528 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES
trade in terms of cutlery or any other commodity that enters into the trading operations of the country. The extent to which money enters into the trading transactions of two countries is governed by the same law of relative values as is the case with any other commodity. If more money goes out of a country than did previously, it simply means that relatively to other commodities it has become cheaper. But if there is such a thing as an adverse balance in the sense that commodity imports exceed commodity exports, then there arises the further question : Why do exports fall off and imports mount up ? In other words, given a normal equilibrium of trade, what causes an adverse balance of trade ? For this there is no official explanation. Indeed, the possibility of such a query is not even anticipated in the official literature. But the question is a fundamental one. An adverse balance of trade in the above sense is only another way of stating that the country has become a market which is good to sell in and bad to buy from. Now a market is good to sell in and bad to buy from when the level of prices ruling in that market is higher than the level of prices ruling outside. Therefore, if an adverse balance of trade is the cause of the fall of exchange, and if the adverse balance of trade is caused by internal prices being higher than external prices, then it follows that the fall of exchange is nothing but the currency’s fall in purchasing power, which is the same thing as the rise of prices. The adverse balance of trade is an explanation a step short of the final explanation. Try to circumvent the issue as one may, it is impossible to escape the conclusion that the fall in the exchange value of the rupee is a resultant of the fall in the purchasing power of the rupee.
Now what is the cause of the fall in the purchasing power of the rupee ? In that confused, if not absurd, document, the Report of Price Inquiry Committee,* one cause of the rise of prices in India was assigned, among others,† to the decline in supplies relatively to population. In view of the more or less generally accepted theory of quantity of a currency as the chief determinant of its value, the line of reasoning adopted by the
- This Committee was appointed in 1910 to investigate into the rise of prices in India and was composed of Messrs. Datta, Shirras, and Gupta. The first and the last named commissioners being members of the Finance Department of the Government of India, the Committee may be regarded as more or less an official body. The results of its investigations appeared in 1914 in five volumes, Vol. I of which contained the Report signed by Mr. Datta.
† See Report, paras. 126-27.