568 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES
“While India’s exports and imports in the absolute are
large, still, in the main, the people of India live on their
own products, and a large part of those products run their
life history from production to consumption in a very small
territory. They have only the remotest connection with
foreign trade, gold, and the gold exchanges. In time, of
course, any substantial disturbance in the equilibrium of
values in the country’s import and export trade will make
itself felt in these local prices, but allowing for exceptions,
it may be said that in a country like India the influences
of such disturbances travel very slowly and lose much of
their momentum in travelling.”
In consequence of the thinness of connection between the two it is obvious that the prices of such Indian goods as do enter into international trade cannot always be said to move in more or less the same proportion as those which do not. Besides this thinness of connection which permits of deviations of the general purchasing power of a currency from the level indicated by the actual exchange rate, it is to be noted that the prices of Indian commodities which largely enter into international trade are not governed by local influences. Such exports of India as wheat, hides, rice and oil seeds are international commodities, not solely amenable to influences originating from changes that may be taking place in the prices of home commodities and services. The combined effect of these two circumstances, except in abnormal events such as the war, is to militate against the prices of traded and non-traded goods moving in quick sympathy.*
If this is true, then, although the maintenance of the exchange standard does imply a purchasing power parity of the rupee with gold, it is not a purchasing power parity of the two currencies with respect to all the commodities. All that it implies is that the purchasing power of the rupee over such commodities as entered into international trade was on a par with gold, so that there did not often arise the necessity of exhausting the gold reserve. The preservation of the gold reserve only meant that there was equality of prices so far as internationally traded goods were concerned. Thus interpreted, the fact that the rupee
- This is merely re-stating what has previously been stated to explain why specific depreciation of the rupee does not immediately follow upon its general depreciation.