606 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES
settled upon and all further coinage is stopped, India will be in a position to have an effective gold standard based on a free inflow and outflow of gold. There will be no necessity to reduce the rupee in legal tender and provide for its convertibility. Its value would be maintained intact by sheer force of its quantity being limited, provided the quantity in circulation has been reduced so far as to be always below the minimum demand.
Supporters of the existing system of rupee currency have ever since its inauguration held out that the currency is economical and secure. Its claim for security, both in terms of gold and commodities, has been tested, and the grounds of it have been analysed in the course of this and previous chapters, wherein is demonstrated how very much wanting it is in the essentials that go to make up a secure currency. We must now endeavour to assess whether it is economical, for if it were really so, then that might be a point of some value against its opponents. We must therefore scrutinize the economy effected by the rupee currency.
Kemmerer says,*
“ A convertible money finds its raison d’etre largely in the fact that it economizes the precious metals, and makes possible a saving to the community. If paper money or token money are substituted for primary money, their substitution ruduces the demand for the precious metals by the difference between the amount of metal used in the token money introduced plus that contained in the primary money required for the redemption fund. This economy of the precious metals results in an increased supply being thrown upon the market” [which supply goes abroad and into the arts and increases the non-monetary wealth of the country by an equivalent amount: the gold obtained for the metal economized represents a net gain to the community].
The same kind of gain, says Kemmerer, attaches to the use of inconvertible money, and even on a larger scale, because there is no necessity to use primary money even for a redemption fund, as there is when the money is convertible. Such views as these have led Prof. Keynes to opine that the Indian currency system is a marvel of economy, and that other
- Money and Credit Instruments in Relation to Prices, p. 63.