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is so dangerously correlated, and I am sure you cannot indefinitely go on coining rupees simply because there is a gold reserve. If you go historically into this matter, my submission is that such has really been the case. In the history of India people who have had to deal with currency were so much infatuated by the idea that they must have some reserve that the coinage of rupees was really initiated for that purpose. The coinage of rupees in India in 1893 and 1898 when the Fowler Committee’s Report was brought into operation and reforms were introduced is a point, Sir Edward Law was so much obsessed by the volume of rupees in circulation that he felt that there must be some reserve, and it was on this ground that he proposed to the Secretary of State that the Government should be allowed to coin rupees. If he knew properly that the value of rupees would maintain themselves if they were limited in volume, then he would certainly not have gone on increasing the currency. I am recommending simply what the Government of India recommended to the Secretary of State in 1893.
To turn to the immediate point : the function of a reserve under these conditions is to maintain stability, is it not ?— I think a reserve ought not to be there. A currency is something like any commodity which maintains its value simply because of the law of supply and demand.
Do you reject the proposition that the function of a reserve is to maintain stability ?—Yes, I do. I do not think a reserve has anything to do ; in fact, a reserve maintains itself when the currency is limited ; it does not maintain the currency.
Let us now consider your practical proposals for the reform of the currency. You say :—“The following, then, are the requirements of my plan for the reform of the Indian currency :—
(1) Stop the coinage of rupees by absolutely closing the mints to the Government as they are to the public. (2) Open a gold mint for the coinage of a suitable gold coin. (3) Fix a ratio between the gold coin and the rupee. (4) Rupees not to be convertible in gold and gold not to be convertible in rupees, but both to circulate as unlimited legal tender at the ratio fixed by law.” A question which does suggest itself to a practical man