648 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES
there is, under those circumstances, how are you to maintain the ratio between the gold coin and the rupee, and how are you to prevent one going to a discount or a premium in comparison with the fall in accordance with the balance of the country’s trade ?—Well, the rupee will maintain its value by reason of the fact that it will be limited in volume ; no more issues of rupees are to be issued.
What is to prevent it going to a premium ?—It cannot at once go to a premium because it has a substitute in gold. Rupees are not to be convertible in gold. The rupee cannot go to a discount because it is limited in volume. No more rupees are to be coined. The rupee cannot go to a premium because there is the alternative of a gold coin functioning as currency.
Then you say :—“But there is just this chance : that the existing volume of the rupee currency is so large that when there is a trade depression it may become redundant and may by reason of its excess lose its value. As a safeguard against such a contingency, I propose that the Government should use part of the gold standard reserve for reducing the rupee currency by a substantial margin so that even in times of severe depression it may remain limited to the needs of the occasion.’ How would that operation take place ?—You simply call in rupees and not issue them again—by the process of calling in rupees up to a certain limit.
So that the rupees would not, to that extent, be convertible into gold ?—It will never be convertible into gold, until the limit is reached, so that it will never be in excess even in times of depression—the rupee will not be convertible into gold and gold will not be convertible into rupees. Even as it is, I am not very much afraid that the rupee will go to a discount, but there is just this chance that it might and I therefore propose that safeguard.
Coming then to the question of the ratio, you say : “In European countries the problem is one of deflating the currency, i.e., appreciating it; in other words, of bringing about a fall in prices. In India the problem becomes one of inflating the currency, i.e., depreciating it; in other words, of bringing