IX - Money and Credit (1858–1947)

Summary

Cecily, you will read your Political Economy in my absence. The chapter on the Fall of the Rupee you may omit. It is somewhat too sensational. Even these metallic problems have their melodramatic side. Miss Prism (Oscar Wilde, The Importance of Being Ernest)

The period 1858–1947, which covers some of the most salient developments in the financial history of India, is still highly germane to many of the contemporary concerns of the sub-continent. But its intrinsic interest and importance is not limited to this aspect alone, judging by the fact that Indian monetary experience over the greater part of this period seems to have exercised a singular fascination for some of the most acute contemporary intellects. It is no accident that some of the major contributions of eminent economists like Marshall and Keynes to monetary thought have stemmed from a close analysis and observation of India's monetary history. For instance, Keynes's treatment of India's monetary problems touches on the very core of the theory and practice of the international gold standard as well as of central banking. A variety of factors seem to have prompted the involvement of distinguished academic economists in Indian monetary affairs. Partly, this could be attributed to the intellectual challenge posed by the uniqueness of India's monetary history in the nineteenth and early twentieth centuries. India witnessed practically every variety of monetary standard, passing successively from a silver standard to a managed inconvertible silver currency, then almost fortuitously to the gold exchange standard; thereafter, to a paper standard, a gold bullion standard, and after 1931, to a sterling exchange standard.