THAT PERVERSE RUPEE.
THE very bold experiment of the Government of India, in ceasing to coin rupees has partially succeeded, or at all events has appeared .to succeed. The fall in the value of the rupee has been checked. The Sherman Act has been repealed by Congress, but the great collapse which th. Government of India feared. has not occurred. The rupee, instead of tumbling to a shilling, as was anticipated, has remained above is, 30., and the Indian Exchequer has been saved from the alternatives of bank- ruptcy or an addition to taxation so severe as to be politically dangerous. The Government, if the rupee had fallen, say by 3d. farther, must have taxed either tobacco or sugar, and either impost might have produced popular insurrection, and must have produced intense popular discontent. Indeed, though tobacco might be reached by the French system of selling local monopolies of the right of sale, the taxation of sugar would be so tremendous an interference with the food of the people, who need sugar because they eat no meat, that we do not know whether bankruptcy, with all its consequences, would not be preferable. The Government, however, has steered clear of that difficulty, and but for its extravagant military expenditure on the frontier, which now costs 44,000,000 a year extra, at least, and its laxity in yielding to demands for civil outlay, the Indian Treasury would be pretty safe. Unfortunately, however, the stoppage in the fall of the rupee, though it has succeeded on one side, has not succeeded on another. It was expected to make it easy for the India Office to draw its great remittance— call it 415,000,000 a year—from India, and it has not made it. The India Office usually gets that money, by selling for gold in London, bills on the Indian Treasuries which are paid there out of rupee revenue. That practice has ceased to work. In 1893 practically nobody would buy India bills, and the India Office, with millions to pay in pensions, in railway dividends, and for purchases, found itself without money—except some cash in the till, left over from old loans. The whole cause of this failure of demand is still obscure, but part of it is tolerably clear. imports mports increased so that some of the usual payments of the merchants to India were made in piece goods. Rupee paper—the silver Indian loans—was sent out in considerable quantities, and there was a very large i despatch of silver n bars. What on earth the natives wanted with an extra supply of bar-silver, just when it had been demonetised, was, and is, a grand. puzzle to the India Office, and, we believe, two theories are current. One is that rupees being dear, and bar-silver cheap, the Indians who hoard bought bars with their rupees, and hoarded. them. That is quite possible, because Indians do not believe in a permanent fall of silver, and would. trust the bars just as soon as the rupees—perhaps a little sooner, the bars being outside the grip of treasury decrees ; but there is another possibility. Many experts say, and we confess we incline to believe, that the cheapness of silver has produced a new demand for it ; that a poorer class of Indians are adorning their wives and children ; and that, in fact, a new trade has arisen, which, if silver keeps low, may last a thousand years, and expand, too, to heavy figures.
We shall see ; but meanwhile, the India Office cannot sell its bills, and has just three alternatives before it. One is to sell its bills at any price they will fetch in an unwilling market; and so, in fact, abandon its great ex- periment of stopping the fall in the rupee. This would be very humiliating, and might be dangerous ; for nobody knows to what point the rupee might tumble down, drag ging after it the Indian revenue. The second course is to buy gold in India, where there is plenty of the metal if you can only get it, at an outside price, and send it home to the India Office as a gold remittance. Sir R. Temple, who is a man of nerve, once did that successfully to the tune of millions, rather to the consternation, we believe, of the English bullion-dealers ; but this is not a, nice time for doing it again. The Indian Government wants to accumulate gold, not to send it away, and indeed must do it if its policy is to be carried out. The India Office fell back, therefore, on the third alternative—to ask Parlia- ment for permission to raise a loan of 410,000,000 to tide them over to next year; and on Wednesday, after a debate confined to experts, and hardly intelligible even to Anglo- Indians, they got it.
What does it signify ? Well, nothing if the failure to sell bills is only temporary ; but suppose it should happen to be permanent ? The Under-Secretary for India, and the Chancellor of the Exchequer and Sir R. Temple, all hope it will not be ; but they are only guessing, and admit as much. Mr. Goschen, who has forgotten more about exchanges than they ever knew, shakes his head at them very decidedly ; and even to ignorant people like our- selves it is quite patent that the ten millions is only a stop - gap. There is not the smallest security that India will not go on taking Lancashire goods and cheap silver, and so make India bills a drug in the market. It is a pure speculation that she will not, and consequently the India Office may in June be once more at a standstill for cash. That is serious, for tho Office cannot go on borrowing for ever ; a great import of gold from India would upset all recent policy ; and to sell bills cheap and let the rupee go to any price, means the com- plete and thorough reorganisation of all Indiali ta,xation, expenditure, and military system. That is a very big business, and where we are to find the man of genius who could do it nobody knows ; but it may have to be done, and that at a much earlier period than anybody believes. The situation may right itself ; but it is far too ticklish to be pleasant ; and of one fact we think the India Offie.e may rest assured—the demand for cheap bar-silver in India is not going to stop. They must tax the import if they want to arrest it ; and what the precise effect on the currency will be of that step—absolutely unprecedented in the history of the world—they know, and the best experts know, just as little as we do. Protection for corn one has heard of, but protection for silver is too new to be profitably discussed.
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