32 MODERN MONETARY SYSTEMS
duction, and Mr. Walras, an economist and a mathema-
tician, proceeding from this simple idea, endeavoured by
means of accurate scientific calculations to establish a
constant parity between Indian silver and British gold.
The Indian Government, impressed by the same idea, de-
cided, on the advice of an expert Commission, to adopt a
plan of monetary reform based on principles which will
emerge from the following account of its provisions.
The Indian law of the 26th June, 1893, can be shortly
summarised. As a first step iz abolished the free coinage of
rupees; the new parity was fixed at 15 rupees to one pound
sterling, or 16 pence to the rupee; in theory, individuals
who had payments to make in India were allowed to obtain
rupees at the above rate in exchange for pounds sterling ;
but the law contained no provisions to make this trans-
action possible in practice. Lastly, no provision was
made for the conversion of rupees into pounds sterling
with a view to payments in England by inhabitants
of India.
The Government of India, in abolishing the coinage of
rupees, certainly reckoned on the efficacy of contraction
in gradually raising the exchange to the desired level. The
normal development of business, and above all the native
habit of hoarding, necessitated the annual coinage of
rupees in large quantities in order to maintain the mone-
tary stock of the country ; in these circumstances, the cur-
rency could be rapidly reduced by merely suspending
coinage for a few years. It was thought that the exchange
could thus be raised, and with the same idea in mind it was
hoped that the value of the rupee could be prevented from
rising above the desired rate by resuming coinage at the
right moment.
Nevertheless, considered objectively, the step taken by
the Government of India will be seen to have a much
deeper significance. Under the system of free coinage which
had been applied ro the rupee, anyone having a debt to pay in
India had always been at liberty to discharge it by sending
silver bought at the market rate and having it coined at Bom-
bay. Hence the price of silver, plus the costs of transmission,
