RECOVERY OF THE EXCHANGES 33 
determined the variable import silver point in the exchange 
rate of the rupee, so that even at times when India had a 
surplus trade balance the exchange value of the rupee 
could not rise much above a rate given by the market 
value of the weight of fine metal which it contained.! 
The suspension of coinage, or rather of the system of 
free coinage, was therefore much more efficacious than the 
mere process of monetary contraction, since its effect was 
immediate. It acted directly on the exchange by abolishing 
the silver point limit, which may have been unstable, but 
prevented the rate of the rupee from rising above the value 
of its content of fine metal. The first effect of this measure 
was likely to be that the rate of the rupee would separate 
from that of silver ; and this is what in fact happened ; the 
exchange value of the rupee henceforward rose above a 
rate corresponding to the price of the metal which it 
contained. 
Thus in pursuing one object, viz., monetary contrac- 
tion, the Indian Government had attained another, and 
one which was much more to the point; they had de- 
stroyed the connecting link between the rate of the rupee 
and that of silver. 
Moreover, after closing the mints to the coinage of 
rupees, the Government of India was obliged to provide 
persons owing debts in the country with another method 
of discharging their obligations. It was decided to accept 
pounds sterling, giving in exchange silver or paper rupees 
at the rate of 15 rupees to the pound, i.e., 16 pence a 
rupee. This was therefore the new parity which, with the 
addition of the costs of transmitting gold coin, was to de- 
termine the import gold point, limiting the maximum 
value of the rupee to this rate whenever there was a sur- 
plus trade balance ; and this was in fact a first step towards 
stabilising at the desired rate of 16 pence the exchange 
1 This shows that Walras need not have been concerned by the possible 
influence of internal causes on the value of the rupee, such as the number 
of rupees in circulation in India; for the rate of exchange was definitely 
bound up with that of silver for the reasons given, and depended on the 
world market for that metal. 
D