John Maynard Keynes's Indian Currency and Finance

By Betancourt, Rebeca Gomez | History of Economics Review, Summer 2013 | Go to article overview

John Maynard Keynes's Indian Currency and Finance


Betancourt, Rebeca Gomez, History of Economics Review


Abstract: John Maynard Keynes (1883-1946) started working for the India Office in 1906, when the British Empire's administration was at the height of its power and influence. After working for the Military Department of the India Office, Keynes was transferred in March 1907 to the Department of Revenue, Statistics and Trade. He wrote the Indian Currency and Finance (ICF) four years after leaving the civil service in 1908 to lecture on Indian monetary problems at the London School of Economics and the University of Cambridge (in 1910-1911). ICF was Keynes's first book. Lionel Abrahams and Neville Keynes discussed and helped to improve the book's first drafts, which were made up of chapters that Keynes had originally planned to include in a larger and more comprehensive volume on the India System. After completing ICF, Keynes joined the Royal Commission on Indian Currency and Finance chaired by Austen Chamberlain, which was a major opportunity for him to influence policy. Even though it was very critical of Great Britain's official doctrine, ICF was widely accepted. This article analyses Keynes's proposals for Indian currency reform as a tribute to the centenary of its publication.

'A preference for a tangible gold currency is no longer more than a relic of a time when governments were less trustworthy in these matters than they are now.' (Keynes 1971 [1913]: 51)

1 Introduction

John Maynard Keynes (1883-1946) started working for the India Office in 1906, when the British Empire's administration was at the height of its power and influence. (1) After working for the India Office's Military Department, Keynes was transferred in March 1907 to the Department of Revenue, Statistics and Trade. He wrote Indian Currency and Finance (ICF) four years after leaving the civil service in 1908 in which time he gave lectures on Indian monetary problems at the London School of Economics and at the University of Cambridge (1910-1911). Based on his lectures Keynes proposed a book on this topic to Macmillan publishers in August 1910. However, work on it was interrupted somewhat when, in January 1912, he was elected editor of the Economic Journal after Edgeworth (who was editor after Neville Keynes) declined to continue the job. It may be said this marks the beginning of Keynes's recognition as an economist.

Published in June 1913, ICF was Keynes's first book. (2) Lionel Abrahams and Neville Keynes discussed and helped to improve the book's first drafts, which were made up of chapters that Keynes had originally planned to include in a larger and more comprehensive volume on the 'India System'. The ICF's eight chapters deal respectively with (1) the present position of the rupee; (2) the gold exchange standard; (3) the paper currency; (4) proposals for a gold currency; (5) the council bills and remittances; (6) the Secretary of State's reserves and cash balance; (7) the Indian banking system; and (8) the Indian rate of discount.

After completing ICF, Keynes joined the Royal Commission on Indian Currency and Finance chaired by Austen Chamberlain, which was a major opportunity for him to influence policy. (3) He made sure that being part of the Chamberlain Commission would not jeopardise the publication of ICF. Even though it was very critical of Britain's official policy doctrine, ICF was well received.

2 The Economic Context

Many British monetary economists were interested in determining what monetary reforms would be appropriate for India after the depreciation of silver that was caused by the abandonment of bimetallism in several countries in the 1870s. Between 1878 and 1898, India was a silver monometallic country and the debates centered on how to stop the depreciation of the Indian currency which had begun in 1873. Among the most important committees that were drawn up to find a solution to this question was the Herschell Committee in 1892-3 and the Fowler Committee in 1898. …

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