Reforming the Rupee

Abstract

The sheer complexity and uniqueness of Indian monetary experience have invested the history and problems of Indian currency and finance with a distinctive intellectual appeal and even an indefinable element of mystique.¹ No wonder Indian monetary experience since the advent of British rule seems to have exercised a singular fascination for some of the most acute contemporary economists. It is no accident that some of the major contributions of eminent economists like Alfred Marshall and Keynes to monetary thought have stemmed from a close analysis and observation of India’s monetary history. In his very first publication after leaving the India Office, Keynes noted that ‘Apart from the practical side of the matter, India’s intricate and highly artificial system presents problems of special interest to the student of the theory of currency.’² In a subsequent review Keynes for the first time specifically addressed the problems of the Indian rupee.³ Almost a decade later Keynes remarked that ‘Indian currency can always find some new thing with which to interest and instruct the student. More numerous and more skilled Commissions have sat over it than over any other currency in the world; yet no sooner does a Commission rise than this currency presents some further problem, which no one had contemplated in advance, to perplex its official custodians.’⁴ The frequency of official enquiries into Indian currency was true not only of the historic period referred to by Keynes but also of developments since then as will be readily obvious from the following list.

‘He even understood the Indian Rupee.’ Paul Samuelson

‘He began life as a monetary economist.’ Joan Robinson