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Money, Prices, and Economic Development in India, 1861–1895

Published online by Cambridge University Press:  11 May 2010

John Adams  and
Robert Craig West
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Abstract

In the late nineteenth century, when most of the world was on a gold standard, India was on a silver standard. Silver was used for coins, held in hoards, and worn as jewelry. Regression analysis confirms a positive relationship between prices and the money supply, and inverse relationships between prices and rainfall and prices and the combined influences of railroads and commercialization. The. influx of silver was not correlated with the money supply, apparently because hoarding and dishoarding by peasants and others caused the amount of money in active circulation to vary.

Type
Papers Presented at the Thirty-Eighth Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 39 , Issue 1 , March 1979 , pp. 55 - 68
Copyright
Copyright © The Economic History Association 1979

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References

1 Basham, A. L., The Wonder That Was India (New York, 1959), pp. 228–30Google Scholar ; Warmington, E. H., The Cgmmerce Between the Roman Empire and India (Delhi, 1974)Google Scholar.

2 See, for example, Tooke, Thomas, “A History of Prices, and the State of the Circulation during the Nine Years 1848-56,” in Chaudhuri, K. N., ed., The Economic Development of India under the East India Company, 1814-58 (Cambridge, 1971), pp. 177–79Google Scholar.

3 Several early studies focus on the metallic portion of India's currency, but they neglect the organization and operation of the banking system: Bhatwadekar, M. V., A History of Indian Currency (Bombay, 1944)Google Scholar ; Chablani, H. L., Indian Currency and Exchange (London, 1925)Google Scholar ; Coyajee, J. C., The Indian Currency System (Madras, 1930)Google Scholar ; Malhotra, D. K., History and Problems of Indian (Simla, 1949)Google Scholar.

4 Catanach, I. J., Rural Credit in Western India (Berkeley, 1970), Ch. 1.Google Scholar

5 Little has been written in a serious vein about the economic functions of the mahajans or shroffs, who are generally perceived-in old times and the present-to be parasitic, exploitative money lenders and landgrabbers. For a treatment of their modern roles see Walter C. Neale, “The Role of the Broker in Rural India,” a paper delivered to the American Association for the Advancement of Science, December, 1967, photocopied.

Two recent studies also show concern with the historical and modern functions of these rural credit agents: Michie, Barry H., “Baniyas in the Indian Agrarian Economy: A Case of Stagnant Entrepreneurship,” Journal of Asian Studies, 37 (1978), 637–52CrossRefGoogle Scholar ; Ghatak, Subrata, Rural Money Markets in dia (Delhi, 1976).Google Scholar

6 Nugent, Jeffrey B., “Exchange-Rate Movements and Economic Development in the Late Nineteenth Century,” Journal of Political Economy, 81 (1973), 1110–35.CrossRefGoogle Scholar

7 Baden-Powell, B., The Land Systems of British India, 3 vols. (London, 1892)Google Scholar ; Dutt, Romesh C., The Economic History of India Under Early British Rule (London, 1956), Chs. 5-9, 11, 21-22Google Scholar ; Neale, Walter C., Economic Change in Rural India (New Haven, 1962)Google Scholar

8 Anstey, Vera, The Economic Development of India, 3rd ed. (London, 1936), pp. 373ff.Google Scholar

9 Ibid., ch. 14 ; Whitcombe, Elizabeth, Agrarian Conditions in Northern India, Vol. 1 (Berkeley, 1972), ch. 6Google Scholar.

10 Dutt, Romesh C., The Economic History of India in the Victorian Age (London, 1956), p. 595.Google Scholar

11 Ibid., ch. 10.

12 Harnetty, Peter, Imperialism and Free Trade: Lancashire and India in the Mid-Nineteenth Century (Vancouver, 1972), p. 49.Google Scholar

13 The exact relationship between regional rainfall series and famine reports deserves more careful study. The best record of the incidence of famines is Bhatia, B. M., Famines in India, 1860-1945 (Bombay, 1963)Google Scholar.

14 On the motives behind and financiing of the railroads see Thorner, Daniel, Investment in Empire (Philadelphia, 1950); on the impact on prices seeGoogle ScholarHurd, John, “Railways and the Expansion of Markets in India, 1861-1921,” a paper delivered to the Association for Asian Studies, 03, 1971, mimeoGoogle Scholar.

15 Atkinson, Fred J., “Silver Prices in India,” Journal of the Royal Statistical Society, 60 (1897), 142–43.CrossRefGoogle Scholar

16 United States Department of Treasury, Report of the Director of the Mint, 1895 (Washington, D.C., 1896), p. 62.Google Scholar

17 , Atkinson, “Silver Prices,” p. 142.Google Scholar

18 Ibid., p. 143.

19 Ibid.,

20 There are not many descriptions of peasants' handling of silver and their use of jewelry as a store of value. See, however, Bailey, F. G., Caste and the Economic Frontier (Manchester, 1957), pp. 75–82Google Scholar.