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Published online by Cambridge University Press: 28 November 2008
A puzzling feature of interwar Anglo-Indian economic relations is the contrast between Whitehall's relatively hands-off attitude to Indian tariff policies, and its insistent hands-on approach to monetary policy issues in the colony. Both sets of issues were, at various times, equally contentious. But while Britain's strategic objectives in India paved the way for the Fiscal Autonomy Convention, the road towards a similar monetary ‘convention’ was never taken. Rather, thanks to Britain's external financial problems, the interwar decades saw initially a tightening, and later a refinement, of London's control over Indian monetary policies. This paper hopes to set out the processes at work more clearly than has been attempted before, and to account for them. The interpretation offered here is consistent with the ‘gentlemanly capitalism’ explanation of British imperialism during the interwar years, and of the postwar de-colonization process.
1 In this paper, the term ‘monetary policies’ is used to represent exchange-rate policies as well.
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5 In general, India's gold imports depended on her income, which could be expected to rise as the world economy expanded. During the 1920s, Britain sought an expansionary global economic environment to ease her own postwar adjustment problems. Since Indian gold imports were thought to exert a counter-cyclical influence upon the world economy, Britain's policy-makers felt the need to insulate the Indian economy from global upswings. The exchange rate was the main instrument for this purpose, and the 1920 episode represented an early use of the emerging policy approach. For a more detailed argument, see Balachandran, ‘Britain's Liquidity Crisis’.
6 National Archives of India (NAI), GOIFD, A & F proceedings, no. June 1919–2073-C, ‘Regulation of Exchange between England and India’, Abrahams' memorandum, 26 Jan. 1919; Abrahams to Lucas, 27 Jan. 1919; Meston's note, 17 April 1919; Howard's note, 12 May 1919.Google Scholar
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8 School of Oriental and African Studies (SOAS), Addis Papers, PP. Ms. 14/37, Addis's diary entry, 20 Oct. 1919; for an example of the new, post-Abrahams attitude, see the India Office memoranda referred to in the previous note.Google Scholar
9 Even as an Indian government official, Brunyate's attitude in financial matters was rather more London-centred than that of any of his colleagues; see NAI, GOIFD, A & F proceedings, no. Feb. 1916–112–A, Brunyate's ‘Statement of the Case’, 4 January 1916.Google Scholar
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11 Bank of England (BOE), ADM 20/13, Norman's diary entry of 6 May 1924.Google Scholar
12 IOR, L/F/5/29, p. 517, Abrahams to Meston, 26 Oct. 1906; para. 3 of Financial Despatch no. 3 of the Government of India, 26 April 1907.Google Scholar
13 Two shillings sterling would equal 2S. gold when sterling returned to its prewar parity with the metal.Google Scholar
14 Balachandran, ‘Britain's Liquidity Crisis’.Google Scholar
15 IOR, Mss Eur D523/4, Chelmsford to Montagu, 17 Mar. 1920; Montagu to Chelmsford, 8 April 1920, 15 April 1920, and enclosed memorandum entitled ‘Reverse Councils’, 13 May 1920.Google Scholar
16 NAI, GOIFD, A & F proceedings, no. May 1923–64-A, note by Dutt and Hailey, September. 1922; no. May 1923–72-A, Cook to McWatters, 9 Oct. 1922.Google Scholar
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19 Churchill College Archives (CCA), Cambridge, Hawtrey Papers, Htry 1/3/1, text of Blackett's speech to the Associated Chambers of Commerce, Dec. 1923.Google Scholar For a more detailed discussion of the episode, see Balachandran, G., ‘The Sterling Crisis and the Managed Float Regime in India, 1921–1924’, Indian Economic and Social History Review (IESHR) 1 (1990), pp. 19–27.Google Scholar
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22 Federal Reserve Bank of New York (FRBNY), Strong Papers, 1111.1, Blackett to Strong, 13 Feb. 1923.Google Scholar
23 BOE, OV 9/17, Schuster to Niemeyer, 10 Jan. 1929; according to Edward Benthall, politically the most active and well-connected British businessman in India, Cecil Kisch, Secretary of the India Office's Finance Department and the subject of Schuster's remarks, felt no European except himself could effectively control Indian finances; he also appears to have had the ear of the Secretary of State; see University of Cambridge, Centre of South Asian Studies (CSAS), Benthall Papers, box 2, f. 3, Benthall's remarks on p. 97.Google Scholar
24 FRBNY, Strong Papers, 1111.1, Blackett to Strong, 13 Feb. 1923.Google Scholar
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29 Royal Commission on Indian Finance and Currency, 1914 (Chamberlain Commission), Appendices to the Interim Report of the Commissioners, vol. 2, app. XIV, ‘Memorandum on Proposals for the Establishment of a State Bank for India’ by Lionel Abrahams.Google Scholar
30 JMK, vol. 15, pp. 151–203 contains the text of Keynes' State Bank plan; Chamberlain Commission, Final Report of the Commissioners, sec. 5, discusses central banking;Google Scholar for a summary of the Keynes plan, see JMK, vol. 15, pp. 128–32;Google Scholar also see pp. 133–50, 212–19; also see Chandavarkar, Keynes and India, and Bagchi, A. K., ‘Keynes, India and the Gold Standard’, in Banerjee, D. (ed.), Essays in Economic Analysis and Policy: A Tribute to Bhabhatosh Datta (Delhi, 1991), pp. 229–34.Google Scholar
31 The latter emphasis—of depoliticizing decision-making in monetary affairs— was not altogether absent in Keynes' plan. But it was somewhat incidental, and arose in the background of the silver purchase controversy which culminated in the setting up of the Chamberlain Commission; see JMK, vol. 15, p. 143.Google Scholar
32 Sayers, R. S., The Bank of England, 1891–1944 (Cambridge, 1976), vol. 1, pp. 156–60; vol. 3, apps. 9 and 10.Google Scholar
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35 BOE, G30/9, Norman to Peel, Viscount, 26 Oct. 1922; also see his letters to Siepmann cited below.Google Scholar
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38 BOE, ADM 25/14, Norman to Siepmann, 12 Sept. 1923.Google Scholar
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55 PRO, T176/25B, Hilton-Young to Niemeyer, 19 Oct., and reply, 20 Oct. 1926; IOR, L/PO/2/3(i), Chancellor to Secretary of State, 21 Oct., and reply, Oct. 1926.Google Scholar
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67 The main financial safeguards papers are in IOR, L/F/6/1179 f. 4495, and L/F/5/191; PRO, T160 519/F12471/05/2, T172/16, and T175/45; BOE, GI/310, and 311.Google Scholar
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