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the Indian rupee was fixed at 1s. 4d. appearing as the golden age in which the long struggle between sterling and the rupee was forgotten. The early history of that contest is given in Chalmers' "Colonial Currency," from which the following extracts may be quoted :-
"Finally in 1876, after half-a-century's futile endeavours to introduce sterling as the local currency, the rupee was established by law as the Island standard of value, and the Colonial dollar' was dispensed with as a needless complication."
In conclusion, it may be stated that in 1886, when the gold-price of silver was low, and when there was a partial demand in Mauritius for a gold standard, a Colonial Committee was appointed to report on the monetary system of Mauritius. The valuable report of the Committee, which is dated 14th September, 1888, (i) traced the evils complained of to the price of sugar, and (ii) arrived at the sound conclusion that it was to the interest of the Colony to maintain the existing system, aussi longtemps du moins que ce systéme sera celui de l'Inde, qui est le pays auquel notre situation géographique, nos besoins, et la nature de nos relations commerciales, rat- tachent plus intimément Maurice."
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During the period leading up to the establishment of the rate of Rs.15 to the pound sterling, Mauritius followed closely the Indian rate, and continued to use that rate from the time when it became operative until after the end of the great War. When, however, the Indian rate became unpegged" the Mauritius rate did not immediately follow it, but remained at a steady parity with sterling until the end of July, 1919--with the assistance of the prohibition of the export of silver rupees which had been imposed and of the arrangements made by the Banks for financing the 1918-1919 crop. Subsequently the Mauritius exchange caught up the Indian rate at 28., and continued to rise in sympathy.
The Indian rupee reached its highest value, 2s. 94d., on February 12th, 1920, and while the peak of the Mauritius exchange is not on official record it is known that at about that time transactions were carried out at approximately 2s. 6d.
5. In March, 1920, Sir Hesketh Bell called a conference to discuss the question whether the currency of Mauritius should be linked up at a fixed rate with sterling or whether it should be linked with the rupee, which the Indian Government then hoped to fix at Rs.10 to the gold sovereign, in accordance with the recom- mendation of the "Babington Smith" Currency Committee. Among the factors which had then to be taken into account were (1) the unexpectedly wide fluctua- tions of which the rupee had shown itself capable, (2) a change in the trade rela- tions of the Colony-its principal export, sugar, having ceased to a great extent to go to India and having found a ready market in the United Kingdom. Whether the latter was to be regarded as a permanent alteration was not, and still is not clear. After the conference Sir H. Bell sent to the Secretary of State, and pub- lished locally, the following telegram:-
Your telegram of 2nd March. Conference of 20 representatives of all the chief interests in the Colony unanimously came to the conclusion that Mauritius should be linked up with India as regards rupee exchange and currency."
The Secretary of State approved this conclusion.*
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Subsequently, however, when the Indian rupee, after falling below 1s. 4d., began to rise again, and when the Government had again imposed a prohibition of exporta- tion of rupees in order to prevent the Colony being denuded of silver, there was estab- lished in Mauritius an artificial rate of exchange which had the effect of attain- ing a precarious stability as regards sterling while breaking down parity with the Indian rupee.
6. These circumstances led naturally to the suggestion of a special rupee, or roupie" (see Appendix I) for Mauritius, which it was thought might meet the desire for stability vis-a-vis sterling without involving so radical a disturbance of the currency as any other method which could be devised for that end. the outset great interest was taken in the scheme, but as time went on it became evident that it would not be practicable to adopt it for the following reasons:→→→
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* The misunderstandings arising out of this conference are shown in the printed account of the Conference on Rupee Exchange and Currency, 1925, laid on the table of the Council of Government in Mauritius.
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(i) It was widely feared that the new coin would not prove acceptable to the Indian population generally.
(ii) The body of opinion which leaned towards sterling was anxious for the definite adoption of a sterling currency and was not attracted by this com- promise.
(iii) Fears were expressed that the Island was too small and its trade too limited for it to maintain successfully a coin of its own.
In short, after a time it was clear that this policy, which aimed at producing an arrangement to satisfy all, would in fact meet with strong opposition from a variety of quarters, and accordingly I sought and obtained your consent to drop the sug- gestion.
7. There remained three possibilities—
(1) The adoption of a sterling currency.
(2) The maintenance of the status quo.
(3) Reversion to approximate parity with the Indian rupee.
The first is a course which is by no means without supporters in Mauritius,
though some of these wish that the change should take place at the rate of two shillings the rupee-which, it is hardly necessary to point out, would in present circumstances involve the total dislocation of the export trade of the Colony.
The advantages which Mauritius would derive from a sterling currency are obvious. Trade relations with the United Kingdom, with the Union of South Africa, and with British East Africa would be facilitated. On the other hand there are very obvious and cogent reasons against the adoption of this system. The gold sovereign is not legal tender in Mauritius and was not during the long period when the rupee was maintained at a fixed parity with the sovereign. No question was raised during my visit as to maintaining a supply of gold sovereigns for use in Mauritius. No need for them is felt for currency purposes and it is clear that to supply them would be wasteful and to maintain a stock of them very difficult. What the Mauritius advocates of sterling contemplated was a supply of United Kingdom silver which would be unlimited legal tender there with pos- sibly a supply of Treasury notes but the discussion of this alternative never got so far as serious consideration whether Treasury notes would be used in replace- ment of the present note issue by the Government of the Colony. Of course in this country the silver coins of the United Kingdom are not unlimited legal tender, there is no obligation to exchange them either for sovereigns or notes, and the maintenance of their value depends partly at least upon a careful regulation of the supply to the requirements of the community. It is obvious that calcula- tions of such requirements are liable to be upset by fluctuations in any other area in which the same currency is used. Further, holders in Mauritius might for a number of reasons be seriously embarrassed in the event of over-supply or of any great contraction in the circulation in the Colony. Considerations of this kind, together with the advantage of eventually disposing of profits from a well- managed local currency, have no doubt had much weight in determining the adop- tion of such a currency in preference to sterling in the areas supplied by, e.g., the West African Board.
In the second place, whereas the transition to a "roupie" could, if generally desired, be made with comparatively small dislocation, the sub-divisions of the roupie" remaining the same as those at present in use, and that coin itself being of approximately the same value as the rupee, the change to the shilling would involve a recalculation of wages and prices which would probably have a very disturbing effect especially amongst the labouring classes of the community. It
is generally recognised that a complete change of currency such as this would be is a surgical operation, only to be undertaken in case of necessity. Mauritius is at present possessed of an acceptable and popular currency, which in the past, as shown above, has been decidedly preferred to sterling, and there does not appear to be at present any sufficient reason for a drastic change.
8. The maintenance of the status quo was a course to which I was aware you were strongly opposed for the reasons set out in Appendix I, but in view of the vigorous pressure of representative planters for its continuance, I thought it proper