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many other supplies as well come from India. A shipment of rupees in either direction marks the limit of exchange and the banks operate between those limits. Moreover, you have been so long accustomed to accounts based on the rupee that I do not think you would agree or could be asked to agree to change to accounts in another denomination. History has shown that accounts continue to be kept in the old unit even when new currency is introduced and in circulation, but I need not now detain you to give instances. With regard to this important matter, however, I hope to show later on that you can still have fupees (though not the rupees of India) if it is decided to establish a fixed parity with sterling. You know the present position of the pound sterling. It has weathered a terrible storm. When I left England it had almost recovered its former parity with gold, and the Chancellor of the Exchequer, Mr. Winston Churchill, under whom I had the honour of serving when he was Colonial Secretary, had just announced the intention of the Govern- ment that the gold standard should be restored and the market in gold freed from the present restrictions. But even apart from that the pound sterling has long since regained its position as the great monetary unit of the world, and London has fully regained its position as the world's great financial centre. I need not emphasise the extreme prudence with which the Old Country has managed its currency and exchange affairs. I think I may say it has evoked universal admiration.
Now in the old happy days before the war, and even down to the end of the war, your currency had a fixed relation with sterling and also had the great advantage of being at par with India. The present position of Indian currency is peculiar. It is on neither a gold basis nor a silver basis, but a basis depending upon scarcity of supply of course in this connection the expression scarcity includes abundance. The rupee is worth, for its silver, about a shilling. Its scarcity value is nearly is. 6d. What the future of the rupee may be it is impossible to predict. I have no secrets of the Government of India in my possession, and so you must not take me as speaking with inner knowledge. In the particular matter of currency the controlling Government is bound to keep its confidences strictly to itself, and the Colonial Office cannot, and indeed does not wish to, take any part in India's currency responsibilities. Rupee-using Colonies should duly note and weigh this fact. Are you then prepared to remain closely associated with the future fortunes of the rupee? I do not think you are quite comfortable about it, because you are trying by the present artificial arrange- ments to remain linked with sterling as well, at the rate with which we were so familiar in the old happy day of 15 rupees to the pound. Gentlemen, I believe that you are in very great danger while this arrangement lasts. If the rupee should again go higher, and no one can say that it will not, you will be compelled to make a violent readjustment, as you were some years ago, and there will be great dislocation and possibly panic. For you cannot expect in the future such an abounding prosperity as enabled you when the rupee went up before to disregard exchange difficulties. Now of course the Government of India could easily, by issuing currency in India against payment in London at any stated rate, prevent the rupee from rising further-Ï speak on the assumption that we shall not see silver again above 44 pence an ounce. But India does not do so, no doubt because she does not at present see her way to guaranteeing the sterling value of the rupee at any given But what are you doing? You are preventing the value of the rupee in the Colony from going above one and fourpence, although you have no means whatever of maintaining that value of 15. 4d. if the exchange value of the Indian rupee falls below that level.
rate.
Your arrangement is dependent upon the prohibition of the export of rupees from the Colony. This step is one for which the Government of the Colony is responsible, and the Secretary of State finds it very difficult to continue his sanction of this arrangement, both because it and it alone makes it possible for you to adhere to what he considers an unsound and dangerous system and because it is economically unfair.
The great sugar industry is, indeed, by far the greatest economic part of Mauritius. But Mauritius as a whole is greater even than its largest part, and the total body of consumers has to pay a tax as a subsidy to the sugar industry. This tax takes the shape of an artificial under- valuation of the rupee for the purpose of remittance to England and of high bank rates for remittance to India, and it bears most hardly on the poorest classes, who subsist on food from India. I know that there are special arrangements for alleviating this hardship, especially in the matter of food, but that there is a great hardship on the consumers of Mauritius there is no doubt, and it applies also to consumers drawing supplies from England and elsewhere which have to be financed by remittance from Mauritius to London.
If on further consideration you decide to have a currency of your own, I will tell you how it would be supplied.
The Secretary of State has in recent years appointed small Currency Boards in London to provide for and control the supply of currency to Colonies which use coins of their own linked by a fixed ratio to sterling. A similar arrangement could no doubt be made for Mauritius, and a Board might be appointed to supply the new rupee. I do not see why the French spelling should not be adopted, so that the new coin would be known officially as the roupie. It might be of the same size and weight as the rupee of India, but would have a different design. It need not have so high a silver content. Indeed, 500 parts of silver might be sufficient as in the case of the present silver coins of the United Kingdom, or, if not, 500-600. Of course, the less silver is used the larger would be the funds in the hands of the new Currency Board to maintain the sterling value of the coin at Is. 4d., and the greater would be hereafter the profit to the Colony when profits are available after making all necessary provision in the reserve.
In making the change of coinage the procedure would be something as follows. After the new coin is designed and approved the Currency Board would be asked to obtain by means of a temporary advance from some suitable fund a large supply of new coin, which, on arrival in Mauritius, would be exchanged for coins in the note reserve and also 'coins held by the public as the public were willing to exchange them. The rupees so collected would be sent by the Government to India, and with them a remittance would be bought on London, from the proceeds of which the Board would proceed with further coinage. The new coin would be made legal tender side by side and on a par
with the rupee of India. During the operation of a change in currency it would almost certainly be necessary to prevent the export of rupees to India except by the Government. When practically all the Indian rupees in the Colony had been sent to India and had been fully replaced by the Mauritius roupies the Indian rupee would be demonetised. Further details of the arrangements and of steps that might be necessary to induce the population generally to part with their Indian rupees must at present be omitted from consideration for reasons of brevity.
Now what are the great advantages resulting from this scheme? They are that you not only get a rupee at 15 to the pound, the old familiar rate which you wish to adhere to, but also that the Government of Mauritius through the Currency Board will be able to maintain the value of the rupee at ls. 4d. It is obvious that there is sufficient value behind the present currency in Mauritius to enable the Government to guarantee it at Is. 4d., even after paying the cost of supplying the new coins, especially if the new coins are not more than 300 or 600 fine. But, you will ask, how about the future? In future no additions would be made to your circulation except on payment to the Currency Board in London of the full amount in sterling. Similarly, where reduction is taking place in the amount of your circulation, the Board would make payment in sterling in London against a deposit of the new coinage or of notes with the Government out here. The rates quoted by the Board would, of course, be a little above and a little below is. 4d. for the above purposes. But the charge made by the Board would not exceed the cost of sending the coins, including insur- ance, freight, and interest, between England and Mauritius. The Board would not therefore interfere with the legitimate operations of the Banks to whom the business would be left within the limits described.
I may
As to your exchange with India under this scheme, it would no doubt be freely obtainable from the Banks on terms fairly close to the ruling rate of exchange between England and India. add in passing that as regards the coins with a limit of tender you have your own subsidiary coins, and no change will be necessary with regard to them.
This, then, as clearly as I can make it, is the alternative of a currency, linked to sterling. If you still prefer Indian rupees, the Secretary of State will not decline to sanction adherence to long- continued practice, and he quite sympathises with your wishes. But he feels that if you are to be linked with Indian coinage you must be really and continuously linked with it and that it is not quite reasonable that you should say "We prefer to be joined to the Indian rupee when, in fact, by artificial arrangements you are joining yourselves to the pound sterling and disguising your dis- sociation from the Indian rupee by bank rates and charges which are a great weight on consumers.
DEAR MR. BECKETT,
Appendix II.
Port Louis,
29th June, 1925.
To comply with your request, I beg to submit my opinion:—
(1) On a special token for Mauritius.
(2) On the reduction of the rate of the pound sterling in Mauritius, by the removal of the embargo or otherwise.
(1) I am decidedly opposed to the introduction into Mauritius, and to the currency of kcal token; the Colony, in my opinion, is too small to risk an experiment of that kind.
Such an experiment might cause ruin if the balance of trade was against us. In that case it is probable that our sole product would be paid for with our own token bought at a discount by London and Bombay, thus further depreciating our produce.
It is certainly to our advantage that we should have a standard, a silver coin justly appreciated by all the world.
I must insist upon the danger of altering in any degree the present system, especially in the pre- carious condition of our sugar industry, the only resource of the Colony.
(2) The lowering of the rate of exchange of the pound sterling to that of Bombay would have a disastrous effect on the business of the Colony; we shall doubtless see a reduction of the local rate through a weak demand, which already begins to be felt; let us not accentuate it without reason. We can hardly count on an average price of Rs. 10.00 per 50 kilos of sugar. If our pound sterling was sold for Rs. 13.25, the average would be reduced by about Rs. 1.00, that is to say a deficit of more than four million rupees, besides that caused by the difference between the sale price and the cost of production.
Such a contingency would have as a consequence :~~-
(a) A reduction of the price of small planters' canes who, at Rs. 12.00 per 50 kilos, barely make both ends meet, unless they are free from debts.
(b) An unavoidable large reduction of the number and salaries of the staffs of sugar estates and town offices, increasing thereby the number of families in needy circumstances. Misery in certain classes is acute by the fact of the last crop, which only fetched its cost price. What would happen with a reduced crop and a low exchange?
(c) That would create state of things practically unknown at Mauritius, i.e., unemployed artisans, carpenters, masons, mechanics, etc.
(d) A positive decrease of customs revenue and fiscal receipts.
(e) Numerous commercial and industrial bankruptcies.
PUBLIC RECORD OFFICE
I l k k b
C.O.
Reference :---
882 /10
PUBLIC RECORD OFFICE, LONDON
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