RUPEE, the standard coin of the monetary system in India (Hindustani rupiya, from Sanskrit rupya). A silver coin of 175 grains Troy, called tanka, approximating to the rupee, was struck by the Mohammedan rulers of Delhi in the 13th century; but the rupee itself, of 179 grains, was introduced by Sher Shah in 1542. The English at first followed various indigenous standards ; but since 1835 the rupee has uniformly weighed i8o grains, contain ing 165 grains of pure silver. The weight of the rupee (one tola) is also the unit upon which the Indian standard of weights is based. Down to about 1873 the gold value of the rupee was 2S., and ten rupees were thus equal to Li ; but after 1873, owing to the de preciation of silver, the rupee at one time sank as low in value as Is. In order to provide a remedy the government of India decided in 1893 to close the mints, and in 1899 to make the rupee legal tender at fifteen to Li. The Government also engaged to sell Council drafts on India to an unlimited amount at a price from is., 4id. to is. 310. per rupee. This worked satisfactorily, owing to the fact that normally India exports more than she imports. Should there be a trade balance temporarily adverse to India, so that the market quotation of sterling against the rupee fell below is. 3d., the Government undertook to sell reverse Council drafts on London. The exchange was thus main tained at is. 4d., and the rupee linked to a gold currency, sterling, with the sale of Council and reverse Council drafts as a somewhat artificial substitute for the shipment of gold.
The success of this system depended upon two conditions. First, the bullion value of the rupee must not rise above is. 4d., otherwise it would pay the public to melt down rupees for their silver content. Secondly, the secretary of State must have suf ficient rupees at his command to enable him to redeem such quantities of Council drafts as the public wished to buy. Until the outbreak of the World War, both these conditions were ful filled. The secretary of State had little difficulty in amassing sufficient rupees to meet his engagements, while it was only found necessary to sell reverse Councils on three occasions in the present century.
The Rupee Crisis.—The World war altered the situation. India's exports increased owing to the Allies' demand for raw materials, while imports of manufactured goods were forcibly curtailed owing to the inability of belligerent countries to produce them. Also the campaign in Mesopotamia was financed in rupees. All these causes led to a greatly increased demand for rupees, and by 1916 the secretary of State was experiencing great difficulty in obtaining enough to meet in full the demand for Council drafts.
At the same time, partly owing to troubles in Mexico, the price of silver rose ; in short, by 1916 the two conditions on which the Indian currency was based were ceasing to operate. Radical modifications had to be introduced. The sale of Council drafts
was rationed, and their price gradually increased in sympathy with that of silver. All gold imported had to be sold to the Gov ernment, and the private importation of silver was prohibited. Rupee notes could be issued to a certain extent, but the danger of inconvertibility had to be watched. But the quantity of silver available still fell below the country's requirements, and the con vertibility of the note issue was threatened. In April 1918, the Pittman Act enabled the U.S. Government to sell 200 million fine ounces of silver to India at a price of $1.015 per fine ounce. This shipment eased the situation and preserved the currency till the Armistice.
In May 1919, the Babington-Smith committee sat to evolve a new system, made necessary by the grave modifications due to war measures. It recommended the fixation of the exchange at Rs. f o to the gold sovereign; the sale by open tender of Council and, if necessary, of reverse Council drafts; free importation and exportation of gold and free importation of silver. Owing to un foreseen circumstances, the scheme broke down almost im mediately. The report was issued at the moment when the prices of commodities, including silver, were at their highest ; and the slump followed. The price of silver collapsed, and rendered un necessary the raising of the value of the rupee. Also the 1921 trade depression had a serious effect in India. The demand for raw materials dried up, but meantime goods ordered from Europe continued to arrive up till the end of 1921. Consequently, a heavy adverse trade balance set in. The rupee began to fall, until finally it arrived at round about the pre-war level of is. 4d. The sale of reverse Councils was quickly found to be too expensive a remedy, and was abandoned.
By 1923, conditions had improved, and the excess in imports of 1921 had largely been absorbed. The Babington-Smith report still remained nominally in force for a few years, but it became neces sary to reconcile the official currency system with the facts of the case. The Hilton-Young committee was appointed, and pre sented its report in 1926. It recommended the formal adoption of the gold standard for India, and the establishment of a new central bank. A bill passed in 1927 gave effect to the first part of the report. It stabilized the rupee at is. 6d. gold. Pending the establishment of the central bank, the Government of India was bound to buy or sell gold at the gold points corresponding to the new parity of is. 6d. ; these duties are to be taken over by the central bank when established. The Bill to establish the central bank was thrown out by the Assembly ; the Government of India continued indefinitely to maintain the exchange at the new level of is. 6d.
The rupee is divided into 16 annas, and the arena is sub-divided into 12 pies. (See also CURRENCY.) (N. E. C.)