So far as the reform of Indian currency was concerned no deliberate plan was followed and the changes that have taken place or even the fact that the gold exchange standard was allowed to develop was due mainly to force of circumstances. Prior to the introduction of the gold exchange standard, the finances of the Government of India were not very satisfactory; but since 1898 up to 1912 there was a net surplus of 29,433,000 in fourteen years. A great deal of this budget prosperity was certainly due to the fact that the inflation of the value of the rupee reduced the home charges; this contention is borne out by the fact that, when exchange fell in 1908/9 the Government had a deficit of 3,737,000, instead of a surplus. But what really helped the position was a sudden inflation of exports. Even as late as 1895 the balance of trade in India continued to be unfavourable to her; but the great expansion of trade and the entry of the Continental markets for buying raw produce led to a large excess of exports of merchandise over imports. This was specially noteworthy after 1908/9 when the excess increased from 16,221,000 to 55,782,000 in 1911/12. Thus, it happened that, even allowing for home charges, India had a fairly large amount of her credit which was paid to her mostly in gold. For instance while in 1897/8 she received 732,000 oz. of gold, in 1909/10 3,505,000 oz. were imported and in 1911/12 6,244,000 oz. besides the total of 600,000 oz. produced yearly in India. The prosperity of the exporters also helped to introduce the gold coin, especially the sovereign, in the Punjaub, from which most of the wheat produced in India was exported. The Government was also able to maintain a gold standard reserve to the value of 42,045,000 at the close of the financial year 1911/12 without imposing any cost on the revenue of India. Of this huge total the total actual profit in coinage was 22,000,250. Circumstances, therefore, conspired to bring about a fixity of the arrangement, even although there has been considerable borrowing in London in order to help the standard; but the tendency has been towards a reduction in, and not an increase of, borrowings in London.

Since 1906 the flow of gold into India has been over 80,000,000; and latterly, especially in 1911/12, India took more than 25 per cent. of the world's output. There has therefore been an outcry against the drain of gold into India. The speculations in connexion with that subject are beyond my province; but before the war in Europe started, the position in India was such that with a large excess exports over imports and a heavy flow of gold into the country, the time was ripe to complete arrangements to establish a gold standard in that country.