PANDIT NEHRU ON DEVALUATION · Pakistan Decision Upsets STOCK EXCHANGE Devaluation and the Stock...
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24th Sept., 1949 Eight annas EDITORIAL Pandit Nehru on Devaluation Defensive Measures OFF THE RECORD The Deep End FROM OUR AMERICAN CORRESPONDENT On the Eve of the IMF Meeting SPECIAL ARTICLES Exchange Parities after World War II The New Crucifixion FROM SOUTH INDIA Zamindars Go, but What Next? MONEY MARKET Pakistan Decision Upsets STOCK EXCHANGE Devaluation and the Stock Market Devaluation Makes Pak Cotton Dearer CURRENT STATISTICS 1 2 7 9 5 11 14 19 17 16 23 Manuscripts should be typed, double- spaced, on one side of the paper, and be accompanied by a stamped enve- lope. Communications to be addressed to the Editor, The Economic Weekly, 13-15, Tamarind Lane, Fort, Bombay, Subscriptions post free to India and Pakistan Twelve months-Twenty-four rupees. Six months—Twelve rupees V o l u m e O n e N u m b e r 3 9 PANDIT NEHRU ON DEVALUATION HOPE springs eternal in the human breast and faith dies hard that by strategic action—at the near strathosperic level of in- ternational currency negotiations—our economic problems can be solved and all of us can have a good time. A corollary of this naive belief is that we are not having a good time because our Finance Minister or those whom we send for the highest level talks on such things are not clever enough. Such widespread feelings and sus- picions cover the issue of devaluation, making it both obscure and suspect in the public eye at the same time. It was clearly, there- fore, the duty of the Government that when they took a decision on this important issue, they should take the public into confidence, place the facts clearly before them and explain the reasons that led them to adopt this particular course instead of any other. If they were free to act one way or the other—the Prime Minister has as- sured us that our freedom in this respect was complete and un- fettered—this was the least that could be expected from his Gov- ernment. Not that Pandit Jawaharlal Nehru has quailed at the job. Those who failed to be impressed by his physical courage in facing the angry audience in Calcutta will now revise their opinion, after the manner in which he has gone at devaluation with hammer and tong. Britain also devalued. She felt it was necessary. But the step was not pleasant. Though Sir Stafford Cripps naturally tried to sugar-coat the bitter pill with the assurance that cost of living would not rise much except the price of bread, there has been no attempt to whittle down the ugly fact that devaluation means hard- er work and further sacrifices. It means, in short, that the British people will have to accept a lower standard of living. They have got to take it as gracefully as they can. But why did we have to follow suit? Maybe, there was no alternative, since the sterling area is such as important market for cur exports. Pandit Nehru admits that. But instead of asking the people bravely to face whatever sacrifices are inevitable in such a course of action, he has unnecessarily weakened the Gov- ernment case by a number of irrelevancies. His final appeal is to his own feelings. "I cannot furnish any proof", he said on the occa- sion of the anniversary of the celebration of the National Employ- ment Service in New Delhi, "but, I have a feeling that devaluation
Transcript of PANDIT NEHRU ON DEVALUATION · Pakistan Decision Upsets STOCK EXCHANGE Devaluation and the Stock...
24th Sept., 1949 Eight annas
E D I T O R I A L
P a n d i t N e h r u o n D e v a l u a t i o n
D e f e n s i v e M e a s u r e s
OFF T H E RECORD
The Deep End
F R O M OUR A M E R I C A N
CORRESPONDENT
On the Eve of the I M F Meeting
SPECIAL ARTICLES
Exchange Parities after Wor ld
War I I
The New Crucifixion
F R O M SOUTH I N D I A
Zamindars Go, but What Next?
MONEY M A R K E T
Pakistan Decision Upsets
STOCK E X C H A N G E
Devaluation and the Stock Market
D e v a l u a t i o n M a k e s P a k C o t t o n
Dearer
CURRENT STATISTICS
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2
7
9
5
11
14
19
17
16
23
Manuscripts should be typed, double-spaced, on one side of the paper, and be accompanied by a stamped envelope. Communications to be addressed to the Editor, The Economic Weekly, 13-15, Tamarind Lane, Fort, Bombay,
Subscriptions post free to
India and Pakistan
Twelve mon ths -Twen ty - fou r rupees.
Six months—Twelve rupees
V o l u m e O n e N u m b e r 3 9
PANDIT NEHRU ON DEVALUATION
H O P E s p r i n g s e t e r n a l i n t h e h u m a n b r e a s t a n d f a i t h d ies h a r d
t h a t b y s t r a t eg i c a c t i o n — a t t h e near s t r a t h o s p e r i c l e v e l o f i n
t e r n a t i o n a l c u r r e n c y n e g o t i a t i o n s — o u r e c o n o m i c p r o b l e m s c a n b e
s o l v e d a n d a l l o f u s can h a v e a g o o d t i m e . A c o r o l l a r y o f t h i s n a i v e
b e l i e f i s t h a t w e a re n o t h a v i n g a g o o d t i m e because o u r F i n a n c e
M i n i s t e r o r those w h o m w e send f o r t he h i g h e s t l e v e l t a l k s o n s u c h
t h i n g s are n o t c l e v e r e n o u g h . S u c h w i d e s p r e a d fee l ings a n d sus
p i c i o n s c o v e r t h e issue o f d e v a l u a t i o n , m a k i n g i t b o t h o b s c u r e a n d
suspec t i n t h e p u b l i c e y e a t t h e same t i m e . I t was c l e a r l y , t h e r e
f o r e , t h e d u t y o f t h e G o v e r n m e n t t h a t w h e n t h e y t o o k a dec i s ion
o n t h i s i m p o r t a n t issue, t h e y s h o u l d t a k e t h e p u b l i c i n t o conf idence ,
p l a c e t h e facts c l e a r l y b e f o r e t h e m a n d e x p l a i n the reasons t h a t l e d
t h e m t o a d o p t t h i s p a r t i c u l a r c o u r s e i n s t ead o f a n y o t h e r . I f t h e y
w e r e f ree t o ac t one w a y o r t h e o t h e r — t h e P r i m e M i n i s t e r has as
s u r e d u s t h a t o u r f r e e d o m i n t h i s respec t w a s c o m p l e t e a n d u n
f e t t e r e d — t h i s w a s the leas t t h a t c o u l d b e e x p e c t e d f r o m h i s G o v
e r n m e n t .
N o t t h a t P a n d i t J a w a h a r l a l N e h r u has q u a i l e d a t t h e j o b .
T h o s e w h o f a i l e d t o b e i m p r e s s e d b y his p h y s i c a l c o u r a g e i n f a c i n g
the a n g r y a u d i e n c e i n C a l c u t t a w i l l n o w r e v i s e t h e i r o p i n i o n , a f t e r
t he m a n n e r i n w h i c h h e has gone a t d e v a l u a t i o n w i t h h a m m e r a n d
t o n g .
B r i t a i n a lso d e v a l u e d . S h e f e l t i t was necessary . B u t t h e
s tep w a s n o t p leasan t . T h o u g h S i r S t a f f o r d C r i p p s n a t u r a l l y t r i e d
t o suga r - coa t t h e b i t t e r p i l l w i t h t h e assurance t h a t cost o f l i v i n g
w o u l d n o t r i s e m u c h e x c e p t t h e p r i c e o f b r e a d , t h e r e has b e e n n o
a t t e m p t t o w h i t t l e d o w n t h e u g l y fac t t h a t d e v a l u a t i o n m e a n s h a r d -
e r w o r k a n d f u r t h e r sacr i f ices . I t means, i n s h o r t , t h a t t he B r i t i s h
p e o p l e w i l l h a v e to accep t a l o w e r s t a n d a r d of l i v i n g . T h e y h a v e
go t to t a k e i t a s g r a c e f u l l y a s t h e y can.
B u t w h y d i d w e h a v e t o f o l l o w s u i t ? M a y b e , t h e r e w a s n o
a l t e r n a t i v e , s ince the s t e r l i n g a rea i s s u c h a s i m p o r t a n t m a r k e t fo r
c u r e x p o r t s . P a n d i t N e h r u a d m i t s t ha t . B u t i n s t e a d o f a s k i n g
t h e p e o p l e b r a v e l y t o face w h a t e v e r sacr i f ices a r e i n e v i t a b l e i n
s u c h a cour se o f a c t i o n , he has u n n e c e s s a r i l y w e a k e n e d t he G o v
e r n m e n t case b y a n u m b e r o f i r r e l e v a n c i e s . H i s f i n a l a p p e a l i s t o
h i s o w n f ee l ings . " I c a n n o t f u r n i s h a n y p r o o f " , h e sa id o n t he occa
s i o n o f t h e a n n i v e r s a r y o f t h e c e l e b r a t i o n o f t h e N a t i o n a l E m p l o y
m e n t S e r v i c e i n N e w D e l h i , " b u t , I h a v e a f e e l i n g t h a t d e v a l u a t i o n
E C O N O M I C W E E K L Y 2 4 t h S e p t e m b e r 1949
w o u l d r e s u l t i n s o m e b e n e f i t t o
I n d i a . " O n e m a y n o t q u a r r e l
w i t h h i s f ee l i ngs , b u t t h i s a m a t
t e r o f h a r d fac ts ; a n d h i s assur
ance " t h a t t h e cash w h i c h a n y i n
d i v i d u a l m a y possess o r h i s b a n k
depos i t s w i l l n o t b e t o u c h e d i n
a n y m a n n e r . " by d e v a l u a t i o n i s
p r o o f e n o u g h t h a t p e r s o n a l f e e l
ings d o n o t l e a d one v e r y f a r i n
t h e u n d e h s t a n d i n g o f c o m p l e x
p r o b l e m s .
B r i t a i n has b e e n i n a v e r y
t i g h t c o r n e r . N e c e s s i t y has f o r c e d
h e r t o accep t a l o w e r s t a n d a r d o f
l i v i n g . S i n c e p o l i t i c a l e x p e d i e n
c y m a d e i t i m p o s s i b l e e v e n f o r
t h e l e ade r s o f S o c i a l i s t B r i t a i n t o
i m p o s e a s t r a i g h t f o r w a r d c u t i n
wages , she h a d t o compass t h e
same e n d b y t h e m o r e d e v i o u s
process o f c u t t i n g d o w n r e a l
wages , l e a v i n g m o n e y w a g e s u n
c h a n g e d .
W h y s h o u l d w e h a v e t o accept
a s i m i l a r c u t i n r e a l i n c o m e s e x
cep t t h a t s t e r l i n g m a r k e t s a r e i m
p o r t a n t f o r o u r e x p o r t s has n e v e r
b e e n e x p l a i n e d . P a n d i t N e h r u
does n o t c o n t e n d t h a t o u r b a l a n c e
o f p a y m e n t p o s i t i o n d e m a n d e d
s u c h a d r a s t i c cou r se of a c t i o n .
F r o m B r i t a i n , h o w e v e r , has c o m e
c l a r i f i c a t i o n . T r u e , she h a d n o
w a y o u t save b y h a r d w o r k a n d
t i g h t be l t s . B u t , she h a d t h e
c o n s o l a t i o n o f k n o w i n g a s M r .
E d e n p u t i t w i t h b r u t a l f r a n k n e s s
t h a t " i n t h e D o m i n i o n s w e h a v e
s t a u n c h c o l l a b o r a t o r s , i n t h e
c o l o n i a l t e r r i t o r i e s va s t r e s o u r c e s
o f h i t h e r t o u n d e v e l o p e d w e a l t h
a n d i n t h e U . S . A . a n a l l y w h o s e
w e a l t h a n d p o w e r a r e i n c r e a s i n g
l y b e i n g p l e d g e d t o t h e m a i n t e n
ance o f t he w h o l e s t e r l i n g sys
t e m . " P a n d i t N e h r u ' s i n s i s t ence
t h a t t h e r e was n o s u g g e s t i o n f r o m
B r i t a i n t h a t I n d i a s h o u l d also d e
v a l u e h e r r u p e e seeks t o d r a w a
t h i n v e i l o v e r t h i s aspect o f c o l l a
b o r a t i o n , t o w h i c h o u r F i n a n c e
M i n i s t e r h a d c o m m i t t e d t h i a
c o u n t r y i n a d v a n c e d u r i n g t h e
C o m m o n w e a l t h F i n a n c e M i n i s
t e r s ' C o n f e r e n c e .
T h e r e i s n o t h i n g w r o n g , h o w
e v e r , i n c o l l a b o r a t i o n i f t h e r e b y
w e c a n f u r t h e r t h e c o u n t r y ' s
i n t e r e s t s . M a n y t h i n g s w e r e
d i s cus sed i n W a s h i n g t o n , b u t i f
o n e scans c a r e f u l l y t h e t e n p o i n t s
i n t h e c o m m u n i q u e i s sued a t t h e
e n d o f t h e t a l k s , one does n o t f i n d
t h a t o u r case w a s p res sed a t a l l .
T h e r e w a s n o p r e s s u r e o n o u r
p a r t t h a t a n y c o m m o d i t i e s f r o m
t h i s c o u n t r y s h o u l d b e i n c l u d e d
i n t h e s t o c k - p i l i n g a r r a n g e m e n t s
w h i c h a re t o r e l i e v e s h o r t a g e o f
d o l l a r s . B u t h a v i n g s t a r t e d t o
d e f e n d s o m e t h i n g f o r w h i c h h e
c o u l d n o t o f f e r a n y p r o o f s , g u i d
e d s o l e l y b y h i s f e e l i n g s , P a n d i t
N e h r u r e a c h e d a l m o s t t h e p o i n t
o f a b s u r d i t y i n h i s c o n c l u s i o n
t h a t d e v a l u a t i o n s h o u l d n o t a f fec t
o u r p r i v a t e l i v e s a n d o u r d o m e s
t i c e c o n o m y , s ince b y h a r d w o r k
w e c a n a t t a i n s e l f - s u f f i c i e n c y a n d
d o n o t h a v e t o w o r r y a b o u t e x
c h a n g e p r o b l e m s a t a l l .
Q u i t e u n d a u n t e d t h a t s o m a n y
issues w e r e i n c o n v e n i e n t t o e x
p l a i n , P a n d i t N e h r u rose t o
h e i g h t s o f e l o q u e n c e w h e n h e
' s a i d t h a t d e v a l u a t i o n c o u l d t u r n
o u t a b l e s s i n g to t h e p e o p l e o f
I n d i a , p r o v i d e d t h e y b e c a m e
a l e r t . I n t h e h a p p e n i n g s o f t h e
las t f e w days t h e r e is a l esson
f o r u s t o s h a k e off o u r l e t h a r g y
a n d " t o d e v o t e o u r s e l v e s t o t h e
t a s k o f p r o d u c i n g a l l o u r necess i
t i e s o f l i f e i n t h i s c o u n t r y . I f w e
d o t h a t i t w o u l d t h e n m a t t e r
l i t t l e w h e t h e r v a l u e s o f c u r
r e n c i e s i n o t h e r c o u n t r i e s c h a n g e d
o r n o t . " S o w h y b o t h e r a b o u t
t h e d o l l a r v a l u e o f t h e r u p e e ?
T h a t t h e o c c a s i o n w a s t h e
f o u r t h a n n i v e r s a r y c e l e b r a t i o n o f
t h e N a t i o n a l E m p l o y m e n t S e r
v i c e o n w h i c h h i s G o v e r n m e n t
h a d e f fec ted a c u t i n e x p e n d i t u r e
i n t h e i n t e r e s t s o f e c o n o m y , d i d
n o t s t o p P a n d i t N e h r u e i t h e r ,
f r o m e x t o l l i n g t h e a c t i o n o f S i r
S t a f f o r d C r i p p s , w h i c h h e s a i d
h a d b e e n t a k e n i n t h e i n t e r e s t o f
k e e p i n g u p e m p l o y m e n t i n B r i
t a i n . I f h i s G o v e r n m e n t w e r e
e q u a l l y s e r i o u s a b o u t e m p l o y
m e n t , w h y c u r t a i l t h e E m p l o y
m e n t S e r v i c e ? A n d w h a t i s
m o r e , w i l l d e v a l u a t i o n c u r e e m
p l o y m e n t i n t h i s c o u n t r y also?
I f i t i s t h e p r e s c r i p t i v e
r i g h t o f c i v i l s e r v a n t s t o b e
o m n i s c i e n t a b o u t e v e r y t h i n g f r o m
l a n d r e v e n u e a n d c r i m i n a l l a w t o
t r a d e a g r e e m e n t s a n d c u r r e n c y
m a t t e r s , i t i s t h e p r i v i l e g e o f
p u b l i c m e n t o a i r t h e i r v i e w s o n
occas ions o n issues o f p u b l i c i m
p o r t a n c e . S o m e t i m e s i t i s a lso
t h e i r m i s f o r t u n e , t h e p r i c e t h e y
h a v e t o p a y f o r t h e i r g rea tness .
N o one c a n d e n y P a n d i t N e h r u
h i s m e e d o f p r a i s e f o r d i s c h a r g
i n g h i s d u t i e s o n t h e p r e s e n t
occas ion so c o u r a g e o u s l y .
D E F E N S I V E M E A S U R E S
NOT a s ing l e a r g u m e n t has
b e e n p u t f o r w a r d e i t h e r b y
t h e P r i m e M i n i s t e r i n h i s b r o a d
cast t a l k o r i n t h e ' c o m m u n i q u e '
i s sued b y t he F i n a n c e M i n i s t e r i n
f a v o u r o f d e v a l u a t i o n o f t h e
rupee . F r o m press c o m m e n t s a n d
d i scuss ions o n t h e s u b j e c t , i t ap
pea r s t h a t t h e r e i s a w i d e s p r e a d
f e e l i n g a n d b e l i e f t h a t I n d i a has
a v o i d e d d e p r e c i a t i o n o f a m a j o r
p o r t i o n o f t h e s t e r l i n g assets b y
p r o p o r t i o n a t e d e v a l u a t i o n o f t h e
r u p e e i n t e r m s o f g o l d . R u n n i n g
t h r o u g h t h e F i n a n c e M i n i s t r y ' s
' c o m m u n i q u e , ' t h e r e i s t h e u n s a i d
a s su rance t h a t I n d i a has succeed
e d i n p r o t e c t i n g h e r f o r e i g n assets
b y d e v a l u i n g t h e r u p e e .
2
2 4 t h S e p t e m b e r 1949 E C O N O M I C W E E K L Y
T h o u g h n e i t h e r t h e P r i m e M i
n i s t e r n o r t h e F i n a n c e M i n i s t r y ' s
' c o m m u n i q u e ' d i r e c t l y r e f e r s t o
t h i s aspec t o f t h e p r o b l e m , f r e e
c o m m e n t s a n d d i s cus s ions s e e m t o
sugges t t h a t , w h i l e d e p r e c i a t i o n
o f t h a t p o r t i o n o f s t e r l i n g assets
c o n v e r t i b l e i n t o d o l l a r s c o u l d n o t
b e a v o i d e d , d e v a l u a t i o n o f t h e
r u p e e t o t h e same e x t e n t a s t h a t
o f t h e p o u n d has e n s u r e d t h e
v a l u e o f t h e s t e r l i n g assets w h i c h
a r e e x p e n d a b l e w i t h i n t h e s t e r l i n g
a r e a . T h a t i s w h y t h e d e m a n d
ha s b e e n m a d e i n s o m e q u a r t e r s
t h a t B r i t a i n s h o u l d b e a s k e d t o
c o m p e n s a t e I n d i a f o r t h e loss i n
v o l v e d o n t h a t p o r t i o n o f s t e r l i n g
w h i c h i s , o r w h i c h w i l l be , c o n
v e r t i b l e i n t o d o l l a r s .
F a c t s a r e o t h e r w i s e . D e p r e c i a
t i o n o f I n d i a ' s s t e r l i n g assets i s a n
a u t o m a t i c s e q u e l t o d e v a l u a t i o n
o f t h e p o u n d i n t e r m s o f g o l d , a n d
i t e x t e n d s t o t h e w h o l e o f o u r
s t e r l i n g ba l ances w h e t h e r c o n v e r
t i b l e o r n o t . O n t h e p o r t i o n o f
s t e r l i n g r e l e a s e d f o r d o l l a r c o n -
. v e r s i o n , d e p r e c i a t i o n of assets i s
d i r e c t l y p r o p o r t i o n a t e t o d e p r e c i a
t i o n o f s t e r l i n g i n r e l a t i o n t o t h e
d o l l a r . O n t h e n o n - c o n v e r t i b l e
p o r t i o n , t h e e x t e n t o f d e p r e c i a
t i o n w i l l b e m e a s u r e d b y t h e
a m o u n t o f r i s e o f p r i c e s i n B r i
t a i n .
I t i s a safe a s s u m p t i o n t h a t
i n t e r n a l p r i c e s i n B r i t a i n w i l l i n
c rease as a r e s u l t of d e v a l u a t i o n .
D e s p i t e S i r S t a f f o r d C r i p p s ' as
s u r a n c e t h a t , a p a r t f r o m t h e
a l r e a d y a n n o u n c e d r i s e i n b r e a d
a n d f l o u r p r i c e s t h e G o v e r n m e n t
w o u l d t r y t o c h e c k a n y t e n d e n c y
t o w a r d s h i g h e r p r i c e s , i t m a y n o t
b e p o s s i b l e t o c u r b p r i c e inc reases
c o n s e q u e n t u p o n d e v a l u a t i o n .
T h e h i s t o r y o f p r i c e c o n t r o l s
m a k e s i t a b u n d a n t l y e v i d e n t t h a t
t h e a p p a r a t u s i s l i k e l y t o . b r e a k
d o w n o r w i l l , a t bes t , f u n c t i o n i n
e f f e c t i v e l y , i n t h e absence o f
a d e q u a t e s u b s i d i e s . A n d , i n r e -
t r p s p e c t , i t m a y w e l l s eem t h a t
m o r e s i g n i f i c a n t t h a n d e v a l u a t i o n
o f t h e p o u n d i s S i r S t a f f o r d
C r i p p s ' i m p l i e d h i n t t h a t t h e
a m o u n t o f subs id i e s c a n n o t , a n d
w i l l n o t , b e r a i s e d .
A d m i t t e d l y , t h e p i c t u r e i s s t i l l
c o n f u s e d . B u t i t i s d i f f i c u l t t o
r e s i s t t h e c o n c l u s i o n t h a t t h e , B r i
t i s h G o v e r n m e n t w i l l h a v e t o
p e r m i t a r i s e i n p r i c e s . I n t h e
absence o f i n c r e a s e d subs id ie s , i t
i s n o use a s s e r t i n g t h a t p r i c e s a n d
costs c a n b e m a i n t a i n e d a t c u r
r e n t l e v e l s w h e n p r i c e s o f s o m e
o f t h e e s sen t i a l m a t e r i a l s a r e
b o u n d t o m o v e u p a s a r e s u l t o f
d e v a l u a t i o n . I n d e e d , t h e u n d u l y
l o w e x c h a n g e v a l u e o f t h e p o u n d
i s w i d e l y e x p e c t e d t o e n a b l e S i r
S t a f f o r d C r i p p s t o y i e l d p a r t i a l l y
t o t h e a n t i c i p a t e d d e m a n d f o r
h i g h e r w a g e s w i t h o u t l o s i n g t h e
e x p o r t a d v a n t a g e f r o m d e v a l u a
t i o n . T h e r e f o r e , i t i s n o t a r g u a b l e
t h a t d e v a l u a t i o n o f t h e r u p e e t o
t h e s a m e e x t e n t a s t h e p o u n d
s t e r l i n g a f fo rds I n d i a a n i n d i r e c t
p r o t e c t i o n f o r t h e m a j o r p o r t i o n
o f t h e s t e r l i n g ba l ances .
W h a t a b o u t t h e e x p o r t s t i m u
l u s ? W i l l d e v a l u a t i o n o f t h e
r u p e e h e l p I n d i a ' s e x p o r t s ? T o
b e f a i r t o N e w D e l h i , i t has t o b e
a d m i t t e d t h a t t h e F i n a n c e M i n
i s t r y i s a w a r e t h a t I n d i a n e x p o r t s
a r e i n e l a s t i c ; t h a t , a s p r i c e i s n o t
t h e m a i n f a c t o r i n I n d i a ' s e x p o r t s ,
d e v a l u a t i o n i s n o t l i k e l y t o s t i m u
l a t e sales o f I n d i a ' s e x p o r t a b l e
c o m m o d i t i e s t o A m e r i c a . . A n d , o f
c o u r s e , i t i s r i d i c u l o u s t o sugges t
t h a t R u p e e d e v a l u a t i o n w i l l e n
h a n c e I n d i a ' s e x p o r t s t o t h e s t e r
l i n g a r e a , w h e r e m o s t c o u n t r i e s
h a v e d e v a l u a t e d t h e i r o w n c u r
r e n c i e s to a m o r e o r less i d e n t i c a l
deg ree .
C o n s i d e r , n o w , t h e i m p a c t o n
i m p o r t s . T r u e , t h e b u l k o f I n d i a ' s
i m p o r t s c o m e f r o m t h e s t e r l i n g
a r ea . T h a t b e i n g so, i t w i l l n o t
a f fec t i m p o r t costs e x c e p t t o t h e
e x t e n t o f t h e a n t i c i p a t e d r i s e i n
p r i c e s i n B r i t a i n a n d i n t h e n o n
d o l l a r a rea . B u t , w h a t a b o u t i m
p o r t s f r o m A m e r i c a ? T h e m o s t
s e r i o u s r e p e r c u s s i o n o f d e v a l u a
t i o n w i l l b e t h a t i t w i l l cos t I n d i a
m u c h m o r e t o i m p o r t d o l l a r
goods . E x c l u d i n g f o o d i m p o r t s ,
I n d i a ' s d o l l a r d e f i c i t i s n o t a p p r e
c i a b l e . S t r a n g e , t h o u g h i t m a y
seem, t h e d o u b l e a s s u r a n c e o f t h e
P r i m e M i n i s t e r a n d t h e F i n a n c e
M i n i s t r y t h a t I n d i a has c o m p l e t e d
h e r f o o d i m p o r t p r o g r a m m e f r o m
A m e r i c a w i l l b e a c c e p t e d a s ' a
p r o f o u n d r e l i e f .
B u t , t h i s i s n o t t h e w h o l e s t o r y .
R e c e n t l y , I n d i a has s e c u r e d a l o a n
f r o m t h e W o r l d B a n k . T h e r e a r e
o t h e r W o r l d B a n k loans i n t h e
o f f i n g . T h e r e i s a b u n d a n t e v i d
ence t h a t A m e r i c a i s n o w eager t o
assist u n d e r - d e v e l o p e d A s i a n
c o u n t r i e s w i t h d o l l a r l oans f r o m
t h e U . S . E x p o r t - I m p o r t B a n k s . B y
t h e f i r s t q u a r t e r o f 1950, t h e f l o w
o f P o i n t F o u r d o l l a r s i s e x p e c t e d
t o c o m m e n c e . I t i s , t h e r e f o r e , a
r e a s o n a b l e p r e s u m p t i o n t h a t I n
d i a , a l o n g w i t h o t h e r d e p r e s s e d
a reas i n A s i a , w i l l be p r o v i d e d
w i t h m o r e d o l l a r s t o b u y goods
a n d m a t e r i a l s n e e d e d f o r e c o n o
m i c r e c o n s t r u c t i o n a n d r e c o v e r y .
B y d e v a l u i n g t h e r u p e e a t t h i s
j unc tu i^e , I n d i a a u t o m a t i c a l l y
ra ises t h e cos t o f h e r c a p i t a l
e q u i p m e n t . I n d u s t r y w i l l h a v e
t o p a y m o r e n o w f o r i m p o r t s o f
m a c h i n e r y a n d o f a g r i c u l t u r a l
i m p l e m e n t s , w h i c h i t w i l l h a v e t o
b u y f r o m A m e r i c a . I n s t e a d o f
d e v a l u i n g t h e r u p e e , w i t h i t s d e
b a t a b l e e x p o r t bene f i t s a n d u n
d e n i a b l e h a r m f u l consequences
o n i m p o r t s a n d p r i c e s , I n d i a ' s d o l
l a r p r o b l e m c o u l d h a v e b e e n
b e t t e r s o l v e d b y a n A m e r i c a n
u n d e r t a k i n g t o s t o c k - p i l e , a l o n g
w i t h r u b b e r a n d t i n , s t r a t e g i c r a w
m a t e r i a l s l i k e m i c a , m a n g a n e s e ,
she l l ac a n d j u t e .
R e m a i n s t h e p r o b l e m o f assess
i n g t h e m e a s u r e s u n d e r t a k e n o r
u n d e r c o n t e m p l a t i o n b y t h e G o v
e r n m e n t t o i n s u l a t e t h e c u r r e n c y
3
