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The question is about the adoption of currency during imperialist rule.

  • Why did the British persist with the local currency, the rupee?
  • What impediments did the British face in implementing the pound-sterling system in India?
  • Were these impediments overcome in other colonies, and if yes, how?
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My guess would be for the same reason that introducing the Euro turned out to be not such a good idea. The gap between the British & Indian economy was pretty high during that time and the monetary policy required for either must have been pretty different. I'm not an economist though so this may not be correct. –  Opt May 18 '12 at 18:16

3 Answers 3

up vote 9 down vote accepted

Just speculating here, but moving sterling from Britain to India would have been rather expensive back in the day. Also, minting sterling in India would have been risky to the currency back home since in those days currencies were based on the gold standard and Indian mints could easily have diluted the metals and thereby the home currency. also, it sounds like (I don't really know) India already had a currency that was easily interchangeable based on the Gold standard...unlike today's fiat floating currencies that always change.

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From the wikipedia

Following the Indian Mutiny in 1857, the British government took direct control of British India. Since 1851, gold sovereigns were produced en masse at the Royal Mint in Sydney, New South Wales. In an 1864 attempt to make the British gold sovereign the "imperial coin", the treasuries in Bombay and Calcutta were instructed to receive gold sovereigns; however, these gold sovereigns never left the vaults. As the British government gave up hope of replacing the rupee in India with the pound sterling, it realised for the same reason it could not replace the silver dollar in the Straits Settlements with the Indian rupee (as the British East India Company had desired).

There are some sources listed in the wikipedia article that I have cited above. If this is true then it seems that they did attempt but failed.

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It would be nice to know why the British gave up hope-or why they did not replace the silver dollar in the Straits Settlements. It is good to know that the British tried. –  JoeHobbit May 30 '12 at 3:38

The reason why is that India was on a silver standard and England was on a gold standard in which pounds were denominated. To convert India to pounds sterling, you would have had to convert the whole country to a gold standard first, which was discussed occasionally, but was more or less impractical because India had no central bank like England did. To quote from the Calcutta Magazine and Register (1831):

We think therefore that the Sicca Rupee should be selected for general currency in British India. If indeed the unit of English money were now silver as it was in 1815, we should have no hesitation in recommending a complete assimilation of the currencies of the two countries. This in the case supposed would be feasible by establishing in India, as the unit of denomination, the double-shilling sterling, or 1/16th of the pound sterling. The slight derangement which the Bengal circulation would experience would be more than compensated by an Identity of the currencies of Great Britain and India—As however, the unit of pecuniary denomination in England is gold, the desired assimilation is not now practicable ; and therefore there would be no compensating advantage, which would justify the disturbance of the currency which here measures the state debt and fixed Revenue.

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