From The Economic Journal, March 1909

RECENT ECONOMIC EVENTS IN INDIA

India's unfavourable trade balance during 1908 has attracted a good deal of attention on account of the effect on the London money market of the Secretary of State's action in supporting exchange. The period of unprecedentedly high prices in India during the previous year, which excited some controversy there, had a less direct influence on affairs in this country, and was not so closely studied. It will be worth while to trace the connection between the two occurrences, and to examine the course of events in its successive phases. Amongst a number of comments on the situation which have appeared in various financial journals in this country, there have been criticisms of the Indian Government's action which seem to the present writer to show a mistaken view of the connection of events; and, on the other hand, those who have tended to support the official policy have treated the question of exchange and the balance of trade as an isolated problem rather than as part of a complex phenomenon presenting other sides of far-reaching importance. Apart from the practical side of the matter, India's intricate and highly artificial system presents problems of special interest to the student of the theory of currency.

It will be convenient first of all to describe the recent rise of rupee prices and the explanations of it which have been suggested.