ABSTRACT
The administration of colonial finance and the monetary policy of the imperial powers for their dependencies made an impact on the structure of the colonial economy. The dominant doctrine of the nineteenth century with regard to money and banking was the currency principle which was based on the assumption that a currency consisting of precious metal would always establish an automatic equilibrium of all economic transactions. The advocates of this principle, following their master Ricardo, reduced everything to this metallic model. India’s mints remained open due to this stand taken by the British authorities, and the Indian currency expanded very rapidly. The total active circulation of rupees amounted to 1,250 million in 1876, 1,500 million five years later, and 1,850 million in 1891. At the same time the silver rupee depreciated by about one-third within 18 years. The contemporary Indian nationalists, for reasons of their own, also believed in the benefits of the free flow of silver.
