Introduction
The Herschell Committee, formed in 1892, was a significant step in the financial reforms introduced by the British colonial administration in India. Its primary purpose was to examine the question of currency standard and recommend measures to stabilize the Indian monetary system, especially in the context of the fluctuating value of the silver rupee.
Background
During the late 19th century, India followed a silver standard while major international economies had adopted the gold standard. The declining value of silver adversely affected the Indian economy, especially international trade and government finances. To address the currency crisis and explore the adoption of a gold-based standard, the British government appointed the Herschell Committee under Lord Herschell’s chairmanship.
Key Recommendations
- Closure of Indian mints to free coinage of silver to control the overproduction of rupees.
- Fixing the exchange rate of the Indian rupee at 1 rupee = 1 shilling 4 pence (i.e., 15 rupees = £1).
- Gradual movement towards a gold exchange standard without adopting full gold coinage in circulation.
Impact
The recommendations were largely implemented. The Indian Currency Act of 1893 followed, closing mints to silver coinage and effectively pegging the rupee to gold. This stabilized the currency exchange rate and brought predictability to foreign trade and revenue collection.
Conclusion
The Herschell Committee Report was a key moment in India’s transition toward modern monetary policy. It laid the foundation for a managed currency system and helped integrate India into the global economic framework dominated by the gold standard.