'The Problem of Rupee' was whose DSc Thesis ?

Correct — D, (d) Dr. Bhimrao Ambedkar.

'The Problem of the Rupee: Its Origin and Its Solution' was submitted by B. R. Ambedkar to the University of London, where he studied at the London School of Economics, and he was awarded the degree of D.Sc. in Economics for it in 1923. The book appeared the same year. The booklet prints the title in single quotes and without the definite article before 'Rupee', and sets 'DSc' with no full stops.

The substance is worth knowing, not just the attribution, because the thesis is one of the earliest sustained works of Indian monetary economics and it took a position against the most famous economist then writing on the subject. India at the time ran on a GOLD EXCHANGE STANDARD: the rupee was a silver coin, but it was made convertible at a fixed rate into sterling, which was itself on gold. The currency authority could issue rupees against sterling reserves rather than against gold held in India. J. M. Keynes, in 'Indian Currency and Finance' (1913), defended that arrangement as an economical and modern one.

Ambedkar argued for a modified GOLD STANDARD instead, and his objection was distributive as much as technical. A gold exchange standard leaves the issuing authority with discretion over how much currency to put out, and discretion in the hands of a government is exercised in the direction of issuing more. More currency means a falling internal value of money — inflation. His conclusion was that the object of currency policy should be the STABILITY OF THE VALUE OF MONEY rather than the stability of the exchange rate, because a rising price level silently transfers wealth away from everyone whose income is fixed in money terms, which in India meant wage earners, pensioners and the poor. The examiner's word 'thesis' is therefore doing real work: this was an academic argument with a social conclusion, which is characteristic of everything Ambedkar wrote.

He is the only one of the four named men who was a professional economist. The prefix 'Dr.' does not separate him from option (b), since Rajendra Prasad also held a doctorate, but the FIELD does.

Why the others are wrong

• (a)Sri Aurobindo — Aurobindo Ghose was educated in England and at King's College, Cambridge, entered the nationalist movement as one of the leaders of the Extremist wing during the Swadeshi years, and after 1910 withdrew to Pondicherry, where he spent the rest of his life on philosophy and spiritual practice. His major works — 'The Life Divine', 'Essays on the Gita', 'The Synthesis of Yoga' and the epic poem 'Savitri' — belong to metaphysics and literature. He took no doctorate and wrote nothing on currency. He is on the page as a well-known name from the same era rather than as a plausible author of a monetary thesis.
• (b)Dr. Rajendra Prasad — Rajendra Prasad was President of the Constituent Assembly and the first President of India, and his 'Dr.' is genuine — he completed a Doctorate in Law at Allahabad University after taking a master's in law at the University of Calcutta, where he won a gold medal. He even held an M.A. in Economics from Calcutta, taken in 1907, which makes this the most defensible of the three wrong options. But his doctorate was in LAW, not economics, and his writing belongs to law, politics and autobiography — 'India Divided', 'Satyagraha in Champaran', 'Atmakatha'. The currency thesis is not his.
• (c)Pt. Jawaharlal Nehru — Nehru read natural sciences at Trinity College, Cambridge, and was then called to the bar from the Inner Temple. He held no doctorate and submitted no thesis; his books — 'An Autobiography', 'Glimpses of World History' and 'The Discovery of India' — were written largely in prison and are history and political reflection rather than academic economics. His economic thinking mattered enormously after 1947 through planning and the Industrial Policy Resolutions, but it was the thinking of a head of government, not of a monetary economist, and it belongs to a period two decades after this thesis.

Two things are being tested at once: an attribution, and the currency debate the work belongs to.

THE MONETARY BACKGROUND. Under a full GOLD STANDARD a country's currency is convertible into gold, gold circulates or backs the note issue directly, and the money supply is tied to the gold the country actually holds. Under a GOLD EXCHANGE STANDARD the domestic currency is convertible not into gold but into another currency that is itself on gold — for India before 1931, sterling. The second arrangement is cheaper, because reserves can be held as interest-bearing foreign securities instead of as idle metal, and it gives the authorities room to expand the note issue. Ambedkar's case was that the room to expand is precisely the defect, because an expanding issue erodes the internal value of the currency, and that loss falls hardest on those whose money incomes cannot be renegotiated.

The general principle worth carrying out of this is the trade-off between EXTERNAL stability, which is a fixed exchange rate, and INTERNAL stability, which is a stable price level. Ambedkar chose internal stability. The same trade-off is the substance of exchange-rate policy today, and the reason a central bank with an inflation target cannot also fix its exchange rate while capital moves freely.

AMBEDKAR AS AN ECONOMIST. His academic record was substantially in economics: an M.A. at Columbia in 1915 with the thesis 'Ancient Indian Commerce', a second M.A. in 1916 with 'National Dividend of India', a Ph.D. in economics from Columbia, an M.Sc. from the London School of Economics in 1921, and the D.Sc. of the University of London in 1923 for this work. Papers set for administrative and financial services return to him regularly because he is one of the few figures who belongs to the history of Indian economics, the history of the national movement and the making of the Constitution at the same time.

Key facts

• 'The Problem of the Rupee: Its Origin and Its Solution' was B. R. Ambedkar's D.Sc. thesis, awarded by the University of London in 1923 and published the same year.
• It examines the causes of the fall in the rupee's value and argues for a modified gold standard rather than the gold exchange standard that J. M. Keynes had favoured.
• Under a gold exchange standard the domestic currency is convertible into another currency that is on gold, not into gold itself — India's rupee was tied to sterling in this way.
• Ambedkar's objection was that discretion over the note issue tends towards expansion and so towards inflation, which falls hardest on those with money incomes fixed in nominal terms.
• His stated priority was the stability of the internal value of money over the stability of the exchange rate.
• His economics degrees: M.A. Columbia 1915 ('Ancient Indian Commerce'), a second M.A. 1916 ('National Dividend of India'), Ph.D. Columbia in economics, M.Sc. LSE 1921, D.Sc. London 1923.
• Rajendra Prasad's doctorate was in Law, from Allahabad University, though he also held an M.A. in Economics from Calcutta taken in 1907.

Common traps

• Answering by general eminence rather than by professional formation. All four options are famous; only one wrote academic economics for a degree.
• Using the 'Dr.' prefix as the discriminator. Rajendra Prasad's doctorate is genuine, so the prefix separates nothing; the field of the doctorate does.
• Assuming the thesis argued for the gold exchange standard because that was the arrangement India used. Ambedkar argued against it.
• Confusing the gold standard with the gold exchange standard. Under the second, convertibility is into another country's currency, not into metal.

• practice — not a real PYQ

  Under a gold exchange standard, the domestic currency is made convertible into

  • (a)gold held within the country
  • (b)silver at a statutory ratio
  • (c)another currency that is itself convertible into gold
  • (d)a basket of commodities of fixed composition

  Answer(c) another currency that is itself convertible into gold — the country holds its reserves in that foreign currency or in securities denominated in it, rather than in metal. Colonial India's rupee was linked to sterling in exactly this way, and it was the discretion this arrangement gave the issuing authority that Ambedkar's thesis attacked.

• practice — not a real PYQ

  Which of the following works was written by B. R. Ambedkar ?

  • (a)Indian Currency and Finance
  • (b)The Problem of the Rupee : Its Origin and Its Solution
  • (c)Poverty and Un-British Rule in India
  • (d)The Discovery of India

  Answer(b) The Problem of the Rupee : Its Origin and Its Solution — his D.Sc. thesis at the University of London, 1923. 'Indian Currency and Finance' (1913) is by J. M. Keynes, whose position on the gold exchange standard Ambedkar wrote against; 'Poverty and Un-British Rule in India' is by Dadabhai Naoroji; 'The Discovery of India' is by Jawaharlal Nehru.