a change in their respective rupee ratios, and India will meet Pakistan half way by
raising the rupee from its present, is. 6d. rate to is. 9d., while Pakistan will bring ...
ECONOMIC WEEKLY
M a y 20, 1950
Delhi Letter
Rajaji And The Rupee E S P I T E the categorical stateD ment from D r . John M a t t h a i that there would be no further revaluation of the rupee, and an even more emphatic statement from the Pakistan Prime Minister that his Government w o u l d not depart from the present exchange rate of the Pakistan rupee, and that these questions could not be discussed in the trade negotiations w i t h India, it is now definite that the extension of the K a r a c h i Agreement, now under discussion, w i l l be based on a revaluation of both these rupees. if the present negotiations go through, as seems likely, a simultaneous announcement would be made by both the Governments of a change in their respective rupee ratios, and I n d i a w i l l meet Pakistan half way by raising the rupee from its present, is. 6d. rate to is. 9d., while Pakistan w i l l bring down her rupee from its present rate of 2s. 2-2/3d. to a lower figure, possibly to is. 9d. The two rupees will either return to par, or the premium of the Pakistan rupee in terms of the Indian rupee will be reduced to a nominal amount.
the Finance Minister. Moreover, Dr. M a t t h a i is known to hold very strong views on the subject. He believes that, an upward revision of the rupee would be extremely detrimental to India at this stage; that, i t w i l l impede exports which have been such an encouraging feature of the situation after devaluation; that, it w i l l give undue encouragement to imports from Britain, and thus retard the industrial recovery which, he confidently expects, must follow devaluation and his tax concessions. The man chosen to execute this new policy, so unacceptable to Dr. M a t t h a i , is Chakravarti Rajagopalachari, in whose inclusion in the Cabinet Sir Archibald Nye, the British High Commissioner, is believed to have played a hand. Rajaji is regarded as the most pro-British among the top ranking politicians of the day; he has also been one of the most conciliatory to Pakistan, and is likely to prove more acceptable to Britain and Pakistan than any other public figure who could be considered for this important portfolio. There can be no question, of course, of any attempt by the British H i g h Commissioner at direct intercession; but some strings may have been delicately pulled. There is, besides, the question of personal influence. Whatever it may be, all that can be gathered from the outside, is the significant postponement by Sir Archibald of his departure to the UK for three days while Rajaji was here.
T h a t Britain would favour such an arrangement was more than hinted at when, commenting on M r . Gulam Mahomed's denial in London that Pakistan was contemplating devaluation either to the o l d sterling rate of is. 6d. or to the new rate of is. 6d. "The Economist remarked significantly that, the denial appeared to go beyond the bounds of that uncomfortable perfunctoriness which Finance Ministers are apt to assume when asked a w k w a r d questions just before a W h o sponsored, then, this move forced change of front." (italics for the revaluation of the rupee? ours). Nothing much can be gathered on this subject except the feelings This put Dr. John M a t t h a i into shared by many that the sort of at Karachi a position so awkward that there agreement arrived clating to specific commodities could was no means for h i m to extricate himself but to resign. He had com- only restore trade between the two mitted himself in his budget speech countries to a very limited extent. and later in Bombay in the clearest Freer trade is not possible without possible language that there would restoring the parity between the two be no further revaluation of the rupees which will enable a lot of rupee. He could not very well go restrictions, otherwise unavoidable, back on his word and still remain to be removed. 501
On the side of Pakistan, the rupee ratio had become such a political issue, and feelings had been worked up to such high pitch, that even if M r . Ghulam Mahomed was convinced that the decision not to devalue was wrong, it is not possible for h i m to climb down without a face-saving formula. The political atmosphere is now favourable for a revision of this decision, and the formula can easily be supplied if the Indian rupee meets the Pakistan rupee half way. REPARATIONS FROM THAILAND D I A is expected to get, I N share of reparations,
as her about £100,000 from Thailand's sterling assets, lying frozen, in London. T h a i l a n d entered the war against the Allies in January 194a, and ever si nee the p e a c e settlement of 1946, negotiations have been going on for collecting reparations from her. Though there is no confirmation yet of reports that the Commonwealth countries w i l l get £5,245,000 in all as war claims, it is understood that UK will get £4,600,000 and Australia £500,000 from Thailand's sterling assets in London.
