obligations as to convertibility were those of “effective absolute immediate convertibility.”²⁹³ We can now appreciate why Prof. Sumner said²⁹⁴ that ²⁹³ “No single word can convey the full meaning,” says Prof. Nicholson, _War Finance_, 2nd ed., 1918, p. 36. ²⁹⁴ _A History of American Currency_, New York. 1874, p. 116. “convertibility in the currency is like conscientiousness in a man: it has many grades and is valuable in proportion as it is strict and pure.” That being so, it would be foolish to assume that we are immune from the consequences of an inconvertible currency until we know what is the grade of the convertibility that is provided. Now, what is the character of the convertibility of the rupee in India? It is a deferred, delegalized, delocalized, and therefore a devitalized kind of convertibility. Indeed, really speaking it is not a convertibility, but rather it is a moratorium which is a negation of convertibility, for what does the provision for convertibility for foreign remittances mean in practice? It simply means that until a fall of exchange takes place there is a moratorium or inconvertibility in respect of the rupee. Not only is there a moratorium as long as exchange does not fall, but there is no guarantee that the moratorium will be lifted when a fall does occur. It may not be lifted, for it is a matter of conscience and not of law.²⁹⁵ Is such a grade of convertibility, if [pg 176] one has a predilection for that term, very far removed from the inconvertibility of the bank notes during the suspension period? Let those who will say so. For a person not endowed with high and subtle imagination the distinction between such a convertibility and absolute inconvertibility is too thin to persuade him that the two systems are radically different; indeed, when we come to analyse the problem of prices in India and outside India we shall find another piece of evidence to show that they are not different, and that the analogy between the two is perfect enough for all practical purposes. It may, however, be said that an inconvertible currency may be so well managed as not to give rise to a premium on gold, so that there may be little to choose between it and a perfectly convertible currency. But whether an inconvertible currency will be so well managed is a question of practical working. Again, whether the absence of premium on gold suffices to place an inconvertible currency on par with a convertible currency, so far as the price problem is concerned, is also a matter depending on circumstances. All these questions will be considered in their proper places.²⁹⁶ [pg 177]