These facts were admitted by the Finance Department of [pg 206] the Government of India to be substantially correct,³²² and yet in the face of them the Committee recommended the 2s. gold parity for the rupee. The Committee confused the rupee with the silver, and thus failed to distinguish the problem of retaining the rupee in circulation and raising its exchange value in terms of gold. The latter solution was applicable only if the _rupee_ had appreciated. But as it was silver that had appreciated in terms of the rupee, the only feasible solution was to have proposed the reduction of the fineness of the rupee. Had the Committee regarded silver as a commodity distinct from the rupee like any other commodity to be measured in terms of the rupee as a unit of account, probably it might have avoided committing the blunder which it did. But what is more than probable is that the Committee did not think that the general purchasing power of the rupee was a factor of any moment in the consideration of the matter it was asked to report upon. What was of prime importance in its eyes for the maintenance of the exchange value of the rupee was a favourable balance of trade, and that India had at the time the Committee drafted its Report. For the Committee, in the course of its general observations on the exchange standard, remarked: ³²² Cf. the reply of the Hon. Mr. Howard to the question of the Hon. Mr. Sinha on September 23, 1919. _S.L.C.P._, Vol. LVII, p. 417. “that the system had proved effectual in preventing the fall in the value of the rupee below 1s. 4d., and unless there should have been profound modifications in India’s position as an exporting country with a favourable trade balance, there was no reason to apprehend any breakdown in this respect.”³²³ ³²³ Report, par. 33. Proceeding on this view of the question it was quite natural for the Committee to have argued that if a favourable balance of trade sustained 1s. 4d. gold exchange, why should a similar balance of trade not sustain 2s. gold exchange?