quantity theory and mughal monetary history

7/29/2019 Quantity Theory and Mughal Monetary History

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JournalThe Medieval History

DOI: 10.1177/0971945899002002051999; 2; 309The Medieval History Journal

Najaf HaiderThe Quantity Theory and Mughal Monetary History

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The Quantity Theory and MughalMonetary History

Najaf Haider*

*

Department of History, University of Delhi, Delhi, 110 007, India.

Until now, the study of Mughal money was dictated either by the concerns ofnumismatic analyses or by the need to define its position in a given economicstructure. While theformer was confined to the technical aspects of specie-money, the latter was preoccupied mostly with the theoretical implicationsof monetary movements on an aggregate scale. In both cases, the historicalconditions responsible for shaping the monetisation of the Mughal economyremained understudied. This essay examines the concepts and frameworkderived from the quantity theory of moneyand deployed in recent approachesto the study of the Mughal monetary economy. By offering a critique of themethodology adopted to evaluate money supply and price movements, itstresses the need for an inductive study of historical material in order torefine the current picture and to extend existing knowledge of the subjectbeyond macro-economic modelling.

Modern historians efforts to identify and interpret monetary phenomenahave grown under the powerful influence of two streams of thoughtregarding the precise nature of money and its ability to function in anexchange economy: one emphasising the essential neutrality of money,and the other ascribing to it the capacity to produce real economicchanges. The dichotomy of real and monetary approaches inherent inthe

analysesof economic

changehas

longdominated the

Europeanhistoriography of money, and investigation into issues of such vital1 For a discussion of real and monetary approaches, see JosephA. Schumpeter, History

of EconomicAnalysis, London, 1954; reprinted 1994: 276-88.

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importance as the dissolution of feudalism, economic depression duringthe Renaissance, and the Price Revolution of the sixteenth century,have shown how preference for a particular set of explanations canintervene in the orderly arrangement of facts and can influence outcomes.22

The impact of the macro-economic approach on the monetary historyof non-European societies is equally apparent. It is evident in the treat-ment of Ottoman economic development in the sixteenth and seven-teenth centuries, which has become trapped in a debate around whetheror not the European Price Revolution extended to Turkey and whetherit was

caused by monetaryor

real factors.In the case of the

MughalEmpire, too, the thrust of the current historiography is pre-eminentlyon the relationship between money and the real economy, a genuineconcern in itself, without any detailed exploration of the processes bywhich monetisation as a dynamic phenomenon evolved in specific his-torical situations. There is a great deal of speculation involved in themeasurement of all the important variables of the money economy,ranging from the acquisition of monetary metal to its production and

circulation, and to its more abstract usage in credit and price formation.In that sense, the study of Mughal money has switched over from pure

2 For money and the transformation of feudal relations see Rodney Hilton, Introduc-tion, in idem (ed.), The Transition from Feudalism to Capitalism, London, 1978: 23-24.The monetary basis of medieval depression is discussed and criticism analysed in JohnDay, The Medieval Market Economy, Oxford,1987; John Munro, Bullion Flow and Mon-

etary Contraction in Late-Medieval England and the Low Countries, in John F. Richards(ed.), Precious Metals in the Later Medieval and Early Modern Worlds, Durham, 1983:

97-157. The two works which bring togethera range of competing views on the role of

money in the sixteenth century European economy are Peter H. Ramsay (ed.), The PriceRevolution in Sixteenth Century England, London, 1971; and Peter Burke (ed.), Economyand Society in Early Modern Europe: Essays fromA nnales, London, 1972. For more wide-ranging comments on the relationship between money, prices and industrial growth seeD. Felix, Profit Inflation and Industrial Growth: The Historic Record and Contempor-aryAnalogies, Roderick Floud (ed.), Essays in Quantitative Economic History, Oxford,1974: 133-51.

3 Omer Lutfi Barkan, The Price Revolution of the Sixteenth Century:A TurningPoint in the Economic

Historyof the Near

East, Justin McCarthy (tr.), InternationalJournal of Middle East Studies, vol. 6, 1975: 3-28; Halil Inalcik, Impact of theAnnalesSchool on Ottoman Studies and New Findings,Archivum Ottomanicum, vol. 6, 1978:92-96; reprinted in idem, Studies in Ottoman Social and Economic History, Variorum,1985; Robert W. Olson, The Sixteenth Century "Price Revolution" and its Effect on theOttoman Empire and on Ottoman-Safavid Relations,Acta Orientalia, vol. 37, 1976:45-55. For a critique of this kind of Eurocentricism see Suraiya Faroqhi, In Search ofOttoman History, in Halil Berktay and Suraiya Faroqhi (eds), NewApproaches to Stateand Peasant in Ottoman History, London, 1992: 211-12 and passim.



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concerns with the physical substance of money to more complete eco-nomic analysis, but without treading the interface between monetary

history and monetary theory.The purpose of the present essay is to offer an analysis of the organis-ing assumptions and techniques adopted in the study of the Mughalmonetary economy which are derived from a particular, albeit dominant,version of the quantity theory of money. In order to illustrate the abilityof the quantity theory to inspire contradictory tendencies in thehistoriography of money, an overview of the theoretical issues under-lying the notion of neutrality of money is prefaced to the main discus-sion. In the remainder of the essay, the treatment of two major themesin the historiography of Mughal money, that is, money supply andprice movements, is subjected to critical scrutiny with the help of freshtextual and numismatic material. The purpose of this criticism is to

suggest that monetary theory is way ahead of our empirical knowledgeabout the money economy, and unless monetisation as a cultural and

commercial phenomenon also becomes a major focal point for historicalattention, the domain of monetary history is likely to shrink down tomere macro-economic modelling.

FromAristotle toAbu1 Fazl: The Notion ofMonetary Neutrality

The basic concepts surrounding the nature and substance of moneywere worked out in ClassicalAntiquity whenAristotle, the most influ-

ential of the early theorists of money, placed specialisation and exchangeof surplus product at the heart of social demand. In the Peripatetictradition, the value of social products varied with the skill of the pro-ducer and the extent of household demand requiring the use of money(nomisma) to make them comparable. Money, in turn, also became themeans of exchanging goods whose value it so effectively measured.With the natural purpose of exchange being the satisfaction of humanwants, monetisation was conceived strictly within the context of justexchange, and fromAristotle onwards, the employment of money to

The two passages from Nichomachean Ethics (1133a-b) which form the basis ofAris-totles views on money as a measure of value are cited and analysed in S. Todd Lowry,TheArchaeology of Economic Ideas, Durham, 1987: 192-97. Money as a means of exchangeappears more exclusively in Politics (I. 1257a); for this seeArthur Eli Monroe, MonetaryTheory BeforeAdam Smith, Cambridge, MA, 1923: 5-9.



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accumulate more money (usury) was held to constitute an abrogationof this natural law.5

To a considerable extent, this understanding of the origin and statusof money continued to dominate the formation of economic ideas for

a long time. The ease with which it was absorbed into the various strandsof medieval Islamic thought was symptomatic of a process where pre-existing traditions were integrated into the general value system of thereligion If one looks atArabic works of such differing nature as theresponses of a Mesopotamian jurist to philosophical questions (980),the manual

penned by Dimashqi (ninth-eleventh centuries)to extol the

excellence of commerce (mahisin al tijjra) or the compendium of reli-gious sciences lulfm a] din) produced by Ghazali, the remarkably simi-lar treatment of the origins and function of money betrays allegianceto a common form of knowledge. Here, the economic needs of societywere met by the specialisation of functions and commodity exchange,and money was required to facilitate this process as a measure of valueand a means of exchange. The limits imposed on the accumulation of

money varied with the degree of individual attachment to Islamic ide-als, ranging from absolute prohibition in Ghazali to cautious approvalin Oimashq.7For Ghazali, who tied professional earnings to subsistence and prepara-

tion for the next world, the actual form of money was immaterial as

long as it remained legal tender. This is quite consistent with his con-demnation of hoarding and usury, both of which imparted an intrinsicvalue to money, as well as his criticism of counterfeiting which tampered

5 Though the idealAristotelian society accommodated trade to a limited extent, itsbasis remained forms of production associated with slavery and simple exchange betweenhouseholds. For the impact ofAristotles views on money in medieval Christendom, seeOdd Langholm, TheA ristotelianAnalysis of Usury, Bergen, 1984: Chapter 2.6Gustave E. von Grunebaum, Islam and Hellenism, Scientia, vol. 44, 1950: 21-27;

reprinted in idem, Islam andMedieval Hellenism: Social and Cultural Perspectives, Variorum,1976; Marjorie Grice-Hutchinson, Greek Economics in Spain, in idem, Early EconomicThought in Spain 1177-1740, London, 1978: 64-65.

7

[Al-Miskawayh],AlHaw&amacr;mil wal

Shaww&amacr;mil,AhmadAmin andAl

SyedAhmad Safar

(eds), Cairo, 1951: 346-68;Abul Fazl Jafar binAli al Dimashq&imacr;, Kitabal Isbara ila Mabasinal Tijara, etc., Fahmi Saad (ed.), Beirut, 1993: 25-31. The main content of Dimashq&imacr;s,work is summarised inA.K.S. Lambton, The Merchant in Medieval Islam,ALocusts

Leg, Studies in Honour of S.H. Taqizadeh, London, 1962: 122-23. For Ghaz&amacr;l&imacr; see S.M.Ghazanfar andA.Azim Islahi, Economic thought of anArab scholastic:Abu Hamid al-Ghazali (A.H. 450-505/A.D. 1058-1111), History of Political Economy, vol. 22, 1990:391-95.



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with its legal value. Dimashqi, on the other hand, considered accumulationto be a fact of mercantile life. He devoted two chapters of his manual to

discussing various forms of wealth (mal), the best of which was goldand silver money (al ayn wa al warq). Gold and silver were also the bestmedium of circulation for the qualities which made them immune toforgery and falsifications (al gfiash wal radlis).1t is evident that Dimashqisformulations were set in the context of a monetised society where allother forms of wealth could be acquired with money, and where themedieval Islamic bimetallism of dinar and dirham had already assimi-lated the

Byzantinedenarius and the Sassanian drachma.8

Dimashqisproximity to the mercantile position softened his attitude towards otheruses of money, though it still remained very much within the parametersof Islam.

If we turn our attention to another genre of literature, the fzqh, whichset up legal standards for governing economic behaviour, we find thatdespite the differing orientation of the jurists (faqih) and their respect-ive schools, there is a rare unity implied in their treatment of money.The

centraltheme of the

corpus jurisexamined

by Brunschvigis the

legal distinction between precious metals and money, and the evalu-ation of correct bimetallic ratios, both serving to ensure rightful ex-change (~arf) and to uphold the Quranic prohibition against usury.9 Inthis, the legists worked all along with the notion that money derivedits value from productive social functions and that just exchange couldtake place either between commodities or between commodity andmoney. Money-changing was deemed an act of necessity and permittedto the extent where coins in exchange

were of two different types butof the same value.

The formation of monarchical states in the Central Islamic Lands

and in India generated a substantial body of administrative and histor-ical literature. In these writings, monetary conceptions crop up underseveral items of importance but abstract reasoning over the status ofmoney does not extend beyond the adaptation ofAristotelian and neo-Platonic notions, and their amplification to accord with the ideals of

Islam. In this process, however, problems associated with statecraft and

8Andrew S. Ehrenkreutz, Money, in Handbuch der Orientalistik. ErsteAbteilung,Sechster Band, SechsterAbschnitt, Teil, 1 (wirtschaftsgeschichte des Vorderen Orients inIslamischer Zeit), Leiden, 1977; reprinted in idem, Monetary Change and Economic Historyin the Medieval Muslim World, Jere L. Bacharach (ed.), Variorum, 1992: 84-97.

9 Robert Brunschvig, Conceptions Monetaires Chez Juristes Musulmans (VIIIe-XIIIesiecles),Arabica, vol. 14, 1967: 113-43.

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the pervasive influence of an exchange economy touched off a range of

issues which needed to be addressed side by side.10 InAbui Fazl,we

find a combination of both the ideal and the practical.Abu1 Fazl regarded money to be a creation of the state. The idea

obviously represented the cartalism embedded in the thoughts and pol-icies of some of the leading Mughal functionaries, like Todarmal, whobelieved that money derived its substance from the political authorityinvested in it, and thus discounted the sprawling effect of the marketon the process of monetisation. However, whenAbui Fazl deliberates

upon the function of money as a measure of value, it is the use value ofthe substance employed as money which assumes importance. Here,gold does not appear merely as a metonym for money, but is moneypar excellence. For medieval Islamic jurists, as indeed for their Christian

counterparts, the pre-eminence of gold had much to do with the searchfor a stable monetary standard to preserve the viability of just exchangeas well as the permanency of a legislation. Gold, being a gift from God,was an inherently stable metal, immune to those external factors whichdetermined the general value of commodities.&dquo; The hoarding of goldand its non-monetary usage were construed as forms of interference

bound to threaten the stability ensured by divine will. In this scheme,silver figured as a secondary metal closely following the path of gold.The fact that the eastern half of the Islamic world-Iraq, Iran and CentralAsia-was based largely on a silver standard had to be taken into accountif the letter of the law was to remain uniformly effective throughoutthe Central Islamic Lands. Thus,

Miskawayhconsidered silver to be a

deputy (nilb) of gold, and one gets a similar characterisation in theworks ofAbil Fazl, Dimashqi andAbu1 FazlAlidmi. In order for silverto also remain as an invariable standard, a permanently fixed ratio ofone unit of gold to 10 units of silver was prescribed with the reasoningthat 10 was the limit of all units (nihjyat al ahjcf). 12

This formed the intellectual backdrop toAbu1 Fazls apotheosis ofgold and his meaningful selection of two of the several titles by which

10For views on wealth and accumulation expressed in Persian writings of the Mughalperiod see Peter Hardy, The Mughals and Money, Urdu and Muslim SouthAsia: Studiesin Honour of Ralph Russell, Christopher Shackle (ed.), Delhi, 1991: 19-27, esp.: 21-23.

11 Ibn Khaldun, The Muqaddimah, vol. 2, F. Rosenthal (tr.), New York, 1958: 313, citedin Maxime Rodinson, Islam and Capitalism, Brian Pearce (tr.), London, 1974: 32.Alsosee the views of Ibn al Qayyim cited in Louis Beck, The Mediterranean Tradition in Eco-nomic Thought, London, 1994: 104-5.

12 [Al-Miskawayh],AlHaw&amacr;mil walShaww&amacr;mil: 349.



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it was referred to in medieval literature: the universal adjuster (muqauwimi kullfi and protector of justice (b3fiz i ad31at). For justice (ad~ could

only prevail if the object chosen to assess the value of all commoditieswas capable of maintaining its own stable value.&dquo;Abu1 Fazls subsumption of silver and copper money into his exposi-

tion of gold is clearly a disproportionate reflection of the presence ofthese metals in the Mughal monetary system. He was writing in an ageof copper, and by the time he prepared his final draft, a steady streamof silver was making significant advances into the monetary economyof the empire. On the other hand, it is quite likely that, being the

ideological counsellor ofAkbar,Abu1 Fazi was in a unique position toreconcile the reasoning engrained in his monetary vision with the prac-tical requirement of a stable standard for all monetary metals. It is note-worthy that the official rates of exchange for gold and silver, and ofsilver and copper after 1582, given in theAin-i Akbari, remained remark-ably stable even in the face of considerable fluctuations in the market.This point has important implications for the analysis of bimetallicratios which occupy the centre stage in current debates on

Mughalprices.

Money as Material Wealth? Mercantilismand its Critique

We notice that the hallmark of medieval writings on monetary issueswas the presence of a moral idealism. The mercantilist literature of

sixteenth- and seventeenth-century Europe may have retained the pre-scriptive nature of all previous writings, but differed in a fundamentalaspect from them. It reflected intensely the historical conditions con-temporary to the writers, and by seeking theoretical justification forviews popular within the mercantile community, offered a new dimen-sion to the discussions on the role of money.

13

Abul Fazl, &Amacr;&imacr;n-iAkbar&imacr;, H. Blochmann (ed.), Bibliotheca Indica (henceforth Bib.Indica), 1872: vol. 1: 12-13. It is interesting to note that the need for an invariable meas-ure of value also occupied the attention of the Classical economists, particularly Ricardoand Marx, who settled for gold as the most stable of all commodities representing money.David Ricardo, The Works and Correspondence of David Ricardo, vol. 1, Piero Sraffa (ed.),Cambridge, 1951: 43-46; for the views of Marx on gold see Leonard Gomes, ForeignTradeand the National Economy, Mercantilistand Classical Perspectives, Hampshire, 1987:240-43.



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The mercantilists located in the physical substance of money-goldand silver-the source of all wealth, by assigning to it an active role in

the expansion of trade, economic production and the prosperity ofa

nation.4 Just as a successful mercantile venture concluded with the

exchange of goods for money, the welfare of a nation, now conceivedas an economic unit, advanced with net accumulation of treasure througha favourable balance of trade. The measures prescribed to achieve thisobjective, with active intervention by the state, became diverse andcomplex as more and more issues, such as the paradox of bullion exportsto the east or lower interest rates under inflation, came to be included.While the inclusion of these matters considerably enlarged the scope ofthe debate on money, it also exposed the limitations of mercantilistthought, notably its inability to penetrate those levels of the economythat lay beyond simple market exchange, and to offer a theory of moneywhich could reconcile the pursuit of precious metals with diverse areasof economic development. Thus when the challenge came from criticslike David Hume (1752), reaching its climax inAdam Smiths full blown

critiquein the Wealth

of Nations (1776), specificelements of mercantilist

thought were refuted with reference to a comprehensive theory, onewhich was meant to shake the belief in the power of money to drive

the economy.

David Hume and the Duality of Quantity Theory

The guiding principle of the quantity theory of money, which received

its first systematic expression in Humes critique of mercantilism, wasthe understanding that money is nothing but a representation of labourand commodities, and serves only as a method of rating and estimatingthem .15 Consequently, the quantity of money circulating in an economy

14 The two works which deal brilliantly with the monetary aspects of mercantilism areJacob Viner, Studies in the Theory of International Trade, London, 1964: 3-45; and Chi-Yuen Wu,An Outline of International Price Theories, London, 1939: 13-74. Two majormercantilist texts of Gerrard de Malynes and Thomas Mun from which extensive quota-tions were made available in Viner and Wu are published inAntoin E. Murphy (ed.),Monetary Theory, 1601-1758, vol. 1, London, 1997: 55-178.

15 David Hume, Of Money, Writings on Economics, Eugene Rotwein (ed.), Edinburgh,1955: 37. The pre-history of the quantity theory is traced in Hugo Hegeland, The Quant-ity Theory of Money: A Critical Study of its Historical Development and Interpretation andaRestatement, Goteburg, 1951: 1-25.Also see Pierre Vilar,A History of Gold and Money1450-1920, London, 1976; reprinted 1991: 163-65.



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would be determined by the volume of goods available for exchange-and not vice versa as was the case with the mercantilists-and would

always remain in proportion to the level of prices.6From this conceptual position, Hume mounted a powerful assault

on the virtues of treasure accumulation by suggesting that any increasein the quantity of money would lead to inflation and, by making ex-port goods less competitive, would reduce exports. Price levels and inter-national trade would be restored to their equilibrium position onlywhen the excess money is drained out to service the deficit in balanceof payments.&dquo; While the core proposition in Humes model-that anyvariation in the quantity of money would only affect prices, and notthe real economy-formed the basis for the modern quantity theory ofmoney, his demonstration of the dynamic effects of this variation cameto be known as the specie-flow mechanism in which international move-ment of precious metals was seen as the function of relative price differ-ences.g

Humes analysis of the function of money was not simply the revivalof an old tradition. Rather, it signified the transition in economic think-ing from the level of pure exchange analysis to the question of realoutput and social distribution of resources which, with the growth ofindustrial capitalism, became a major concern in the Classical politicaleconomy. Humes doctrine of automatic adjustment, anthropo-morphised inAdam Smiths invisible hand, also became a powerfulconceptual tool until it was overturned by the Keynesian revolution ofthe early twentieth century.&dquo; However, the very fact that Hume was

standingat the crossroads

(Keynes saidthat he had a foot and half in the

16 If we consider any one kingdom by itself, it is evident, that the greater or less plentyof money is of no consequence; since the prices of commodities are always proportionedto the plenty of money .... Hume, Of Money: 37.

17 Idem, Of Balance of Trade: 62-63.18 Viner, Studies in the Theory of International Trade: 74-75; Hegeland, Quantity Theory

of Money: 34-35. The modern version of the quantity theory, popular with the monetar-ists, has focused on the element of causation in Humes original formulation by stipulat-

ing that, ceteris paribus, an increase in the quantity of money causes a proportional increasein the level of commodity prices. For the latest statement of the modern version seeRobert E. Jr. Lucas, Nobel Lecture: Monetary Neutrality, Journal of Political Economy,vol. 104, 1996: 661-82.

19 The mercantilist doctrine received a new lease of life with Keynesian Revolution(1936) which advocated public spending as a cure for depression and unemployment anda means to achieve growth andprosperity. Michael Stewart, Keynes andAfter, Harmonds-worth, 1967: 103-5.



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Classical world)2 explains the presence of such notions in his formula-tions as were purely mercantilist in origin and remained in apparentcontradiction to the general drift of his argument.When Hume set out to construct the mechanism which transmitted

the effects of an increased monetary circulation to the price structure,he conceded real economic gains, that is, increased production, em-ployment and consumption. He admitted the fact that it all happens inthe interval before prices cross the optimum level and specie begins toflow out. It is important to note that Humes admittance of the shortrun

non-neutrality of money, whichbarred

his entryinto the

celebratedclub of the Classics,21 mirrored the current perception ofAmericansilver and universal price rise as contributing favourably to the pros-perity of recipient countries.22 Significantly, the same course of eventsalso compelled Marx, who otherwise premised his views on money onthe Classical law of circulation, to acknowledge the positive impact ofprecious metals on the growth of capital and the rise of the bourgeoisiealthough, for him, it was the fall in its objective cost of production,rather than a rise in the quantity of money, which triggered the trans-mission.zThe susceptibility of the quantity theory to rival interpretations of

monetary phenomena was reinforced by the mathematical expression

20J .M. Keynes, The General Theory of Employment, Interest and Money, London, 1936:343.

21Humes contention that an increased money supply would cause, initially at least, anincrease in output is cited as one important reason for the omission of his otherwise

famous specie-flow mechanism from the Wealth of Nations. Frank Petrella, Adam SmithsRejection of Humes Price-Specie-Flow Mechanism:A Minor Mystery Resolved, TheSouthern Economic Journal, vol. 34(3), 1968: 365-74; Robert V. Eagly, Adam Smith andthe Specie-Flow Doctrine, ScottishJournal of Political Economy, vol. 17, 1970: 61-68.

22 [S]ince the discovery of mines inAmerica, industry has increased in all the nationsof Europe, except in the possessors of those mines; and this may justly be ascribed, amongstother reasons, to the encrease of gold and silver.Accordingly, we find, that, in everykingdom, into which money begins to flow in greater abundance than formerly, every-thing takes a new face: labour and industry gain life, the merchant becomes more enter-

prising, the manufacturer more diligent and skilful, and even the farmer follow his ploughwith greater alacrity and attention. Hume, Of Money: 37. The mercantilist contents ofHumes doctrine are ably summarised in E.A.J. Johnson, Predecessors of Adam Smith, TheGrowth of British Economic Thought, New York, 1937, reprinted 1965: 164-67.

23 Karl Marx, Wage Labour and Capital, Moscow, 1952, reprinted 1976: 33.Also seeidem,A Contribution to the Critique of Political Economy, Moscow, 1970: 148. Marxssympathy for some elements of the quantity theory is detected in Don Lavoie, Marx, thequantity theory, and the theory of value, History of Political Economy, vol. 18(1), 1986:155-62.



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it received in what is known as the Fisher equation or the equation of

exchange (MV=

PT) 24The

equationbalances the total

quantityof

money in the economy (M) and its velocity of circulation (V) with asuitably chosen average price (P) and volume of monetised transactions(T), and allows for the integration of various elements of the moneyeconomy, notably the movement of money supply and prices, withina single framework. It is noteworthy that the Fisherian formula is onlya tautological tool of analysis and that the relationship between thevariables of the equation is dictated by a theory which either supportsor

negates the neutrality of money. For mercantilists, the positive im-pact ofM on T rationalised their doctrine, while a reversal of the orderof causation in Classical and Marxian monetary theories establishedthat only changes in T (real sector) were capable of inducing changes inMV (monetary sector) via P.25

Historiography of Mughal Money

Early studies of money in India had been the preserve of numismatistsfor whom coins epitomised money, and metrology represented mon-etary history.26 To a large extent, the credit for placing numismaticevidence in a wider context and raising questions directly relevant tomonetary history goes to W.H. Moreland whose particular preoccupa-tion with the indices of economic growth set up an agenda both for hiscontemporaries as well as for a future generation of historians.&dquo;

In his observations on the monetary economy, Moreland shared the

prevalent view that India was a passive recipient of precious metals

24 Irving Fisher, The Purchasing Power of Money, New York, 1911: 14-21.25Adam Smith,An Inquiry into the Nature and Causes of the Wealth of Nations, London,

1776; published in Pelican Books, London, 1970; Penguin reprint 1986: 293, 439-40; KarlMarx, Capital,A Critique of Political Economy, Samuel Moore and EdwardAveling (trs),Frederick Engels (ed.), vol. 1, London, 1970: 117-18. For the best account of the classical[and Marxian] law of monetary circulation see Roy Green, Classical Theories of Money,

Outputand

Inflation, Houndmills,1992:

67-68, 75-79, 89-94.26 The classic example of this is G.L. Schanzlin, The Monetary System of the MoghulTimes, Indian Historical Quarterly, vol. 9, 1933: 157-60.

27 For the specific use of numismatic data see W.H. Moreland, FromAkbar toAurangzeb.A Study in Indian Economic History, London, 1923: 174-78.Also see Irfan Habib, TheCurrency System of the Mughal Empire, Medieval India Quarterly, vol. 4, 1961: 1-21. Inthis important and extensively documented work, aspects of Mughal coinage were de-scribed with the intention of highlighting their economic rather than purely numismaticsignificance.



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where the bulk of the imported gold and silver was hoarded or used fordecorative purposes, with only a small part of it used for coinage andindustrial production.28 Morelands framework bore the deep impres-sion of a century-long European scholarship on the character of non-capitalist societies. Marx contrasted the role of precious metals in theEuropean and Indian economies, while Weber considered the lack ofnecessary infrastructure as an important reason for Indias inability toproduce economic changes comparable to the European Price Revolu-tion.29 Possibilities of monetary change were, however, acknowledged

byMoreland in an area which also saw the first

applicationof the

quant-ity theory to the study of Mughal money. European supplies of silvermoney were held directly responsible for raising commodity prices inBengal and bringing them to the level of the rest of the Mughal Empire.As for Gujarat and northern India, the continued influx of silver failedto produce any significant change in the price level.&dquo; The static level ofeconomic production and a fixed velocity of coin circulation necessarilymeant that the sphere of exchange was untouched by the absorption of

precious metals.3Numerous studies have appeared in the past three decades whichhave enriched our understanding of the Mughal economy in generaland the role of money in particular. Morelands presence in the mindsof Mughal historians, both as a challenge and influence, has naturallyresulted in the rejection and refinement of some of his conclusions,particularly the one on the lack of dynamism in the economy. Indeed,the raison dtre of post-Moreland historiography has been the search

28 Moreland, FromAkbar toAurangzeb: 184-85, 264-66.29 Marx, Critique of Political Economy: 134-35, 150; Max Weber, General Economic

History, F.H. Knight (tr.), London, 1929: 353-54. Such is the general appeal of theseassumptions that, in recent neo-mercantilist critiques of the specie-flow mechanism, theautomatic link between bullion flow, price changes and trade balances was rejected withparticular reference to the inactive monetary economy of the East. J.D. Gould, TheTrade Crisis of the Early 1620s and English Economic Thought, Journal of EconomicHistory (hereafter JEH), vol. 15, 1955: 124-25; Rudolph C. Blitz, Mercantilist Policiesand the Pattern of World Trade, 1500-1750, JEH, vol. 27, 1967: 43-44.

30 Moreland, FromAkbar toAurangzeb: 174-76, 178-82.31 In Morelands view, all major indices of economic growth (per capita income and

production) remained unchanged betweenA.D. 1605 and 1911. Moreland reached thisconclusion after analysing the statistics of the &Amacr;&imacr;n-iAkbar&imacr; and supplementing them withthe accounts of European travellers in his India at the Death of Akbar, London, 1920;reprint Delhi, 1962.



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for signs of growth within the economic structure or, possibly more,changes in the structure itself.One influential series of analyses, based essentially on inferences drawn

from Persian sources and associated with the names of theAligarh groupof historians, located the possibilities of long-term growth within theexisting economic structure and argued for a slow expansion in theGross National Product (GNP) propelled exclusively by populationgrowth.32Although per capita productivity remained constant, a degreeof mobility was imparted to the economy in the way state financesfunctioned.Articulated

bya dominant fiscal system, the monetised tax

base of the empire and the consumption pattern of the aristocracy stimu-lated commodity production and enlarged the circuit of exchange.&dquo;Money was incorporated into this model in two ways: as a historio-graphical counterpoint to Moreland, and as a theoretical acceptance ofthe place assigned to the quantity theory in Marxian monetary analysis.At the domestic level, monetisation was treated as a symptom of mobil-

ity in the economy, with the recognition that as an economic variable,it can be

quantitativelyconceived and measured. In the wider

context,silver influx and price changes were perceived as part of a more funda-mental process of capital accumulation which had a deeper theoretical

32 Irfan Habib, Monetary System and Prices, in Tapan Raychaudhuri and Irfan Habib(eds), The Cambridge Economic History of India (hereafter CEHI), Cambridge, 1982, vol.1: 365-66; Shireen Moosvi, The Silver Influx, Money Supply, Prices and Revenue Ex-traction in Mughal India, Journal of Economic and Social History of the Orient (hereafterJESHO), vol. 30(1), 1987: 82-83. Broad estimates of the Indian population at the turn ofthe seventeenth century were offered on the basis of a comparison and backward ex-

trapolation of the land-man ratio as it stood in the early twentieth century, and estimatesof the ratio between per capita and total revenue. The results suggested a compoundannual growth of 0.21 per cent between 1601 and 1871 in the population. Shireen Moosvi,The Economy of the Mughal Empire c. 1595:A Statistical Study, Delhi, 1987: 399-405.Alower rate of growth (0.14 per cent) was suggested in Habib, Population, CEHI: 163-71,esp. p. 167. The total agricultural production grew in tandem with the population at astrikingly similar rate of 0.23 per cent between 1595 and 1665. Moosvi, Economic Changein the Seventeenth Century.A QuantitativeApproach, Proceedings of the Indian History

Congress (hereafter PIHC), 54 Session,Amritsar, 1993: 279-80.33Moosvi, Economy of the Mughal Empire: 299-307.An argument for state driven

monetisation is also presented in J.F. Richards, Official Revenues andMoney Flows in aMughal Province, in idem (ed.), The Imperial Monetary System of Mughal India, Delhi,1987: 192-231; Stephen P. Blake, The Structure of Monetary Exchange in North India:The Provinces ofAgra, Delhi and Lahore in 1600, in Richards (ed.), The Imperial Mon-etary System: 100-36.



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and historical significance than was normally ascribed to it in the realanalysis paradigm.4 Thus, by sharing with Hamilton a conviction inthe causal significance of money, Irfan Habib,

aleading member of this

group, diverged from the orthodox Marxist position of treating thePrice Revolution as some incidental monetary process.&dquo;With the premise of enquiry set between history and epistemology,

the impact of Spanish-American silver on the Mughal economy wasexplored within the framework of the quantity theory of money, andwith the help of the equation of exchange MV = PT. Since concretehistorical data on the

dynamicassessment ofV and T are taken as almost

non-existent at the present level of research, it is assumed that positivechanges did occur in the velocity and volume of monetised exchange,with the use of credit instruments and the imposition of a cash nexus intax collection respectively, and that each levelled out the other in thelong run. The simultaneous exit of the two variables from the quantityequation placed the reciprocal relationship between M and P at theheart of all monetary developments in this historiographical tradition.The

quantity theory approachto

Mughal money supplyand

pricesinvited a comparison between the scale of monetary circulation andinflation, measured respectively by using a numismatic-statisticalmethodand by tracking changes in bimetallic ratios. In a manner reminiscentof Morelands method of corelating museum specimens with foreignimports and price movements,Aziza Hasan computed all cataloguedrupees from 1556 to 1592 (the terminal date was chosen with the assump-

34Any expansion or contraction of money supply in an economy must cause changesin prices, profits, interests, and scale of investment, and these by causing shifts of wealthfrom one class to another may alter the entire relationship between classes. Irfan Habib,Caste and Money in Indian History, Bombay, 1987: 21.35Irfan Habib, Capitalism in History, Social Scientist, vol. 23(7-9), 1995: 21. Hamil-

ton adopted a monetarist model to link the diffusion ofAmerican silver and the Euro-pean price revolution in order to explain the growth of industrial capitalism. In his analysis,the widening gap between prices and money wages is identified as an important source ofbusiness profits (profit inflation) and capital accumulation. Earl. J. Hamilton,AmericanTreasure and the Price Revolution in

Spain, 1501-1650, Cambridge, MA,1934:

283-306;idem, Profit Inflation and the Industrial Revolution, Quarterly Journal of Economics,vol. 56, 1942: 256-73; reprinted in Frederic C. Lane and Jelle C. Riemersema (eds), Enter-prise and Secular Change, Readings in Economic History, London, 1953: 323-36. The cri-tique of Hamiltons monetarist approach, illustrative of the standard Marxist discourseon the origin of capitalisrii, comes from a scholar of theAnnales school who has devotedconsiderable attention to the study of money in historical societies. See Pierre Vilar, Prob-lems of the Formation of Capitalism, Past and Present, No. 10, 1956: 15-38. For a criti-cism of Habibs position, also from a Marxist standpoint, seeA.K. Bagchi, The MughalEconomy:A Quantitative Study, Indian Historical Review (hereafter IHR): 178-80.



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tion that the rupee did not become the principal medium of exchangetill 1592), and assumed that this total represented the amount of silvermoney in circulation in 1592, relative to the totals of subsequent years.To make allowances for recurring recoinage she made a standard deduc-tion of 2.5 per cent from annual totals. Hasan was able to demonstratethat relative silver circulation in 1705 had increased by 200 per centfrom the level in 1592, and that the movement of her currency curve

corresponded to Hamiltons histogram of Spanish silver imports on theone hand, and fluctuations in the prices of monetary metals in theMughal Empire on the other. 16

Hasans work signalled a general endorsement of the quantity theoryapproach by Indian historians while, at the same time, making an in-souciant attempt to integrate the Mughal Empire into the globaleconomy of early-modern times. 17 Historical and methodological prob-lems associated with Hasans approach were indeed debated, althoughthe framework of her enquiry remained largely intact.8 Rather, it wasreinforced with an improved database by Shireen Moosvi who workedout

aggregateestimates of coined silver stock in the

Mughal Empire.Moosvis more refined and elaborate calculations showed that an in-crease of only 138 per cent had taken place in the scale of silver circula-tion between 1596 and 1705. The downward revision of Hasans estimates

was the result of a shift in the base year chosen to anchor the variables,from 1592 to 1596. 39With the magnitude of silver money reworked, the question of its

value assumed importance for the determination of prices. In the absence

ofan

unbroken price series fora

basket of commodities for any regionof the empire, one straightforward method was to measure the valueof silver against a stable standard. Morelands study of copper pricesindicated a rise in its value in terms of silver, but he related this to

changes in the supply and demand of copper. In later studies, beginning

36Aziza Hasan, The Silver Currency Output of the Mughal Empire and Prices inIndia during the Sixteenth and Seventeenth Centuries, Indian Economic and Social HistoryReview (hereafter IESHR), vol. 6(1), 1969: 85-110.Also see Habib, Monetary Systemand Prices: 363-66.

37 See Miskimins critical approval of the relevance of Hasans efforts for studying theglobal movement ofAmerican silver. HarryA. Miskimin, The Economy of RenaissanceEurope, 1460-1600, Cambridge, 1977: 132.

38 See Om Prakash and J. Krishnamurthy, Mughal Silver Currency-A Critique,IESHR, vol. 7(1), 1970: 139-50 (Hasans reply in ibid.: 151-60); John S. Deyell, Numis-matic Methodology in the Estimation of Mughal Currency Output, ibid., 13, 1976:393-401; Moosvi, Silver Influx, Money Supply: 49-55.

39 Moosvi, Silver Influx, Money Supply: 47-94.



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with Habibs analysis of the silver price of copper and gold, the focuswas shifted to the

quantityand value of silver.As we saw, Habib was

writing at a time when, following Hamiltons stimulating study of Span-ish imports and their effects, the European Price Revolution was in-

creasingly understood to be a function of the rising quantity of silver.Thus, gold, and to a lesser extent copper, became a stable medium whilesilver began to depreciate when its absorption in the monetary economyreached a threshold level beyond which lay the exclusive copper do-main of petty transactions. From 1615, silver fell against both metals

and, ipso facto, against commodities in general. 40Once it was accepted that the rupee held its purchasing power till1614, whatever increase took place in its quantity was of no consequenceeither to prices or to wages. Hence the total increase in M was reset byMoosvi at 45 per cent between 1615 and 1705, and the net increase,adjusted against population growth (here same as 1), at 27 per cent. Onthe other side of the equation, the rise in the silver value of copper andgold was calculated at 110 and 33 per cent respectively between 1595

and 1705. The extent of a general rise in silver price (P) was then locatedwithin the band of these indices at 27 per cent.4 The quantity equationnow stood fully balanced.At this point, conclusions derived from sundry calculations were

*invoked to assess the extent to which monetary changes were able toinfluence the real economy of the Mughal Empire. With populationalready singled out as the sole determinant of growth, the assessmenthad to be anything but positive. However, unlike Moreland, who con-

sidered institutional factors-notably the extractive nature of the MughalState apparatus in the agrarian sector and intrusive in the mercantilesector-as solely responsible for arresting economic growth, Hasan andMoosvi preferred a structural explanation in which an unchanging modeof production and distribution of economic resources impinged uponmonetary movements to prevent positive growth in production andexchange.42As the imperial revenue system was geared to mop up any

40Habib, System of Trimetallism: 147-50, 159-60; idem, Caste and Money: 32-33;Moosvi, Economy of the Mughal Empire: 367-69.41Moosvi, Silver Influx, Money Supply: 81-88.42The structural agenda to assess the inner mechanics of Mughal economic develop-

ment was set up in Irfan Habib, Potentialities of Capitalistic Development in the Economyof Mughal India, Enquiry, NS, vol. 3, 1971: 1-56; reprinted in Habib, Essays in IndianHistory, Towards a Marxist Perception, Delhi, 1995: 180-232. Subsequently it was statistic-ally reinforced in a series of writings by Moosvi, culminating in her Economy of the MughalEmpire.



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additional income, thus in rural areas, the benefits of rising prices

never actually reached the peasants.43 In the towns, which differed incharacter from their European counterparts, especially in providingstimulus for change, artisans working either for merchants or noblesexperienced a fall in real wages, and whatever gains accrued from thedifference between prices and money wages went entirely to the em-ployers. Merchants stood to gain from a modest profit inflation but theimpact of this on capital accumulation was too limited to break throughthe circuit of exchange governed by the needs of the ruling class.44

Accumulation, the only engine of economic growth other thanan eco-

logical one, took the form of massive hoarding of precious metals bythe aristocracy with practically no investment in sectors outside luxuryconsumption. ,

Constructed on the basis of limited empirical evidence, it can besaid, with some justice, that it is the logical consistency and tight con-struction of the above argument which is responsible for its continuedhistoriographical dominance.At one level, the over-reliance on internal

factors, undermined the importance of external trade in fostering theexpansion of the economy by supplying it with the much requiredmonetary media.At another, while the configuration of forces whichplaced the Mughal state in a position advantageous to monetising itstax base was acknowledged, the overemphasis on its extractive natureand dominance over the market diverted attention from the positiverole it played, along with the mercantile groups associated with themoney market, in monetary management.Above all, the lack of preci-sion in understanding issues specific to the circulation of Mughal cur-rency undermined the whole range of numismatic statistical analyseson the evaluation of money supply (M) and prices (P) and the conclu-sions derived from them.

The range of competing views on the relationship between the keyvariables of the Mughal monetary economy also revolve around thetheoretical basis of the quantity equation in their attempts to offer

43Irfan Habib, The Agrarian System of Mugbal India (1556-1707), Bombay,1963: 236-69;ibid., Processes ofAccumulation in Pre-Colonial and Colonial India, IHR, vol. 11(1-2),1984-85: 67-68.

44 Habib, Monetary System and Prices: 379-81; ibid., Processes ofAccumulation:70-72. Moosvi, Silver Influx, Money Supply: 93-94; idem, Economy of the Mughal Em-pire: 198-201, 259-60, 271. It was argued that only the zamindars or rural money lendersinvested in agriculture and, by doing so, either facilitated tax collection or depressed pro-duction through usurious rates of interest. Habib, Processes ofAccumulation: 70.



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alternative explanations based on evidence drawn from European

sources. 41 The immediate mercantile considerations of the Europeanfactors in India allowed them to record a wide variety of information

on various aspects of the Mughal economy. The suitability of this ma-terial for a study of the Indian economy in the seventeenth century, asopposed to Indo-Persian sources, was already emphasised by Moreland,and this emphasis has been retained by historians who deal with Com-pany trade in particular and economic and monetary issues in general. 46The most ardent advocate of the positive contributions of European

trade to the Mughal economy has been Om Prakash who developeda

general argument, based mainly on his studies of the Dutch trade inBengal, for a growth in output, income and employment, induced bythe bullion imports of the companies .4 This model of the Mughaleconomy located possibilities of long-term growth within the exchangesector and outside the influence of the state, and has been endorsed

recently by the recognition that European trade was an important aspectof Mughal economic development.48

45Sanjay Subrahmanyam, The PoliticalEconomy ofCommerce: Southern India 1500-1650,Cambridge, 1990: 353-54; Introduction, in idem, (ed.), Money and the Market in India1100-1700, Delhi, 1994: 44-45; Om Prakash, Precious Metal Flows, Coinage and Pricesin India in the 17th and the Early 18th Century, in E. Van Cauwenberghe (ed.), Money,Coins and Commerce: Essays in the Monetary History ofAsia and Europe (FromAntiquity toModern Times), Leuven, 1991: 71-73; reprinted inOm Prakash, Precious Metals and Com-merce: TheDutch East India Company in the Indian Ocean Trade, Variorum,1994;John F.Richards, The New Cambridge History ofIndia, The Mughal Empire, Cambridge, 1993:186-78.

46 K.N. Chaudhuri, The Trading World of Asia and the East India Company 1660-1760,Cambridge, 1978; Om Prakash, The Dutch East India Company and the Economy of Ben-gal: 1630-1720, Delhi, 1988; H.W. Van Santen, De Verenigde Oost Indische Compagnie inGujarat en Hindustan, 1620-1660, Leiden, 1982. The writings of these historians, fromwhich we get a different picture of the Mughal economy, are often dubbed as mercantilistin approach by their critics. See Habib, Caste and Money: 35; and Moosvi, Silver Influx,Money Supply: 92-94, for a critique of Om Prakash and K.N. Chaudhuris approachtowards the study of the Mughal economy.

47According to this argument, the increase in exports (and export-surplus) involveda

net increase in output and income (Y). In terms of the national income identity: Y - C +I + (X - M): an increase in the export-surplus (X - M) could be effected through a declinein consumption (C) or/and investment (I) or/and increase in output and income (Y).Since there was no decline in C or I in Bengal, an increase in X -M effected an increase inY. Prakash, Dutch East India Company: 234-56.Also see Prakash, Precious Metals andCommerce: x.

48Richards, Mughal Empire: 196-98.



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A crucial aspect of this analysis is the denial of price inflation in theseventeenth century. Moreland, who essentially subscribed to this view,

studied the prices of Sarkhej indigo and foundno

perceptible sign ofany long-term change. Similarly, the treatment by Van Santen of theprices of rice, wheat, clarified butter, millet and sugar sold in the marketsof Gujarat suggested a more or less stable trend. The other region forwhich a similar study of food prices had been undertaken by Om Prakashis Bengal, and here too no discernible movement is noticed. Even thoughthe regional studies of Moreland and Van Santen cover the first half ofthe seventeenth century and that of Prakash begins with the second,

they collectively present a powerful case for stability in price trends inthe seventeenth century. Since this approach is also based on the applica-tion of the quantity theory, the link between money and prices is notdenied explicitly.49 Rather, the stability of prices (P) is treated, in theface of growing money supply (M), as an indication of an expansion inthe volume of commerce (T).The mercantilist approach is marred by its reluctance to marshal

impellingevidence on

keyvariables of the real sector, such as

produc-tion, income and employment. European trade and real growth arelinked by a Keynesian variation of the quantity theory of money,o andwe are once again left in the dark about the transmission of the effectsof foreign trade on the monetary economy, and of the latter on the realeconomy.

Thus, in the end, it can be argued that the post-Moreland treatmentof the Mughal monetary economy has followed two distinct lines of

reasoning, albeit sharinga more or

lesscommon

methodology.In

thefirst, the emphasis is on price changes which neutralised the impact ofmoney, and the slow growth in the economy driven essentially by realfactors. In the second, price changes are denied, and the influence ofmoney is shown to be much greater in stimulating economic growth.In both historiographical traditions, relationships between variables areposited to conform to the principles of a monetary theory and also toa given structure of the economy.

49 Moreland indeed saw a rise in Bengal prices to be a function of European bullionimports, but Om Prakash, while retaining the emphasis on European imports, has dis-missed Morelands claim.

50 Subrahmanyam, Introduction, Money and the Market in India: 51-52.



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Mughal Recoinage and Money Supply

We can examine the way in which changes in M are evaluated by rais-ing two important issues which had a distinct impact on the volume ofmoney supply, and which have been ignored in previous studies. Thefirst relates to the Mughal fiscal and monetary policies which broughtabout the great recoinage of 1591-1605, and later the dehoarding oftreasure balances. The second pertains to a problem inherent in themethod of quantifyingM as used by Hasan and Moosvi.The

Mughal currencyin the first

stageof its

development symbol-ised a continuation of the billon-copper regime of the later Delhi Sul-tans. The conjuncture which placed it in a position to articulate a newmonetary system came with the enormous increase in the eastward

migration of international silver and the westward expansion of theempire (the conquest of Gujarat and Sind in 1572 and 1590 respectively).

A massive surge in the imports of Spanish-American silver and its dis-tribution by the Genoese and Portuguese merchants, together with the

political unification of trade routes stretching from the Levant to BasraandYemen, and the rise of Hurmuz, signalled a new era of internationalcommercial exchange. The configuration of these forces favouredthe fortunes of the chain of entrepots across the territorial nexus of

Europe,Africa andAsia and of the diverse mercantile communitiesfeeding the arteries of commerce. Most of all, it was the coastal andcaravan cities of the Mughal Empire which became the principal benefi-ciaries of these developments, at a time when political and commerciallinks between entrepots and the hinterland were deepening and

a new

fiscal and monetary structure was evolving. 51The significance of the unification of the two distinct political and

monetary zones was enormous. It breathed a new life into the effortsof the Mughal state and mercantile groups to incorporate silver, a read-ily available and more efficient medium, into the monetary system andto ensure its constant flow in the circuit of exchange.At the same time,a process of standardisation was set in motion by centralising mint

production and integrating it with the fiscal structure, which culmin-ated in the massive reminting of regional currencies. In 1592, an imperialorder was issued to demonetise all precious metal coins of previousemperors (padshahan i sa6i~. Whatever premium they enjoyedon account

51 Najaf Haider, Precious Metal Flows and Currency Circulation in the Mughal Em-pire,JESHO, vol. 39(3), 1996: 298-364.



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of seigniorage was abolished and they were to be treated as gold andsilver bullion

(babahi i .iJ wa

nuqra)in the market.&dquo; In the

guidelinesissued to the treasurer and the police chief (krwl) in the 1590s, a clausereferred exclusively to the treatment of the coins of the previous rulers(bscni maskk). It was ordered that these should be declared uncurrentand should either be melted down (ba gudazgah dahad) or sent to thetreasury at the value of uncoined bullion (ba irj i na maskk)Y Thepolicy was implemented eventually after much labour, and under differ-ent sets of officials in all regions of the empire (aqsa i mamlik).54

The purpose of passing laws against the circulation of regional coinswas to allow the Mughal imperial issues to take their place. This can bedemonstrated by relating our textual information to the numismaticmaterial. Graph I serialises the total number of rupee specimens inmuseum collections at five-year intervals and is presented here to depictthe order of magnitude of silver output in all the mints of the MughalEmpire. It can be seen that the output registers a massive rise in thequinquennium 1591-95 (about four times), precisely the period in which

recoinage was being carried out, and that the upward trend continuesuntil the end ofAkbars reign.55 The link between recoinage and highmint output becomes deeper if we look at the transformation in theregional currencies of two provinces-Gujarat and Sind-which shared40 per cent of the total silver specimens between themselves (Graph I).

In an earlier work, I have shown that, due to its strategic location,the major supply route of silver for the Mughal Empire ran throughAhmadabad, and from 1582 onwards, the contribution of this mint

alone accounted for almost one-third of the total output.56 I also arguedthat by the turn of the seventeenth century, the Gujarat mahmudi wascompletely wiped out fromAhmadabad, and the rupee became themajor currency of transactions. Figures assembled in Table I indicate

52Abdul Q&amacr;dir Bad&amacr;un&imacr;, Muntakhab utTaw&amacr;rikh, vol. 3, William Lees andAhmadAli

(eds), Bib. Indica, 1869: 380.53 Fazl, &Amacr;

&imacr;n-i Akbar&imacr;, vol. 1: 284, 289.54

Bad&amacr;uni, Muntakhab utTaw&amacr;rikh, vol. 3: 380.55The quinquennium 1591-95 also includes thealfcoins (issued from 1581-82 to 1591-92)

which had a fixed numismatic date for a decade. See Najaf Haider, Disappearance ofCoin Minting in the 1580s?A Note ontheAlfCoins, in Irfan Habib(ed.),Akbar and HisIndia, Delhi, 1997: 55-65. But the share of these coins was less than 25 per cent in thetotal.

56 Haider, Precious Metal Flows: 344-46.



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24/41

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that the conversion of pre-existing mahmudis into rupees, which beganonly slowly, out of fiscal and commercial demand, after the annexation

of Gujarat, reached its culmination in the recoinage of 1592-1605 follow-ing the new monetary policy.

Table I

Rupees of Ahmadabad: 1572-1605

Source: Treasure Trove

Reports (MS.State Museum,

Lucknow);references cited for

Graph I.Note: Dateless and half dated coins are excluded from the total.

Southern Sind was surrendered to the Mughals by Mirza Jam Beg in1590 after an imperial campaign,5 andAbu1 Fazl mentions the goodomen of an ascetics dream in which coins of Sind were impressed withthe name ofAkbar.58 The dream soon came true when Thatta became

the

capitalof the

Mughal subaof the same name, and the seat of an

imperial mint. The city of Thatta had been an important entrepot fortrade with Iran and there was a brisk mercantile traffic between itsoutlet to theArabian Sea, Lahari Bandar, and the ports of Hurmuz andBasra.59 Export goods such as bafta and alacha fabrics, indigo and

57 Sunita Zaidi, AkbarsAnnexation of SindAn Interpretation, in Habib (ed.),Akbarand His India: 25-32; Fatima Zehra Bilgrami, The MughalAnnexation of Sind-A Dip-lomatic and Military History, in ibid.: 33-54.58Abul Fazl,Akbarn&amacr;ma, vol. 3,AghaAhmadAli andAbdur Rahim (eds.), Bib. Indica,

1887: 614.59 M.A.P. Meilink-Roelofsz,Asian Trade and European Influence in the Indonesian Archi-

pelago between 1500 and about 1630, The Hague, 1962: 190-91; Sanjay Subrahmanyam,The Portuguese, Thatta and the External Trade of Sind, 1515-1635, Revista de Cultura,special issue titled TheAsian Seas 1500-1800, Local Societies, European Expansion and thePortuguese, Jorge M. Flores (ed.), Macau, 1991: 50.



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saltpetre were brought from the nearby towns and villages of Nasarpurand Sehwan to Thatta and shipped to Iran, freighted mostly in Portu-

guese ships.The

Portuguese alsoused Thatta as

theirbase

for sellingspices to Indian and Iranian merchants .60 Like other Indian entrepots,this pattern of Thattas foreign trade earned it a considerable exportsurplus in the form of bullion and foreign specie.61 However, unlike theGujarat Sultans or the Mughals, the rulers of Lower Sind, both the Jamsand the Tarkhans, never issued coins in gold and silver and allowed HurmuzJJs and Spanish reales to circulate freely in the market as legal tender. 61The Mughal administration took a keen interest in the trade and

economy of the region.After the conquest of Sind, Ldhdri Bandar wasmade into a khalisa and the emperor, then residing at Lahore, was seenpersonally supervising the construction of a camel (kashti i buzurg) forbig ships to sail down the Ravi to Lahari Bandar.&dquo; In 1591, the Thattamint became operational and began to strike rupees at such a rate that,by 1605, its output was the largest for any comparable phase in theseventeenth century, and second only to that ofAhmadabad and Lahorein the whole of the Mughal Empire. It is important to note not onlythat incoming bullion and specie were minted into rupees but also thatmuch of the existing stock was recoined since, by early seventeenthcentury, most transactions in lower Sind were quoted in rupees, in-

&dquo;eluding the prices of commodities and the rates for bills of exchangeand money loans.&dquo;

60 Pieter Van Dam, Beschryvinge van de Oostindische Compagnie, vol. 2(3), s-Gravenhage:11; H. Dunlop (ed.), Bronnen tot de Geschiedenis der Oostindische Compagnie in Perzie,

1611-38, s-Gravenhage, 1930: 5; George Birdwood and William Foster (eds), The Registerof Letters etc. of the Governourand Company of Merchants of London Trading into the EastIndies 1600-1619, London, 1893: 459; William Foster (ed.), English Factories, 1634-36,Oxford: 130-31.

61 Vitorino Magalhaes-Godinho, LEconomie de lEmpire Portugais aux XVe et XVIeSiecles, Paris, 1969: 514-15.

62 This was noticed with a touch ofastonishment by a contemporary ofthe Tarkh&amacr;ns(sikkais&imacr;m o zar dar zarrab kh&amacr;na nad&amacr;shtand ... aksar muhrifirang... wal&amacr;r&imacr;dar&amacr;zr&amacr;ijbud). TahirMuhammad Nissy&amacr;ni,T&amacr;r&imacr;hiT&amacr;hir&imacr;, Nabi Bakhsh Khan Baloch (ed.), Hyderabad/Sind,1964: 170. For the

J&amacr;mssee Simon

Digby,The

Coinageand

Genealogyof the Later

Jams,Journal of the RoyalAsiatic Society (hereafterJRAS), vol. 2, 1972: 125-26.63Abul Fazl,Akbarn&amacr;ma, vol. 3: 642, 715-16. This is the only reference to the use of

camels (big rafts for driving ships out of shallow waters) in shipping technology in our sources.See Irfan Habib, Akbar and Technology, in idem, (ed.),Akbar and His India: 145.

64Achilles Meersman, Antonio Bocarros Description of Sind,Journal of SindHistoricalSociety, vol. 4(4), 1940: 202; Original Correspondence 1549, Oriental and India OfficeCollection (hereafter OIOC), Series E/3: ff. 135-36; English Factories, 1634-36: 131-33,205; English Factories, 1637-41: 137, 288.



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From the evidence assembled on recoinage, it can be argued that themint output during 1591-1605, though inclusive of the quantities imported

through foreign trade, was largely made up of the re-minting of regionalsilver into Mughal coins, notably mahmudis inAhmadabad and ldrisand reales in Sind. The enormous figures for mint output in these yearsthus largely represent a recycling of the extant currency rather thanreal additions to the monetary stock, and estimates of money supplybased on these figures are likely to deviate significantly from actualcirculation.

Another interesting problem for the evaluation of money supply is

posed by the pattern of imperial expenditure under Jahangir.A mount-ing deficit in the imperial income, placed by a court chronicle in theregion of eight million rupees per annum (91 metric tons of silver),required the emperor to draw upon the silver hoard left byAkbar of100 to 130 million rupees (1,136 to 1,477 metric tons of silver).65 Somuch money was spent from this source that Shahjahan inherited only10 million rupees from his fathers treasury and had to pursue a policyof accumulating silver. 66The silver withdrawn by Jahangir from the imperial treasury could

either have been spent directly or after the conversion of old rupeesinto new ones at the mint. The latter course of re-minting could havesaved the administration market discounts levied on all old issues. 67

However, there is greater possibility that this did not happen and thatJahangirs administration was forced to carry out its expenditure inAkbars money. This suggestion is supported by the shape of the silveroutput curve

(GraphII) which shows a decline in 1621-25, the period

in which money was being spent from this source.68 In the event of a

65 Am&imacr;n Qazw&imacr;n&imacr;,B&amacr;dsh&amacr;hn&amacr;ma, OIOC, MSAdd. 20734: ff. 444-45; MS Or. 173: f.

221 b; Shah Naw&amacr;z Kh&amacr;n,Ma&amacr;sir al Umar&amacr;, vol. 2,Abdur Rahim and Mirza Ashraf Ali (eds),Bib. Indica, 1888: 814-15; Haider, Precious Metal Flows: 352.

66 W.Ph. Coolhaas (ed.), Generale Missiven van Gouverneure-Generaal en Raden aanHeren xvii der Verenigde Oostindische Compagnie, vol. 1, s-Gravenhage, 1960: 341.

67 This was indeed the view taken byAziza Hasan (Mughal Silver Currency-A Reply:157) while responding to a generalremark made by Prakash and Krishnamurty on the

timelag between the date of issue ofa coin and its actual circulation. I took a similar

position (Precious Metal Flows: 352) which stands modified.68 Asaf Khan was sent [A.D. 1622] to bring to Court [Lahore] the whole of the treasure in

muhrs and rupees which had accumulated from the beginning of the reign of my father.Tuzuk i Jahangiri or Memoirs ofJahangir, vol. 2,Alexander Rogers (tr.), Henry Beveridge(ed.), London, 1909-14; reprint Delhi, 1989: 245; (text ed.) Syud Ahmud,Ally Gurh, 1864:352.Also see Mutamad Khan,Iqb&amacr;ln&amacr;ma i Jah&amacr;ng&imacr;r&imacr;,Abdul Hai andAhmadAli (eds), Bib.Indica, 1865: 197.



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recoinage of silver on this scale, matching the total imports of the em-pire, the output figures would have registered a massive upward swing.The other factor which lends credibility to our interpretation is thediscovery of enormous quantities of silver coins belonging toAkbar inthe hoards of Jahangir and Shahjahan, much more than the issues of thereigning emperors themselves.9

If money was being spent directly from the treasury, then we have asituation on hand where neither bullion imports nor output figurescould possibly indicate the extent of increase in the circulation of silvermoney. The impact of this enormous injection of cash into the economyis unknown, but it is important to note that in all discussions where thepurchasing power of silver is understood to have been linked with itsquantity in circulation, this increase has been clearly ignored.The evidence on recoinage and internal circulation of silver currency

during the period chosen as base years would suggest that Hasansmethod had overestimated the rate of change in the money supply sub-sequent to 1592, while Moosvis calculation underestimated it from1605 onwards.

Also,the introduction of hoarded silver into the

economyduring 1622-27 underestimated grossly the rate of change in both themethods. If base year figures are deflated and later additions are incor-porated, then the increase in the silver money supply would appear tobe much higher than the annual rate of 1.38 per cent suggested by Moosviand possibly even higher than the rate of 2 per cent estimated by Hasan.

Second, the level of money supply estimated both by Hasan andMoosvi experienced an absolute fall in its magnitude afterA.D. 1640

which is surprising since its evaluationwas

basedon

cumulative addi-tions of coin totals. On closer look, the decline appears to be a statisticalartefact rather than a historical reality. In order to compute the relativeand absolute magnitude of money supply, Hasan and Moosvi, on accountof the re-minting of Mughal coins, had to make deductions from cumu-lative totals at a uniform rate. This was a necessary step since recoinage

69 This can be verified by looking at the inventory of hoard specimens published in

A.K. Srivastava, Coin Hoards of Uttar Pradesh 1882-1979, Lucknow, 1980.70 The allowance for recoinage was made on the assumption that each coin returned tothe mint after 40 to 50 years or more. This was based on a ratio between the discountsuffered by each silver coin on account of age or weight loss and fixed mint charges (5.6per cent). However, the rate of remintage of such coins could never remain constantsince the mint price of silver changed more than once in the course of the seventeenthcentury. See Haider, Precious Metal Flows: 334-35.



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Graph II

Jahngrs Rupees in Museum Collections

Source: References cited for Graph I.-

of worn out and demonetised rupees could artificially inflate the moneysupply, as in the case of the re-minted regional issues. However, thelimitation of this exercise was that an allowance had to be made for

recoinage, regardless of the volume of output in individual years. For



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instance, if the output in a certain year was nil, a portion of the mintedstock would still have to be deducted from the total. Consequently,with deductions mounting progressively, a point was reached whenthese exceeded the figures for actual mint output, and an absolute fallin money supply became imminent. This happened after 1635 whenthe total output registered a sharp decline from the level of the preced-ing decade.&dquo;An examination of the pattern of regional mint production revealsthat the decline in these years was, in fact, caused by variations in the

outputof

Bengaland the north-western mints. The

regionaldistribu-

tion of the museum and hoard specimens, on which our table and graphsare based, show that in the north-western region, mints were openedby Shahjahan at Multan and Bhakkar which issued large quantities ofrupees in the 1630s. Meanwhile, a dramatic spurt in the rupee produc-tion of the Bengal mint of Rajmahal (Akbarnagar) took place during1630-35. Even though there is no direct explanation available for thislimited phase of heavy minting in Bengal, it is difficult not to associate

it with another dramaticevent

of this period: the Mughal offensivelaunched against the Portuguese and their expulsion from the port ofHugli.72 The campaign was financed from Rajmahal, and after it endedin a victory for the Mughals, a large number of Portuguese vessels wereconfiscated with merchants goods and probably their money aswell. 13 It is quite possible that the proceeds from the sale of these con-fiscated goods and money were converted into rupees at the Rajmahalmint and remitted to the central exchequer.At present, this seems to

be the only plausible explanation for a sudden rise and fall in the silverhoards originating in Bengal, later discovered in UP. In the subsequentdecades, the level of output in the north-west also declined. Part of itwas due to the wars with Iran which seriously affected the caravantrade and the production of Mughal coins in all the regions of the

71 The explanations offered for the decline in total money supply are the non-monetaryusage of coined stock and the outflow of silver to CentralAsia. See Moosvi, Silver Influx,Money

Supply:80. These are, however, more relevant for

explainingthe long-term links

between the inflow of precious metals and the volume of the monetised stock and it is notclear why these two phenomena should become operational only at this point of time.

72Abdul Hamid L&amacr;hor&imacr;,B&amacr;dsh&amacr;h&nacute;ama, vol. 1, MaulviAbdur Rahim and KabiruddinAhmad

(eds), Bib. Indica, 1867: 433-39 has a detailed description of the Mughal expedition against thePortuguese(taskh&imacr;r i bandar Hugli).

73 Sanjay Subrahmanyam, The Portuguese Empire inAsia, 1500-1700:A Political andEconomic History, London, 1993: 168.



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north-west.4 In Qandahar itself, after the loss to the Mughals in 1648,the minting of rupees ceased completely while output in the mints ofLahore, Bhakkar and Multan declined substantially.

It may be noted as an important caveat to statistical generalisationthat the recoinage of Mughal coins was a complex process which didnot follow a uniform pattern. The rate at which such recoinage tookplace varied essentially with the strength of the ordinances and theapparatus required to put them into effect, as well as with the ability ofthe mints to offer competitive prices to money users. Such a policyseems to have existed in the reign of Shdhiahdn when the mint

chargeda much lower seigniorage on recoinage in order to bring the mint priceabove discount rates. The disincentive for holding devalued coins seemsto have produced the desired effect since, at least in one case for whichwe have direct evidence of a mint record, almost 85 per cent of thesilver delivered to the mint in a span of 36 days consisted of olderrupees.&dquo;The problem assumes greater complexity when we move from

aggregateto

regional money supply.The distribution of

moneybetween

different regions of the Mughal Empire was a function essentially ofthe balance of commercial payments and fiscal remittances. In the caseofAgra, it is a known fact that the province enjoyed a positive cashbalance over Gujarat in the west and Bengal in the east for sendingcommercial goods to the two entrepots. Much of the money remittedtoAgra was held by the bankers (5arrgs) against bills of exchange (hundis),and was required to be transferred by reverse remittances. Constant

cash flow was maintained through a modification of exchange rateswhenever balances accumulated at one place and a shortage occurred atanother.6 Whenever favourable rates failed to induce merchants to buyor sell bills in a manner desired by the sarrafs, money had to be trans-

ported physically to their agencies through couriers, if it was in gold,or by carts, if large quantities of silver were required to be delivered.&dquo;

74Aziza Hasan, Mints of the Mughal Empire:A study in comparative output, PIHC,29 Session, Patiala, 1967: 324.

75 Dastur ulAmal-i &Amacr;lamg&imacr;r&imacr;, OIOC, MSAdd. 6599: ff. 54a-b.76 Irfan Habib, The System of Bills of Exchange(Hundis) in the Mughal Empire,

PIHC, 35 Session, 1972: 293.77

Georges Roques, La maniere de negotier dans Les Indes Orientalles dedice a mes Chersamis Et Confreres Les Engages de la Royalle Compagnye de France, Bibliotheque Nationale,MS Fonds, Francais 14614: ff. 227, 229-31.



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Contemporary observers also regarded the transfer of fiscal funds toAgra or Delhi as a major cause for monetary crises in Bengal.78 Such

inter-regional movements of specie can alter significantly the pattern ofmoney supply deduced entirely from mint output data.

Bimetallic Exchange and Price Movements

The claim based on the quantity theory that the purchasing power ofsilver fell vis a vis copper and gold, and that bimetallic ratios represent

themovement

of commodity pricesin

general also requiresa

criticalscrutiny of the evidence. My argument is that the question of the move-ment of bimetallic ratios can only be addressed satisfactorily within thecontext of changes in the pattern of foreign imports and currency cir-culation, and for this reason alone a conceptual distinction ought to bemade between currency and commodity prices.As mentioned earlier, the conventional position on the move-ment of silver prices is that they remained unchanged till 1614. This was

attributed to the simultaneous demand for silver in the monetaryeconomy and of copper in the industrial sector while the demand and

supply of gold were treated as constant. The problem with this argu-ment is that it is essentially a hypothesis based, for the period between1582 and 1614, on the official rates of exchange furnished byAbl Fazlwhich do not represent rates prevailing in the market. For the rest of theseventeenth century, the hypothesis rests on a certain interpretation ofa money of account which tends to inflate the silver price of copper by100 per cent.

In a section entitled the Coins of the Eternal Empire (nuqud i jwiddaulat), the i1-i Akbari provides a detailed listing of a variety of Mughalcoins in all three metals with their weights, denominations and exchangerates as they existed in 1595. The principal copper coin recorded in thisinventory is the dam of 323 grains, with its previous designation aspaisa, of which 40 were exchanged for a silver rupee. It was also men-tioned that a half dam was called adhela. The value of the ordinary roundmuhr of 169 grains was quoted here at nine rupees a piece. 79

If we go back to the beginning ofAkbars reign, we find that beforethe dm entered into official parlance, sometime between 1582 and 1595,

78James Steuart, A Collection of Miscellanies Ralative to Coinage in India, n.p., n.d.:2-3. This information belongs to the year 1739.

79Abul Fazl, &Amacr;&imacr;n-iAkbar&imacr;, vol. 1: 25-27.

http://mhj.sagepub.com/http://mhj.sagepub.com/http://mhj.sagepub.com/


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all accounting was done in a unit called tanka i muridi, each valued attwo copper coins (paisa/dm).80 However, a copper coin of 646 grains(twice the weight of the dam), shows up only from 1598 with the designa-tion tanka inscribed on it but without the adjective murddi (Table II).

Among the fractional pieces of this coin struck by the mints, the coincalled nim tanka (half tanka) corresponded to the weight and size of thedam. From a co-relation of the textual and numismatic evidence, it

appears that the tanka murad7 was not a real coin but a money of

account linked to the paisaldim at a fixed rate.Although the minting ofthe copper tanka

stoppedsometime

duringthe reign of

Jahangir,the

term was kept in constant use to express the relationship between themoney of account and the dam which prevailed since its inception.8

Table II

Copper Tankas of Akbar

Source: British Museum Collection.

Note: Maximum weight

80Abul Fazl,Akbarn&amacr;ma, OIOC, MSAdd. 27247: f. 332b; Todarmals Original Memor-andum on the RevenueAdministration, March 1582, Shireen Moosvi (tr.), PIHC, 49Session, 1988: 237-48;Abul Fazl,Akbarn&amacr;ma, vol. 3: 383; S.H. Hodivala, The Muradi

Tanka, Journal of theAsiatic Society of Bengal, NS, vol. 13, 1917: 80-96.81Ali Muhammad Kh&amacr;n,M&imacr;r&amacr;t i Ahmad&imacr;, vol. 1, Syed NawabAli (ed.), Baroda, 1928: 265,

267, 277, 288.Aurangzebs introduction of a lighterd&amacr;m (2/3 of the heavier type inweight) interfered with the traditional tanka-d&amacr;m exchange insofar as all payments stipu-lated in tanka were now to be made at th

quantity theory and mughal monetary history

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