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Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
June 1971
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Simha, S. L. N., History of the Reserve Bank of India (1935-51), Bombay, India, Reserve Bank of India, 1970, xxiv+ 878 pp., Rs 50, $10.

The present volume, which is the official history of the Reserve Bank of India, is of exceptional interest, recounting as it does the eventful formative years of one of the oldest central banks among the group of countries currently described as “less developed.” In fact Indian monetary experience has always had a distinctive significance for students and practitioners of monetary economics, and it is no accident that some of the major contributions of eminent economists like Alfred Marshall and Keynes have stemmed directly from a close analysis of India’s monetary history.

Unlike the histories of older central banks such as the Bank of England (by Sir John Clapham) and the Common-wealth Bank of Australia (by Professor Giblin), the writing of the history of the Reserve Bank of India was entrusted to a serving staff member working under the guidance of an Editorial Committee comprising Mr. C. D. Deshmukh, the first Indian Governor of the Bank, as Chairman, and Messrs. J.J. Anjaria, R. G. Saraiya, and B. Datta (members).

But it is gratifying to be able to say that the author’s connection with the Bank has not inhibited a reasonably dispassionate appraisal of events, policies, and even personalities. There is, of course, a proper measure of pietas in some places, notably in the sections relating to the Reserve Bank’s organization and its role as an employer.

While essentially the history of the country’s central bank, it is admirably set in the wider perspective of the major phases of India’s financial history since 1835, the year in which the silver rupee of 180 grain troy, 11/12ths fine, was declared the sole legal tender throughout British India. The opening chapter on the “Genesis of Central Banking in India,” which goes back to the celebrated minute (January 1773) of Warren Hastings (Governor of Bengal) outlining his “Plan” for a “General Bank in Bengal and Bahar” will be of particular interest to contemporary central bankers who are prone to regard the rationale and origins of central banking in narrow twentieth century terms. The subsequent narrative is an admirable combination of the historical and functional aspects of the growth and development of the Reserve Bank of India. It exemplifies in a striking manner most of the typical problems of organization and policy which face a new central bank. Of particular interest are the sections relating to the evolution of the Reserve Bank as a bankers’ bank and as a controller of credit and of commercial banking, the development of policy instruments, such as open market operations, public debt management, and exchange control. There are, however, some tantalizing dead ends, notably whether the failure to develop a wide and active treasury bill market reflects inherent institutional factors or a lack of a positive policy, as also the more basic question of why the Reserve Bank has been still unable to bridge the traditional “dualism”of the Indian money market represented by the organized and unorganized sectors.

All in all, this exceedingly well-documented and handsomely produced history does the institution proud and one can confidently hope that the subsequent volumes will be worthy successors to the present one.

A. G. Chandavarkar

Carreau, Dominique, Souveraineté et cooperation monetaire internationale, Paris, France, editions Cujas, 1970, ix + 530 pp.

On the difficult theme of the relationship between national sovereignty and international cooperation in monetary matters, Mr. Carreau, who teaches law in France and is also the author of a book on the Fund, has written a practical, clear, and comprehensive description of the public international law framework within which monetary policies operate. His book is both a history of facts and ideas and a compilation (generally descriptive and explanatory but sometimes critical) of present practices, law, and institutions.

The author distinguishes three major trends in the international monetary system: sovereignty, interdependence, and cooperation and international control. The three parts of his book correspond to each of these aspects which have appeared successively and are now coexisting and sometimes conflicting. Monetary sovereignty is traditional and prevailed until 1944. It is characterized by the so-called, but not absolute, territoriality of monetary and exchange control laws. Each state is legally free to determine the value of its currency as it pleases, e.g., to devalue in order to obtain a competitive advantage or escape its financial obligations; guaranteed value clauses in international loans may be changed by the unilateral decision of the debtor state to the detriment of its foreign private creditors.

Mr. Carreau places the beginning of the second era, interdependence, in 1944, with the creation of the Fund, followed in particular by the European Monetary Agreement, the Organization for Economic Cooperation and Development (OECD), and the European Economic Community (EEC). New purposes (economic growth, mutual help) are defined. The states undertake in principle to maintain unitary and stable exchange rates, to achieve the convertibility of their currencies, and to lift all restrictions on current payments and, to a certain extent, capital transfers. The author gives a general but nevertheless fairly complete description of the “good conduct” rules of the Fund and other institutions such as the General Agreement en Tariffs and Trade, OECD, and EEC, as well as of the rules of various bilateral treatries.

The third aspect, monetary cooperation and international control, is the consequence of interdependence. Agreeing to limit its prerogatives for the benefit of other states, each state may obtain their assistance, or that of international organizations (the Fund, the Bank for International Settlements, OECD, EEC, etc.), for the protection of its interests, especially of its currency (unenforceability abroad of unlawful exchange contracts, swaps, gold pool, Roosa bonds). The author rightly emphasizes the importance of the availability of Fund resources (purchases and stand-by arrangements); he describes the main features of their use (revolving character, credit tranche policies); the members’ obligations (duty to provide information, consult and collaborate); and the possible sanctions. There is also a description of the main legal features of special drawing rights and the General Arrangements to Borrow.

The magnitude of the task undertaken by Mr. Carreau was such that some omissions and mistakes are understandable. An example of misunderstanding of the Fund Articles is the statement that they are silent on the subject of revaluation of par values, whereas, in fact, the general concept of change of par value in the Articles covers both upward and downward changes. The terminology is sometimes incorrect: the author constantly refers to stand-by “agreements,” whereas for the Fund they are “arrangements” of a noncontractual nature. The book, which is based on a 1965 doctoral thesis, has not been fully updated; although it was published in 1970, it refers to the 1969 Amendment of the Fund Articles as if it had not become effective. The editing could have been better: some references are wrong; the style and punctuation are sometimes loose and create ambiguities. On the whole, however, this is an excellent book, certainly the best treatise in French on international monetary law. In a field where law, finance, economics, and politics intertwine, Mr. Carreau has succeeded in his difficult task of writing a book which, although intended mainly for the lawyer, will be easily and profitably read by the economist, the journalist, or the layman interested in the legal aspects of international monetary cooperation.

François Gianviti

The 1971 Yearbook of the Far Eastern Economic Review, The Far Eastern Economic Review Co., Hong Kong, 340 pp., $5.40.

The world recognition of Japan as a political and economic superpower in 1970 is highlighted in this 12th edition of the Yearbook.

Derek Davies, the editor, notes that it was back in the financial year 1968—69 that Japan’s gross national product had topped ¥ 52,000 billion, finally outstripping that of West Germany and putting Japan’s economy in third place, less powerful only than the United States and the Soviet Union. No single event in the past year dramatized this global acknowledgement of Japan’s importance, apart from its successful mounting of Expo ‘70 which demonstrated the achievements of the Japanese people to an international audience (in addition to being the first world fair to make a profit).

The main bulk of the Yearbook again contains the 28 country chapters covering events in the past year and prospects for the next 12 months.

Finance and Development does not attempt to evaluate books or contributions thereto by members of the staff of the International Monetary Fund or the World Bank Group, but notes them as likely to be of interest to its readers.

Hawkins, E.K., The Principles of Development Aid, Baltimore, Maryland, U.S.A., Penguin Books, Inc., 1970, 152 pp., $1.95 (paperback).

As the second development decade commences, the role of aid in international development is currently undergoing review by many countries and international agencies. Mr. Hawkins’s book is concerned with the principles, rather than the history or practice of aid. He defines foreign aid as assistance on concessionary terms for promoting development, and notes that the process of development which aid is designed to facilitate depends not merely upon economic considerations, but also on social, political, and historical factors.

The author discusses how much aid should be provided and how it can be used; what form it can take; and the various sources of aid. The experience of the last two decades, he contends, has been encouraging in that organizations and institutions have emerged in the international sphere dedicated to the rational solution of problems of aid. The chief examples he cites are the multilateral agencies. He also notes there have been ad hoc arrangements which have become permanent pieces of machinery for discussing issues, with the Development Assistance Committee of the Organization for Economic Cooperation and Development being the best example. ‘The existence of these organizations encourages the kind of rational treatment … that lies behind the thinking of the Pearson Commission,” he states.

“Few would have dared to forecast that the ideas behind the postwar planning at Bretton Woods, and elsewhere, would have flowered into the complex pattern of aid that now employs large numbers of both national and international technicians, administrators, and economists. There is obviously a future for foreign aid which may yet encompass the scale of activities considered desirable by the Pearson Commission. In the meantime their discussion of the issues and problems that arise has made a contribution to that future.”

E.K. Hawkins is Chief of the Population and Employment Studies Division in the Economics Department of the World Bank.

Kamarck, Andrew M., The Economics of African Development (Revised Edition), New York, N.Y., U.S.A., Praeger Publishers, 1971, xv + 352 pp., $3.95 (paperback).

The author, whose article, “‘Capital’ and ‘Investment’ in Developing Countries,” commences on page 2 of this issue, believes that international aid to developing countries must be progressively increased. As in the edition originally published in 1967, special emphasis is given to agriculture, which Mr. Kamarck believes “must be the central part of any development program.” Other chapters are devoted to the importance of mining, the problems of growing industrialization, and Africa’s unique infrastructure needs in transport, power, communications, and education. He also considers how African development needs and economic structure are affecting, and will probably continue to affect, its domestic and foreign policies. In the final chapter he extends his forecast on the course of development in Africa to the year 2000.

OTHER BOOKS RECEIVED

Miller, John T., Jr., Foreign Trade in Gas and Electricity in North America: A Legal and Historical Study, New York, N.Y., U.S.A., Praeger Publishers, 1970,336 pp., $18.50.

Radetzki, Marian, International Commodity Market Arrangements: A Study of the Effects of Post-War Commodity Agreements and Compensatory Finance Schemes, London, England, C. Hurst, 1969, vi + 131 pp., £3.5.

Scott, George M., Accounting and Developing Nations, Seattle, Washington, U.S.A., University of Washington, Graduate School of Business Administration, 1970, ix + 168 pp., $4.50 (paperback).

Bochud, François, Zahlungsbilanz und Währungsreserven: Die Konzepte der Theorie und die Praxis, Tübingen, Germany, Kyklos-Verlag, Basel, J.C.B. Mohr (Paul Siebeck), Tübingen, 1970, ix +151 pp., DM 23.

The Overseas Development Institute, Development Guide, A Directory of Non-Commercial Organizations in Britain Actively Concerned in Overseas Development and Training (Revised Edition), London, England, George Allen & Unwin, 1970, 264 pp., £2.50.

Calvez, Jean-Yves, Aspects Politiques et Sociaux des Pays en Voie de Dévelopement, Paris, France, Dalloz, 1971,298 pp., F 32.

Bridger, Gordon and Maurice de Soissons. Famine in Retreat: The Fight Against Hunger; A Study and a Strategy, London, England, J. M. Dent & Sons, 1970, x + 205 pp., 45s.

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