Indian Journal of Economics January 1948

The increase in liquid funds is to be ascribed to the enormous sales of gold during the depression years due to the depreciation of the rupee in terms of gold or the rise in the rupee price of gold since 1931 and the reduction in the demands of Government and of industry and trade. [...] The unorganised section of our money market composed of the indigenous bankers and the money lenders is still unaffected by the policy of cheap money and so long as this is the case the vast bulk of the people composed of the small traders and agriculturists cannot be said to have been benefited by the policy. [...] The revival of private investment and the carrying out of the reconstruction programmes of the Central and Provincial Governments by increasing the demand for funds may lead to a pushing up of the rates of interest. [...] Thus a change in bank-rate (or effective market rate of interest) will affect the rate of saving the rate of investment and the rate of saving of production and employment in a number of ways and will in the long run affect the level of economic activity of the society and hence the welfare of the people as a whole. [...] Granting that the policy is successful in this respect and that the low rate of interest is highly beneficial to the Government in so far as it reduces the burden of the National Debt it may be asked whether the narrow and immediate departmental economies in the cost of National Debt should supersede the broad and vital interests of National Economy.