INDIA AND BURMA (BURMA MONETARY ARRANGEMENTS) (Hansard, 17 May 1946)

The Under-Secretary of State for India () Mr. Arthur Henderson
The House knows that, since the separation of Burma from India in 1937, all matters of currency have been regulated by the India and Burma (Monetary Arrangements) Order, 1937, which the right hon. Gentleman opposite was responsible for having approved by the House. Under this Order, the Reserve Bank of India manages the currency of the country and is the banker to the Government. The purpose of this Draft Order is to transfer, for the period referred to in paragraph 3 of the Draft Order, responsibility for the management of the currency of the country from the Reserve Bank of India to the Governor of Burma, and thereby to enable him to regularise the currency as it now exists.
This transfer has become necessary because, in the view of the authorities concerned—the Government of Burma, the Government of India and the Federal Reserve Bank of India—conditions in Burma at present are such as not to permit the Reserve Bank to resume the full scope of its responsibilities and functions under the 1937 Order. The Reserve Bank will, however, continue to act as agent of the Government of Burma in all currency matters and as banker to the Government itself. I hope that, unless the right hon. Gentleman opposite has any point which he would like to address to me, what I have said is a sufficient explanation.

§ Mr. R. A. Butler () Saffron Walden
The purpose of this draft Order, as has been explained in a lucid manner by the Under-Secretary for India, is to transfer the responsibility for the management of 2291 the currency of Burma from the Reserve Bank of India to the Governor of Burma, the Reserve Bank thereafter acting as agent for the Governor. I was not, however, quite clear about the exact relationship of the Governor of Burma to his agent in this matter. The hon. and learned Gentleman was quite right in saying that I was originally responsible, after the passage of the India Act, for the original Order of 1937. Under that Order of course the Reserve Bank of India was regarded as managing the currency of Burma and being banker to the Government. Can we first of all have any explanation as to what the exact relationship will be now, and whether there is any alteration in the conception laid down in the original Order? Normally, it is satisfactory to both that the Reserve Bank should carry out the day to day management of these complicated affairs, and I presume that the Governor himself will not have to occupy himself with them.
The second point arises on Paragraph 5 of the Order, which is not very easy to understand without a certain amount of explanation. Burma, as we all know, has been through a very exceptional period and, at the time of evacuation, a considerable number of unissued stocks of notes were looted from the treasuries, and I understand that the Reserve Bank of India holds assets only against notes which are in circulation and not against unissued stocks. Would the hon. and learned Gentleman explain what is the position and the responsibility of the Reserve Bank in regard to looted notes? I should be grateful for an answer, for, as I understand it, the Reserve Bank must be protected, and therefore the Governor of Burma, whose agent will be the Reserve Bank, has to assume responsibility for all Burma notes, including the looted ones.
The next question that strikes me on reading Paragraph 5 of the Order is why there should be a reference to Indian notes of the denominations of Rupees 1,000 and Rupees 10,000. The expression here is: shall, with the exception of notes of Rupees 1,000 and Rupees 10,000 denomination continue to be legal tender in Burma. It is not, of course, normal for many of us to deal with notes of such a very high value, but I would like to know whether there is any other explanation. As I 2292 understand it, this Measure is being carried out in order to deal with persons who amassed high value notes by illegal methods during the occupation period. I should like to be assured that such practices are in fact not likely to continue. If they are likely to continue, have those words been put in the Order to prevent such practices? Is it necessary for the Government of Burma, in view of the danger of such amassing of notes, merely to include those notes of high value, since if there is a danger of such malpractices how can they be prevented from happening with notes of different denominations? Those are the main questions I should like to put to the hon. and learned Gentleman, because the House must see that, in view of the extreme strain to which Burma has been subjected, it is necessary to make arrangements of this sort to deal with the exceptional situation.
The only other question is about Paragraph 6. I understand that there is a great mixture of currency media in Burma at the present time, and I presume that the terms of Paragraph 6 are designed to deal with the complicated position which exists and to carry out Paragraph 14. of the principal Order which was introduced in 1937, since the Reserve Bank will have the right to buy or sell at par unlimited amounts of Burma currency from or to the Government of Burma. These are the main questions which I think will come into the minds of those present this morning and they all concern subjects upon which we are very keen to hear the hon. and learned Gentleman give a reply. I thought it was my duty to raise them owing to the great interest they have evoked, and we should like to have a further explanation.

§ Viscount Hinchingbrooke () Dorset, Southern
I do not want to jump the hon. and learned Gentleman out of the realm of cautious constitutional advance indicated in the Order which we are now considering into a wild world of speculation resulting from the drastic changes which the Government are proposing in India, but I think we might have just a word from him about what is likely to happen to these currency provisions in Burma in the event of the Indian Reserve Bank passing under a new Government of India which elects to leave the British Empire. Burma is by no means yet in that position; it is not yet a Dominion, 2293 and nobody contemplates its leaving the British Empire. Will it not be necessary for some Commonwealth bank, the Bank of England or a new Reserve Bank of Burma in relation to the central Government at home, to back the Burma currency in the event that the Indian Reserve Bank can no longer provide the facilities because of the fact that India elects to leave the British Empire? I should like the hon. Gentleman to say whether any arrangements are in contemplation to cover this eventuality. Nothing could be worse, from the point of view of the relations between Burma and this country and that the Burma currency should be backed by an Indian Reserve Bank which was responsible to an Indian Government that had elected to leave the British Empire altogether.

§ Mr. A. Henderson
The right hon. Gentleman addressed a number of questions to me, the first of which was, Is the Governor of Burma himself to be concerned with the day to day administration of currency matters? The Governor of Burma has a financial adviser and, subject to his advice, he will be responsible for financial policy, but the day to day administration, as far as the banking aspect is concerned, will be in the hands of the Federal Reserve Bank of India. The noble Lord asked what the position would be in the hypothetical event of the new India desiring to be outside the Commonwealth. I can say that, apart altogether from that consideration, the question of the future relationship of the Federal Reserve Bank of India to the Government of Burma is under consideration, but that is quite apart from what the position would be in the event of India seeking to leave the Commonwealth.

§ Mr. R. A. Butler
Would there have to be a revision of the Order, or would the Order have lapsed?

§ Mr. A. Henderson
In any event, this Order is an amending Order, and its scope and duration are temporary. As the right hon. Gentleman knows, it is only to cover the period ending 30th September, and it will be necessary to come to the House, probably before the Recess, in order to deal with the more permanent aspect of the situation. With regard to looted notes, Paragraph 5 is designed to transfer to the Governor the liability for 2294 all the notes that were looted during the early days of the Japanese occupation. At the same time, the paragraph does provide that the assets in respect of those notes now held by the Government of India shall be transferred to the Government of Burma. As regards the large notes, those of 1,000 and 10,000 denomination, it is, as the Order indicates, the fact that those notes are not to be regarded as legal tender. That, of course, does not mean that they will not be legal; but it will mean in practice that the onus will be put upon those who have them in their possession to establish that they came into their possession by lawful means. I think that that is a very necessary provision, having regard to the facts of the situation.

The right hon. Gentleman
asked whether paragraph 14 of the 1937 Order would be affected by the provisions of paragraph (6). Paragraph (6) ensures the continuance of unrestricted remittance facilities at a fixed rate of exchange between India and Burma, and for the same exchange link with sterling in Burma as obtains in India, by providing that the Reserve Bank of India is to have the right to buy or sell unlimited amounts of Burma currency from or to the Governor at the value laid down in the paragraph—one Burma rupee to be equal to one Indian rupee. I hope that these answers cover the points raised by the right hon. Gentleman.

§ Mr. R. A. Butler
As I understand it, this Order expires on 30th September, 1946, and, therefore, it will be necessary for him to come to the House again before the end of the Session. If that is so, I should like to ask why the Government want this Order to job backwards to 16th October, 1945, and why they did not come with this Order before—why the hon. and learned Gentleman has to come before the House again as he always has to do; for I sympathise with him in his having to come with these difficult Orders before the House. I should like to ask why earlier provision could not be made to last longer, so that he would not have to trouble Parliament with this matter again.

§ Mr. Henderson
The reason why it will be necessary to come back to the House, possibly towards the end of July, is that the long term policy has not yet been settled. The whole question of the relationship of the Federal Reserve Bank 2295 of India and the Government of Burma, the question of the control of currency, has been under active discussion for some months, and no final decision has yet been arrived at by the various authorities concerned. The reason why the draft Order itself dates back to 16th October, is, of course, that that is the date on which the Governor returned to the country after the occupation; and because the difficulties with which the Government of India have been faced are very considerable—the right hon. Gentleman is well aware of the difficulties—it was not possible to deal with this matter earlier than we have done. The Governor has had great difficulty; and it was only in the light of the experiences they have had in Burma that it was decided that the position had to be regularised. The form of regularisation is in the provisions of this Order, by transferring the control and management of the currency from the Federal Bank to the Government. I can assure the right hon. Gentleman there has been no unnecessary delay. It is really that we have been bound by the circumstances of the position.

§ Mr. Butler
Can the hon. and learned Gentleman give the assurance that it was not due to a lack of a legislative programme that the Government did not bring this before us sooner? Question put, and agreed to. Resolved: That an humble Address be presented to His Majesty in pursuance of the provisions of Section 157 of the Government of Burma Act, 1935, praying that the India and Burma (Burma Monetary Arrangements) (Amendment) Order, 1946, be made in the form of the draft laid before Parliament.