The artificially fixed rupee-sterling exchange rate prescribed by the Hilton-Young Commission (1926) was adopted by the British Government for which one of the following reasons ?
- (a) Aiding the flow of remittances from India and maintaining India's creditworthiness ✓ UPSC's answer
- (b) Providing support to Indian importers
- (c) Encouraging export of cotton produce from India
- (d) Preventing depreciation of the Rupee in terms of gold
Why the answer is (a)
• The Hilton-Young (Royal Currency) Commission of 1926 fixed the rupee at 1s 6d in gold, a rate Indian opinion considered artificially high.
• A high rupee made it cheaper for the Government of India to remit Home Charges to London and reassured British creditors, so the official justification was smooth remittances and India's creditworthiness.
• It did not aim to help Indian importers or exporters: an overvalued rupee actually hurt Indian exports, including cotton.
• The rate was a fixed sterling peg, not a device to stop depreciation against gold; Indian nationalists and businessmen demanded 1s 4d instead.
• The controversy is a standard illustration of imperial financial policy serving British interests over Indian ones.
Why the other options are wrong
- (b) Providing support to Indian importers
- An overvalued rupee was not designed to support importers; the policy served British remittances, not Indian trade.
- (c) Encouraging export of cotton produce from India
- A high rupee made Indian cotton exports dearer, so it discouraged rather than encouraged them.
- (d) Preventing depreciation of the Rupee in terms of gold
- The 1s 6d ratio was a sterling peg chosen for remittance convenience, not a safeguard against depreciation in gold.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2026, held on 24 May 2026. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.