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As mentioned in the earlier chapter, English merchants, under sanction of the Royal Charter in the name of East India Company entered into India in the beginning of the seventeeth century A.D. Though the Company started operating as traders, it created such institutions, civil and military,that lead to its domination over the country. By 1757 , the English were firmly established in India. During the next sixty years, the East India Company acquired territories over most of India. From traders they eventually emmerged as sovereign and governed the country directly or through their feudatory princelings till 1857.
TheRevolt of 1857 forced the Crown Government to take over the administration from the Company. In 1858, it took the administrative control over India from the Company in its hand and then carried out a number of changes in the administrative pattern. The East India Company, on the eve of its departure from India, had left a large deficit as its legacy to the new government. It is said that it amounted to nearly fourteen million pounds. Attempts were made to meet this deficit by raising loans. The public debt of British India rose from rupee 55.78 crores on April 30,1858 to rupees 97.33 crores on April 30,1860. Interest charges also rose correspondingly. The major cause of increase in expenditure was the operations for the supressing the Revolt. To meet the deficit and to maintain the budget under control, a number of measures were adopted by the Government. One of the measures adopted was to bring changes in the currency system and to regularise the country's paper currency by taking its issue under the government control.
The establishment of government paper currency was first suggested in the early part of 1859. James Wilson, the first Finance member of the Council of the Governor-General, discussed this question with Sir Charles Wood, the Secretary of State for India before leaving England to join his post in India. He thought the prospect of a large addition to the revenue by this method and an opportunity to test the validity of his economic doctrines, which he had advocated in England.
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