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?

The correct answer is A.

Why the correct option is correct: The Hilton-Young Commission (Royal Commission on Indian Currency and Finance, 1926) recommended an artificially high rupee-sterling exchange rate of 1s. 6d. (one shilling and sixpence) instead of the widely demanded 1s. 4d. The British Government adopted this overvalued peg primarily to ease the burden of the "Home Charges"—massive sterling obligations remitted to Britain that included interest on public debt, military expenses, and British officials' pensions. By artificially maintaining a stronger Rupee, the colonial government required fewer rupees to buy the sterling needed for these remittances. This prevented massive deficits in the colonial budget and guaranteed that the British Indian government could comfortably service its foreign debt, thereby maintaining its international creditworthiness.

Why the other options are wrong:

• Option B is incorrect: While an overvalued currency naturally cheapens imports, the British Government's primary macroeconomic motive for the peg was to secure its own fiscal budget and facilitate Home Charges, rather than to specifically support Indian importers.
• Option C is incorrect: An artificially strong Rupee made Indian goods more expensive abroad, severely discouraging and hurting Indian exports like cotton. This provoked immense backlash from Indian nationalist leaders and industrialists, who argued it harmed domestic agriculture and industry.
• Option D is incorrect: Although the Commission recommended a Gold Bullion Standard to provide general currency stability, the specific choice of the artificially high fixed rate (1s. 6d.) was intentionally selected to aid sterling remittances.

Concluding takeaway: Remember the "Ratio Controversy" of the 1920s: The British enforced a high exchange rate (1s. 6d.) to easily extract Home Charges, while Indian nationalists fiercely demanded a lower rate (1s. 4d.) to protect Indian agricultural exports and domestic industries.