Token currency

Topic: Turkic Invasions and the Delhi Sultanate · NCERT: Class 8, Ch 2 "Reshaping India's Political Map"

Meaning

Token currency was Muhammad bin Tughlaq's plan to issue cheap copper coins and order that they be accepted at the same value as silver or gold coins. The idea failed because people forged the copper coins at home on a large scale, and the Sultan had to withdraw them.

It matters because the idea was ahead of its time: most modern money, including our paper notes, is token money. It is also a standard example of a good policy that failed because the state could not carry it out.

Explanation

Background: why he tried it

• Muhammad bin Tughlaq made the Delhi Sultanate bigger than it had ever been.
• For the first time since the Mauryan Empire, most of the subcontinent came under one ruler.

• A large empire needed a lot of money for its army, its officials and its campaigns.

• Historians generally explain the experiment by a shortage of silver and the Sultan's need for more money. This is the usual reading, not a certain fact.

• It was one of several bold "Tughlaq experiments". Another was moving the capital from Delhi to Daulatabad in AD 1327. [3]
• He was not careless about money in general. Britannica records that he reformed the coinage and issued coins of high quality. Only the token-currency attempt failed. [3]

What token currency means

• Token currency is money whose stamped value is higher than the value of the metal it is made of.
• A silver coin is worth its silver.

• A token coin is worth what the state says it is worth.

• Its value comes from the state's word and authority, not from the metal.

• Muhammad bin Tughlaq's token coins were made of copper, a cheap metal. Some accounts also mention brass.
• By royal order they were rated equal to silver or gold coins.
• Most textbooks date the issue to around 1329–30, but historians do not all agree on the exact year.

How it failed

• Traders got confused.
• They could not be sure what a coin was really worth.

• Many preferred to keep their silver and gold and pay with copper.

• Mass counterfeiting followed.

• Copper was easy to get.
• The royal stamp was easy to copy.

• People made fake coins at home. Each copper coin they made counted as a silver one.

• The state had no way to stop it.

• It had no full mint monopoly (sole control over making coins).

• There was no technology to make coins that were hard to copy.

• The economy declined. Trade suffered and the value of the copper coins fell.

Results

• The Sultan withdrew the token currency.
• According to most textbook accounts, the treasury exchanged the copper coins for real silver and gold coins. Since the forged coins were exchanged too, the state lost a great deal of money.
• The failure hurt the Sultan's reputation, as the Daulatabad move also did. By the end of his reign the south had broken away and much of the north was in revolt. [3]

Time, place and evidence

• Period: first half of the 14th century, about 1329–30 according to most textbooks (the exact dates vary between historians).
• Dynasty: the Tughlaq dynasty of the Delhi Sultanate (c. 1000–1526 era of Turkic rule in north India).
• Ruler: Muhammad bin Tughlaq, son of Ghiyasuddin Tughlaq and predecessor of Firuz Shah Tughlaq.
• Region: the whole Sultanate, run from Delhi, at the same time as the shift to Daulatabad (old Devagiri / Deogiri) in the Deccan. [3]
• How we know:
• Coins. Tughlaq coins survive in Indian museum collections and are catalogued on the Indian Culture Portal (Ministry of Culture). They include coins of Muhammad bin Tughlaq, Ghiyasuddin Tughlaq and Firuz Shah Tughlaq. [2]
• Court chronicles. Persian chronicles of the Sultanate period describe the experiment. The best known is by Ziauddin Barani.
• Modern accounts. Britannica describes his coinage reforms and the failure of the token currency. [3]
• NCERT: Class 7, Ch 4 "Turning Tides" and Class 8, Ch 2 "Reshaping India's Political Map".

Don't confuse with

• Shift of capital to Daulatabad (AD 1327): this was his administrative experiment, moving people from Delhi to the Deccan. Token currency was his monetary experiment. Both failed, but they are separate measures. [3]
• Alauddin Khalji's market reforms: Alauddin fixed the prices of goods in Delhi's markets. Muhammad bin Tughlaq changed the coins themselves. Price control and token currency are often swapped in MCQs.
• Silver tanka: the tanka was a full-value silver coin that was worth its metal. A token coin is cheap metal given a higher face value.
• Modern paper money: it is also token money, but it works because the state controls printing and makes notes hard to forge. Tughlaq's coins failed because the state had neither of these.

Prelims Hooks

• Token currency was issued by Muhammad bin Tughlaq of the Tughlaq dynasty, not by Alauddin Khalji or Firuz Shah Tughlaq.
• Metal used: copper (some accounts add brass), declared equal in value to silver/gold coins.
• Main cause of failure: mass counterfeiting. Copper was easy to get and the royal stamp was easy to copy.
• Muhammad bin Tughlaq's two famous experiments were the capital shift to Daulatabad (AD 1327) and token currency. [3]
• Apart from the token experiment, he issued coins of high quality. [3]
• Coins of Muhammad bin Tughlaq, Ghiyasuddin Tughlaq and Firuz Shah Tughlaq are catalogued on the Indian Culture Portal (Ministry of Culture). [2]

Mains Points

• A good idea that failed because the state was weak.
• Token money is sound economics, and most modern money works this way.
• It failed because the 14th-century state had no mint monopoly and no way to stop forgery.

• This is useful in GS-I answers on how policies fail through weak state capacity rather than bad ideas, which is why he is called "a wise fool".

• Over-extension and the loss of trust.

• The token-currency failure and the Daulatabad move damaged both the treasury and public trust.
• This came at the same time as the empire was over-stretched. By the end of his reign the south had broken away and the north was in revolt. [3]

• The decline that followed fed into the rise of the Vijayanagara and Bahmani kingdoms.

• Coins as historical evidence.

• Surviving Tughlaq coins in museum collections let historians check what the chronicles say. [2]
• Comparing them with his high-quality regular issues shows that the failure was in this one experiment, not in his coinage as a whole. [3]

Related concepts

• Tughlaq dynasty
• Ghiyasuddin Tughlaq
• Tughlaqabad Fort
• Muhammad bin Tughlaq
• Transfer of capital to Daulatabad
• Daulatabad
• Diwan-i-Amir-i-Kohi
• Futuh-us-Salatin
• Musunuri Nayakas
• Firuz Shah Tughlaq

Read more

• Tughlaq experiments