The artificially fixed rupee-sterling exchange rate prescribed by the Hilton-Young Commission (1926) was adopted by the British Government forwhich one of the following reasons?

1. A

   Aiding the flow of remittances from India and maintaining India's creditworthiness

   Aiding the flow of remittances from India and maintaining India's creditworthiness. The Hilton-Young Commission (Royal Commission on Indian Currency and Finance) recommended a stabilization of the rupee at 1s. 6d., which the British Government adopted primarily to secure the remittance of Home Charges (payments for British administrative expenses, pensions, and debt servicing in London) and to maintain the external creditworthiness of British rule in India.

2. B

   Providing support to Indian importers

   Providing support to Indian importers: This option is incorrect because an overvalued rupee made imports cheaper and exports dearer, severely harming Indian industrialists and importers overall, while the deliberate rate fixation was designed to benefit British financial interests rather than domestic importers.

3. C

   Encouraging export of cotton produce from India

   Encouraging export of cotton produce from India: This option is incorrect because the artificially fixed higher exchange rate (1s. 6d. instead of the historical 1s. 4d.) made Indian agricultural and manufactured exports, including cotton, uncompetitive in international markets, rather than encouraging them.

4. D

   Preventing depreciation of the Rupee in terms of gold

   Preventing depreciation of the Rupee in terms of gold: This option is incorrect because the primary policy debate centred around pegging the rupee to gold or sterling at an artificially appreciated rate to facilitate imperial remittances, rather than merely preventing depreciation, which actually inflicted deflationary pressures on the Indian economy.

Summary. Official key is (a) because the British Government accepted the Hilton-Young Commission's recommendation of a 1s. 6d. exchange rate chiefly to safeguard Home Charges remittances and preserve Indian financial credit in London, despite widespread domestic opposition.