PART I. COUNCIL SPEECHES SPEECHES DELIVERED IN THE IMPERIAL LEGISLATIVE COUNCIL. BUDGET SPEECH, 1902. [This is the Hon. Mr. G. K. Gokhale's first Budget Speech at the Imperial Legislative Council, delivered on Wednesday, 26th March 1902, His Excellency Lord Curzon being President of the Council, and the Hon. Sir Edward Law being Finance Member.] YOUR EXCELLENCY, I fear I cannot conscientiously join in the congratulations which have been offered to the Hon'ble Finance Member on the huge surplus which the revised estimates show for last year. A surplus of seven crores of rupees is perfectly unprecedented in the history of Indian finance, and coming as it does on the top of a series of similar surpluses realised when the country has been admittedly passing through very trying times, it illustrates to my mind in a painfully clear manner the utter absence of a due correspondence between the condition of the people and the condition of the finances of the country. Indeed, my Lord, the more I think about this matter the more I feel-and I trust your Lordship will pardon me for speaking somewhat bluntly-that these surpluses constitute a double wrong to the community. They are a wrong in the first instance in that they exist at all-that Government should take so much more from the people than is needed in times of serious depression and suffering; and they are also a wrong, because they lend themselves to easy misinterpretation and, among other things, render possible the phenomenal optimism of the Secretary of State for India, who seems to imagine that all is for the best in this best of lands. A slight examination of these surpluses suffices to show that they are mainly, almost entirely, currency surpluses, resulting from the fact that Government still maintain the same high level of taxation which they considered to be necessary to secure financial equilibrium when the rupee stood at its lowest. The year when the rupee touched this lowest exchange value was 1894-95, the average rate of exchange realised in that year being only 13ld, to the rupee. Government, however, had in the face of the falling rupee, resolutely maintained an equilibrium between their revenue and expenditure by large and continuous additions to the taxation of the country, and thus even in the year 1894-95, when the rupee touched its lowest level, the national account-sheet showed a surplus of seventy lakhs of rupees. From this point onwards, the currency legislation, passed by Government in 1893, began to bear fruit and the exchange value of the rupee began to rise steadily. In 1895-96, the average rate of exchange realised was 13.64d. and the surplus secured was 1 crores. 1896-97 and 1897-98, the average rate of exchange was 14:45d. and 15·3d. respectively, but the years turned out to be famine years and the second year also one of a costly frontier war necessitating extraordinary expenditure for direct famine relief and military operations of 2.1 crores in the first year and 92 crores in the second. The result was that 1896-97 closed with a deficit of 17 crores and 1897-98 with a deficit of 5.36 crores. It will, however, be seen that if these extraordinary charges had not come upon the State, both years would have been years of surpluses, and the surplus for 1897-98 would have been close upon four crores of rupees. In 1898-99, exchange established itself in the neighbourhood of 16d.-the average rate realised during the year being 15.98d.-and the year closed with a balance of 3-96 crores of rupees, after providing a crore for military operations on the frontier-thus inaugurating the era of substantial surpluses. Now we all know that a rise of 3d. in the exchange value of the rupee-from 13d. to 16d.— means a saving of between four and five crores of rupees to In the Government of India on their Home Charges alone, and I think this fact is sufficient by itself to explain the huge surpluses of the last four or five years. The following figures are instructive, as showing the true position of our revenue and expenditure, on the new basis of an artificially appreciated rupee: If there had been no extra charges for war and famine, the national revenue on the basis of the new rupee would have been found to exceed the requirements of Government by about 63 crores a year. Allowing for the savings effected in consequence of the absence of a portion of the troops in South Africa and China, as also for the generally reduced level of ordinary expenditure in famine times, and taking note of the fact that the opium revenue turned out somewhat better than was expected and might reasonably be relied on, we still may put down the excess of our present revenue over our present expenditure at about five crores of rupees, which is also the figure of the amount saved by Government on their Home Charges as a consequence of the exchange value of the rupee having risen from 13d. to 16d. Now, my Lord, I submit with all respect, that it is not a justifiable course to maintain taxation at the same high level when the rupee stands at 16d, that was thought to be necessary when it stood at 13d. During the last sixteen years, whenever deficits occurred, the Finance Member invariably attributed them to the falling rupee and resorted to the expedient of additional taxation, explaining that that was the only way to avoid national bankruptcy. During the first 12 years of this period, from 1885-86-when Sir Auckland Colvin told the Council in his Financial Statement almost in prophetic terms that affairs were 'passing into a new phase,' necessitating a reconsideration and revision of the fiscal status established in 1882-down to1896-97, there was one continued and ceaseless struggle on the part of the Finance Department of the Government of India to maintain at all risks and hazards a 'strong financial position' in the face of a rapidly changing situation, and provide by anticipation against all possibledangers near and remote, fancied and real: and not a year passed-literally speaking-but heralded some change in the financial arrangements of the country. The famine grant was suspended for three successive years, 1886-871888-89, then reduced for two more, and permanently so in the last year of the period. Twice during these 12: years were the Provincial Contracts subjected to drastic revision (1887-88 and 1892-93), and the total gain secured to the Imperial Treasury on such revision and by a contraction of Provincial resources was full 1.10 crores (64 lakhs in 1887-88 and 46 lakhs in 1892-93). Furthermore, during the period, thrice (in 1886-87, 1890-91 and 189495) were the Provincial Administrations called upon to pay special contributions in aid of Imperial revenues. But the chief financial expedient employed to escape the supposed embarrassment of the time was continuous additions to the taxation of the country. Nine years out of these 12 witnessed the imposition of new taxes. First came the income-tax in 1886, and then followed in rapid succession the salt-duty enhancement of 1887-88 (June, 1888), the petroleum and patwari-taxes and extension of the income-tax to Burma in 1888-89, customs on imported liquors increased in 1889-90, the excise-duty on Indian beer in 1890-91, the import-duty on salt-fish in Burma in 1892-93, the re-imposition of the 5 per cent. ad valorem duties on imports, excluding cotton-goods, in 1893-94, and the extension of import-duties to cotton-goods in 1894-95. In 1896 there were changes in the tariff. The 5 per cent. import and excise duties on cotton-yarns were abolished and the import duties on cotton-goods were reduced from 5 to 3 per cent.-involving a sacrifice of 50 lakhs of rupees as a concession to the clamour of Manchester, but a countervailing excise of 3 per cent. was imposed on cotton-goods of all counts manufactured in Indian mills. Lastly, came the imposition of countervailing duties on imports of bounty-fed sugar in 1899. The total additional revenue raised by these measures of taxation during the past 16 years has been no less than 12.30 crores a year. But this is not all. The land tax, too, has come in its own automatic way for large augmentations during the period. Taking the ordinary revenue alone under the head, we find the increase has been 2.82 crores. One startling fact about these land-revenue collections is that during the six years from 1893-97 to 1901-02 (a period including the two greatest famines of the country) these collections actually averaged £17:43 millions a year as against £1667 millions, the average for the six preceding years, .., from 1890-91 to 1895-96! Putting these two heads together, the total augmentation of public burdens during these years comes to over 15 crores. Such continuous piling up of tax on tax, and such ceaseless adding to the burdens of a suffering people, is probably without precedent in the annals of finance. In India, it was only during the first few years following the troubles of the mutiny year that large additions were made to the taxation of the country; but the country was then on the flood-tied of a short-lived prosperity, and bore, though not without difficulty or complaint, the added burden. During the past 16 years the country has passed through a more severe phase of agricultural and industrial depression and yet it has been called upon to accept these fresh burdens-year after year-increasing without interruption, and all this with a view to ensuring and maintaining a 'strong financial position' proof against all assaults. The broad result of this continued series of taxing measures has been to fix the taxation of the country at a level |