money for the relief of agricultural indebtedness, and similar objects concerning the moral and material wellbeing of the masses. Hitherto the first policy has been on the whole predominant. When I say that, I do not mean that the second has been neglected altogether. I do not mean that at all. But there is no doubt that far more money has been and is being spent on the first, whereas the second has been and is being comparatively starved; and I urge that the relative claims of the two on the resources of the country should now be reversed.

REDUCTION OR AVOIDANCE OF DEBT.

[The second stage of the discussion on the Financial Statement for 1910-11 was taken on 9th March 1910, the Hon'ble Sir Harvey Adamson, Vice-President, being in the chair. At this meeting, Mr. Gokhale moved a resolution recommending the abolition of the annual allotment for Reduction or Avoidance of Debt under the head of Famine Relief and Insurance and in support of his motion made the following speech:-]

The Hon'ble Mr. Gokhale said:-Sir, my resolution reads as follows:

That this Council recommends that the annual allotment of half a million sterling under Famine Relief and Insurance to Reduction or Avoidance of Debt should now be abolished.

I would like at the outset to make a slight alteration in the wording of the resolution. I would say that this Council recommends that the annual allotment (which for next year, is half a million sterling) under Famine Relief and Insurance to Reduction or Avoidance of Debt, should now be abolished.'

I make this alteration because though in ordinary times when there is no expenditure on Famine Relief one might expect this allotment to be half a million—in practice it has not always been half a million: therefore in order to be strictly accurate I should like to alter the wording as proposed.

The Council no doubt is aware that there is a head of expenditure in our accounts known as Famine Relief and Insurance. The total charge under this head is one million sterling and is divided into three sub-heads. One is actual famine relief; the second is expenditure out of revenue on protective works, being both railway and irrigation, but now for all practical purposes irrigation; and third, the

sum allotted for the reduction or avoidance of debt. I understand there is a limit as regards protective works, not more than half being devoted to protective works. Therefore when there is no actual expenditure on famine relief, the other half goes, or can go, to reduction or avoidance of debt.

Now, Sir, I want to invite the attention of the Council briefly to the history of this Famine Insurance Grant, and I shall state it in as few words as possible.

This grant, or fund as it was called at the beginning, was created thirty years ago on account of very serious expenditure which Government at that time had to incur in connection with the relief of two famines. The Government of Lord Lytton in 1878-79 found that the Government of India had to spend about 17 crores of rupees in connection with the famine in Bengal and the North-Western Provinces in 1874 and the bigger famine which ravaged the Western and Southern Presidencies later on from 1876 to the beginning of 1878. The total expenditure in connection with famine relief and loss of revenue in the years was about sixteen or seventeen crores, and the Government decided that they should levy extra taxation in order to provide in the course of ten years a sum of 15 crores of rupees. It was calculated that ordinarily two famines might be expected in ten years, and a sum of one million sterling under the three heads which I have just mentioned, was provided and earmarked for famine purposes. Immediately afterwards a question arose as to how this money was to be disposed of. In 1879 a Parliamentary Committee was appointed, presided over by Lord George Hamilton, to enquire into the question of public works, and this Committee laid down how the Famine Insurance Fund should then be spent. I think perhaps the best way in which I could state to the Council the objects of that Famine Insurance Grant would be to quote an extract from the report of that Parliamentary Committee. This was what Lord George Hamilton and his colleagues said: 'During the financial years 1877-78-79 additional taxation was imposed in India in order to establish an annual Famine Insurance Fund of a crore and a

half (in the currency of that time a million and a half). That amount was fixed with reference to famine expenditure which during the last six years amounted to the enormous sum, exclusive of the loss of revenue of 14 crores of rupees and of which a large proportion_had been met by borrowing. The object of this Famine Insurance Fund was, by increasing the revenue, to avoid constant additions to the debt of India which the prevention of periodical famines would entail by either applying that increase of income to works likely to avert famine and thus obviate famine expenditure, or by reducing annually the debt contracted for famine, so that if famine expenditure should again become inevitable the reduction of debt made in years of prosperity would compensate for the liabilities incurred during scarcity. This increase of taxation was sanctioned by the Secretary of State in Council on this understanding.'

The understanding, therefore, was that the grant was to be devoted, first, to preventing additions to the debt of the country, and secondly, for promoting protective works which would mitigate the rigours of famine. Now the history of this fund or grant is a somewhat chequered one. Immediately after it was instituted, owing to financial difficulties connected with the Afghan War, the fund had to be diverted to other purposes. During the five years of Lord Ripon's Viceroyalty the fund was spent on the purposes for which it was instituted, but again in Lord Dufferin's time there was a diversion.

There was then very considerable criticism in the House of Commons, and ultimately the Government restored this Famine Insurance Fund, but during Sir James Westland's time it was never fully a crore and a half for several years but only one crore, and he justified that reduction by saying that there was an improvement in the condition of the country and in the capacity of the people to resist famine.

However, in Lord Curzon's time the full crore and a half was restored.

This period of thirty years during which the famine grant has been devoted to the purposes mentioned may roughly be divided into two equal parts from 1881 to 1895-1896 and from 1895 up to the present time. The first period was practically free from famine. There were no doubt scarcities here and there and even small famines, but there was nothing serious, and I therefore omit the whole of that period as not being altogether too favourable for the purposes of my argument.

Taking the second period 1895-up to the present time-there were two of the greatest famines of the century which ravaged the greater part of the country, besides two or three smaller famines. Therefore it could not be said that this period was free from famine conditions, and yet what do we find? The unproductive debt of the country, which alone has to be taken into consideration in connection with this matter, was 70 millions at the beginning of this period. At the close of this period that debt was only 40 millions. Therefore this unproductive debt or ordinary debt, instead of being added to, was actually reduced from 70 millions. Out of this the portion of the famine Relief Grant devoted to reduction comes to 4 millions or 4 millions to 40 millions. The rest was due to the surpluses having been devoted to railway construction and through that to reduction of debt. My point therefore now is, if in the absence of this grant the unproductive debt had had to be added to, then this expenditure out of revenue in reducing the debt would have been justified and this sum would have been properly devoted according to the original intention to preventing additions to the debt of the country. But as the debt was largely reduced independently of the grant, I think it was unnecessary that this grant of 4 millions should have been devoted further to the reduction of the debt. And I say this sum might have been spent usefully in other directions.

I want the Council to realise this; that there is a difference between what Lord George Hamilton's Committee laid down as the object of this grant in relation to the debt, and the present practice of Government. It is