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1870-71 were revised at the instance of the Select Committee on Indian Finance so as to include some obligations not previously exhibited, and this plan was followed in subsequent years. The total Debt of 139 millions at the close of 1876–77 includes the money borrowed and spent by the Government on State Railways and Irrigation Works, but does not include the money spent by private companies under guarantee of interest from the Indian revenues. Down to 1876–77 the Government had spent about 24 millions on State Railways and Irrigation Works; that is to say, £14,651,353 on State Railways, and £9,651,618 on Irrigation Works.

It is also necessary to explain that the figures given above do not include the East India - Stock of twelve millions sterling, forming the capital of the East India Company on which India still paid interest.

We have seen in a previous chapter that the East India Company had piled up a Public Debt of 69}

millions during the century of their rule in India. It is painful to observe that the Administration of the Crown doubled this Debt in nineteen years, bringing it up to 139 millions—not including the East India Stock.

Let us suppose once again that an independent and impartial tribunal—an International Arbitration Court not composed purely of British or of Indian judges had to deal with this Indian Debt of 139 millions in the memorable year 1877, when the Queen assumed the title of Empress of India.

There can be little doubt what the verdict of the Court would have been. The arbitrators would have made a clean sweep of the Company's Debt of 691 millions, as made up of a part of the unjust demand of an annual tribute which India should not have paid. They would probably have given an award to Great Britain for the Mutiny Debt of 40 millions--the cost of British troops employed in India-after deducting from it the cost of Indian troops employed in Imperial wars in Afghanistan, China, Persia, and Abyssinia; and the balance against India, if any, would have been small. And lastly, the arbitrators would have allowed the Public Works Debt of 24 millions to stand—with perhaps an injunction against the borrowing of more capital for such works—as minor railway lines could wait until taken up by private enterprise, and irrigation works could be annually extended from the ordinary revenues of the empire. A hundred inillions of the so-called Public Debt of India would thus have been struck off as not justly due from India. And the balance would soon have been extinguished from the revenues of India, once freed from the payment of interest of this enormous and unjust liability. There would have been no National Debt; for there need be no National Debt in India.

1 See Economic History of British India, 1757 to 1837, chapter xxiii.

? We assume there would be balance against India, not reckoning the whole of the tribute paid by India during the century of the Company's rule, and not reckoning interest. If this was reckoned, the balance would be largely against Great Britain.

The institution of a National Debt was unknown in India under her old rulers. Hindu and Mahomedan kings sometimes borrowed money from bankers on their own credit, as English kings in the olden days borrowed money by pledging their Crown jewels, or assigning specific revenues for the discharge of the debt. So late as 1688, the year of the English Revolution, England had scarcely any National Debt-the amount was less than a million. And it would have been better if British rulers of India had followed the Indian precedent, or the old English precedent of the seventeenth century, instead of importing into India the more recent European institution of a National Debt.

Modern European nations create National Debts mainly to extend their conquests and colonies, and to maintain their position among rival nations. India seeks no conquests; she has no rivals in Asia; her position under a strong and good government is invulnerable. The cost of the British conquest of the country had been defrayed from her annual revenues; the cost of useful public works could be met from those revenues. There was no need for creating a permanent National Debt in such a country; and there was no need for continuously increasing it when peace had followed the Mutiny wars, and the administration had been assumed by the Crown. Lord Lawrence endeavoured to meet all expenditure from the annual income. Lord Mayo's plan of constructing Public Works with borrowed capital was a mistake. When money is easily borrowed it is easily spent, and the Debt accumulates.

The alarming growth of Debt and expenditure in India attracted the attention of Mr. Gladstone, the greatest. British financier of the nineteenth century. He wished to. arrest it, and he moved for a Select Committee on Indian Finance in 1871. It would have been well for India if Mr. Gladstone himself could have sat on that Com

* £664,263

mittee ; but as Prime Minister of Great Britain he could not do so. He did what was possible when he appointed Mr. Henry Fawcett as one of the members. Select Committees sat for four years, from 1871 to 1874, and unfortunately discontinued their inquiries soon after the Liberal Government was upset in 1874. No final recommendations and no great remedial measures therefore ensued. But the evidence recorded during the four years is valuable, and has been referred to in preceding chapters. And it is interesting to turn again and again to this evidence, given by men who conducted the administration and directed the finances of India a generation ago.

One of the most important witnesses examined was the Right Honourable W. N. Massey, who had been Finance Minister of India from 1865 to 1868. And he impressed on the Committee, in the strongest words he could use, the necessity of limiting the expenditure in India to the annual income.

“The principle of English Finance is,-adjust your income to your expenditure. In my opinion the contrary principle should be adopted in Indian finance. The truth is that your resources are so limited, that if you should outrun the constable a little, you are at once landed in a deficit. You cannot expand any of your taxation; you cannot create new taxation with the exception of the Income Tax. I wish to say that in round terms, for there is no new source of taxation, as far as I am aware, that it is possible for you to invent. Therefore it is that I would most earnestly impress upon all Indian financiers the expediency of accommodating their expenditure to their income.” And referring to the Duke of Wellington's reply to the Court of Directors in .1834, to make the expenditure keep within the income, the witness said, “I wish the spirit of the Duke of Wellington's reply was made applicable to the present administration throughout the whole of India.” 1

| Report of 1872 ; Questions 8583 and 8612.

Still more emphatic was the evidence of another Finance Minister of India, Sir Charles Trevelyan. He had been the colleague of Lord William Bentinck and Macaulay in Indian administration forty years before ; he had been Governor of Madras and had been recalled from that post for protesting against increase of taxation; and he had then been Finance Minister of India from 1863 to 1865. A venerable man of sixty-six years, he still spoke with the fire of youth; and a veteran administrator of India both under the Company and under the Crown, he protested against the increased expenditure of the Crown Government.

“Do you think,” he was asked, “ that, since the direct administration of affairs by the Secretary of State for India in Council, there has been a greater disposition to give way to demands for expenditure of Indian finances ?”

“ Yes, no doubt,” he replied. “The Queen's Government has shown itself profuse and squeezable.... I refer to the great point which was made in the transfer of the Government, of building up the personal independence of the Members of the Indian Council by a life tenure of office, and the arrangement that was made to continue in the Council the exclusive control over payments out of the revenue which had attached to the East India Company. But as regards expenditure, it has all gone for nothing. . . . The influences which press upon the Government outside, through the Press and through their influential supporters, have altogether been too strong, and every safeguard has been overborne.” 1

“ Stout resistances,” said Sir Charles on a subsequent day, “which the East India Company opposed to the. demands of the Queen's Government in former days, show that a substantial barrier did exist; and I can answer for those resistances having been, to a great

1 Report of 1873; Questions 415 and 416.

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