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Yes, I think it was is. 2d., if I remember rightly, in 1893, and it is now nearly is. 4d., so that within these last five years the value of the rupee has been enhanced by ad. as compared with gold. With regard to the fall from 1871 to 1893 I may be allowed to explain that the Indian Government and Provincial Governments got a natural increase in their revenue in consequence of the fall. The Land Revenue and other revenues went up in this way. The price in rupees rose all round; the price of food grains rose; and as the Government in its recurring Settlements made that a ground of enhancementbecause the Government as (superior] landlord is entitled to an increase if the price of the produce rises—there was a natural increase in Land Revenue. Then, also, with regard to the Income Tax; as the incomes, estimated in rupees, went up, the Government got an increase of the Income Tax. So that while there was a fall in the value of the rupee from 1871 to 1893, the Government was directly, and in a natural way, getting an increase in the revenues as estimated by the rupee.

10,661. Your first objection [to the artificial raising of the rupee) is that practically this means a general increase in taxation.

Yes, over and above the natural increase.

10,674. Then you say there is another and a still graver objection to the proposal. Will you explain that?

Millions of agriculturists and labourers in India are indebted to money-lenders and Mahajans; and the debt is, in many cases, reckoned in rupees and not in grain. To artificially enhance the value of the rupee, or to fix the value at the rate to which it has been already artificially raised, is to increase the indebtedness of the cultivators and labourers of India to money-lenders and Mahajans. The measure serves to add to the profits of the prosperous classes who feed on the distresses of the poor, and to add to the weight of the millstone which

the poor and indebted classes carry round their necks. Throughout the bazaars and money-markets of India, the effect of raising the value of the rupee is to add to the profits of the rich money-lender, and to enhance the liabilities of the poor cultivator who has a debt. .

10,692. Now, will you come to the matter of trinkets?

All that the poor people in India can possibly save in years of good harvest is saved, not in savings banks, which do not exist in India for the poor, but in silver jewellery and trinkets for their women. Practically, all the spare wealth which the cultivating and labouring classes have in India is in this form; and in years of scarcity and famine all this silver, or a great part of it, is sold in the affected districts in order to procure food grains. The proposal of the Government of India is virtually one to confiscate about a third of the poor man's savings in India. The value of the rupee being artificially raised, the silver bangle or bracelet in which the cultivator has invested all his savings, sells for less than what it costs; and thus by a stroke of the pen the Government of India reduces what is really the national wealth of the poor in India in order to meet its own liabilities on somewhat easier terms.

10,707. Then, will you tell us how you think these proposals have an effect on the manufactures of India ?

On that point I should premise that my information is second hand, because I am not personally engaged in manufacture or trade. But I have consulted men engaged in trade, and they tell me that the raising of the value of the rupee artificially dislocates trade, and has injured manufac- -ture. I have heard from merchants engaged in Bombay in the cotton industry, that the cotton industry is in a miserable state just now, specially in competition with the produce from China and Japan, and they impute that directly or indirectly to the closing of the mints. ...

tificially card from that the

British trade is prospering with other Asiatic countries having silver currencies; why should British traders demand, in the case of India, a fixed ratio between gold and silver, which they cannot demand from other Asiatic countries? The people of India do not ask for it; the people of India will not profit by it; the people of India are likely to lose in a variety of ways, as indicated above, by the artificial raising of the value of the rupee. And the Government of India, naturally representing the people, and standing forward as the protectors of their welfare, should reject a scheme which the people do not want, and cannot profit by.

10,710. You say: "The proposal of the Government of India is not the natural or the proper remedy for that increasing drain which is annually flowing from India to England, in the shape of pay, pensions, and allowances” ?

The allowances are paid in England in gold, and instead of reducing its gold obligations, which is the natural and the proper remedy, the Government seeks to adopt the unnatural and desperate and dangerous remedy of converting all its remedies in India into gold. Let us suppose the case of an Indian landlord who gets his rents from his estate in rupees, and has to pay an agent in London in gold. What would Courts of Justice and Equity think if the landlord preferred suits to realise his Indian rents in gold, on the ground that he has to pay one London agent in gold ? His prudent and proper course would be to minimise his London expense.

CHAPTER XIII

FINANCE AND THE INDIAN DEBT.

“ Two conflicting policies prevailed in India,” said Sir Charles Trevelyan in 1873, in his evidence before the Select Committee on Indian Finance. “One, the policy advocated by me, of reduction of expenditure ; the other, which was the favourite at Calcutta and in England, increase of taxation."

After the retirement of Lord Northbrook from India, and of the able and sympathetic Finance Minister, Sir William Muir, in 1876, the policy of increase of taxation prevailed unchecked. The Madras famine of 1877 did not lead Lord Lytton to a reduction of expenditure and a reduction of taxes. On the contraty, under the advice of his new Finance Minister, Sir John Strachey, he imposed new taxes to create a Famine Relief and Insurance Fund. “The simple object was, in fact, to provide so far as possible an annual surplus of one and a half crores, for famine relief in famine insurance expenditure. To the extent to which, in any year, the amount was not spent on relief, it was to be spent solely on reduction of debt, or rather upon avoidance of debt, which is the same thing."1 And a pledge was given to the people of India that the proceeds of the taxes would not be expended for any purpose other than that for which they were imposed.

The pledge was broken soon after it was given. In the budget of 1878-79 the grant was made; but in the budget of 1879-80 it was suspended. The famine insurance taxes continued to be levied; but the grant

1 Report of the Famine Commission of 1898, p. 324.

for famine relief and insurance disappeared. There was a strong protest from the public in India. The Finance Minister, Sir John Strachey, argued that whether the public accounts showed surplus, equilibrium, or deficit, the new taxes must prevent debts by the amount they yielded, and therefore fulfilled the conditions under which they were imposed. The public in India considered this argument a disingenuous evasion of a specific pledge. The Secretary of the State for India himself took exception to Sir John Strachey's argument. It was decided in 1881 that, the full grant of it crores of rupees should in future be entered in the budget under the head of Famine Relief and Insurance, with sub-heads for (1) Relief, (2) Protective Works, and (3) Reduction of Debt.

Thus “the original policy of devoting the whole of the grant, less actual cost of famine relief, to reduction or avoidance of debt had been changed by the acceptance of the view that a large part of the grant might be better applied to what are called Famine Protective, as distinct from Productive, Public Works."1

But even this new and modified purpose of the Famine Grant was not scrupulously adhered to. In the • fifteen years ending with 1895-6, the Famine Grant of

It crores, or one million sterling a year, would be fifteen millions sterling. But the expenditure in Famine Relief, Protective Works, and Reduction of Debt was less than ten millions sterling, as shown in the following figures.

1881-82 to 1896-97.

Famine Relief . . . . .
Protective Railways ...
Protective Irrigation Works ..
Reduction or Avoidance of Debt .

213,571 4,367,287 1,209, 207 3,551,533

Total . . . . . . . . .

9,341,598

| Report of the Famine Commission of 1898, p. 325.

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