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remain on friendly terms with both parties, in the trust that, whatever party is in power, that party will be doing its utmost, as it has hitherto done, for the general welfare of the Indian people.

In conclusion, there is one duty we should constantly perform; that is to hold out the hand of fellowship to every native gentleman who visits this country. There are already in London, Oxford, and elsewhere some clubs and institutes which offer them a home, such as the Northbrook Institute in London, established under Lord Northbrook's auspices, and the Institute at Oxford, organized by the exertions of our friend Professor Monier Williams,-both which institutions were inaugurated by H.R.H. the Prince of Wales. It should be our pride and duty to offer information to our native visitors, and to place at their disposal the results of our knowledge; for such knowledge must be regarded in connection with the best interests of India. We should strive, by these and other means, to create a favourable impression on the minds of our Indian fellow-subjects, who visit our shores, by making their associations with England happy, so that they may carry back with them to India pleasing recollections of English people and things. We shall thus produce impressions which will be favourable to us as a nation, and tend to render us popular in the Eastern Empire. I am sure that those of us who have spent many of their best days in that distant country still look back to it with fond recollections; and though, while we were in the country, we saw the faults as well as the merits of our native fellow-subjects, now that we have left the country, the memory of the faults has faded, while the remembrance of the merits and virtues becomes brighter and stronger.

CHAPTER X.

POLITICAL ECONOMY OF THE INDIAN EMPIRE.

State of Indian finance - Public debt - Works of material improvement Their remunerative character Condition of the people - Absence of Poor-laws Physique of the peasantry Dangers always threatening India- Impossibility of European colonization in India - Nevertheless large field for employment of Europeans Practical instruction needed for them Landed estates held by them in the interior — Industries under their direction-Tea, coffee, sugar, wheat, rice, cinchona, tobacco, malt liquor, jute, flax, hemp, coir, silk, indigo, vegetable and mineral oils, skins and horns- Working of coal and iron-Doubtful prospect of gold-mines Forest produce Competition to be expected from natives in trade and industry Purchasing power of the rupee Rise of prices and of wages simultaneously - Capacity of the empire to absorb new capital — Railways, canals, and staple industries — The directions in which new capital will probably be required - Annual drawing of capital from England to India.

PART I.

[Speech delivered before the Royal Colonial Institute, in London, December 1880.]

I HAVE the honour at this moment of speaking before a large number of gentlemen who have been taking part in the Government of the various Colonies and possessions which make up the British Empire in the world; also many gentlemen who have been or still are engaged in the numerous affairs and various kinds of businesses in which the British Empire is concerned. Well, then, gentlemen who have governed our dependencies,

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gentlemen also who have taken part in the concerns commercial and industrial of those dependencies, you are, as I understand, anxious to hear something regarding the Government, and the affairs, industrial and commercial, of what I venture to think is the greatest dependency of them all, in fact, perhaps the greatest foreign empire which has ever been seen in ancient or modern times. But we sometimes hear in these days that this splendid dependency is verging upon insolvency. I am far-and those who think with me are far-from complaining when gentlemen in this country,-learned and accomplished both in statistics, economy, finance, and administration-make observations of this character, because such observations constitute warnings of the dangers which lie before an Empire-a distant alien Empire like that of India-and warnings also against the pitfalls into which the administrators of that Empire are likely to be betrayed. But still the effect of such observations is to throw us back, as it were, upon our haunches, and make us consider whether the finances of India are sound or not. Now, in the first place, let me assure you that they are sound.

You hear of deficits, annual deficits, year after year. But these are technical nominal deficits, and are hardly deficits at all in the proper sense of the word. These merely arise because the sums spent by the Government upon the improvement of the country, upon canals and railways, are included in the ordinary finances. But, in no other country in the world are such charges included in the ordinary finances; on the contrary, they are excluded; and that being so, there is in India no deficit whatever; on the contrary, there is an exact equilibrium established between income and expenditure. Upon the finances of the last twelve years there has been actually a slight surplus; and thus it goes on, a little deficit one year with a little surplus another; and, when you come to draw out the threads of a series of years, there comes out a slight surplus. Then the revenues are said to be inelastic; well they are inelastic as compared with the elastic revenues of England; but,

nevertheless, they are growing and increasing. The incidence of taxation is excessively low, when you take it per head of population, it is as low as taxation can possibly be, if there is to be any taxation at all. Then, the army expenditure is not excessive; it does not amount to above one-quarter of the annual receipts. Or it may be said to bear a proportion of about one-fourth or one-third, accordingly as you choose to take the total of the revenues proper or the total receipts of all kinds. It does not exceed the proportion which the defensive expenses of any one of the great Powers of Europe bear to the general finance of that Power. Therefore the army in India costs about as much as it costs in all other civilised countries-that, and no more. The civil expenses are not outrunning the constable; they are kept well in hand, and, while they are rather diminished in all those respects which affect Europeans, they are slightly increased in other respects, but merely for the sake of giving the natives better pay and better preferment. But even then, so correct has been the management, there has been no real increase on the whole, savings being balanced against augmentations. Then public works have, no doubt, been carried out to a great extent; the Government has invested 125,000,000l. sterling upon railways, of which about 93,000,000l. have been expended by guaranteed companies, and the rest directly by the State.* Upon the whole of that concern taken together some railways paying more and some paying less -upon the whole they are paying about 5 per cent., and this notwithstanding the many new railways which have just been opened, or are not quite completed, and which have not yet got their traffic developed. You hear much about canals. Well, we have the finest irrigation canal system to be seen in the world. Whether it is equalled by the canal system of the Babylonians in the days of Nebuchadnezzar, or of Alexander the Great, I hardly know; but even

* These figures have, of course, risen somewhat during the three years which have elapsed since this speech was delivered.

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in Mesopotamia there could hardly have been canals to surpass the canals now to be seen in India. There have been 20,000,000. sterling spent upon them, and upon that six per cent. is being paid now; and if that is so now, you can judge what will be obtained a few years hence.

Then you will ask, how about the Public, or National Debt? The Debt stands at about 150,000,000l. sterling. But that includes all that has been spent upon the State railways which I have been describing, and also upon the canals; it likewise includes large sums of money which have been spent for the relief of the recent famines. So that if you deduct this sum, and take the debt which has really been spent upon actual war, upon military operations, and the like, which corresponds to the Public Debt of the European Powers, the Indian Debt is just about equal to two years' revenue. That is not an excessive incumbrance; that will not sink the Imperial boat, nor drag the Empire into ruin. Further, what is the condition of that debt? The rates of interest have been repeatedly reduced of late years. They have been reduced from five to four-and-a-half, and even four per cent., and the Fours once rose to 105, or five per cent. premium, though they have since fallen. The Fours and a Half, however, still command a premium; and, altogether, if you look at the quotations—the financial quotations of the world— you will find that the Indian Government is now borrowing at a rate which is the most favourable in the world-next after that of England itself. Well, then, you hear also that this Public Debt is not raised locally-not in the country, not from the natives, but in England. It is perfectly true that the debt for the guaranteed railway was entirely raised in this country, but exclude that and exclude also the public debt that has been raised in this country, then you will find that of the remaining debt, which has been raised in India, of which the interest is payable there, and which amounts to about 60,000,000.

* This is exclusive of the 93,000,000l. mentioned above, as expended on guaranteed railways.