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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 2 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. Io,7 Io. 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 contrary, 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."i 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 14 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

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

" Avoidance of Debt" is an ambiguous term. Nothing but positive “ Reduction of Debt" should be shown under the last head. But taking the figures as they are given, the total expenditure fell short of the stipulated Famine Grant by over five and a half millions sterling. The Indian Debt should have been reduced by that amount. Instead of that the loss incurred on the Bengal Nagpur and Midland Railways, amounting to £2,389,397 in the fifteen years, was shown as expenditure from the Famine Relief and Insurance Grant.

Then followed six years of almost continuous famines, and famine relief expenditure largely increased. The total expenditure for the twenty-one years, therefore, from 1881-82 to 1901-02 exceeds the total stipulated grant by a million sterling, as shown in the following figures :

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We have excluded the loss on the Bengal Magpur and Midland Railways, which, in these twenty-one years, amounted to £3,280,334. It should be noted that recent famine relief expenditure has increased the liabilities of India; the original purpose of the famine relief taxes, to keep down such liabilities by reducing the debt in ordinary years, has not been fulfilled.

The total revenues of India, including the Land Revenue, and the total expenditure, including the Home Charges, during twenty-five years, are shown in the following table, compiled from Statistical Abstracts :

Year.

Land
Revenue,

Gross Revenue

and Receipts.

Expenditure Gross Expendi

ture charged England. Jagainst Revenue.

in

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1878–79 1879-80 1880-81 1881-82 1882-83 1883-84 1884-85 1885-86 1886-87 1887-88 1888-89 1889-90 1890-91 1891-92 1892-93 1893-94 1894-95 1895-96 1896-97 1897-98 1898-99 1899-1900 1900-01 1901-02

Tens of Rupees. 19,891,145 22,323,868 21,861,150 21,112,995 21,948,022 21,876,047 22,361,899 21,832,211 22,592,371 23,055,724 23,189,292 23,016,404 23,981,399 24,045,209 23,965,774 24,905,328 25,589,609 25,408,272 26,200,955 23,974,489 25,683,642 27,459,313 25,807,584 26,254,546 27,432,027

Tens of Rupees. 61,972,481 65,194,020 68,433,157 74,290,112 75,684,987 70,278,337 71,841,790 70,690,681 74,464,197 77,337,134 78,759,744 81,696,678 85,085,203 85,741,649 89,143,283 90,172,438 90,565,214 95,187,429 98,370,167 94,129,741 96,442,004 101,426,693 102,955,746 112,908,436 114,516,788

Tens of
Rupees.
16,202,016
16,794,424
17,486,144
17,340,712
17,369,631
17,335,995
18,464,752
17,527,406
18,426,170
19,829,035
21,855,698
21,954,657
21,512,365
20,656,019
22,911,912
26,161,815
26,112,111
28,775,648
27,458,338
26,234, 255
25,319,824
24,487,765
24,589,269
25,801,435
26,052,983

Tens of Rupees. 66,234,521 63,059,922 69,661,050 77,921,506 72,089,536 69,603,500 69,692,313 71,077,127 77,265,923 77,158,707 80,788,576 81,659,660 82,473,170 82,053,478 88,675,748 91,005,850 92,112,212 94,494,319 96,836,169 95,834,763 101,801,215 97,465,383 98,793,811 110,403,130 107,091,423

We shall confine ourselves to the figures of the last five years to trace the exact results of the artificial appreciation of the rupee. The rupee had been raised to slightly over 150. in 1897-98, and to 16d. in 1898–99, at which figure its value has been fixed. We show below the total revenues and the total expenditure of India for these five years in pounds sterling for the convenience of British readers.

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Total re

venues. 64,257,207 67,595,815 68,637,164 | 75,272,291 76,344,525 penditure 67,830,014 64,954,942 65,862,541 73,602,087 | 71,394,282

Total ex

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