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INDIAN FRONTIERS AND INDIAN

FINANCE

A FRESH chapter has been opened, in the present year, not only in the history of Indian finance, but in the annals of British India. A policy of advance and acquisition beyond our north-west frontier has been inaugurated in 1895 which, in the importance of its probable issues and in the extent of the area occupied, has had no parallel since 1848. Far reaching as the consequences of this new departure necessarily must be, in no direction will they be sooner felt, or more deeply marked, than in the balance-sheet of India. While this is, however, generally admitted, it may seem to some premature to speculate at present on the probability of immediate disturbance. For the moment, all is painted couleur de rose. The Swát tribesmen, if Simla telegrams may be trusted, are not content merely to condone our occupation of such points in their territory as Chakdara and the Malakand Pass. They insist in demanding that the Government of India should administer their country. They would even be mortified at the refusal of their request. If this is so, nothing could be happier. No reply more forcible could be made to those who have declared that the tribesmen between Chitral territory and the Indus are a barbarous race, with whom independence is a passion, and whose fanaticism admits of no compromise. Still, it is well to recall to mind that something very like it has been heard on previous and analogous occasions. Events which belied the accuracy of precisely similar assertions in 1838 are now so distant that their echo has become well nigh inaudible. But some may remember, and those who have forgotten may be reminded, that in 1838 there were not wanting voices which loudly proclaimed the delight of the Afghan nation at their deliverance from their elected ruler. Four years later, when Afghanistan had unmistakably spoken for itself, those voices were conspicuously silent. It came at length to be recognised that among the Afghans were many who, from complaisance, from compulsion, or from cunning, had protested too much ; and whose too effusive expressions of welcome had misled many who were in haste to credit them. With that experience in our minds, it will be well to suspend judgment as to the credence to be placed in the reports

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which reach us of the pleasure of the tribesmen at the permanent settlement of British troops within their borders. All that as yet can be seen clearly is that there has been made by the Government of India a fresh departure, which may lead to grave complications, either in the immediate or in a more distant future. On this point all authorities are agreed. The Viceroy and his Council, the late and the present Secretary of State for India, alike concur in this regard. ' It was apparent from your letter of the 8th of May,' wrote Lord George Hamilton to Lord Elgin on the 16th of August, “that your Government was not without apprehension that the task of opening up the road might, if it were to necessitate the military coercion of the tribes, and the interference with their independence, be one of such great cost and involving such embarrassing complications, as to render it of doubtful expediency.' Lord George Hamilton seems, from the same despatch, to have founded on the reports of political officers on the spot his hopes that military coercion and interference with the independence of the tribes may be avoided. As no regular negotiations had been carried out either at that date or a fortnight later, when the Chitral debate took place, and as the binding effect of negotiations with one particular tribe on all the many tribes, clans, and sections of clans directly or indirectly concerned, will be in the highest degree doubtful, the Secretary of State's hopes may be regarded as being mainly the outcome of his desires. The tribes immediately concerned, beyond doubt, as Lord George Hamilton said, will be glad to get the money. It remains to be seen whether, as he hopes, the fruit of the expedition will be to induce the people to adopt more regular habits. Punctual payment of subsidies to Yusufzáis will not blind Momunds to the fact that tribal territory has been entered and occupied. Swát may adopt more regular habits. But, in spite of all edification, Boner will recognise that the thin edge of a wedge has been inserted which may lead to the disruption of tribal autonomy and independence. For his part Sir Henry Fowler, in the Chitral debate, roundly described the country through which the military road is to be made from the British to the Chitral frontier as inhabited by tribes who are distinguished by the fierceness of their fanaticism, their love of independence and their fear of annexation. He added that the practical question which will sooner or later have to be determined is whether we are going to extend the frontier of India on the western side by at least two hundred or two hundred and fifty miles. It is not too much, therefore, to say that the highest authorities are agreed that the Government of India has entered on a fresh departure, which may lead to grave complications, either in the immediate or in a more distant future.

Reserving, for the moment, further inquiry into this aspect of the question, it is in the first place the purpose of this paper to set out as clearly as space permits, at whatever risk of tediousness, the present position of the Indian finances, and to indicate the degree in which they can bear further strain. The nature and probable duration of the political strain which threatens them will be then reverted to. Some judgment may be thus facilitated of the prospects which lie before India. It is commonly agreed, we bave seen, that there is risk, as the Secretary of State for India puts it, of 'an intolerable burthen of expenditure being imposed on the Indian revenues. But how far those revenues may prove able to bear such a burden is very little understood. Nor is the language of those who affect the greatest apprehensions on this score always intelligible or consistent. On the day of the Chitral debate, for example, no words were too strong to express Sir Henry Fowler's apprehensions as to the consequences of the forward policy. Prominent among the many grounds on which the late Government had rejected it was that of finance. Sir Henry Fowler quoted, with unreserved concurrence, weighty words of Lord Lawrence and of his Government, which are as applicable now as when written twenty-six years ago :

We foresee no limits to the expenditure which such a move (a forward move) might require; and we protest against the necessity of having to impose additional taxation on the people of India, who are unwilling, as it is, to bear such pressure for measures which they can both understand and appreciate. ... Our true policy, our strongest security will be found to be in the contentment, if not in the attachment of the masses, ... in husbanding our finances, and consolidating and multiplying our resources.

Yet forty-eight hours later, while the Chitral debate was still hot in his moutb, we find the late Secretary of State, in the debate on the Indian budget, after the decision of the Government to remain in Chitral had been confirmed, congratulating himself and his successor on the improved financial prospects. If he had been accused, he said, of taking an ignorant, optimistic view of Indian finance, at least it was endorsed on the opposite benches. And then, unmindful, as it would seem, of his auguries in the Chitral debate, of Lord Lawrence, of the tribes, of their fanaticism, their love of independence, of the practical question which will have to be determined,' and the rest of it, he passed to discussion of reduction of taxation, and to urging on his successor increased vigour in the costly work of railway construction by the State and by State guarantees. It is little wonder that at least the public should take an ignorant and optimistic view of Indian finance, when a late Secretary of State so soon loses sight of the dangers immediately confronting it. For it is difficult to attach much weight to language so inconsistent with itself; or seriously to share apprehensions as to impending expenditure, or additional taxation, when we find that the most active opponents of the decision just arrived at as to frontier policy are the first to proclaim themselves optimists in regard to the future of Indian finance.

In the course of the recent budget debate, the view that the difficulties in which Indian finance is plunged are solely due to exchange was repeated and re-affirmed. In a paper contributed last year to this Review, I ventured to point out, and, as I believe, to demonstrate, that the increase of Indian expenditure from 1883-4 to 1892–3 was due to three causes. Put in order of magnitude, those causes were : increase to military charges, the unfavourable course of exchange, and abnormal activity in State construction of railways, on a gold basis, during a rapid and progressive fall in the exchange value of silver with gold. The Parliamentary Commission now sitting will probably, in the course of its inquiries, examine one or more of these points. When the Commission has concluded its inquiries, an authoritative expression of competent opinion may be looked for. Nothing is to be gained at present by returning to that aspect of the question. It will be more useful to take a brief but comprehensive survey of the main features of the present financial position; to try and form some adequate conception of the political outlook, whether in the immediate or more remote future; and thus to arrive at an estimate of the balance between the magnitude of impending complications and the resources which are available wherewith to meet them. On the military aspect of the matter I can, of course, express no useful opinion. It is a question on which military experts are alone competent to advise. But the more the public is permitted an insight into their views, the more it transpires how little they are in accord.

In endeavouring to form a conception of the present prospects of the Indian finances, we begin with a retrospect. The net results of comparison between receipts and expenditure in the twelve years commencing 1884–5 may be taken as the point of departure. The year 1884–5 was a typical year, for it was the last of a brief period of repose and of relief from taxation, and the first in which was recommenced that almost uninterrupted downward movement of exchange which seems for the moment to have been arrested. For the receipts and expenditure of the years 1884-5 to 1893-4 the Parliamentary Return No. 319 has been made use of in this paper. It is an authoritative India Office Return of the net income and expenditure of British India, under certain specified heads, for the ten years from 1884–5 to 1893-4. The figures in this paper for the years 1894–5 and 1895-6 are those which were presented to the House of Commons in the late Indian budget debate, in an Explanatory Memorandum signed by the late Secretary of State for India. Modifications made by Lord George Hamilton in those figures in the course of his speech have been adopted here. The figures for these last two years are not final figures, such as shown in the closed accounts, but are based on estimates which, to a greater or less extent, are still unverified. Vol. XXXVIII-No. 225

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Ranged respectively under years of surplus or of deficit the results of the twelve years from 1884-5 to 1895–6 are as follows:

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There would seem to have been so far an equal number of years of deficit and surplus; but an excess on the wrong side of the account to the amount, in round numbers, of about Rx. 600,000. Should the prospects of the current year further improve, this debit figure may yet be turned into a credit. On the other hand it was pointed out by the Secretary of State in the Indian budget debate that since 1884-5 there has been a certain amount of debt raised in this country, and whenever a debt is raised for the purpose of meeting the annual obligations through inability to sell bills, the money so raised does benefit the year of the expenditure, and in a manner which cannot be brought to account; because by diminishing the number of rupees that would otherwise be sold, it advances the prices of those that are sold. The amount of the debt which was incurred in this period (from 1884-5 to 1894-5) through the failure of the sale of bills amounts to 9,386,0001. The balance of the twelve years thus inclines, in any case, decidedly towards considerable deficit.

During the ten years from 1884-5 to 1893-4 the net increase of expenditure, as shown in the Return No. 319, was Rx. 11,359,135. The figures for 1894–5 have not been included in that return as yet, and comparison taken from its columns can extend to 1893-4 only. Taking twelve millions, roughly, however, as the net figure of increased expenditure in the eleven years between 1884-5 and 1894-5 (the present year being excluded as still current), it is next necessary to form a clear conception as to the sources from which it has been mainly met. In a small measure this growth of expenditure has been met by normal growth and increase in various minor heads of revenue. But it has been almost entirely provided for, either by measures of taxation; or by increase accruing to the State at those periodical revisions of land revenue of which the thirty years' cycle has again, in the last decade, come round; or by the appropriation to current needs of the proceeds of previous taxation, which had

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