J. D. (John David) Rees.

India; the real India (Volume 19) online

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action of Russia on the Russo-Afghan frontier in
1885, and the conquest of Upper Burma, led to
further charges, which resulted in the necessity for
a general tax on non-agricultural incomes hi excess
of 500 rupees per annum, and the increase of the
salt-duty to 2 rupees 8 annas per maund of 82 pounds.
Between 1892 and 1895 exchange fell from Is. 3d.
to Is. Id.; in 1893 the mints were closed to the free
coinage of silver, and the Government definitely
adopted the policy which has led to the stable rate
of exchange at Is. 4<d. and to the practical attainment
of a gold standard. In 1894 the general import-
duty of 5 per cent, was reimposed, a countervailing
excise-duty being levied on cotton goods produced
by Indian mills. In 1900 the value of the rupee
reached the Is. 4>d. rate, and from 1895, when the
effect of the new policy began to be fully felt, up to
the present day financial prosperity has increased,
though two exceptionally severe crop failures have
occurred, and plague has fastened upon the country.
These two famines cost sixteen and the military
operations on the frontier of 1897-1898 accounted
for five crores. During this period the duty on

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REVENUES AND TAXATION

cotton cloth was largely reduced, cotton twist and
yarn were exempted, and a countervailing duty was
imposed to protect Indian sugar against the com-
petition of bounty-fed beet sugar from Europe. In
1902-1903 the Government remitted 2 crores of
arrears of land revenue which had accrued in the
famine, and in 1903-1904 the salt-tax was reduced
from 2J to 2 rupees per maund, and all incomes of less
than 1000 rupees per annum were exempted from
income-tax. In 1905-1906 the salt-tax was further
reduced to lj rupees, and the grants to local govern-
ments were largely increased. The Budget for the
current year provided for increased expenditure on
police and education, and the local cesses levied for
the payment of village officials were abolished a
welcome remission, though this is the particular
service remunerated by local cesses, to which the
payers have the least objection. Of the gross reve-
nue of British India about 26 per cent, is raised from
taxes proper, as against about 83 per cent, in the
United Kingdom, and the land revenue forms about
39 per cent, of the total net receipts, as against 44
per cent, thirty years ago.

The revenue derived from opium is obtained
chiefly from the export of this product to China,
where the local product has become a formidable
competitor in spite of decrees by the Emperor for-
bidding the use of the drug. At present, however,
the Indian Government is under an engagement to
gradually reduce the export, year by year, till it
altogether ceases, provided that the Chinese Govern-

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INDIA

ment furnishes proof that the production of native
opium has been correspondingly diminished. This
engagement as a firm agreement is limited to three
years, at the expiry of which the British Govern-
ment will be free to reconsider the position as
free, that is, as that Government ever can be, when
pressed by bodies possessing considerable interest
with the electorate, and desiring to abolish the
opium trade, without regard to the results to the
Indian revenue, and whether or not the abolition
results in any diminution of the consumption in
China. The latest authority, Major Bruce, thinks
the English Government could as easily abolish beer
drinking as the Chinese Government, even if in
earnest, could appreciably reduce the use of opium
in China.

There was a time when opium yielded 16, but it
now furnishes only 7 per cent, of the total net reve-
nue. The receipts from salt, the consumption of
which has largely increased in recent years, amounted
to 8 crores in the last year of the 2| rupees duty,
when the average incidence, which now has fallen
to about 3d., was 5d. per head of the population.
Under the term excise is included not only the reve-
nue from intoxicating liquors, but also the duty on
opium consumed in the country, where the drug is
used chiefly as a medicine and preventive of fever.
In malarial tracts the people are absolutely depend-
ent upon it, and prisoners in jail from such regions
if deprived of their dose run the risk of losing their
lives. The use of opium has also proved highly

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REVENUES AND TAXATION

beneficial to Indians in malarial parts of Africa,
as appears from reports submitted to the Colonial
Office. The wholesale condemnation of the use of
this drug because of its misuse in China and else-
where obscures the fact that it plays a very valuable
part in the pharmacopoeia, and is a specific in regard
to malarial diseases, from which 19 per mille of the
people of India die, as against 2 per mille per annum
victims of the plague, of which we hear so much
more, because even the ingenuity of the virulent
critics of British rule in India can hardly assert
that malarial fevers, which have been the scourge of
the country throughout its history, were, like plague,
invented by the British Government, or brought
about by the oppression and excessive taxation of
its unhappy subjects. But post hoc propter hoc is
good enough argument where the English in India
are concerned.

The customs duties are levied for revenue pur-
poses only. They have no protective power, and
they tend to decline in consequence of the rapid
growth in the local production of petroleum, and the
development of the Indian cotton trade. Of the
stamp revenue, which amounted to 5 crores in
1902-1903, more than one-third is collected in Bengal
owing to the exceptionally litigious character of the
inhabitants of that region. Of the ordinary heads
of expenditure, the charges for civil administration
naturally show a disposition to increase, one reason
for which has been the grant of compensation allow-
ances to officers of Government for the loss caused

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INDIA

to them by the fall in the value of the rupee upon
their remittances to England. Little or no excep-
tion could have been taken to this measure provided
its operation had been confined to Government
servants who had entered the service under an
express or implied understanding that they would
be paid in rupees at the rate of ten, or about ten, to
the pound. But there is much reason for holding
that to extend the concession to officers who joined
the service when exchange had fallen, and was
falling rapidly, was hardly fair to the tax-payer,
who was in no way responsible for such fall. The
question is one of little interest now, but it gave rise
at the time to some acrimonious criticism, for which
there was, it would appear, no little justification.
The expenditure under general administration, police,
and education shows a progressive increase, that
for education being 83 lakhs more than in 1876-
1877, though there will perhaps in the future be
still further increases, in consequence of the changes
contemplated by Lord Minto's Government.

Under the item, political pensions, 40 lakhs
annually are spent, and when the administration
is accused, as it frequently is, of niggardly dealings
with these pensioners, it should be remembered that
the latter have been confirmed in the receipt of
handsome stipends, whereas before, they were as a
rule merely new and precarious occupants of the
thrones and more or less royal cushions from which
they or their ancestors have been deposed. Many
of the families, who have been subjects of much

132



REVENUES AND TAXATION

superfluous sympathy, were of mere mushroom
growth, and would certainly have been swept away
but that they found salvation in the consolidation
of British rule.

No outline of the finances of India, however brief,
would be in any sense complete without a reference
to the railway system, which is destined to become
a very large contributor towards the revenues of
the country. In 1850 and succeeding years Eng-
lish companies constructed eight railways, upon a
guarantee of 5 per cent, on their total outlay with
half the surplus profits. Without such a guarantee
British capital would not have been attracted to
India, where it has performed such valuable work
for the people of the country, and where, moreover,
capital from no other quarter was at all likely to
have been attracted. All the old guaranteed rail-
ways have now been purchased by the Government
under a provision in their contracts in that behalf.
When the system above described had been in force
for twenty years the Government began to borrow
money for construction. With these funds, only
such lines were constructed as were expected to yield
sufficient to cover the interest on the capital outlay
within a reasonable time, and other railways required
for protection against famine were built out of reve-
nue. In order, however, to expedite the completion
of the necessary programme, the aid was invoked
of private companies, whose contracts were far
more favourable to the State, and far less generous
to the proprietors, than those given on a 5 per

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INDIA

cent, sterling guarantee. At the end of 1904-1905
India was provided with 27,728 miles of railway, of
which some 20,000 belonged to the State, and the
capital outlay was 202 crores, of which 59 crores
were spent on the purchase of the companies' lines.
The result the railway account shows is that between
1876 and 1881 there was an average net loss of 120
lakhs, and between 1899 and 1905 an average net
gain of 111 lakhs. There is no doubt whatever that
in the future railways will prove a valuable source
of revenue to the State, and they have already saved
the lives of millions during seasons of widespread
failure of crops.

For forty years past officers, designated consult-
ing engineers, had exercised supervision over com-
panies' lines, and they were, in the case of Madras,
Bombay, and Burma, attached to those Govern-
ments, and in other cases directly under the Gov-
ernment of India, which of course directly exercised
control over guaranteed lines. After various modi-
fications in the secretarial arrangements and in the
agency maintained at headquarters for the conduct
of railway business a Railway Board was created.
After a report had been received from an officer,
Mr. Robertson, specially deputed to examine the
problem, it was considered that the management
of the railway system should be entrusted to practi-
cal railway men, less tied up in red tape than the
Government officials previously engaged in this
responsible duty. Accordingly, the railway branch
of the Government of India Secretariat was abolished

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REVENUES AND TAXATION

in 1905, and a Railway Board, consisting of a chair-
man, Sir F. Upcott, and two members, one with
English and one with Indian railway experience,
was created to take its place. This board works
under the department of Commerce and Industry
created by Lord Curzon's Government, and the care
of irrigation and civil works, which alone now fell
to the Public Works Department, was transferred
with that department to the charge of the depart-
ment of Revenue and Agriculture. Certain defects
in this arrangement have, however, already become
apparent, and Mr. Morley has appointed a commis-
sion, with Sir James Mackay, the negotiator of the
last trade treaty with China, at its head, to inquire
into the whole subject. This commission has not
yet reported and meanwhile important changes are
taking place in Southern India owing to the pur-
chase by Government of the Madras railway, an
old 5 per cent, guaranteed line, the mileage of which
is being distributed between the South Indian and
Southern Mahratta narrow-gauge systems.

The national debt of India in 1904-1905 was
133,000,000 sterling and 122 crores of rupees, and
the total debt, taking both classes together, rose
from 103,000,000 sterling in 1876 to 214,000,000
sterling in 1905, but whereas in 1876 there was a
charge against revenue for railways and irrigation
works of over a crore of rupees, in 1905 these works,
after paying all interest charges, yielded a profit of
nearly 5 crores. In 1903-1904 Sir Edward Law,
then Finance Minister, showed that the excess of

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INDIA

debt of assets in 1902 was only 33 crores, the whole
Government debt being shown on one, and the cap-
italised value of railways, canals, and other com-
mercial assets on the other side. The subject of
military expenditure looms largely in considering
the financial system of the British Indian Empire,
upon which it has produced, and continues to pro-
duce, so great an effect. The advance of Russia
and the conquest of Upper Burma in 1885, the intro-
duction of improvements in armament, equipment,
land organisation in 1890, 1891, and similar improve-
ments which have been continually effected subse-
quent to that date; the raising of the pay of the
native soldiers in 1895, and of the British soldiers in
1898 and 1902; the establishment of cordite, gun
casting, and small arms factories, redistribution and
reorganisation; the supply of new guns and rifles,
and the expenditure on military works, have brought
the average figures for the quinquennial period
1896-1897 to 1900-1901 to 23 crores, against the
quinquennial average of 17 crores in the period
1876-1877 to 1880-1881, and the figure for 1904-
1905 rose to 27 crores. In spite of criticisms lev-
elled against the military administration, which is
further noticed elsewhere, it can hardly be seri-
ously contended that an army of 230,000 is exces-
sive for a vast empire, with many thousands of
miles of land frontier, and a population approach-
ing 300,000,000.

Of the extraordinary expenditure of the Govern-
ment of India, the largest item has been famine

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REVENUES AND TAXATION

relief, or, as it should be called, prevention of famine,
upon which, between 1876 and 1903, 26 crores were
spent, while the cost of military operations during
the same period was 22 crores. Within this time
occurred the Afghan War of 1878, the Upper Burma
expedition of 1885-1886, the Chitral campaign of
1895-1896, and the Tirah and other frontier cam-
paigns of 1897-1899, and also three great crop fail-
ures, that of 1876-1878, in South India, and of
1896-1897 and 1899-1900 in Upper India, the Cen-
tral Provinces, Bombay, and other regions.

Indian accounts are kept in three sets those of
the Home Government, of the Government of India,
and of the local governments. The decentralisa-
tion policy was initiated by Lord Mayo in 1870, and
subsequently further developed with the intention of
giving local governments an inducement to develop
their resources and economise in their expenditures,
to obviate the need for interference in the details
of provincial administration on the part of the
Central Government, and at the same |time to
maintain the unity of the finances, so that all parts
of the administration should receive a proper share
of the increase of revenue.

Under the existing arrangement, the Government
of India delegates to local governments the control
of the expenditure on the ordinary provincial ser-
vices, together with certain heads of revenue, or a
proportion of certain heads of revenue, sufficient to
meet these charges. Thus salt, customs, opium, and
tribute are wholly Imperial heads; stamps, excise,

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INDIA

land revenue, assessed taxes, forests, and registration
are divided between the Imperial and provincial
governments, and local taxes are wholly provincial.
The Government of India entirely controls charges
connected with foreign affairs, with the public debt,
the army, Indian marine, and the home charges of
the central administration. It also keeps in its own
hands post and telegraphs, mint and railways, and
its expenditure amounts to three times as much as
that of all the provincial governments put together.
The local governments have no borrowing powers,
but fall back on the Government of India when
their own resources are exhausted as was the case
in Bombay, for instance, during the last famine. It
was very clearly laid down by Sir James Westland,
with the approval of Lord Elgin and his colleagues,
that the whole resources of India were at the disposal
of the Government of India, and that local govern-
ments were merely delegates, and exercised such
functions as they were permitted to perform under
the control of the central administration. Arrange-
ments with the local governments, which formerly
lasted five years only, have now been made of a
more permanent character. Permanent they can
never be made, for the financial fortunes of the
provinces must always stand or fall with those of
the Central Government. The changes made, how-
ever, are in the right direction, and in future Budget
day at Calcutta will cease to resolve itself into a
wrangle as to which of the provincial governments
is the milch cow of the Government of India. The

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REVENUES AND TAXATION

net expenditure in England chargeable to Indian
revenue is about 17,700,000 sterling, of which
6,500,000 are railway revenue account; 2,800,000,
interest and management of debt; 1,800,000, stores;
1,300,000, army effective charges; 400,000, civil
administration; 200,000, marine; 4,700,000, fur-
lough and pension allowances of civil and military
officers. These are the payments which are com-
monly described by hostile critics of British admin-
istration as the drain, or as the tribute paid to
England. But of the 17,000,000, upwards of 11,-
000,000 are payment on account of capital and
materials supplied by England, and cannot properly
be regarded as an administrative transaction. The
charge of 4,700,000 for furlough and pension allow-
ances stands, it must be confessed, on a different
footing. It is of no avail to say that such a pay-
ment is unprecedented, because the Indian Empire is
unprecedented and no precedents can be expected,
but, inasmuch as the salaries paid by the Indian
Government to its servants are by no means ungen-
erous, it may very fairly be argued that this is an
exceptionally large amount for the Indian tax-payer
to find for the benefit of officers who have left the
country. To the furlough allowances no reason-
able exception can be taken. They must necessarily
be pitched upon a scale analogous to that of the
salary in each individual case. But when a public
servant enjoys good pay during the whole of his
service, retires, and returns to his own country,
perhaps in the prime of life, to live for many years

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INDIA

as a pensioner, it is hardly reasonable that he
should claim to be altogether relieved of the neces-
sity for making provision for himself after his retire-
ment, and that a generous scale of pensions operates
in encouragement of extravagance can hardly be
denied.

The class of pension often selected for adverse
criticism is that of the Indian civil servant who
receives 1000 a year, but it should be understood
that, of this sum, he has subscribed an amount equal,
as a minimum, to one-half of the whole, by compul-
sory payments to the pension fund, and, in the case
of an officer of long service it frequently happens
that his payments to the provident fund would
entitle him to a pension of this amount. There are
indeed many public servants who draw higher pen-
sions than 500 a year, which is the maximum
received by the Indian civil servant from the Indian
tax-payer. It would probably be generally admitted
that British officers serving in India are able to
make some provision for their old age, though the
cost of living has largely increased, family expenses
are exceedingly heavy, and no Indian civil servant
who has not considerable private resources can pos-
sibly hope, on his return to England, to take any
part in public life, or to end his days in other
than modest obscurity. This is a regrettable fact,
because the sound common-sense views and experi-
ences of this class of the unemployed are not by any
means represented by those of their cloth, whom
want of success and disappointment, or a naturally

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REVENUES AND TAXATION

anti-English turn of mind, inspires with sufficient
energy to push their way through to platforms
from which to criticise their own kith and kin and
the administration, willing and concurring agents of
which they have apparently been for the greater
part of their lives. However this may be, it is emi-
nently desirable that home charges, other than those
represented by interest upon capital and materials,
should be kept within the lowest possible limits.
Mr. Morley has given practical proof that he enter-
tains this view by effecting a reduction in the salaries
of the members of his own Council, a measure which
has met with some adverse criticism in India. It is
true that retired officers of the Indian Government
who have secured employment in the city, or else-
where, might find it difficult to accept a seat on the
Indian Council, with the consequent loss of emol-
ument. But on the other hand it must be remem-
bered that a very small proportion of retired civil
servants, of the class and age from which members
of Council are recruited, can, or at any rate do,
obtain, after their retirement, employment so re-
munerated that they would incur loss of income
by accepting a membership of Council. In the vast
majority of cases the officers the Secretary of State
would desire to appoint would be as ready to take
the appointment at 1000 as at 1200 a year. Offi-
cers who serve in administrative appointments in
India occupy a position of power and importance
which can hardly be realised by those who spend
their lives in England, and it is only fair that proper

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INDIA

provision should be made for the evening of their
days. It is, however, out of the question to attempt
to provide them from public funds with pensions at
all proportionate to the dignity of the appointments
they held in India, and it is probable that, in regard
to officers appointed in the future, terms might be
imposed providing that in no case should any pension
from Indian revenues exceed 500 a year, exclusive
of such amounts as any officer may subscribe towards
the cost of his own pension. Judges of the High
Court appointed from England receive a pension of
1200 a year for less than twelve years' service in
India that is, 100 a year for life for every year
spent in the country, an amount only exceeded, it is
believed, by that paid to an ambassador who passes
twelve years in that grade after a long life spent in
the public service. This exceptionally large pension
was attached to the office of High Court judge to
induce barristers of eminence, in large practice, to
leave this country and take up judgeships in India.
It would be idle to ignore the fact that men of the
class these terms were intended to attract do not
avail themselves of the offer, and that judges of
equal capacity, to a great extent, perhaps for the
most part, natives of India, could be obtained on
more favourable terms. Here, perhaps, is an oppor-
tunity of effecting a reduction in the home charges,
and there may be other concrete cases. Every such
reduction will be unpopular, and will be resisted by
the officers affected, but the critics of the home
charges have their eyes fixed upon cases like these,

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REVENUES AND TAXATION

and being, as they are for the most part, lawyers
they fasten upon every appointment made to the
High Court benches in India which affords any
justification for the views they entertain. These
appointments are not in some cases such as an
impartial judge can consider altogether satisfactory,
but that is only an additional reason for giving the
fullest consideration to every complaint for which
there appears to be any justification. The dispenser
of patronage can only appoint men who are willing
to go. The men the terms were intended to secure
will not go. But that would be a good reason for
reducing the pay, not for overpaying the men who
will accept.

For the rest, the great advance in revenue and
prosperity is so obviously due to the use in the coun-
try of British capital that it is idle to entertain the
theory that the Empire is exploited for the benefit
of the British capitalists, who indeed manifest a
preference for almost any other field of investment.
Without a Government guarantee it is at present dif-
ficult to attract capital at all, and the action of the
Bengali agitators, who have succeeded by intrigue
in awakening a slight echo in the Punjaub, will not
tend to diminish the previously existing shyness of
the investor.

The expenditure in England is defrayed by the
sale of telegraphic transfers and from the sale of


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Online LibraryJ. D. (John David) ReesIndia; the real India (Volume 19) → online text (page 9 of 21)