Thus the following is an official statement of the ordinary revenue and expenditure for the year 18 76-77.1 In making a comparison between revenue and expenditure, I think it is fairer to select this year, because since the year 1876-77 the finances of India have been seriously disturbed by the large expenditure caused by the famine in Southern India and by the cost of the Afghan war. In the following table all the items of receipt and expenditure are included which are contained in the official return. I have, however, with a view of exhibiting the accounts in the simplest possible manner, arranged the items of receipt under three classes. In the first class all those receipts are included which represent real revenue. The second class embraces those receipts which are exceeded in amount by the expenditure necessary to obtain them, and must therefore be regarded as items of expenditure rather than as sources of revenue. In the third class various items of expenditure are included, against which, as a set-off, there are no corresponding receipts.

1 See speech of Mr. Stanhope, the Under-Secretary of State for India, in the House of Commons, August 13, 1878. Hansard, vol. ccxlii.

1 See Finance and Revenue Accounts, printed as a Parliamentary paper, No. 176, May 16, 1878.

Ordinary Revenue And Expenditure, 1876-77

From these figures certain conclusions can be drawn, which may be regarded as of fundamental importance in forming a correct opinion as to the actual position of Indian finance. It thus appears, and it is a fact which cannot be kept too prominently in view, that the entire revenue of India, with the exception of 504,208l., is derived from the six following sources: land, opium, salt, excise, customs, and stamps. The various other items of revenue mentioned in the accounts cannot be fairly considered as sources of revenue. They do not in fact produce revenue; but, on the contrary, should be regarded as causes of expenditure. Thus the revenue of 794,328l. from the Post Office requires an expenditure of 859,783/. to obtain it. A receipt of 341,227/. from the telegraph is more than balanced by an expenditure of 473,127l. But if any further illustration were needed to show that no accurate idea can be formed of the real revenue of India by adding together all the items of receipt which are now included in the statement annually published of revenue and expenditure, it is only necessary to refer to the items of receipt which have been arranged under Class II. Amongst these there is one of 505,129/. described as "gain by exchange." When it is remembered that in this very year India had to bear a most serious loss from exchange, amounting to no less than 2,181,611l., it is evident that, if any good could result from augmenting her nominal revenue, 2,000,000l. might be added to each side of the account, and the gain by exchange might be represented as 2,500,000l.1 But unless the subject is confused by unnecessary complications, nothing can be more easy than to arrive at correct conclusions with regard to the amount of the real revenue of India. It has been already stated that the revenue, with the exception of the sum of 504,208l., is derived from land, opium, salt, excise, customs, and stamps, and if, as has been done in the above table, the cost of collecting each of these items of revenue is deducted from their gross amount, the real revenue of India is shown to be only 37,417,569l. The conclusion which has been just arrived at as to the amount of the real revenue of India is fully confirmed by the Indian Finance Minister, Sir John Strachey, who, about twelve months since, estimated the net ordinary expenditure of India at between 37,000,000l. and 38,000,000l., and said that the ordinary revenue is only just sufficient to meet it.

1 It is sometimes said that no harm can result from exhibiting the Indian revenue at its gross instead of its net amount, because the same course is adopted with regard to the English revenue and expenditure. There is, however, such a fundamental difference between the position of English and Indian finance, that a mode of exhibiting revenue which may be perfectly suited to the one country is altogether unsuited to the other. Thus the difference between the gross and net revenue of England is much smaller than the difference between the gross and net revenue of India. In 1877 the gross revenue of England was 78,565,036l., and its net revenue was not less than 68,000,000l. Many of the items of receipt which in India are balanced by a larger corresponding expenditure represent in England important sources of revenue. Thus, the Post Office, as has been shown, causes to India a loss of about 65,000l., while it yields in England a net revenue of more than 2,000,000l., after allowing for the cost of the packet service.

It may perhaps be thought that I have laid too much stress on the importance of keeping steadily in view the distinction between the gross and net revenue of India; but it can scarcely be denied that, if excessive expenditure is bringing embarrassment upon the finances of a country, nothing is more essential to secure strict economy than, as far as possible, to discourage any exaggerated estimate being formed of the actual amount of such a country's revenue. Thus, as one illustration, it may be mentioned that the military expenditure of India is estimated by Sir John Strachey at more than 17,000,000l. a year. Such an expenditure would be sufficiently serious if it were defrayed out of a revenue which was, as the Indian revenue has been represented to be, rapidly increasing from 56,000,000l. to 63,000,000l.; but how incalculably more serious must such an expenditure be, and how much more likely is it that retrenchment will be demanded as an imperative necessity, when it appears that this enormous charge of more than 17,000,000?. a year has to be met, not out of an increasing revenue of 63,000,000l., but out of an almost stationary revenue of about 38,000,000l.

In the statement that has been given of the receipts and expenditure for the year 1876-1877, it was shown that the ordinary revenue fell short of the ordinary expenditure by about 1,000,000l. As it may be thought that this year was an exceptional one, it will be desirable again to refer to the financial statement of Sir J. Strachey; for nothing can be more explicit than the opinion he expresses that the normal condition of Indian finance is one in which the ordinary revenue is barely sufficient to meet the ordinary expenditure. Thus he says: -

"A careful examination of the accounts of the seven years ending on the 31st of March, 1876, a period long enough to illustrate fairly the state of our finances, made it plain not only that we had, when I spoke, made no proper provision for the cost of famines, but that we possessed no true surplus of revenue over expenditure to cover the many contingencies to which a great country is exposed."1

Of the many contingencies necessitating increased expenditure to which Sir John Strachey refers, it is only necessary here to mention two - War and Famine. At the time he spoke India was in a state of profound peace; but within less than a twelvemonth a war has been undertaken which will throw upon her finances a charge, the amount of which it is impossible at the present time to calculate. For the other contingency famine, Sir John Strachey was at the time attempting to make some provision by imposing additional taxation on the people of India. In view of the occurrence within twelve years of four serious famines in different parts of India, and of the fact that between 1873 and 1878 famines have thrown a charge upon the Indian revenues of no less than 16,000,000l., no other alternative presents itself to the Indian Government than to treat famines, not as exceptional or accidental occurrences, but as calamities which are so certain to recur that provision should be made to meet them out of the ordinary revenue of the year. The amount that is required to provide an adequate fund for the relief of famines was estimated at 1,500,000l. a year.