As there seems to he every probability that during the next few months an unusual amount of public attention will be directed to Indian affairs, I think the present may be regarded as a suitable time to consider the financial condition of that country. With the view of treating the subject with as much clearness as possible, it will be desirable in the first instance to ascertain what is the real revenue of India. Much of the complexity which so often confuses discussions on Indian finance arises from the want of any definite understanding as to the sense in which certain terms are employed. From the last financial statement of the Indian Finance Minister, it appears that he estimates the real revenue of India at between 37,000,000l. and 39,000,000l.; whereas a short time afterwards the revenue was officially stated at more than 63,000,000l. This great disparity of course arises from the gross revenue being referred to in the one case and the net revenue in the other. It has not unfrequently been said, in discussions on Indian finance, that it cannot be of any moment whether the revenue is estimated at its gross or its net amount; it is, after all, simply a matter of account.

In one sense this, no doubt, is true; but there will be no difficulty in showing that it is of the first importance to give as much prominence as possible to the net, as distinguished from the gross, revenue of India.

1 February, 1879.

Few things have done so much harm to Indian finance in the past, or may cause greater embarrassment in the future, than an exaggerated idea as to the revenue which the Indian Government has to spend. Although there is much in the present financial condition of India to cause serious apprehension, yet there is one circumstance connected with it which may fairly be regarded as a most hopeful omen for the future. Until quite lately, India was looked upon as an extremely wealthy country, and there was no project, however costly, that India was not supposed to be rich enough to pay for. Now, however, juster ideas of the resources of the country and of the condition of the people prevail. The recurrence of famines, and other circumstances which have caused more attention to be directed to Indian questions, have at length led the English public to take firm hold of the fact that India is an extremely poor country, and that the great mass of her people are in such a state of impoverishment that the Government will have to contend with exceptional difficulties if it becomes necessary to procure increased revenue by additional taxation.

It is not more true of an individual than it is of a nation that, if it is desirable to check all extravagance, and secure rigid economy, the amount of the income which is available for expenditure should not be over-estimated. It is often said that if a man comes into possession of an encumbered estate, the mere amount of the mortgages and other debts upon the property does not form an accurate measure of the real extent of his embarrassments, for he has constantly to contend with the difficulty of possessing an income so much less than its nominal amount. Having perhaps ten thousand a year to spend, he is regarded by the world as the possessor of twice as much, and is expected every hour of his life to live accordingly. The position of India is not dissimilar to this. Year after year the Government of India has been living beyond its means. Deficits have been repeatedly recurring, and debt has been steadily and surely accumulated. Nothing, therefore, can be of greater importance, and nothing can be more likely to bring about a better state of things, than to ascertain what is the real amount of the revenue which the Indian Government has at the present time to spend.

On official authority1 it was stated when the Indian Budget was discussed in the House of Commons, that the revenue of India in 1876-77 was 55,995,785l, in 1877-78 58,635,472l., and the revenue for 1878-79 was estimated at 63,195,000l. Without desiring to question the correctness of these figures as mere statements of account, I believe it can be easily proved that they are calculated to produce the most mischievous and misleading conclusions as to the true position of Indian finance. In the first place they would seem to show that the revenue of India, which is almost stationary, is rapidly increasing; and in the second place a most exaggerated opinion is likely to be formed of the resources of the Indian Government. If the items of revenue and expenditure for any year are examined, it will be at once seen that the large foregoing totals of revenue are arrived at by estimating gross instead of net revenue, and by including amongst the receipts many items which really do not represent revenue, but expenditure.