Nothing more than a very trifling amount can ever be raised by imposing taxes on luxuries which are consumed by the few. The indirect taxes which are really productive are those which are imposed on articles of general consumption. In India the mass of the people are so poor that they use no article which can be taxed except salt, and the taxation on salt has already reached that extreme point when any increase of duty would seriously diminish consumption. Lord Lawrence, in the evidence he gave before the Indian Finance Committee in 1873, had his attention specially directed to the question of obtaining additional revenue by increased taxation in India. It will be generally admitted that, from his long official experience, and from his intimate knowledge of the habits and feelings of the Indian people, no one could speak on such a subject with greater authority than Lord Lawrence, and he unhesitatingly said: "I am not prepared to mention any new sources of revenue which I think it would be politic to make use of.

Succession duties, and the tobacco-tax, and so forth, have been constantly talked of; but we went into the subject very carefully, and came to the conclusion, almost unanimously, that it was unwise to introduce such taxes." 1 As since this evidence was given, the suggestion has from time to time been revived that a tobacco duty should be imposed in India, it is desirable to refer to the reasons that were urged against it by Lord Lawrence. He showed that, in order to levy it, it would be necessary either to increase the assessment on the land on which it was grown - and this would be interpreted as an augmentation of the land revenue - or to levy an excise duty on tobacco. As tobacco is freely grown in all the native states whose boundaries are conterminous with our own territories, it would become requisite, in order to prevent the importation of tobacco from these states, to establish customs lines extending over thousands of miles. As, moreover, tobacco is often grown by the Indian people for their own use, it would in all probability be found essential, in order to prevent the evasion of the duty, to make the growth of tobacco a Government monopoly.

Scarcely any arrangement that could be adopted would be regarded as more harassing by the people of India. The opinion of other high authorities against a tobacco duty might be quoted. Thus Sir Donald McLeod, who was for many years Lieutenant-Governor of the Punjaub, and who was admitted to be one of the ablest financial administrators India ever produced, objected to the tax, and when examined before the Finance Committee directed its attention to an elaborate minute that had been prepared condemnatory of a tobacco duty, by Mr. (now Sir John) Strachey.

1 See Report of Committee on East India Finance, 1873, p. 330.

Unless it can be shown that the description which has been here given of the financial condition of India is inaccurate, I think it must be admitted that the subject is one which should cause the gravest anxiety. But it will probably be said: If the finances of India are in so critical a condition, can nothing be done? Can no effort be made to avert impending embarrassment? Of all the things connected with the financial administration of India that require to be done, nothing is so essential as the immediate recognition of the fact that India has hitherto been governed on far too costly a scale. Her position is like that of a landowner who has been living beyond his income. Each year some new mortgage has to be raised to make good the deficiency; and as the interest on these successive mortgages accumulates, and as there is no reduction but rather an increase in the scale of his expenditure, his estate steadily becomes more burdened with debt. To add to his difficulties, he has borrowed large sums of money to carry out various improvements; and, however desirable these improvements may be, many of them do not pay the interest on the capital expended.

If, under such circumstances as these, a practical man of business were called in to advise what ought to be done, it is obvious that he would insist above all things that expenditure should be reduced. He would probably soon discover that which is usually the case when a man lives beyond his means, that in all directions too much money had been spent. There would be no chance of placing the estate in a secure position, unless its owner were prepared by rigorous retrenchment to bring his expenditure well within his income. Mortgages might then be gradually reduced, and when a surplus had been secured many improvements might be carried out which could not prudently be undertaken when there was a risk that they would burden the property with a still heavier load of debt. The remedy which would have to be applied under the circumstances just described not inaccurately represents what is necessary to be done in order to place the finances of India in a sound position. For some years the Indian Government has been living beyond its means. In almost every direction too much money has been spent;and those who have been responsible for this expenditure seem too often to have forgotten that India, instead of being one of the wealthiest, is one of the poorest countries in the world.

Page after page might be filled with instances of reckless extravagance. At one time a private irrigation company with a capital of a million, the 100l. shares of which are unsaleable at the nominal quotation of 60/., is bought by the Indian Government at par, and in addition a large bonus is given to be distributed among the officials of the company. At another time 175,000/. is expended in building and furnishing a country house for the Governor of Bombay. It is no exaggeration to say that it would not be one half so mischievous to permit a million of English money to be spent in building a mansion for an English minister. It is quite within recent years that the Public Works Department has assumed its present large proportions. No care apparently has been taken to adjust the supply of highly paid European officers in this department to the demand, and it is now admitted that there is a complete block in the higher grades of the service. Employment cannot be found for many who are drawing large salaries from Indian revenues, and it is acknowledged that many are simply holding on to become eligible for pensions. But it is not simply that money has been thus recklessly squandered. It is just the same with a nation as it is with an individual.