As, therefore, this important item of receipt in the customs duties of India will be liable to constant attack from persons possessing great power and political influence in England, and as there is no new excise duty which it has been suggested could be imposed, I think no other conclusion can be arrived at than that not only is there little chance of obtaining additional revenue from customs and excise, but, on the contrary, the Indian Government may, in face of the promises they have made about the cotton duties, find it difficult to maintain the revenue which they now receive.

In reference to stamps, it is only necessary to remark that if it were practicable to obtain additional revenue from this source, stamps would certainly not have escaped the watchful eye of the Indian financiers, who, when last year they were creating a famine fund, were apparently so bard pressed that, as previously stated, they were compelled to subject to direct taxation incomes of only four shillings a week.

This brief review of the general prospect of the Indian revenue is, I think, sufficient to show not only that this revenue is comparatively stationary in amount, but that as the revenue is received in silver, and a large part of it has to be devoted to making payments in gold, the real value of this revenue has been, and may continue to be, most seriously diminished by the depreciation of silver. This conclusion as to the inelasticity of the Indian revenue is strongly confirmed by the extremely slow growth of the revenue during the past ten years, from 1868 to 1877. This particular period is selected for comparison because the figures are to be found in the latest number which has been published of the Statistical Abstract of British India. It appears from the table already given that four-fifths of the entire net revenue of India is derived from land, opium, and salt; and the inelastic character of the Indian revenue is at once shown if the average yield of these three sources of revenue, from 1868 to 1872, is compared with their average yield from 1873 to 1877.

It will be extremely important to keep these conclusions as to the inelasticity of the Indian revenue steadily in mind when considering, as I now propose to do, the prospects of Indian expenditure. It will not be necessary to examine all the detailed items of this expenditure, for I believe it will be perfectly possible to obtain data from which a correct opinion on the subject can be formed, by directing attention to the four chief branches of expenditure- namely, military expenditure, cost of administration, loss by exchange, and interest on loans for the general purposes of government, as well as for public works.

No subject connected with Indian finance demands such prompt and anxious attention as the enormous and increasing burden which is thrown upon India by her military expenditure. I have already referred to the fact that, even in a time of peace, the cost of the army to India is upwards of 17,000,000l. a year, 45 per cent. of her entire net revenue of 37,500,000l. being thus absorbed. It seems moreover that no limit can be placed to the extent to which India may not be exhausted by this drain on her resources. In the financial statement of 1878, allusion was made to the significant fact that the cost of the army being at that time more than 17,000,000l., had increased by "upwards of 1,000,000l. since 1875-76, and that a large part of this increase was in the expenditure recorded in the home accounts." But serious as seemed to be the danger, at the time when these words were spoken, that India was gradually having thrown upon her a military expenditure which with her stationary revenue she would be absolutely powerless to bear, yet how indefinitely has this danger been increased by the events of the last few months. I shall carefully abstain from saying a single word on the Afghan war which is not most strictly relevant to the subject now under discussion.

It is, however, of the utmost importance to the future of India that the consequences involved in carrying out what is known as a "forward' frontier policy should be considered in their financial as well as in their military aspects. It would not be more unreasonable to decide what is the best house for a particular individual to live in, without having any regard to his income, than it is, on a mere consideration of military tactics, to determine to advance the frontier of India, without first ascertaining the expenditure which such an advance would necessitate. It is particularly worthy of remark that those who have been foremost in advocating a "forward" frontier policy in India have apparently ignored any consideration of its cost. The long and able statements of Sir Henry Rawlinson, Sir Bartle Frere, and Lord Napier of Magdala, contain scarcely a single reference to the financial aspects of the policy which they advocate. On the other hand, nothing can be more precise than the declarations of many of those most competent to express an opinion on the question, that the frontier could not be advanced without causing a most serious permanent addition to the military expenditure of India. Lord Lawrence, speaking of such an advance as is now contemplated, declared that it would "paralyse the finances of India." This was not simply his individual opinion.

It has been often said that no Governor-General was ever surrounded by abler men than those who constituted the Council of the Viceroy in 1867, and the despatch which contains this remarkable declaration was signed not only by Lord Lawrence, but by the Commander-in-Chief, Sir W. H. Mansfield (afterwards Lord Sandhurst), Sir H. S. Maine, Mr. G. N. Taylor, Mr. W. N. Massey, Sir Henry Durand, and Mr. G. U. Yule. This despatch, moreover, was addressed to Sir Stafford Northcote, who was then Secretary of State for India, and its conclusions were accepted by him and the Government of which he was a member. In view of these facts I think it may be fairly asked, if the expenditure necessary to carry out a particular policy would have paralysed the finances of India in 1867, what single circumstance can be pointed to which would show that such an expenditure would produce less serious consequences at the present time? No one can pretend to say that India's financial condition is more flourishing now than it was then.