Many other branches of Indian expenditure might be referred to, besides those to which attention has been here directed. I think, however, enough has been said on the subject of revenue and expenditure to establish the following conclusions with regard to the financial position of India: -

1. The revenue is characterised by great inelasticity.

2. The expenditure has increased in a marked manner in recent years, partly from the general increase in the cost of administration, and partly from a depreciation in the value of silver.

3. The military expenditure is excessive, absorbing 45 per cent. of the entire net revenue of the country; and this expenditure is likely to be greatly augmented if the frontier of India is advanced, as now seems to be contemplated.

4. A comparatively stationary revenue having to meet an increasing expenditure, it will be necessary sooner or later to add to the taxation of India. If a deficit is temporarily met by borrowing, the money which will have to be provided to pay the interest on the loan must ultimately increase the deficit, which will have to be met by increased taxation.

5. There has already been a most serious increase in the indebtedness of India, amounting in twenty years to 100 per cent.

Such being the present condition of Indian finance, scarcely another word need be said to show that if some fundamental change is not promptly introduced, if expenditure is not rigorously curtailed, it will be absolutely impossible to avoid the necessity of imposing on the people of India a large amount of additional taxation. In order adequately to appreciate the grave consequences which may be produced by an increase of taxation in India, it is essential to bear in mind that the question cannot be regarded as if it were simply a financial one. Between England and India, in matters of taxation, there is a fundamental difference. If some contingency should occur in England which would render it necessary to obtain. 5,000,000l. by additional taxation, it is perfectly well known how easily the money could be provided. More than 5,000,000l. could be raised by adding twopence in the pound to the income-tax, and by slightly increasing the duty on some article of general consumption, such as tea or spirits.

But in India, if it became necessary to raise, not 5,000,000l., but even a smaller sum, say 3,000,000/., by additional taxation, it will scarcely be denied that taxes might have to be imposed which would be regarded by the people as so burdensome as to create a most serious amount of discontent. When examining in detail the present sources of revenue, I believe it was clearly proved that they present so little prospect of increase that, if additional revenue has to be obtained, it will be absolutely necessary to have recourse to some new forms of taxation. The truth of this conclusion is corroborated in a most striking manner by the recent action of the Indian Government. In order to obtain the comparatively trifling sum of 750,000/., the Government came to the conclusion, as already stated, that no better course was open to them than to impose a trades licence tax of fivepence in the pound upon all trade incomes, even on those as small as is. a week. As the Government of India must have been fully aware of the discontent which such a tax would inevitably cause, it may be fairly concluded that they would never have sanctioned it, if they could have discovered any less unsatisfactory way of obtaining the money required.

But if the trades licence tax was regarded, a twelvemonth since, as the best mode of obtaining additional revenue, one of two things must occur if it becomes necessary still further to add to taxation in order to provide for the increasing expenditure which is now taking place - either the rate of the licence tax must be advanced, or some tax which the Government considered, a twelvemonth since, still more objectionable must be resorted to. It is already rumoured that the income-tax will again be imposed; and although this tax has often been supported on the ground that it will reach a wealthy class who are least heavily taxed, yet nothing can be more unwise than to ignore the very serious disadvantages associated with the levying of such a tax in India. It was unequivocally condemned by three successive Indian Finance Ministers. The practical objections to the tax, as distinguished from the theoretical arguments that may be adduced in its favour, have been stated with remarkable clearness by Mr. Laing, who for many years served in India as Finance Minister. He has said that he regarded the income-tax as "about as bad and obnoxious a mode of raising revenue as it is possible to imagine in a country like India.... I think that for an Oriental country, and with the Eastern habit of mind, any tax which imposes inquisition into individual means is attended with innumerable evils which are little felt in a country like England." And he further expressed an opinion that, in consequence of the impossibility of preventing abuses connected with the assessment of the tax in a country like India, "for every rupee that comes into the Treasury, two rupees are extorted from the population that have to pay the tax."

Probably, however, one of the most weighty objections that can be urged against the imposition of an income-tax in India is that a great machinery of assessment, which it has been shown is liable to the gravest abuse, is brought into active operation over the length and breadth of the country, in order to realise a very trifling financial result. When this tax was last levied in India, it was at the rate of twopence-halfpenny in the pound, and the net revenue realised was little more than 500,000l. From an income-tax of twopence-halfpenny in the pound in England about 5,000,000l. would be obtained, and many small incomes which would be exempted in England would certainly be assessed in India. No fact can bring out with more striking distinctness the remarkable contrast between the wealth of England and the poverty of India. India contains a population more than seven times as great as that of England, and yet a tax which in England produces 5,000,000l. yields little more than 500,000l. in India. The amount, therefore, which can be raised by any form of direct taxation in India is, in consequence of the general poverty of the country, extremely small; and the amount which can be raised by indirect taxa-tion may be regarded as having already nearly reached its utmost possible limits.