On all sides opinions are now expressed about the state of Indian finance, which only a short time since would have been described as the idle forebodings of sensational alarmists. The following is a description of the budget of the present year by one who certainly cannot be regarded as a prejudiced critic of the Indian Government: -

"The Indian press and the public continue to discuss the Financial Statement, and all classes, both European and native, show singular unanimity in condemning it, all sides describing it as the most melancholy, the most disheartening, and the most unstatesmanlike ever issued by the Government since the budget system was introduced."1

Although the opinion may be readily endorsed that nothing can be more unstatesmanlike than to surrender revenue at the very time when an exceptionally large deficit has to be met by increased borrowing, yet I think it would be unfair to single out Sir John Strachey for special censure, and to assume that he, being Finance Minister, is solely responsible for the financial arrangements which he has had to propose. It is probably impossible for any one who is outside the Government properly to appreciate the difficulties with which the Finance Minister has had to contend. One of his predecessors in office not many years since bitterly complained of the "extent to which Indian finance was often sacrificed to the exigencies of English estimates;" and, if there were no occasion for official reserve, the present remission of the duties on cotton goods would not improbably be referred to as an example of the "extent to which Indian finance has to be sacrificed to the exigencies of English" politics. Not only, therefore, would it be unfair to concentrate all the blame either upon Sir John Strachey or the authorities at Calcutta, but I think it would be unjust to hold the present Indian Government, whether at Calcutta or in London, solely responsible for the existing embarrassment in Indian finance.

Some of the causes which have brought about embarrassment have no doubt been solely the creation of the present Government. They alone are responsible for the addition to the strength of the army, and the consequent increase in military expenditure, which are said to be rendered necessary by the attempt to secure a more "scientific" frontier for our Indian empire. There are, however, many causes that have contributed to bring upon India her present financial difficulties, which came into operation long before the present Government took office. Thus it will be generally admitted that, in order to place the finances of India on a more satisfactory basis, it is above all things essential to reduce her present excessive military expenditure, which absorbs no less than 45 per cent. of her entire net revenue. Although this expenditure must be increased by the addition to the strength of the army to which reference has just been made, yet, in order to effect any important reduction in the cost of the Indian army, it will be necessary fundamentally to change the present military system, and to undo a great part of the work which was done when, under the auspices of Lord Palmerston's Government, and in spite of the remonstrances of every Indian statesman of experience, the army amalgamation scheme was carried out, and India was compulsorily made a partner in all the costly military arrangements of England. Next to military expenditure it will, I think, be acknowledged that there is no question which more urgently demands immediate attention than the large outlay on public works which has been continued for many years in India. It cannot, however, be said that the present Government is more responsible than its predecessors for the policy, which has proved financially so disastrous, of borrowing large sums of money each year for the construction of public works, which, though called at one time "reproductive," and at another time "remunerative," seldom, as is now shown by official returns, repay even a small part of the interest on the capital expended.

Then again, the present unfavourable exchange is due to many causes, some of which at least are altogether beyond the control of the Indian Government. As already explained, an unfavourable exchange is a necessary accompaniment of a depreciation in the value of silver; and the present great depreciation in the value of silver is partly due to the discovery of new silver mines in the United States, to a falling off in the demand for silver consequent on a demonetisation of silver by Germany, and to the restriction of the silver coinage in those countries which have joined what is known as the Latin Union. Although the present unfavourable state of the Indian exchange is no doubt in part to be attributed to the causes just mentioned, yet as the rate of exchange is intimately connected with the amount which India has to remit to England, each addition to the home charges must make the exchange more unfavourable; and these home charges have been permitted to increase, not under one, but under successive Indian Governments.

1 Times Calcutta correspondent, in the Times of the 24th of March, 1879.

If for no other reason, I should think it particularly important fully to acknowledge that the present Government is not solely responsible for the existing condition of Indian finance, because I believe it is almost impossible to exaggerate the harm that may be done, if, in attempting to remedy the present state of things, the subject is approached in a spirit of political partisanship. It is scarcely necessary to remark that when the financial condition of a country is such as that of India at the present time, it is impossible for her finances to be placed in a more satisfactory position unless a policy of rigorous retrenchment is carried out with the most persistent determination. Any government that is prepared to do this is certain to have to bear a load of unpopularity. Expenditure cannot be curtailed, salaries cannot be reduced, and unnecessary offices abolished, without producing a great amount of discontent, and without bringing into active operation the keen opposition of those who consider that they have a vested interest in the continuance of the present system.