If it is difficult for the Government to borrow comparatively so small a sum as 3,500,000l. from the people of India themselves, it is evident either that they are too poor to lend, or that they are unwilling to entrust their savings to the State. Again, it must be borne in mind that those who lend one year have probably so much less to lend the next year, and consequently, if it is now found difficult to borrow 3,500,000l. in India, there will be still greater difficulty in borrowing a similar amount hereafter. Unless, therefore, something is immediately done to place the finances of India on a sounder basis, the deficits which will have to be annually met must necessarily, in an increasing proportion, be made good by loans raised in England.

At the present time there appears unfortunately little ground for hope that there will be any diminution in the amount of the Indian deficits. As already stated, it appears that no attempt is to be made to carry out in any of the spending departments such a policy of rigorous economy as India urgently needs; and, serious as is the loss which she now has to bear in consequence of an unfavourable exchange, I believe. it can be shown that it is only too probable that the financial proposals which are now brought forward will, if they are carried out, exercise a very material influence in making the exchange even more unfavourable than it now is. If 10,000,000l. is borrowed in England, the financial position of India may no doubt for a time be made to wear a somewhat improved appearance. But the improvement will be just as unreal as if an embarrassed landowner, in order to meet his pressing obligations, raised another mortgage on his estate. It cannot be too persistently pressed on those who have to administer Indian finance, that each addition which is made to the debt of India in England must increase the amount which has to be transmitted, in the form of interest, from India to England. If, therefore, by devoting the proceeds of a loan to meet the obligations of India in England, the amount of bills on India which the Secretary of State has to sell in London is diminished, the relief can only be temporary; the loss by exchange is diminished this year only to be increased in future years.

In defence of such a policy it is said, "something may happen." The Government at Calcutta seem to derive the greatest encouragement from the fact, that they have been informed that the Secretary of State and his council are taking the relative value of gold and silver into their consideration; and this is apparently regarded as such a hopeful omen for the future, that revenue is sacrificed at the very time when a great amount of additional indebtedness is being incurred. The relative value of gold and silver is determined by precisely the same laws as those which regulate the value of any other products. If, compared with gold, there is a large increase in the supply of silver, accompanied by a considerable falling off in the demand, a Secretary of State is just as powerless to arrest a depreciation in the value of silver as he is to stop the flow of the tide. It has sometimes been suggested that an Act of Parliament should be passed to fix the relative value of gold and silver, by declaring that so many rupees should be always worth a sovereign. Such a proposal is not less unreasonable than it would be to enact that, whatever the seasons might be, whether the harvest was good or bad, a sack of wheat should always exchange for a ton of coal.

Such tampering with values can produce no other result than, by creating confusion and spreading a feeling of distrust, to aggravate the evils which it is sought to remedy. If silver becomes depreciated, there is only one way of restoring its value, and that is by acting either on the supply or the demand. In consequence of the large amount of silver, variously estimated at from 15,000,000l. to 20,000,000l., that has been accumulated in Germany since silver was demonetised in that country, the supply of silver which can now be brought into the market depends to a considerable extent upon the German Government. The influence, however, which can thus be exerted upon the supply of silver must be regarded as temporary and accidental. The supply of silver is determined by precisely the same natural laws as those which regulate the supply of any other similar commodity. If new and more productive mines are discovered, the supply of silver will increase. If, however, the value of silver becomes depreciated, the profit obtained from existing mines will diminish, and the supply will consequently decrease.

It, therefore, appears that it would be alike unwise and futile to make any attempt to regulate the supply of silver. So far as the supply of silver depends upon the action of the German Government, we have, obviously, no power to exercise any control. Whatever may be our wishes on the subject, Germany will treat the disposal of her silver as a purely commercial transaction, and will bring her silver into the market at whatever time she thinks she will be able to sell it to the most advantage. It seems only too probable that the first effect of the policy which the Indian Government now seem anxious to carry out, may be to enable Germany to dispose of a large portion of her silver at a better price than she is now able to obtain. As already stated, if an Indian loan of 10,000,000Z. is raised in England, the Government will be able for a time to withhold their council drafts from the market; the rate of exchange will improve, and the price of silver will advance. Germany will not be slow to take advantage of this advance; she will at once bring a large quantity of silver into the market; the price of silver will again fall; and the chief effect of the loan will have been to enable Germany to sell a portion of her silver on better terms, while India will be left to meet her increased obligations with the price of silver still further reduced, and the exchange made more unfavourable than before.