From the reference that has just been made to the opinions recently expressed by the Governor-General and the Secretary of State, it not only appears that the necessity of immediately obtaining a large reduction of expenditure is fully acknowledged, but it can be shown that this reduction is a matter of such urgent importance that no excuse can be put forward to justify even its temporary postponement. In the memorandum of the Governor-General from which I have already quoted, it is stated that "rigid economy in every branch of the public service is, in present circumstances, the policy which must be followed.....No fresh establishments must be entertained; no new offices must be created; no new works which it is possible to postpone must be commenced." And now it may be naturally asked, what are the circumstances which have induced the Government to adopt so entirely new an attitude with regard to Indian finance? As previously remarked, until quite lately, instead of a large reduction of expenditure being peremptorily insisted upon, expenditure was year after year permitted to increase without apparently exciting even a semblance of uneasiness.

For some time past it has been the settled policy of the Government to borrow from four to five millions a year for the construction of public works. The importance of curtailing this outlay is now so fully acknowledged, that sanction has been given to the most drastic measures of retrenchment. The amount to be borrowed for public works is in no single year to exceed 2,500,000l., and this limit is not to be exceeded even if its maintenance should involve the necessity of suspending works which are already in process of construction. It need scarcely be remarked that it would have been far better if this awakening to the real position of Indian finance had not been so long delayed. The difficulties of carrying out a policy of economy are indefinitely increased, if such a policy has suddenly to be introduced where before there have been carelessness and extravagance. However desirous the Indian Government may now be to reduce expenditure, they will find themselves perpetually hampered, and their efforts to save money constantly thwarted by the effects of past lavishness still continuing in operation.

If costly establishments have been allowed to grow up, a large part of the expense which their maintenance involves will have to be borne long after it has been decided that these establishments shall be reduced. When a government finds that there are more persons in its employment than there is work for them to do, it cannot suddenly dismiss them without any compensation; pensions on a liberal scale have to be granted; and these pensions will for some time absorb a considerable part of the saving which may be ultimately secured. As an illustration of what has just been stated, it may be mentioned that the Government hope during the present year to obtain in the civil departments a reduction of expenditure which will amount to 1,000,000l. a year. A considerable part of this reduction, however, must be regarded as prospective, for the Governor-General admits that there must be a serious set-off on account of pensions and other forms of compensation to the officers with whose services it will be necessary to dispense." Without desiring to make any unnecessary reference to errors that have been committed in the past, I think it is important to lay special stress upon the fact that the results of a policy of laxity and extravagance will cause a severe drain upon the resources of a country, long after such a policy has been replaced by one of the most rigorous economy.

The special circumstances which are now imposing so severe a strain upon the finances of India may to a great extent cease to exist. If this should be the case, the necessity for care and thrift appearing not to be so pressing as it now is, the Government may drift back into its old course, and the present zeal for economy may pass away. The fact, however, should never for a moment be lost sight of, that new contingencies may arise; these may suddenly create financial difficulties as serious as those which now have to be encountered, and these difficulties will be indefinitely increased, if, in addition to the actual needs of the day, there has to be met in a season of adversity a considerable portion of the expenditure sanctioned in more prosperous times.

In endeavouring to give an explanation of the causes which have produced the present remarkable change in the official view of Indian finance, it will not be necessary to attempt to apportion the exact amount of blame which may be fairly laid to the charge of successive governments, for having so long and so persistently given an inaccurate account of the financial condition of India. No useful end can be served by embarking on such a controversy. It may, no doubt, be fairly argued that some of the circumstances which, at the present time, are so prejudicially affecting the finances of India, have only recently come into operation; it would not, however, on the other hand, be difficult to show that for years past India has had no financial reserve, and that additional expenditure has consequently had to be met either by increased borrowing, or by imposing fresh taxation most burdensome to the people. But however greatly we may regret that those who have been responsible for the government of India should, during so lengthened a period, have administered her finances in a manner which has brought her to the brink of the gravest financial embarrassment, yet it may now be regarded as a subject for the most sincere congratulation that the peril of the situation has at last been recognised, and that efforts are to be made which, if steadily persisted in, will place her finances on a sound and satisfactory basis.