It is well essay was written, it is proposed to amend the Trades Licence Tax in many important particulars. These amendments are considered in the Appendix.

The object I have in view in making these remarks is not to condemn the Government for imposing the licence tax. The more unreservedly we accept all that has been urged to justify what has been done, the more irresistibly are we led to the conclusion that the financial condition of India is one of such extreme peril that economy is not only desirable, but is a matter of imperative necessity. If, in order to increase the revenue by an amount comparatively so small as 750,000l., the best course that can be adopted by the Government is to impose such taxation as that which has just been described, the question may be asked, to what straits may not the Government be reduced, if any fresh contingency, such as the renewal of hostilities with Afghanistan, should make it necessary to increase the revenue by an amount compared with which 750,000l. would be but a trifle? In order adequately to appreciate the financial situation in India, the answer which must be given to this question should never be absent from the thoughts of those who are responsible for the administration of her finances.

If such an additional amount of revenue had to be obtained, we are brought face to face with these alternatives: either recourse must be had to some new form of taxation which is more objectionable than the licence tax, because, if it were not so, it would have been selected in preference to the licence tax; or the yield from the licence tax must be augmented either by-increasing its rate, or by assessing it on incomes even smaller than those on which it is now imposed. Such considerations as these cannot have been absent from the minds of those who are responsible for the government of India, and, if they stood alone, they might be regarded as sufficient to account for the remarkable change in the official view which is now taken of Indian finance.

It cannot, however, be doubted that in considering the causes which have brought home to the Government the necessity of increased economy, a prominent position ought to be given to the serious loss which has resulted from a depreciation in the value of silver producing an unfavourable exchange. As I have already referred to this subject, it is not necessary again to explain in detail the manner in which a fall in the value of silver prejudicially affects the finances of India. As, however, the home charges have hitherto steadily increased, it may be desirable not only to show the manner in which the loss by exchange depends on the amount of these charges, but also to point out the direct influence which is exerted by any increase in these charges in depreciating the value of silver, and in thus adding to the loss by exchange. It is obvious that any country which receives its revenue in one metal and undertakes to make large payments in another, enters into a very speculative undertaking. If the value of the metal in which the revenue is received becomes depreciated when compared with the value of the metal in which payments have to be made, the real amount of these payments is proportionately increased.

On the other hand, their amount will be diminished if the value of the metal in which the revenue is received becomes appreciated when compared with that in which payments have to be made. It is manifestly very undesirable that the fiscal system of a country should be deranged by such risks of loss and gain as those to which reference has just been made, and therefore the greatest care ought to be taken to prevent a country pledging itself to make unduly large payments in a metal different from that in which her revenue is received. It is now admitted that the entire net revenue of India is only about 38,000,000l. The whole of this revenue is received in silver, and more than one half of the amount has, in order to defray the home charges, to be devoted to make payments in gold. The net amount of these home charges during the present year has been officially stated at 17,000,000l. In calculating the Indian revenue in pounds sterling it is assumed that ten rupees are equivalent to one pound. The net revenue of India may therefore be stated as 380,000,000 rupees. But now that silver has fallen from what was long its normal value, about 60d. an ounce, to about 52d. an ounce, twelve rupees and not ten are equivalent to a pound sterling.

In order therefore to make a payment of 17,000,000l., 204,000,000 rupees are required, and it consequently appears that as the home charges now amount to 17,000,000l., these charges absorb more than one-half the entire net revenue. As, therefore, India is liable to the most serious risks as long as so large a portion of her revenue has to be expended in making payments in gold, it is of the first importance that these home charges should not be permitted to increase, but measures ought at once to be taken to effect in them every possible reduction. During the last few years the home charges have increased to a most serious extent. It was shown by Mr. J. K. Cross, in the able speech which he made in the debate last session on the Indian budget, that the home charges, which in 1868 absorbed 43½ per cent. of the net land revenue, will during the present year absorb the whole of that revenue. The necessity of securing a reduction in the home charges is the greater, because each increase in them exerts a direct influence in still further depreciating the value of silver, and thus adds to the loss by exchange which India has to bear; while every reduction in the amount of these charges must exercise a corresponding effect in restoring the value of silver.

Any question referring to the value of the precious metals is liable to be so confused by the irrelevant intrusion of currency theories, that it cannot be too carefully borne in mind that the value either of gold or silver is regulated by just the same causes as those which regulate the value of any other commodity. If there is a diminution in the demand, or an increase in the supply, an influence is at once brought into operation to lower values. It has already been shown that many agencies have come into operation during the last few years which have caused an increase in the supply of silver to be accompanied by a considerable falling off in the demand, and thus a double influence has been exerted to lower its value. Amongst the many circumstances which have contributed to lessen the demand for silver, a position of chief prominence must undoubtedly be given to the great augmentation in the home charges during the past few years. It is well known that these charges are usually not defrayed by the remission of specie from India, but that bills drawn on India are sold by the Secretary of State in London. About 300,000l. worth of these bills are each week offered for sale.