They are purchased by merchants and others who have payments to make in India, and as these bills thus take the place of specie, it is obvious that each increase in the amount of these bills proportionately diminishes the demand for silver to be transmitted to India. For many years the large loans which were annually raised in England for the construction of Indian railways to a great extent neutralised the prejudicial effect which is now exercised on Indian finance by the home charges. Previous to 1874, during a period of twenty years, a sum of not less than 5,000,000l. was on the average annually raised in England for the construction of guaranteed railways in India. Instead of transmitting this capital to India in the form of money, a very considerable portion of it was used to meet the home charges, and thus the amount of bills which had to be sold by the Secretary of State to defray these charges was proportionately diminished. This system of constructing Indian railways on the guaranteed system has been finally abandoned.

It has also now been decided that when money is borrowed for public works in India, the loan should be raised there and not in England; and consequently, as the home charges will have in future to be entirely met either by the transmission of specie from India to England, or by the sale in England of bills drawn upon India, the prejudicial effect which must be exercised upon the rate of exchange will, unless these charges are diminished, continue with unabated force. For a long time the Government in India seemed to cling to the idea that by some artificial currency arrangement the value of silver could be restored, and the exchange rendered less unfavourable. It is unnecessary again to discuss the many theories which have from time to time been propounded. I believe it can be shown that any tampering with the currency would have indefinitely aggravated the evil it was sought to remove. No surer means can be adopted of still further depreciating the value of silver than to diminish the demand for it, and if any of the many proposals which have lately been propounded with regard to the silver question are considered, such, for instance, as the introduction into India of a gold currency, or the limitation of the amount of silver annually coined, it will be at once seen that all these suggested remedies alike labour under the defect that they could not be carried out without lessening the demand for silver.

No circumstance that has recently occurred in connection with Indian finance is a subject for more sincere congratulation, than that it seems to have been finally determined by the authorities in England not to sanction any change whatever in the Indian currency. Independently of the objections to which allusion has just been made, it would be difficult to overestimate the mischief which would result from altering the currency of a people who are so stationary in their habits that they dislike change with an intensity which Europeans find it almost impossible to understand. A large majority of the population of India are cultivators of the land. They have entered into engagements to pay, either permanently or for a fixed period, a certain number of rupees to the Government for the land which they cultivate. If, because silver has become depreciated, they were ordered to make this payment in gold, or if they found that the weight of silver in the rupee was increased in order to get from them more silver than they had stipulated to pay, a feeling would spread among the people from one end of India to the other that they were the victims of a breach of faith; there would naturally arise the deepest distrust of the Government; and the harm that would be done would be indefinitely more serious than any mischief which can possibly result from the loss by exchange.

It appears that India has had a very narrow escape from the danger to which reference has just been made. Up to the very last the authorities at Calcutta apparently indulged the hope that the loss by exchange might be averted by some currency device. Sir John Strachey, in his budget speech of the present year, refers with satisfaction to the fact that measures which were suggested by the Viceroy and his Council for dealing with the exchange difficulty were at the time under the consideration of the Secretary of State. It is well known that the suggestion to effect some alteration in the Indian currency was favourably entertained by some members of the Council of the Secretary of State, and by other authorities at the India Office. Fortunately, however, advice was sought from the outside; a departmental committee was appointed which comprised amongst its members some officials who were not connected with the India Office; and it is probable that to the investigations of this committee it is to a great degree due that the wise decision has been arrived at, that, so far as the currency is concerned, things must be left alone. The decision which was thus come to, seems at once to have produced a most marked effect.

The authorities in India and in Ed gland had brought home to them with convincing force, that as the loss by exchange was a serious burden on the finances of India, which could not be lightened by any modifications of the currency, there would continue to be increasing deficits, unless measures were at once taken to reduce expenditure. Other difficulties, moreover, besides the loss by exchange had to be met. Provision had still to be made for the larger part of the expenses incurred in the Afghan war, and for years there had been carried on an expenditure on public works, which it was every day becoming more evident India could not afford.

With regard to making provision for the expenses of the Afghan war the difficulty has been rather evaded than encountered. Assuming that the cost of the war did not exceed the official estimate of 2,600,000l., only one quarter of this amount has so far been provided by India, for 2,000,000l. has been lent to her free of interest by England. As this 2,000,000?. is to be repaid by India in seven years, the exact amount of the contribution which England will make to this war is less than 320,000l., this sum representing somewhat more than the loss of interest on a loan of 2,000,000l. made in the manner just described. I do not here intend again to consider whether England in contributing 320,000l., or less than a seventh of an aggregate expenditure of 2,600,000l., is either legally or equitably bearing her proper share of the cost of a war which was said, both by the Viceroy and the Prime Minister, to have been undertaken for Imperial purposes. The question, however, as to the exact proportion in which the cost of pursuing a "forward policy" in Afghanistan should be borne by England and India respectively, will have again to be considered, now that it has become necessary to renew hostilities in Afghanistan.