The 2,000,000l, which has been thus advanced by England will no doubt afford India some temporary relief; but it is obvious that this relief is obtained by having recourse to the expedient of discounting the future. The loan will, during the present year, diminish by 2,000,000l. the sum which will have to be provided from India to defray the home charges, and in this way the rate of exchange may, to a certain extent, be favourably affected. During the next seven years, however, as the instalments for the repayment of the loan become due, India will have to provide the money for these payments, and consequently a more favourable exchange during one year is secured by making the exchange more unfavourable during the succeeding seven years. It is obvious that nothing but extreme necessity can be pleaded as an excuse for the adoption by any government of such financial expedients.

The fact that India has had to be assisted by England with a loan of 2,000,000l. affords a striking proof that, in considering all Indian questions, a position of first importance must be given to their financial aspects. In deciding upon any particular course of policy, the element of cost should never for a moment be absent. It may be premature to attempt to determine what should be our future action in Afghanistan under the present change of circumstances, but it cannot be too strongly insisted upon that, in the existing financial condition of India, no peril can be more serious than the adoption of a policy which, if it should lead to a large additional expenditure, would sooner or later necessitate an increase of taxation. It has already been shown that, to obtain the comparatively small sum of 750,000l, the Government thought that the best course which was open to them was to impose the licence tax. In order to form an idea of what increased taxation may signify in India, it is only necessary to bear in mind the effect which this tax is producing, and to remember that, if fresh taxation has again to be resorted to, some impost even more obnoxious than the licence tax will have to be levied.

Those who are most competent to form an opinion seem unanimously to agree that any policy which would lead to annexation in Afghanistan would cause a large permanent addition to the annual expenditure of India. If such a policy should be adopted, both the present Secretary of State and the Viceroy would stand self-condemned; for after the admissions which within the last few months they have so unreservedly made as to the financial condition of India, it is impossible for them to sanction new and heavy charges being thrown upon her, without the conclusion being ever present to their minds that the additional taxation which must be the inevitable accompaniment of increased expenditure will bring upon India the gravest perils.

It has been previously mentioned that in addition to the various unfavourable circumstances already enumerated, which brought home with striking distinctness to the Indian Government the present critical state of Indian finance, facts have gradually come to light which have led irresistibly to the conclusion that a large part of the outlay on works which are classed as "reproductive" does not yield even a small fraction of the interest which has to be paid on the capital borrowed for their construction. Early in the Session of 1878, the Under-Secretary of State for India, in moving for the appointment of a Select Committee to inquire into this public works expenditure, stated that on the 9,000,000l. spent in recent years on schemes of irrigation in Bengal, the return which is yielded is only ½ per cent. This conclusion was abundantly verified after a most careful and exhaustive investigation of the entire subject by the committee which sat during the Sessions of 1878 and 1879. In their report, which has lately been published, and which was drawn up with much ability by the chairman of the committee, Lord George Hamilton, it is shown that, in the case of many irrigation works, the return which is yielded, far from paying the interest on the capital expended, does not even suffice to meet the working expenses.

Some works of irrigation have undoubtedly proved to be very remunerative; but it is clearly shown by elaborate statistical returns which have been summarised in the report of the committee, that, with the single exception of the works in Scinde, the schemes from which large profits are secured are either old native works, like the Eastern and Western Jumna Canals, and the Cauvery anicut, which have been restored by British agency, or works which have been constructed under exceptionally favourable conditions, such as the Godavery and Kristnah. Thus, taking the year 1875-76, the latest for which the official figures are given, it appears that up to that time, without including the value of the old native works, 15,562,655l. had been expended on schemes of irrigation in India. The net return in that year on this outlay, after allowing for working expenses, was 832,243l. As 700,319l. would represent the charge for interest at 4½ per cent. on a capital of 15,562,655l., it follows that the irrigation expenditure yields a net profit of 131,924l. But on further examination it is at once seen that, as previously stated, the whole of this profit is obtained from old restored native works, and from those which have been constructed in Scinde and in the deltas of the Madras rivers.

This is shown by reference to the following table, in which are given the results of the profitable irrigation works: -

With regard to the irrigation works which are not included in the above table, and on which a capital of no less than 10,197,869l. has been expended, the return yielded in 1875-76 was barely sufficient to meet the working expenses, and fell short by no less a sum than 421,859l, of the amount which was required to defray these expenses and the interest on the capital expended. This result is made still more unfavourable if the outlay on the Madras Irrigation Company's works is taken into account. These works, constructed with capital raised by a private company in England, were subsequently purchased by the Government, and on a capital expenditure of 1,372,000l. it appears that the net annual loss is 46,453l.