It has been specially provided by the Government of India Act, of 1858, that there shall be annually made in the House of Commons an Indian Financial Statement. Although the statement thus made is usually described as the Indian budget, the financial measures which constitute the budget arrangements for the year are first brought forward at Calcutta, and are generally in operation some time before the budget is considered in the House of Commons. The budget of 1879, which was discussed in the last Essay, was admitted on all sides to exhibit the financial condition of India in an extremely grave aspect. Hitherto the true character of the financial situation in India had been ignored by successive Governments; but when the time arrived for the discussion of the budget of 1879 in Parliament, the Government felt that they were brought face to face with a state of things so serious that they wisely resolved to abandon all attempts at palliation or excuse, and determined fully and frankly to recognise the true character of the difficulties which had to be encountered.

The admissions which were made on behalf of the Government were so unreserved that the discussion of the Indian budget of 1879 in Parliament will not improbably be long-referred to as marking the commencement of a new epoch in Indian finance.1 As previously remarked, the true financial condition of India had never up till this time been officially recognised. Liberal and Conservative Governments had not only persistently denied that there was anything in the state of Indian finance to cause apprehension, but year after year, as the time for the introduction of the Indian budget recurred, her actual financial condition was depicted in roseate hues, and her future was described in a spirit of increasing hopefulness. So little cause was there said to be for uneasiness or alarm, that the Indian budget used always to be postponed till a period of the session when all other important business had been disposed of. When the budget was considered, it was little more than a repetition of an oft-told tale. By classing some branch of expenditure as "extraordinary," and by regarding some outlay as exceptional, the Indian accounts were almost invariably arranged so as to exhibit a surplus.

The public works expenditure was habitually compared to the profitable investment of capital by a wise and beneficent landowner in the improvement of a judiciously-administered estate. A most significant change, however, has lately occurred. A large portion of the outlay on public works is now officially admitted to be unremunerative; and the Finance Minister, Sir John Strachey, has been forced to admit that a review of the finances of India for seven years, a period long enough to show their normal position, " made it plain that we possessed no true surplus of revenue over expenditure to cover the many contingencies to which a great country is exposed.' Events which have recently happened only too clearly show that contingencies which may put a severe strain upon the finances of India may at any moment occur. When, a few months since, the war with Afghanistan was concluded, and the Treaty of Gundamuk was signed, there seemed some reason to hope that India might enjoy a period of peace and repose.

It now, however, appears that the fanatical fury of a dissolute monarch may lead to another Burmese war; and the revolt at Cabul, by necessitating the renewal of hostilities in Afghanistan, involves an increase of expenditure, and may, if the greatest care and prudence are not shown, make a most serious permanent addition to the military expenditure of India.

1 October, 1879.

1 The debate on the Indian budget of 1879 commenced at an unusually early period of the session (May 22nd), and the discussion excited such general interest that it was continued for three nights. This affords a striking contrast to what has taken place in previous years, when the Indian budget has generally been hurriedly considered in the closing hours of the session.

In order still further to show the striking change of tone recently adopted by those who are responsible for the government of India, it is particularly worthy of remark that the Viceroy and the Secretary of State now unreservedly accept the conclusion that the limit of taxation has been reached in India, and that it has consequently become imperatively necessary that expenditure should be reduced. In a despatch which has been lately issued by the Viceroy and his Council to the local Governments, it is declared that "immediate measures must be taken for the reduction of the public expenditure in all its branches." On behalf of the Secretary of State it has been with equal positiveness announced that the balance between revenue and expenditure must be restored, not by the imposition of new taxation, but by "a large reduction of expenditure."1 It is impossible to overestimate the importance of so full and frank a recognition of the real financial position of India. It is not too much to say that one obstacle which stood in the way of all attempts to reform Indian finance has now been surmounted. All experience, however, shows that any Government that is determined to carry out a policy of rigorous retrenchment will find itself beset by the most formidable difficulties.

Devoted friends of economy in the abstract not un-frequently become its bitter assailants when the particular economy proposed happens to touch some branch of expenditure in which they themselves, either from pecuniary or philanthropic motives, are interested. Whatever may be thought of the previous mismanagement of Indian finance, nothing can be more useless than to indulge in vain regrets and recriminations about the past. Accepting unreservedly the promises which have been given that in the future a different policy shall be pursued, no effort should be spared to strengthen the hands of the Indian Government by rendering them every possible assistance in effecting those reductions in expenditure which they are now so absolutely pledged to secure.

1 See Speech of Mr. Stanhope in introducing the Indian budget, May 22, 1879.