Vol. 6 · pages 146–150

CHAPTER V BUDGET BY ASSIGNED REVENUES 1877-78 TO 1881-82 The scheme of Provincial Budgets, the second stage of which we shall presently study, was launched not without mixed feelings. Boundless hopes were entertained, though not unmingled with a sense of misgiving. Just what was expected of the scheme may be correctly gauged from the remarks of Sir Richard Temple, who, when introducing the scheme in 1870, said :— “We hope that this concession (of increased control over revenues and expenditure) will give the Local Governments an additional interest in the study and the enforcement of economy in expenditure; will afford them a just inducement to supplement their local receipts from time to time by methods either most acceptable to the people or least fraught with popular objection; will cause a more complete understanding to arise between the executive authorities and the tax-paying classes respecting the development of fiscal resources; will teach the people to take a practical share in the Provincial Finance, and lead them up gradually towards a degree of local self-government; and will thus conduce to administrative as well as financial improvement.” 1 While entertaining these hopes he also took the opportunity of asking the Council to be prepared for disappointment, for he went on to remark: “the hopes which I am expressing, however sanguinely, or confidently entertained, are after all but hopes, and like all other hopes may or may not be fairly realized. But let all this eventuate as it may, sure I am with certainty free from shade of doubt, that the measure is advantageous to the Imperial Budget of British India. For it will have the direct effect of definitely limiting, for the present, the expenditure from the general Exchequer on certain important branches of civil expenditure, the very branches indeed, where, from the progressive state of the age, the demands for increased outlet have most arisen, 1 Annual financial statement for the official years 1860-1 to 1873-4, with Appendices : Calcutta, Office of the Superintendent of Government Printing, 1873, p. 348.

132 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES and in which from the nature of the case the supreme Central Authority is least able to check the requirements of the local authorities.” The actual results, however, far surpassed these very moderate hopes and were more than necessary to dispel the misgivings that still lingered in the minds of those who looked upon the institution of Provincial Finance as a project of doubtful utility. Confining ourselves to the issues immediately affecting the Government of India or the Provincial Governments, it was abundantly proved that Provincial management was more economical than Imperial management. If we compare the expenditure incurred upon the services while they were an Imperial charge with the expenditure on them after they were provincialized, the superior economy of provincial management is overwhelmingly proved. Year Total excess Expenditure on all Transferred Services except Registration over Total Receipts from them inclusive of all Contributions other than those for Bengal Famine under Imperial management Year Total excess Expenditure on all Transferred Services except Registration over Total Receipts from them inclusive of all Contributions other than those for Bengal Famine under Provincial management ££ 1863-4 5,111,297 1871-2 4,835,238 1864-5 5,606,248 1872-3 4,964,407 1865-6 5,587,779 1873-4 5,329,180 1867-8 5,821,438 1874-5 5,379,509 1868-9 6,030,214 1875-6Est. 5,135,677 1869-70 5,856,310 1870-1 5,197,250 Complied from an official volume of Notes on Imperial, Provincial and Local Finance, 1876. It was therefore with confirmed belief in its utility and even with a sense of relief that the Government of India proceeded to incorporate into the Provincial Budgets additional services local in character or more amenable to local control. But these additions to the incorporated services made the problem of a supply of funds to Provincial Governments assume greater proportions. In the first period the gap between the receipts of incorporated services and the total charges for them was comparatively smaller than what it was found to be the case on the present occasion. The mode of bridging the gap entirely by assignments was deemed to be ill-fitted for the success of the scheme in its enlarged form. The most radical defect in the system of budget by assignment consisted in its rigidity. The provinces did not favour it as a mode of supply for the reason that while the outlay on the services under

133 BUDGET BY ASSIGNED REVENUES their management continued to expand the assignments made to them remained fixed in amount. Sir John Strachey, to whom belonged the credit of carrying the scheme a stage further, was particularly alive to this weakness of the system. In place of fixed assignments he desired to give the provinces certain sources of revenue, the yield of which largely depended upon good management. His primary object in doing this, no doubt, was to make better and more elastic provision for the growing needs of the provincialized services. But he had also another, and, as he conceived it, a far more important reason in the substitution for assignments of assigned revenues. That economy was the fruit of good management had by that time become a commonplace, but few were sure as to what good management consisted in. it was Sir John Strachey who, for the first time, defined in unmistakable language his notion of good management, which was since his time applied in an everincreasing degree in the development of Provincial Finance. To him good management of finance was to be had “not by any action which gentlemen of the Financial Department or by any other department of the supreme Government can take whilst sitting hundreds or thousands of miles away in their offices in Calcutta or Simla; not by examining figures or writing circulars, but by giving to the Local Governments...... a direct and, so to speak, a personal interest in efficient management.” 1 And in this he had the strong support of recent experience; for, taking the results of the past stage the provinces not only managed the services at a lesser cost to the revenue than was the case under the Imperial regime, but the services yielded increased revenue under the more immediate and fostering care of the provinces than they did under the remote, uninformed, and therefore impotent vigilance of the Imperial Government. Sir John Strachey had long held to the view that so long as the Provinces collected the revenues for the Government of India they did not care to check evasion, which they would have surely done if they had collected them for their immediate benefit, or, as he put it, “when the Local Governments feel that good administration of branches of revenues will give them, and not to the Government of India alone, increased income and increased means of carrying out the improvements which they have at 1 Financial Statement, 1877-8.

134 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES RECEIPTS FROM INCORPORATED SERVICES Allocated Services Under Imperial Management Under Provincial Management 1865-6 1867-8 1868-9 1869-70 1870-1 1871-2 1872-3 1873-4 1874-5 1875-6 £ £ £ £ £ £ £ £ £ £ Jails ... 89,260 96,910 141,218 133,806 128,773 149,888 195,755 271,915 297,198 326,023 Police ... 140,166 231,859 277,179 287,529 270,855 203,624 97,735 90,708 80,509 89,895 Education ... 53,256 66,869 67,207 72,848 60,740 76,789 80,869 101,306 99,537 101,909 Registration ... 86,997 127,070 153,488 165,048 147,152 155,262 171,735 121,470 172,111 184,461 Printing ... 3,333 3,282 2,803 3,718 9,244 10,923 14,383 21,174 18,220 18,066 Medical ... ... ... ... ... 3,273 20,594 30,649 36,370 43,097 26,583 Miscellaneous ... 4,070 5,666 4,076 4,489 6,116 20,991 31,345 32,396 39,666 36,234 Compiled from the same source referred to above.

135 BUDGET BY ASSIGNED REVENUES heart, then, and not till then, was to be had the good administration that every one desired.” This evidence of the expanding receipts of provincialized services were therefore a pleasant surprise which went a great way in confirming the view he had advocated. It was therefore for a double purpose, of augmenting the revenues and of introducing elasticity in Provincial Finance, that Sir John Strachey substituted assigned revenues for assignments as a mode of supply to the provinces. The plan adopted by Sir John Strachey was not new, neither was it brought forward for the first time. It was present in the minds of the people who took part in the discussions of Provincial Finance in 1870, and was actually advocated by Sir John Strachey as early as 1872. 1 That the Government of India did not look upon the plan with favour in 1870 was due to the fact that it was afraid to permanently alienate the sources of revenue on the growth of which its stability depended. By now, however, the financial position of the Government of India had a bit improved, and the six years’ trial of provincial management had also engendered a greater confidence in the scheme in the minds of those who had never completely accepted the administrative utility of the project. To this was added the prospect of the plan being a means of increased productivity in their resources as it had been of increased economy in expenditure. The force of all these factors combined to bring a new stage in the evolution of Provincial Finance which, because of the distinct mode of supply adopted, may be well designated as a stage of Budget by Assigned Revenues. To be sure, assignments still formed a part of the new system. But that was because of the difficulty of assigning such revenues the yield of which would have been precisely equal to the incorporated expenditure. Under any circumstances there was sure to be some difference. It happened that the normal estimated yield of the ceded revenues fell short of the requirements and the margin of difference had to be made up by some adjusting assignment in the case of each province. The method of fixing the adjusting assignment for the different Provinces was on the whole a little too complicated, and may therefore be conveniently explained before proceeding to examine the constitution of the Provincial Budgets of the different Provinces as laid down under the second stage of their growth. 1 See his Minute dated July 27, 1872.