Vol. 6 · pages 301–305

286 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES conserved intact, and its automatic features would work equally well if certain expenditures only, instead of all expenditures, were selected as the basis of calculations. This objection cannot, however, be urged against the Indian system of contributions. In the first place, the contribution is not a varying sum as is the case in the financial systems of other countries. Because the Provinces are made contributory towards the deficit of the Central Government it is to be remembered that they are not liable to the whole of the central deficit whatsoever it may be from year to year. On the other hand, in ordinary years the Provinces are only liable to make contributions towards meeting what is called the Standard Central Deficit of Rs. 9.83 lakhs. That being the case the contributions do not form an element of uncertainty in the Provincial Budgets. Secondly, the contributions are not a permanent feature of the financial arrangements between the Central and Provincial Governments. The levy of the contributions is contemplated to be only transitional, to allow the Government of India to work out its financial salvation, and the Government of India has promised that they will adopt such a policy as to bring about the extinction of the contributions in as short a time as possible. Lastly, the ratio of the contributions to the standard revenues or expenditure of any of the Provinces is not so great as to place a heavy incubus on their financial system, and not being a varying quantity cannot be said to check useful expenditures by Provinces which propose to incur them. As a matter of fact whatever may be said against the flaws in the apportionment by expenditure method of levying contributions it would be difficult to deny that the system eminently answers the requirements of equity. It certainly brings about a more equitable1 distribution of the burden than is possible under other systems. For it may fairly be assumed that expenditures very nearly correspond to the actual abilities of the communities concerned more than do population 2 or area. Not only is the principle equitable in itself, but care has been taken to do equity in its application as between the different Provinces. For we know that the contributions are so regulated as to leave to the Provinces, rich as well as poor, a reserve of spending power in order to enable them to meet such of their pressing needs as may not have been covered by the figure for standard 1 Cf. Seligman, op. cit., p. 360. 2 In Germany under the Empire the contributions from the states were apportioned according to population. The same is the case in Switzerland.

287 A CRITIQUE OF THE CHANGE expenditure. The main purpose of rejecting equal in favour of unequal contributions was to see that the burden of the contributions did not prevent any of the Provinces from meeting such extra expenditure as may be absolutely necessary. Indeed, no system of contributions can be said to be calculated to produce greater equity than the Indian system. So far we have examined whether the new financial arrangement is administratively workable and equitable. What we have now to see is : Has the arrangement proved itself to be financially adequate? It will be recalled that the Financial Relations Committee held that the general resources of the country were abundant, and that it required only a wise (In Thousands of Rupees) Province StandardFigures Revised1921-2 Budget1922-3 Revenue 14,98,02 15,58,59 16,76,50 Madras ... Expenditure 14,07,20 17.15.93 17,18,55 Surplus and Deficit 90,82 —1,57,34 —42,05 Revenue 12,09,70 13,67,13 14,93,06 Bombay ... Expenditure 11,55,03 16,52,80 15,42,17 Surplus and Deficit 54,67 —2,85,67 —50,11 Revenue 8,55,28 8,86,53 10,55,86 Bengal ... Expenditure 8,61,13 11,10,60 10,36,90 Surplus and Deficit —5,85 —2,24,07 18,96 Revenue 12,29,88 13,34,31 13,58,67 United Provinces ... Expenditure 12,06,56 14,59,87 13,85,65 Surplus and Deficit 1,23,32 —1,25,56 —26,98 Revenue 9,73,51 10,73,76 11,38,26 Punjab ... Expenditure 9,10,69 12,23,24 12,68,44 Surplus and Deficit 62,82 —1,49,48 —1,30,18 Revenue 8,24,28 9,99,33 10,00,57 Burma ... Expenditure 7,84,78 10,27,51 11,90,70 Surplus and Deficit 39,50 —28,18 —1,90,13 Revenue 4,30,39 4,46,15 4,62,65 Bihar and Orissa ... Expenditure 4,20,70 4,85,97 5,13,80 Surplus and Deficit 90,69 —39,82 —51,15 Revenue 4,35,37 5,14,80 5,35,23 Central Provinces ... Expenditure 4,38,80 5,41,76 5,72,17 Surplus and Deficit —3,43 —26,96 —36,94 Revenue 1,81,46 2,01,12 2,08,06 Assam ... Expenditure 1,78,25 2,19,45 2,22,58 Surplus and Deficit 3,21 —18,33 —14,52

288 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES plan of distribution in order to leave each Province with a sufficiently large “spending power” or surplus. That the plan recommended by the Committee was calculated to bring about such a result must of course be taken for granted. But when we analyse the Budgets of the different Provinces since the introduction of the Reforms the result appears to be entirely disappointing (see Table, p. 287). Thus, taking the estimated revenue and expenditure of the nine Provinces for 1922-3, equilibrium between current revenue and expenditure is only to be found in two of them, Burma and Bengal, and in the latter this result could not have been attained but for the temporary remission 1 of its annual contribution to the Central Government, and a programme of taxation calculated to bring in Rs. 140 lakhs. In the rest of the Provinces the deficits of the year aggregated to the large figure of Rs. 7,74 lakhs. This huge deficit was financed by new 2 taxation to the extent of Rs. 3,52 lakhs, and for the rest by drawing on balances and by raising loans from the public and from the Central Government. But as the Secretary of State in his despatch 3 pointed out, this “process of financing provincial deficits in part from the accumulated revenue balances of the past will now practically come to an end, as such balances will be generally exhausted by the end of the current financial year ............ If the financial stability of the Provinces is not to be undermined, with ultimate jeopardy to the Government of India itself, it is impossible to contemplate the continuance of a series of Provincial deficits financed by borrowing either direct from the public or from the Central Government.” What is to be the remedy ? At the Conference held in Simla in April, 1922, “to consider various matters connected with the financial arrangements between the Central Government and the Provinces,” it was disclosed 4 that the Government of India and the Provinces were divided as to the proper solution for the rehabilitation of Provincial Finance on a stable and secure 1 Legislative Assembly Debates, Vol. Ill, No. 8. 2 Cf. the letter of the Government of India, Finance Department, No. 13 of July 13, 1922, to the Secretary of State. 3 Cf. the despatch in reply to the above by the Secretary of State (Financial), No. 17 of November 9, 1922. 4 For a summary of the result of this Conference, see Letter of the Government of India, supra, p. 257.

289 A CRITIQUE OF THE CHANGE footing. The Provinces proposed an increase in their resources by revising the financial arrangements made by the Reforms Act. On the other hand, the Secretary of State as a mouthpiece of the Government of India urged that “Equilibrium can only be achieved by reduction of expenditure and the adoption of measures which will lead to an increase of revenue.” 1 The Provinces were not, however, unanimous in the suggestions they made for the revison of the arrangements effected by the Act. Some like the Government of Bombay suggested a return to the system of “divided heads” while others were opposed to it. But the majority was for securing relief through the abolition of contributions. This attitude of the Provinces towards the new financial arrangements is on the face of it a very unreasonable attitude. They are opposed both to the system of divided heads and the system of contributions as well. This is to have things both ways, and they could certainly have had it if the existing resources of the country had been properly husbanded. Inadequacy of finance is not always the result of a paucity of revenue resources. National prosperity may be great and growing and the increase of national wealth may be proceeding unchecked. If under such circumstances enough revenue is not obtained the fault does not lie with the social income. Rather it is a fault of the government which must be said to have failed to organize and marshal the national resources for fiscal purposes. The same is to some extent true of the Indian Government. Surveying the national resources of the country, it becomes evident that there are two sources which the Government has not been able to marshal properly. One is the land revenue. It is notorious that land revenue has been the biggest resource to the Government of India. In the collection of the land revenue every landholder is laid under contribution, but the rate of assessment is not periodically enhanced for every one of them. On the other hand, in Bengal and in other parts of India the rate of assessment is permanently settled. Consequently in such parts of india which by the long period of settled government enjoyed by them, and by the consequent influx of capital, have 1 The despatch of the Secretary of State, supra, p. 257.

290 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES attained to a greater advance in prosperity than any others, the land revenue yields practically no increase; the land-owners, with enormously increased incomes, contribute nothing to the increase in the financial burdens of the State. Permanent Settlement has ever since the days of Lord Canning been suggested as a panacea for improving the financial condition of the people. After the severe famine of 1860, Lord Canning, then Viceroy and Governor-General of India, recommended the extension of the Permanent Settlement to all parts of india. Sir John (afterwards Lord) Lawrence supported the recommendation, and the two Secretaries of State for india, Sir Charles Wood and Sir Stafford Northcote, approved of the proposal. Fortunately for the country the proposal for making the Permanent Settlement universal was finally rejected in 1883. Some no doubt regarded the decision as unfortunate, and continued the agitation in favour of the permanent Settlement long after. But the real force, if there was any in the agitation, was derived from the motive of putting a limit on the financial resources of an alien and an irresponsible bureaucracy. Those who then agitated in favour of the Permanent Settlement probably did not realize that some day this irresponsible bureaucracy would give place to a responsible government of the people and the Permanent Settlement which it was desired to be instituted as a curb on the unchartered licence of a bureaucracy would result in placing a fetter on the freedom of a popular government to enter upon the path of orderly progress. A bad government may abuse its financial powers, but a government cannot be a good government if there is a serious limitation on its financial powers. It was therefore a good thing that this evil of a permanent settlement was not allowed to spread to the whole of India. But it would have been better if the new financial arrangements had contrived to replace the permanent settlement system of land revenue by a periodical settlement system. That was one important way of augmenting the general resources of the country and thereby giving adequacy to all the governments concerned. Instead of this the financial arrangements were so conceived as not to “subject the permanently settled provinces to financial pressure which would have the practical result of forcing them to reconsider the permanent settlement.” 1 If this had been done it would have augmented the general resources to the benefit of all. As it was, not only provision was 1 Joint Report, p. 171.