Vol. 6 · pages 306–310

291 A CRITIQUE OF THE CHANGE made favouring the retention of the Permanent Settlement, but the Bengal Government, which has the largest number of permanently settled holders of land, was later on exempted from contributing to the Government of India which was compelled to meet its deficit in other ways. Land Revenue therefore is one source which the Government could have marshalled in the interest of giving adequacy to the new financial arrangements. The other source which the Government refuses to tap is the customs revenue. The kind of fiscal policy that was adopted during the pre-Mutiny days, was, as we know it to be, of a suicidal character. The same is true of the post-Mutiny fiscal policy. From the Mutiny up to the present time, the Government of India has never looked upon the customs revenue as a resource to be used to meet the exigencies of the State, and when it has used it, it is only very reluctantly, and never to the fullest, not to mention the circumstances when it has actually reduced its revenue from this source in spite of the crying needs of the exchequer.1 While the ostensible reason given in favour of such a fiscal policy is that the customs revenue is wrong in principle, everybody knows that the customs revenue is not raised in India because it is feared that under it Indian industries would be protected against English industries. That the whole policy of India has been dictated by the interests of English manufactures is beyond dispute, and the reason for it is not far to seek. The Secretary of State for India, the supreme executive for India, is directly amenable to the English voters, whose primary concern has been to see that their markets are not closed against them. Whether a protectionist policy is good or bad is another question. For the present it is sufficient to note that the Government of India has been subjected to a pernicious kind of limitation on its fiscal powers which prevents it from using a source of revenue which has everywhere else proved to be most elastic and abundant of financial resources. If these limitations were not there the present financial inadequacy in all probability might not have ensued at all, and there would have been no necessity either for adopting the system of divided heads or for imposing contributions. As it is, owing to these limitations on the taxable resources of the country, a deficit in the Budget of the Central Government is inevitable. Given this fact, the adoption of some method of meeting that deficit was imperative, and there is no doubt that 1 Financial Statement for 1880-81, para. 74.

292 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES the system adopted is better than the system it replaced. In the present circumstances of the finances of the Central Government, contributions must be taken as a settled issue. Nor can it be said that the abolition of contributions would restore stability to Provincial Finance. Such no doubt is the prevalent view of the Provincial Governments and also of non-official politicians. The Resolution moved in the Indian Legislative Assembly on the 14th September, 1922, rested on the same view that if the Government of India were only to dispense with the contributions it would immediately restore equilibrium in the financial position of the Provinces. This belief was strengthened by the assumption that the aggregate estimated deficit of all the Provinces disclosed itself to be 352 lakhs of rupees for the financial year 1922-3; and as the total contribution to the Imperial Government by the Provinces aggregated to the sum of 983 lakhs, a remission of this amount would more than wipe off the deficit in the Provincial Budgets. It must, however, be said that the deficit of 352 lakhs of rupees does not disclose the true position of the Provinces as derived from the financial arrangements made by the Act. If we are to deduce the true position of the Provinces as following from the new arrangement we must take note of the new taxation imposed and of the gain to Bengal through the remission of its contribution to the Imperial exchequer. Making adjustments for these, the position of the Provinces as it would have been without contributions may be seen from the following :— FINANCIAL POSITION OF THE PROVINCES 1922-3 (In thousands of rupees) Provinces Revenue Expenditure Surplus orDeficit Rs. Rs. Rs. Madras ... ... ... ... 15,99,00 17,18,55 —1,19,55 Bombay ... ... ... ... 14,32,06 15,42,17 —1,10,11 Bengal ... ... ... ... 9,15,86 10,99,90 —1,84,04 U.P. ... ... ... ... 13,58,67 13,85,65 —26,98 Punjab ... ... ... ... 11,38,26 12,68,44 —1,30,18 Burma ... ... ... ... 10,00,57 11,90,70 —1,90,13 Bihar and Orissa ... ... ... 4,62,65 5,13,80 —51,15 Central Provinces ... ... ... 5,35,23 5,72,17 —36,94 Assam ... ... ... ... 2,05,06 2,22,58 —17,52 Total dificit ... ... ... —8,66,60

293 A CRITIQUE OF THE CHANGE According to this calculation the aggregate deficit of the Provinces would have been about 867 lakhs. But we must make some further adjustments to this account. It has not been possible to deduct from the revenues of the Central Provinces the sum derived from the enhancement of the Excise duty in the Provinces. Secondly, the revenues of the Central Provinces for the year 1922-3 include collections of suspended revenue of previous years. If these adjustments were made the aggregate deficit of the Provinces would give rise to a figure which would be barely covered by the remission of contributions. We must therefore conclude that remission of contributions would have at best been a very inadequate measure for removing the financial stringency of the Provinces, even if the problem of financing the extra deficit caused by such remission in the budget of the Central Government were to be ignored. But if, remission of contributions cannot improve the difficult situation that has arisen with regard to Provincial Finance, we must go to the root of the matter and inquire what are the causes which have brought on that situation. Is it due to the normal expenditure of the Provinces being under-rated ? Or is it due to the normal revenues of the Provinces being overestimated ? For this purpose we must first ascertain whether the resources allocated to the Provinces were really inadequate to their normal needs. The following table compares the standard receipts and expenditure and shows the margin left between them for covering a probable advance in expenditure. STANDARD REVENUE AND STANDARD EXPENDITURE Provinces StandardRevenue StandardExpenditure Excess or Defect of Standard Revenue over Standard Expenditure Rs. Rs. Rs. Madras ... ... ... 14,98,02 14,07,20 90,82 Bombay ... ... ... 12,09,70 11,55,03 54,67 Bengal ... ... ... 8,55,28 8,61,13 —5,85 U.P. ... ... ... 12,29,88 11,06,56 1,23,32 Punjab ... ... ... 9,73,51 9,10,69 62,82 Burma ... ... ... 8,24,28 7,84,78 39,50 Bihar and Orissa ... ... 4,30,39 4,20,70 9,69 C. P. ... ... ... 4,35,37 4,38,80 —3,43 Assam ... ... ... 1,81,46 1,78,25 3,21

294 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES From this it is obvious that except in the case of two Provinces the standard revenue has left a sufficient margin over standard expenditure. Only in Bengal and Central Provinces there was no margin, owing to the fact that the standard expenditure was slightly in excess of the standard revenue. But this defect was more than remedied in the case of Bengal by the remission of the contributions to the Central Government, and the excess of standard expenditure over standard revenue in the case of Central Provinces was indeed very small. Barring this, in the rest of the Provinces the margin allowed was substantial. Let us now turn to the actual figures and compare them, with the standard figures. First of all, let us take the revenue side of the Provincial Budgets. Has the realized revenue fallen short of the standard revenue ? The following table compares the realized receipts of the Provinces with the standard figure assumed to be the normal in the financial allocation made under the new Act:— Provincial Revenues1 Provinces StandardRevenues + Increase over Standard : — Decrease from Standard. For 1921-2 For 1922-3 Rs. Rs. Rs. Madras ... ... ... ... 14,98,02 60,57 40,41 Bombay ... ... ... ... 12,09,70 1,57,47 2,22,36 Bengal ... ... ... ... 8,55,28 31,25 60,58 U.P. ... ... ... ... 12,29,88 1,04,43 1,28,79 Punjab ... ... ... ... 9,73,51 1,00,15 1,64,75 Burma ... ... ... ... 8,24,28 1,75,05 1,76,29 Bihar and Orissa ... ... ... 4,30,39 15,76 32,26 C.P. ... ... ... ... 4,35,37 79,43 99,86 Assam ... ... ... ... 1,81,46 22,60 23,60 The above table brings out very clearly the fact, not readily admitted, namely that the realized revenue has in no case fallen short of the standard revenue. It may, however, be asked : Has the increase in the realized revenue been equal to the margin allowed under the allocation between the standard revenue and 1 Exclusive of new taxation.

295 A CRITIQUE OF THE CHANGE the standard expenditure of the Provinces ? As throwing some light on that aspect of the question the following table is interesting :— EXPANSION OF PROVINCIAL REVENUES Provinces StandardMargin Excess or Defect of Realized Margin over Standard Margin For 1921-2 For 1922-3 Madras ... ... ... ... 90,82 —30,25 —50,41 Bombay ... ... ... ... 54,67 1,02,80 1,68,19 Bengal ... ... ... ... —5,85 25,40 54,73 U.P. ... ... ... ... 1,23,32 —18,89 5,47 Punjab ... ... ... ... 62,82 37,33 1,01,93 Burma ... ... ... ... 39,50 1,35,55 1,36,79 Bihar and Orissa ... ... ... 9,69 6,07 22,57 C. P. ... ... ... ... 3,43 76,00 96,43 Assam ... ... ... ... 3,21 19,39 20,39 From these figures it is obvious that except in the case of Madras the realized margin has in no case fallen below the standard margin. The excess of the realized over the standard margin is enormous. It cannot, therefore, be said that the financial deficit in the Provinces is due to provincial revenue having failed to reach the assumed normal. On the other hand, the revenues were more than necessary to cover the normal expenditure of the Provinces. The only conclusion that can fairly be drawn from the facts of the case is that the provincial deficits are due to an extraordinary increase 1 in the expenditure of the Provinces. The following figures furnish enough evidence in support of this view:— Provinces StandardExpenditure + Increase over Standard : — Decrease from Standard. For 1921-2 For 1922-3 Madras ... ... ... ... 14,07,20 3,08,73 3,11,35 Bombay ... ... ... ... 11,55,03 2,97,77 3,87,14 Bengal ... ... ... ... 8,61,13 2,49,47 1,75,77 U.P. ... ... ... ... 11,06,56 3,43,31 2,79,09 Punjab ... ... ... ... 9,10,69 3,12,55 3,57,75 Burma ... ... ... ... 7,81,78 2,42,73 4,05,92 Bihar and Orissa ... ... ... 4,20,70 65,27 93,10 C. P. ... ... ... ... 4,38,80 1,02,96 1,23,37 Assam ... ... ... ... 1,78,25 41,20 44,33 1 For a brief review of this fact see the summary of it in the letter of the Government of India, op. cit.