Vol. 6 · pages 431–435

416 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES administration*; and (5) stores purchased in England for use or consumption in India. England being a gold-standard country, these payments were necessarily gold payments. But the revenues of the Government of India out of which these payments were met were received in silver, which was the sole legal-tender money of the country. It is evident that even if the gold payments were a fixed quantity their burden must increase pari passu with the fall in the gold value of silver. But the gold payments were not a fixed quantity. They have ever been on the increase, so that the rupee cost of the gold payments grew both by reason of the growth in their magnitude, and also by reason of the contraction of the medium, i.e. the appreciation of gold, in which they were payable. How greatly this double levy diminished the revenues of India, the figures in Table XI give a convincing testimony. TABLE XI INCREASE IN THE RUPEE COST OF GOLD PAYMENTS† Financial Year Average Rate of Exchange for the Year Total Excess of Rupees needed to provide for the net Sterling Payments of the Year over those required to meet the Sterling Payments of 1874-75 Amount of this Excess due to (1) Fall in the Rate of Exchange over that of 1874-75 (2) Increase in gold payments over those of the Year 1874-75 s. d. R R R 1875-76 1 9.626 86,97,980 41,13,723 45,84,257 1876-77 1 8.508 3,15,06,824 1,44,68,234 1,70,38,590 1877-78 1 8.791 1,30,05,481 1,14,58,670 1,15,46,811 1878-79 1 7.794 1,85,23,170 1,04,16,718 81,06,452 1879-80 1 7.961 39,23,570 1,65,37,394 -1,26,13,824 1880-81 1 7.956 3,12,11,981 1,92,82,582 1,19,29,399 1881-82 1 7.895 3,18,19,685 1.98,76,786 -1,19,42,899 1882-83 1 7.525 62,50,518 1,86,35,246 2,48,85,764 1883-84 1 7.536 3,44,16,685 2,33,46,040 1,10,70,645 1884-85 1 7.308 1,96,25,981 2,48,03,423 51,77,442 1885-86 1 6.254 1,82,11,346 2,54,95,337 -4,37,06,683 1886-87 1 5.441 4,69,16,788 4,46,68,299 22,48,489 1887-88 1 4.898 4,63,13,161 4,96,60,537 - 33,47,376 1888-89 1 4.379 9,00,38,166 6,59,71,998 2,40,66,168 1889-90 1 4.566 7,75,96,889 6,06,98,370 1,68,98,519 1890-91 1 6.090 9,06,11,857 4,65,48,302 4,40,63,555 1891-92 1 4.733 10,44,44,529 6,54,52,999 3,89,91,530 * Since the Reform Act of 1920 that part of this cost which was “political” has been placed upon the British Estimates. † Compiled from figures in Appendix II, p. 270, of the Indian Currency Committee of 1843.

417 THE SILVER STANDARD AND THE EVILS OF ITS INSTABILITY The effect of such a growing burden on the finance of the Government may well be imagined ; the condition of the Government, embarrasing at first, later became quite desperate under this continuously increasing burden. It enforced a policy of high taxation and rigid economy in the finances of the Government. Analysing the resource side of the Indian Budgets from the year 1872-73, we find that there was hardly any year which did not expire without making an addition to the existing imposts of the country. In 1872-73, there commenced the levy of what were called Provincial Rates. The fiscal year 1875-76 witnessed the addition of R. 1 per gallon in the excise duty on spirits. In 1877-78 the Pass Duty on Malwa opium was raised from Rs. 600 to Rs. 650 per chest. An addition of a Licence Tax and Local Rates was made in the year 1878-79, and an increase of Rs. 50 per chest took place in the Malwa Opium Duty in the following year. With the help of these imposts the Government expected to place its finances on an adequate basis. By the end of 1882, it felt quite secure and even went so far as to remit some of the taxes, which it did by lowering the customs duties and the Patwari Cess in the North-Western Provinces. But the rapid pace in the fall of the exchange soon showed that a resort to further taxation was necessary to make up for the increased cost of the sterling payments. To the existing burdens, therefore, was added in 1886 an Income Tax, a duty of 5 per cent. on imported and also on non-illuminating petroleum. The Salt Duty was raised in 1888 in India from Rs. 2 to Rs. 2½ and in Burma from 3 annas to R. 1 per maund. The Patwari Cess of the NorthWestern Provinces, repealed in 1882, was re-imposed in 1888. The rates of duty on imported spirit and the excise duties on spirits were not only raised in 1890, but were afterwards added to in every province. An excise duty on malt liquor was levied in 1893, and another on salted fish at the rate of 6 annas per maund. The yield of the taxes and duties levied from 1882-83 was* as follows:— Sources 1882-83 1892-93 Rs. Rs. Salt ... ... 5,67,50,000 8,14,90,000 Excise ... ... 3,47,50,000 4,97,90,000 Customs ... ... 1,08,90,000 1,41,80,000 Assessed Taxes ... ... 48,40,000 1,63,60,000 * Report of the Indian Currency Committee, 1893, App. II, p. 263.

418 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES All this additional burden was due to the enhanced cost of meeting the gold payments, and “would not have been necessary but for the fall in the exchange.”* Along with this increase of resources the Government of India also exercised the virtue of economy in the cost of administration. For the first time in its history, the Government turned to the alternative of employing the comparatively cheaper agency of the natives of the country in place of the imported Englishmen. Prior to 1870, the scope of effecting economy along this line was very limited. By the Civil Service Reforms of 1853† the way was cleared for the appointment of Indians to the posts reserved by the Statute of 1793† for the members of the covenanted Civil Service. But this reform did not conduce to any economy in the cost of the administration, because the Indian members carried the same high scale of salaries as did the English members of the Civil Service. It was when the Statute of 1870 (33 Vic. c. 3) was passed permitting the appointment by nomination of non-covenanted Indians to places reserved for the covenanted Civil Service on a lower scale of salary, that a real scope for economy presented itself to the Government of India. Hard pressed, the Government of India availed itself of the possibilities for economy held out by this statute. So great was the need for economy and so powerful was the interest of the Government in reducing its expenditure that it proceeded, notwithstanding increased demands for efficient administration, to substitute the less expensive agency of non-covenanted civilians in place of the more expensive agency of the convenanted civilians. The scale on which this substitution was effected was by no means small, for we find that between 1874 and 1889 the strength of the convenanted service recruited in England was reduced by more than 22 per cent., and was further expected to be reduced by about 12 per cent., by the employment of unconvenanted Indians to the posts usually reserved for covenanted civilians.§ Besides substituting a cheap for a dear agency in the administration, the Government also sought to obtain relief by applying the pruning knife to the rank growth in departmental * J.E.O’Conor, Report of the Indian Currency Committee, 1898, App. II, p. 182. † Cf. Report of the Public Service Commission, C 5327 of 1887. ‡ This provision of the Act has been re-enacted by the Act of 1861. § Cf. evidence of Mr. Jenkins, Q. 12. Mil. of Evid. of the Select Committee on East India (Civil Servants), H. of C. 327 of 1890.

419 THE SILVER STANDARD AND THE EVILS OF ITS INSTABILITY extravagences.* Even with such heroic efforts to increase the revenue and reduce the expenditure the finances of the Government throughout the period of the falling exchange were never in a flourishing state, as is shown in Table XII. Much more regrettable was the inability of the Government, owing to its financial difficulties, to find money for useful public works. The welfare of the Indian people depends upon turning to best account the resources which the country possesses. But the people have had very little of the necessary spirit of enterprise in them. The task, therefore, has fallen upon the Government of India to provide the country with the two prime requisites of a sustained economic life, namely a system of transport and a network of irrigation. With this object in view the Government had inaugurated a policy of developing what were called “Extraordinary Public Works,” financed by capital borrowings. For such borrowings India, as was to be expected, hardly offered any market, the people being too poor and their savings too scanty to furnish a modicum of the required capital outlay. Like all governments of poor peoples, the Government of India had therefore to turn to wealthier countries that had surplus capital to lend. All these countries unfortunately happened to be on the gold standard. As long as it was possible to say that so much gold was equal to so much silver, the English investor was indifferent whether the securities of the Government of India were rupee securities or sterling securities. But the fall in the gold value of silver was also a fall in the gold value of the rupee securities, and what was once a secure investment ceased to be so any more. This placed the Government in a difficult position in the matter of financing its extraordinary public works. Figures in Table XIII are worth study. The English investor would not invest in the rupee securities. An important customer for the Indian rupee securities was thus lost. The response of the Indian money market was inadequate. To issue sterling securities was the only alternative to enable the Government to tap a bigger and a more constant reservoir for the drawing of capital to India; but as it was bound to increase the burden of the gold payments, which it was the * Cf. Calcutta Civil Finance Committee’s Report, 1886 ; also The Report of the Civil Finance Commissioner (1887), who completed the work of the Committee after it was dissolved.

420 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES TABLE XII REVENUE AND EXPENDITURE OF THE GOVERNMENT OF INDIA Year. Average Rate of Exchange. In India. In England. Final Result. Net Revenue. Net Expenditure excluding Exchange. Surplus Revenue. Net Sterling Revenue. Exchange. Surplus (+) or Deficit (-) d. R. R. R. £ R. R. 1874-75 22.156 39,564,216 25,897,098 13,667,118 12,562,101 1,045,239 59,778 1875-76 21.626 40,053,419 24,541,923 15,511,496 12,544,813 1,377,428. 1,589,255 1876-77 20.508 38,253,366 25,355,285 12,898,081 13,229,646 2,252,611 —2,584,176 1877-78 20.791 39,275,489 27,658,021 11,617,468 13,756,478 2,123,030 —4,262,040 1878-79 19.794 44,415,139 25,778,928 18,636,211 13,610,211 2,891,902 2,134,098 1879-80 19.961 45,258,197 29,384,030 15,874,167 14,223,891 2,878,169 —1,227,893 1880-81 19.956 44,691,119 34,880,434 9,810,085 11,177,231 2,264,848 —3,031,394 1881-82 19.895 45,471,887 27,717,249 17,754,638 11,737,688 2,421,499 3,595,451 1882-83 19.525 42,526,173 25,500,437 17,025,736 13,299,976 3,050,923 674,837 1883-84 19.536 43,591,273 23,566,381 20,024,892 14,770,257 3,375,158 1,879,477 1884-85 19.308 41,585,347 24,763,779 16,821,568 13,844,028 3,363,986 — 386,446 1885-86 18.254 42,635,953 27,352,132 15,283,821 13,755,659 4,329,888 —2,801,726 1886-87 17.441 44,804,774 25,124,335 19,680,439 14,172,298 5,329,714 178,427 1887-88 16,898 45,424,150 25,968,025 19,456,125 15,128,018 6,356,939 —2,028,832 1888-89 16.379 46,558,354 25,051,147 21,507,207 14,652,590 6,817,599 37,018 1889-90 16.566 50,005,810 26,367,855 23,637,955 14,513,155 6,512,767 2,612,033 1890-91 18.090 49,403,819 25,579,727 23,824,092 15,176,866 4,959055 3,688,171 1891-92 16.733 50,023,142 27,013,618 23,009,524 15,716,780 6,825,909 467,535