Vol. 6 · pages 66–70

THE EVOLUTION OF PROVINCIAL FINANCE IN BRITISH INDIA A STUDY IN THE PROVINCIAL DECENTRALIZATION OF IMPERIAL FINANCE By B. R. Ambedkar Sometime Professor of Political Economy at the Sydenham College of Commerce and Economics, Bombay Author of “The Problem of the Rupee,” “Castes in India,” “Small-Holdings in India and their Remedies” WITH A FOREWORD BY EDWIN R. A. SELIGMAN Professor of Economics, Columbia University, New York [Reprint of the edition published by P. S. King & Son Ltd. Westminster, Great Britain, 1925]

Dedicated to HIS HIGHNESS SHRI SAYAJIRAO GAIKAWAD MAHARAJA OF BARODA AS A TOKEN OF MY GRATITUDE FOR HIS HELP IN THE MATTER OF MY EDUCATION

PREFACE For a long time to come students will be saved the conventional humiliation of making an apology for presenting a study of Indian Finance or Economics. But it will, on the other hand, be necessary, I fear, for an equally long period, for them to tender an apology for the shortcomings of their respective investigations. Even when the treatment of a subject is analytical, a good analytical study often requires an historical setting. Unfortunately no spade-work has been done in the field of Indian Finance. Consequently the difficulties which beset a pioneer in that field are immense. There is occasionally the difficulty owing to the antecedents of some point not having been quite completely elucidated. Often there is the apprehension of some error having crept in, and, when there is hardly anyone to save the student from it, there is nothing but to smart under a sense of irritating affliction. Not very seldom does it happen that a pioneer student is jubilant over his find of material bearing on his subject, but it is not without a long and wearisome search that he is able to sift the grain from the chaff. Again, sources sometimes prove false guides, so that a perusal of them only ends in a considerable waste of time and energy. Precisely these have been the difficulties besetting the present task. There are no books to prepare the student for his work and hardly any savant to lighten his labour or set him on the proper track. Notwithstanding such odds, an attempt is made to make this study thorough without being too detailed. This has rendered the undertaking quite a laborious one. But I do not wish to speak of the labour that is involved, nor do I wish to astonish the reader with what might appear to be a formidable list of books and documents consulted in the preparation of this monograph. What I am anxious to speak of are its shortcomings. There are indeed many of them which a well-versed critic may spot out. It is my hope that they are not of such a character as seriously to impair the value which this

54 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES monograph may otherwise be said to possess. My regrets are with regard to only a few of them. I have specified a date as to when Local Decentralization of Finance commenced in India; but I feel that that date may not be the earliest and that there may be a date earlier than that one given by me. I wish I had settled that point finally. But that would have been a task analogous to that of searching for a needle in a haystack, and it is doubtful whether the value of that result would have been commensurate with that labour. Besides, although I am not confident of my date, my feeling is that later researches may after all confirm my statement. Another matter which I have not dealt with, but which I would have liked to have dealt with, was the inter-relation of Provincial and Local Finance. This l had originally planned to do, but left pursuing it because I found that the chief subject I was dealing with, namely, the Provincial Decentralization of Imperial Finance, began to be overlaid by facts and arguments not germane to that topic. These shortcomings will, however, be removed by a supplementary monograph on Local Finance in British India, which is well under way and which I hope to publish before long. Occasional repetitions may also be pointed out as a defect of this monograph. That they should be avoided is all very well. But where economy in the words of explanation are likely to obscure, repetitions such as are unavoidable must be justified, for the interests of clarification should always outweigh the tedium they involve. I cannot conclude this preface without thanking Mr. Robinson, the Financial Secretary at the India Office, for many valuable suggestions and for the loan of many important documents bearing on the subject. I am also thankful to Prof. Cannan, of the University of London, who has read the rough draft of a small part of the manuscript. My debt to Prof. Seligman, my teacher at Columbia University, is of course immense : for from him I learned my first lessons in the theory of Public Finance. I am obliged to my friend Mr. C. S. Deole for assistance afforded in the dreary task of reading the proofs. zz

FOREWORD The problem discussed by Mr. Ambedkar in his excellent dissertation is one that is arousing a growing interest in all parts of the world. From the very beginning we find fiscal burdens imosed by both central and local governments. As soon as there was a political organization, the conduct of war on the one hand and the provision of local protection and convenience on the other called for expenditures on the part of both state and local authorities. It was only at a later period that there was interpolated between the local and the central political organizations the intermediate form which Mr. Ambedkar calls the provincial government. The names applied to these various classes of expenditure differ with the authorities themselves. In India we speak of local, provincial, and imperial expenditure; in Germany, of local, state, and imperial expenditure; in the United States and Switzerland, of local, state, and federal expenditure; in Australia, of local, state, and commonwealth expenditure; in South Africa and Canada, of local, provincial, and federal expenditure; and in France, of local, departmental, and general expenditure. In some cases, as in the British Empire, there is being developed a still more comprehensive class of expenditures, borne by the empire at large. The character and importance of these various classes of expenditure and the relations between them are undergoing a continual change, due to an alteration in the functions of government. This is itself largely due to a change in the general economic conditions, resulting in a gradual modification either of political structure or of administrative activity. In some countries, as in Canada, Argentine and Brazil, the provinces are really a creation of the central government; in other countries, as in the United States, Germany, and Switzerland, the federal government is the creation of the originally sovereign states. In some countries the intermediate (provincial or state) government is suffering a loss of importance as compared with the local or central governments; in other countries, the reverse is true. With the increasing pressure of taxation and the development under modern democracies of augmented governmental functions, the problem of the equitable distribution of burden among