Vol. 6 · pages 71–75

56 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES these various forms of government is becoming more or less acute. What Mr. Ambedkar calls assignments, assigned revenue, and share revenue, is symptomatic of the choice of methods in all countries. One of three fundamental plans must be pursued. Either the central or the provincial government may be maintained by the other, according to the relative degree of strength : in former times, in the United States, and in Germany the states were supposed to support the central government, either wholly or in large measure; in modern times, in Canada and Australia, the reverse is true. Or, secondly, distinct revenues may be allocated to the separate governments : until recently the federal government in the United States, Germany, and Switzerland was supported primarily by indirect taxes; the state governments by direct taxes. Or, thirdly, the revenues may be collected by one government and a portion of the proceeds allotted to the other : there are many instances of a state or provincial tax being shared with the federal government, and still more examples of a federal or central tax being shared with the state or provincial government. In the United States at present the proper disposition of the inheritance tax as between state and federal government is fast becoming a burning question; in Germany the fiscal relations of state and federal government are in the forefront of political discussion. The value of Mr. Ambedkar’s contribution to this discussion lies in the objective recitation of the facts and the impartial analysis of the interesting development that has taken place in his native country. The lessons are applicable to other countries as well; nowhere, to my knowledge, has such a detailed study of the underlying principles been made. It is true that only half of the picture is presented. For the situation has everywhere been complicated by the entrance of the local authorities into the field; and by their claims to fiscal consideration as compared with both state (provincial) and general (federal) demands. In the United States, for instance, the now widely debated problem of financing the schools is largely dependent for its solution on the proper answer to be given to the question of fiscal interrelations. To this question Mr. Ambedkar proposes to devote himself in a subsequent study. If he succeeds in illumining that situation as successfully as he here deals with the initial problem, he will lay us all under still deeper obligations. EDWIN R. A. SELIGMAN COLUMBIA UNIVERSITY, NEW YORK, October, 1924

CONTENTS CHAP. PAGE AUTHOR’S PREFACE ……… … 5 3 FOREWORD BY PROFESSOR EDWIN R. A. SELIGMAN … 55 INTRODUCTION—DEFINITION AND OUTLINE OF THE SUBJECT 59 PART I PROVINCIAL FINANCE : ITS ORIGIN IT HE IMPERIAL SYSTEM : ITS GROWTH AND ITS BREAKDOWN 65 II I MPERIALISM V. FEDERALISM … … … 89 III T HE COMPROMISE—IMPERIAL FINANCE WITHOUT IMPERIAL MANAGEMENT … … … 100 PART II PROVINCIAL FINANCE : ITS DEVELOPMENT IV B UDGET BY ASSIGNMENTS … … … 112 VB UDGET BY ASSIGNED REVENUES … … … 131 VI B UDGET BY SHARED REVENUES … … … 149 PART III PROVINCIAL FINANCE : ITS MECHANISM VII T HE LIMITATIONS OF PROVINCIAL FINANCE … … 183 VIII T HE NATURE OF PROVINCIAL FINANCE … … 196 IX T HE ENLARGEMENT OF THE SCOPE OF PROVINCIAL FINANCE 213 PART IV PROVINCIAL FINANCE UNDER THE GOVERNMENT OF INDIA ACT OF 1919 XT HE NECESSITY FOR A CHANGE … … … 225 XI T HE NATURE OF A CHANGE … … … 245 XII A C RITIQUE OF THE CHANGE … … … 282 INDEX … … … … … 309

INTRODUCTION DEFINITION AND OUTLINE OF THE SUBJECT A student of Indian Finance has two chief sources of information and guidance open to him. One is the Annual Budget Statement, and the other is the annual volume of Finance and Revenue Accounts. Though separately issued, the two are really companion volumes inasmuch as the financial Statement forms, so to speak, an exhaustive explanatory memorandum of the annual financial transactions, the details of which are recorded in the volume of Finance and Revenue Accounts. Helpful as these sources are, they are not without their puzzles. A reference to the latest volume of Finance and Revenue Accounts will show that the accounts therein are classified under four different categories :—(1) Imperial, (2) Provincial, (3) Incorporated Local, and (4) Excluded Local. But this is by no means uniformly so. For instance, a volume of the same series before 1870 will not be found to contain the accounts called “Provincial”, nor will the accounts styled “Local” be found in any volume prior to 1863. Similarly, any volume of the Financial Statements before 1870 will be found to divide the financial transactions covered therein into—Imperial and Local only. But a volume of the same series after 1908 curiously enough groups the accounts not under Imperial and Local but under (1) Imperial, and (2) Provincial, while the financial Statements after 1921 cover only the Imperial Transactions. Nothing is more confusing to a beginner than the entrance of the new, and the exit of the old, categories of accounts. 1 The 1 It is surprising that the category of accounts, called “Excluded Local,” which is to be found in the volume of Finance and Revenue Accounts, never appears in the Financial Statement. The author has not been able to trace the reason for its exclusion. In the Madras Manual (Vol. I, Chapter V, pp. 467-9) it is argued that the ground for the exclusion is technical and consists in the circumstance that the Excluded Funds are not collected by the ordinary revenue collecting agency of the Central Government and are not subject to its interference. Another technical ground may also be found in a ruling given in the third edition of the Civil Account Code (p. 137), according to which Funds were called Excluded, i.e. from the Financial Statement, because they were not required to be lodged in the Government Treasury. But a ruling on the same point given in the seventh and latest edition (p. 122) of the same seems to imply that every public fund must of necessity be lodged in a Government Treasury. The more probable explanation is that given in the Moral and Material Progress Report for 1882-3 (Part I, p. 107), where it is said that these funds have no place in General Finance because they “consist chiefly of special trusts and endowments.”

60 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES natural question that he will ask is, how did these different categories evolve, and how are they related to one another ? In the present study an endeavour is made to explain the rise and growth of one of them, namely, the “Provincial.” But in order that there may be no difficulty in following the argument it is deemed advisable to preface this study with an outline defining its subject-matter and indicating the interrelations of the parts into which it is divided. To facilitate a thorough understanding of the subject the study is divided into four parts, each one dealing with the Origin, Development and Organization of Provincial Finance and the final form in which it was cast by the constitutional changes of 1919. In Part I a somewhat thorny, untrodden and yet necessary ground has been covered in order to give a complete idea of the origin of Provincial Finance. While due homage is paid to the adage which requires students of the present to study the past, nothing more than the past of the present has been dealt with. In Chapter I, Part I, an attempt is made to present a picture of the system of Finance as it existed before the inauguration of the Provincial Finance and to state the causes that called for a change in its organization. In Chapter II a rival system of Finance proposed during the period of reconstruction is brought to light and shown why it failed of general acceptance. Chapter III is devoted to the discussion of a plan which was a compromise between the existing system and its rival, and the circumstances which forced its reception. Having explained the Origin in Part I, the Development of Provincial Finance is made the subject of Part II. How far the arrangement followed in Part I is helpful must in the absence of anything to compare with it be left to the opinion of the reader. In regard to Part II, however, it is to be noted that the arrangement is different from what is adopted in the only fragmentary sketch published on the subject of Provincial Finance in 1887 by the late Justice Ranade. As will be seen from a perusal of Part II, one of the features of Provincial Finance was that the revenues and charges incorporated into the Provincial Budgets were revised every fifth year. Justice Ranade in his pamphlet, which simply covers the ground traversed in Part II of this study, and that too up