the supply of silver which can now be brought into the market depends to a considerable extent upon the German Government. The influence, however, which can thus be exerted upon the supply of silver must be regarded as temporary and accidental. The supply of silver is determined by precisely the same natural laws as those which regulate the supply of any other similar commodity. If new and more productive mines are discovered, the supply of silver will increase. If, however, the value of silver becomes depreciated, the profit obtained from existing mines will diminish, and the supply will consequently decrease.

It, therefore, appears that it would be alike unwise and futile to make any attempt to regulate the supply of silver. So far as the supply of silver depends upon the action of the German Government, we have, obviously, no power to exercise any control. Whatever may be our wishes on the subject, Germany will treat the disposal of her silver as a purely commercial transaction, and will bring her silver into the market at whatever time she thinks she will be able to sell it to the most advantage. It seems only too probable that the first effect of the policy which the Indian Government now seem anxious to carry out, may be to enable Germany to dispose of a large portion of her silver at a better price than she is now able to obtain. As already stated, if an Indian loan of 10,000,000l. is raised in England, the Government will be able for a time to withhold their council drafts from the market; the rate of exchange will improve, and the price of silver will advance. Germany will not be slow to take advantage of this advance; she will at once bring a large quantity of silver into the market; the price of silver will again fall; and the chief effect of the loan will have been to enable Germany to sell a portion of her silver on better terms, while India will be left to meet her increased obligations with the price of silver still further reduced, and the exchange made more unfavourable than before.

Although, therefore, from the considerations just adduced, it appears to be of the first importance not to attempt artificially to regulate the supply of silver, yet much can undoubtedly be done by Government action to affect the demand for silver, and consequently to influence its value; and I believe it can be shown that the Indian Government can exert a special influence on the demand for silver. Allusion has already been made to the heavy duty, amounting in some instances to 10 per cent., that is imposed on so important an article of Indian export as rice. If the state of Indian finance permitted this duty to be repealed, the export trade of India might be considerably developed, and the extra amount which would be required to pay for the additional quantity of produce exported would proportionally increase the demand for silver. But this is by no means the only way in which the demand for silver may be influenced by the action of the Indian Government. With regard to various

proposals which are from time to time brought forward to deal with the Indian currency, it may be remarked that they one and all labour under the fatal defect, that, instead of increasing, they would materially diminish the demand for silver, and thus ultimately lower its value. It has, for instance, been suggested that a gold currency should take the place of silver in India, and that the amount of the silver coinage should be restricted. But if these measures were carried out, it is evident that one of the largest of the existing sources of demand for silver would be to a great extent closed, and silver might become indefinitely more depreciated in value than it is even at the present time. As previously explained, the chief cause of the falling-off in the Indian demand for silver arises from the curtailment of her export trade, and from the constant increase in the amount which India has annually to remit for payments in England. The only legitimate method, therefore, which can be adopted to increase her demand for silver is to stimulate her export trade, and to diminish the amount of the home charges. Unfortunately, the course which is now being taken by the Indian Government, instead of diminishing, will seriously augment these home charges. If sanction is given to the proposal to raise a loan of 10,000,000l. in England, provision will have to be made to pay the interest on this loan; an additional sum of at least 400,000l. a year will consequently have to be transmitted from India to England, and the demand for silver will be lessened by this amount. Again, the 2,000,000l. which during the present year is to be advanced by England to India to assist her in defraying the expenses of the Afghan war may give her some temporary relief, but the relief can only be temporary; it will add to her difficulties in the future, because, as the money advanced is to be repaid in seven equal annual instalments, India will, during each of the next seven years, in addition to the other home charges, have to transmit about 300,000l. Such an arrangement only affords another example of the many that may be given to show that at the present time the difficulties of Indian finance, instead of being fairly faced, are merely being trifled with; but it cannot be too distinctly stated that, however heavily and recklessly the future may be discounted, a day of reckoning must inevitably come. Unless all considerations of prudence are to be completely set aside, it is evident that as the excessive amount of the home charges is embarrassing Indian finance by causing the serious loss by exchange, the greatest care should be taken, not only that another shilling should not be added to these charges, but that effectual measures should at once be adopted to diminish their amount.

It is often stated that the home charges do not admit of any important reduction, because, to a great extent, they represent payments for liabilities which have already been incurred. Thus, it is said, the interest must be paid on money which has been borrowed, and faith

cannot be broken with those who are entitled to pensions. No one, of course, can be so unreasonable as to suggest that a policy of repudiation should be adopted, and that India should not meet the obligations which have been incurred on her behalf. Such considerations as these, however, do not in the slightest degree affect the importance of preventing in the future that which has happened in the past. Nothing can more conclusively show the peril involved in adding to the debt of India, than the fact that the interest which she has annually to pay on the debt already incurred imposes on her a burden which she finds it difficult to bear. The pensions and allowances which she has undertaken to grant must of course be paid; but if these pensions and allowances throw upon her a charge altogether disproportionate to her resources, an irresistible argument is at once supplied in favour of a fundamental change in the system. Taking the figures of the actual expenditure in 1876-77, the latest year for which they are available, it appears that no less an amount than 2,800,000l. of the revenues of India has annually to be paid in England in pensions, and furlough, compassionate, and absentee allowances. The real significance of this drain upon the resources of a country will be understood, when it is remembered that her entire net or available revenue is less than 38,000,000l. The home charges for the army are constantly increasing. In December 1877 the present Finance Minister, Sir John Strachey, in bringing forward his financial measures for the creation of a famine fund, said: 'I examined in some detail, in my minute laid before the Council on the 15th of March, the accounts of the army. I showed that it now costs upwards of 17,000,000l. a year; that its cost has increased by upwards of 1,000,000l. since 1875-76; and that a large share of this increase is in the expenditure recorded in the Home Accounts.' Sir John Strachey added: 'I do not assert that the whole of the additional expenditure on the army has not been incurred for excellent objects, or that it could have been avoided; but that the Indian revenues are liable to have great charges thrown upon them without the Government of India being consulted, and almost without any power of remonstrance, is a fact the gravity of which can hardly be exaggerated.' Serious as is the state of things thus disclosed, it is not difficult to understand how it has been brought about. Change after change is introduced into the organisation of the army, without a moment's thought being given to the effect which will be produced on Indian finance. A large part of the increase in the home military charges, to which reference has just been made, is no doubt to be attributed to the short-service system which has lately come into operation. As previously remarked, although short service may be an excellent arrangement for England, it was scarcely possible to have devised a more costly scheme of army organisation for India; and yet it appears from evidence given before a parliamentary com

mittee by Sir Thomas Pears, late Secretary of the Military Department at the India Office, that there is no official record that the influence which would be exercised on the finances of India by the short-service system was ever considered by the English Government.3

Although it may be fairly contended that, whatever reforms in administration are introduced, a considerable time must elapse before such great items of charge as those just referred to can be materially reduced, yet an important saving might at once be effected if the work of retrenchment were vigorously taken in hand. An examination of the home charges will at once show that a year never elapses without various acts of extravagance being sanctioned. In some instances the amounts involved may be small, but it not unfrequently happens, that the want of due economy is most strikingly brought to light by some transaction in which the expenditure involved is not large. I might quote almost innumerable examples to show this. Looking over the latest accounts of the home charges, it will be found that India is charged 1,2001. for the 'Passage and Outfit of a Member of the Council of the Governor-General.' In the same year she is charged 2,450l. for the Passage and Outfit of the Bishops of Calcutta and Bombay and their Chaplains.' But if any one requires to have brought home to him the lavishness with which the money of India is spent, it is only necessary to pay a visit to the India Office, and remember, as we pass along its spacious corridors, that that palatial building was erected by the Indian Government, and its costly establishment is maintained, at the expense and for the use of one of the poorest countries in the world.

6

In thus directing attention to the great importance of reducing the home charges, it must not be supposed that this policy of retrenchment ought alone to be carried out with regard to the expenditure of Indian revenues in England. I have, however, in a previous article, referred to the general costliness of Indian administration, and I have thought it important to make here special reference to the home charges, because the chief object which the Government seem anxious to obtain is a diminution of the loss by exchange, and there is, I believe, no hope that the exchange will become more favourable, unless the home charges are reduced. I trust it will not be thought that I underrate the difficulties which will have to be encountered, in carrying out a policy of rigid economy in the administration of Indian finance. Many who, until quite lately, always spoke of India as a country which could scarcely be administered on too liberal a scale, are now going to the opposite extreme, and express the most alarmist views as to her future financial position. In some of the leading English journals scarcely a week elapses, without reference being made to the hopeless embarrassment of the finances of India, and her future insolvency is alluded to as if it could not be averted. See Report of East India Finance Committee, 1874, p. 53.

Although I do not share these desponding views, yet it must be evident that, unless something is promptly done, the financial condition of India will indeed soon become one of hopeless embarrassment. It is not more certain that a stone, if it is not checked in its fall, will gather increased momentum, than it is that the system, which has received its greatest development during the present year, of perpetually adding to the indebtedness of India, will, if it is not arrested, soon burden her with charges which she will be powerless to meet. The simple truth cannot be too persistently insisted upon, that India, throughout every department, has of late years been far too expensively governed. Although great economies may be effected, the smallest saving should not be neglected, and to those who are responsible for the management of Indian finance the fact should ever be present, that India is so poor that the waste of a shilling of her money may be of far more serious consequence than the waste of a pound of the money of England.

As I have now considered three of the four financial proposals of the Indian Government for the present year, namely, the reduction of the cotton duties, the raising of 3,500,000l. in India, and the borrowing of 10,000,000l. in England, it only remains to say a few words on the last of the four proposals-the advance of 2,000,000l. by England to India, free of interest, as a contribution towards the expenses of the Afghan war. This advance may be regarded from two entirely distinct points of view. In the first place, it may be considered as a gift or a charitable offering; and, secondly, it may be looked on as a discharge of an obligation legally and equitably imposed on England to bear some share of the cost of the Afghan war. If no such obligation really rests on England, then this advance of 2,000,000l., without interest, is a gratuitous sacrifice on the part of England on behalf of India. It is scarcely necessary to remark that the consequences involved in the grant of such a subvention are most serious. The financial relations between England and India are at once placed on an entirely new footing. The Indian Government, by the acceptance of such an eleemosynary loan, virtually confess that the strain now put on the finances of India is more than she can bear, and that she is obliged to come to England for assistance. Not only is it an admission of financial exhaustion, but the granting of such assistance may produce a most disastrous effect upon the future financial administration of India. If the idea is once permitted to spread that the Indian authorities, whenever they are pressed for money, can draw upon the English Exchequer, every guarantee for economy will be swept away, and an incalculable injury may be inflicted both upon England and upon India. It will, however, be probably said that the advance of this 2,000,000l. is not intended in any way as a gift, but that it must be solely regarded as a contribution, which India is legally bound to make, towards the expenses of the Afghan war. By the fifty-fifth section of the Government of India Act of 1858 it is distinctly pro