INDIA. 



329 



for the full amount of the famine insurance grant, 

 Ex 1,500,000, and Rx 1,490,000 of war expenditure, 

 besides Rx 200,000 for better pay for British troops, 

 show a surplus of Rx 890,000. The opium revenue 

 is taken at Rx 490,000 less than in 1898, but Rx 

 800,000 of suspended land revenue are expected to 

 be realized, owing to a bounteous harvest, which also 

 warrants the expectation of favorable railroad earn- 

 ings. The expenditure on railroad construction was 

 Rx 10,570,000 for 1898, and for 1899 it was estimated 

 at Rx 13,200,000. The amount spent on famine re- 

 lief in 1897 and 1898 was Rx 7,470,000. Including 

 loss of revenue, the cost of the famine was Rx 14,- 

 040,000, besides Rx 1,850,000 of revenue suspended 

 and Rx 1,370,000 lent to cultivators. The charitable 

 fund expended amounted to Rx 1,640,000. The cost 

 of the plague to the revenue was Rx 420,000 ; of the 

 earthquake, Rx 530,000. 



The war on the northwest frontier cost up to the 

 end of the financial year Rx 5,355,000. The total 

 extraordinary expenditure was Rx 24,000,000, but 

 the deficits were only Rx 6,000,000. 



The debt of British India on March 31, 1896, was 

 Rx 232,339,028, of which Rx 103,788,928 was the 

 amount of permanent debt in India, Rx 14,646,368 

 unfunded debt in India, and Rx 113,903,732 perma- 

 nent debt in England. 



The Secretary of State in England has refrained 

 from drawing on the Indian treasury, leaving at the 

 end of 1898 a temporary debt of 6,000,000 sterling, 

 which the Government was compelled to renew. It 

 also proposed to raise a permanent loan of 6,000,000, 

 of which 3,380,000 were required to pay off debt, 



R~nd in India to raise a rupee loan of Rx 3.000,000. 

 he Council bills required to be drawn in 1899 were 

 timated at 16,000,000. The amount of the ster- 

 ig loan was afterward increased to 10,000,000, 

 hich Parliament in June authorized the Secretary 

 of State to raise. The Government in August placed 

 the first installment of the Indian loan, which bears 

 per cent, interest and was taken at 94.78. 

 The Currency Question. The policy of the 

 Indian Government was formerly to seek to estab- 

 lish a stable ratio between silver and gold by inter- 

 lational agreement. Its earnest efforts in this 

 direction were repeatedly thwarted by the opposi- 

 tion of the English Government. When the Govern- 

 ment of India saw that international bimetallism 

 was unattainable except at a period too remote to 

 relieve it from financial embarrassments threaten- 

 ing its solvency, for it could not continue to dis- 

 charge its annual gold obligations to England with- 

 out imposing new taxes, and financial experts were 

 convinced that the limit of taxation was already 

 reached in India, it decided in 1893 to close the 

 mints to the free coinage of silver. To remit 

 16,000,000 a year to England the Government was 

 obliged to raise 320.000,000 rupees, instead of 160,- 

 000,000 rupees, as when the par value of silver was 

 15| to 1 and the rupee worth two shillings. When 

 the price of silver began to fall the Government had 

 made the salaries and pensions of British officials 

 payable at the old rate of 10 rupees to the pound 

 sterling, so that a great part of the cost of adminis- 

 tration as well as the expenses of the debt and other 

 fixed charges were doubled. The cotton manufac- 

 turers of Lancashire and the wheat-growers of 

 England brought pressure upon the British Gov- 

 ernment to check the fall of the rupee, complaining 

 that Indian manufactures and grain, produced on a 

 silver basis and sold for gold, subjected them to a 

 uinous competition. When the Government closed 

 the mints in June, 1898, it agreed to accept in pay- 

 ment of obligations due to the treasury British sov- 

 ereigns at the rate of 16d. to the rupee. This fixed 

 Lhe maximum rate to which the Government ex- 

 !cted to bring up the rupee by creating a scarcity 



value. At first the exchange continued to fall, 

 going from between 12d. and 13d. to llrf., and 

 afterward it rose with many fluctuations. The Gov- 

 ernment imposed a duty on imported silver bars, 

 and whenever the rate of exchange tended down- 

 ward the Secretary of State intermitted his drafts 

 on India for current obligations, offering no India 

 Council bills in the London market except at the 

 desired rate. This only postponed the demands 

 and doubled the difficulty of meeting them later. 

 The authorities hoped that the withdrawal of bank- 

 ing capital from India, which had already begun, 

 would be checked, but the movement was aggra- 

 vated. With every additional farthing that could 

 be got for the rupee the bankers withdrew larger 

 sums, until they had no capital in India except what 

 they borrowed there. The scarcity of money and 

 the stagnation of business, caused by the check to 

 the great export trade that had grown up under 

 the stimulus of the silver basis, caused Government 

 revenues to fall off. The Government had to borrow 

 in England to meet the annual deficits. The situa- 

 tion was complicated by war, famine, and pestilence, 

 making it necessary to increase the sterling debt by 

 16,000,000, which was 1,000,000 more than the 

 Indian Finance Minister had estimated to be a 

 sufficient sum to put the Indian currency on a gold 

 basis. To arrive at a gold basis was the ultimate 

 object of closing the mints and producing a scarcity 

 rupee, although the measure was described at the 

 time as only tentative. Arthur J. Balfour, the First 

 Lord of the Treasury and leader of the House of 

 Commons, in 1896 promised, as the contribution of 

 Great Britain to an international bimetallic stand- 

 ard, that the Indian mints should be reopened, 

 thereby providing for the " free coinage of silver 

 within the limits of the British Empire and among 

 a population greater than that of France, Germany, 

 and Belgium together." The Indian Government, 

 however, when the United States and France pro- 

 posed an international agreement on this basis, de- 

 clared that it was on the eve of establishing a gold 

 basis, and summarily rejected the American propo- 

 sition, being urged and encouraged by the mono- 

 metallists of the city of London. 



Meanwhile the business and monetary situation 

 in India and the financial position of the Indian 

 Government went on from bad to worse, until in 

 the beginning of 1898 the officials and the banking 

 and commercial community both pronounced the 

 conditions to be intolerable. English merchants in 

 Calcutta and Bombay could not discount their notes 

 at less than 12 or 15 per cent., and in the native 

 bazaars money could not be borrowed on the security 

 of gold bars for less than 24 per cent, per annum. 

 The rupee circulation was estimated by the Indian 

 officials at Rx 120,000,000, a little more than a 

 fourth of the amount of coined rupees in existence, 

 besides which there were Rx 10,000.000 of currency 

 notes in circulation and Rx 14,000.000 in the treas- 

 ury. The quantity of silver hoarded in ornaments 

 and other forms besides coin could not be estimated, 

 and the quantity of gold was placed by some as high 

 as 300,000,000 'sterling. 



In January Sir James Westland, the Indian Fi- 

 nance Minister, carried through the Council a bill 

 providing for the issue of currency notes in India 

 against gold deposited in London. The ostensible 

 object of the bill was to allow quick transfers of 

 money from London in order to relieve the mone- 

 tary "stringency, although telegraphic transfers 

 already answered the same purpose. No gold was 

 deposited in the Bank of England under the bill, 

 and hence no notes were issued. The bill served to 

 prepare the mind of the public for Sir James West- 

 land's plan for establishing a gold basis in India. 

 He first proposed to obtain a reserve of gold coin 



