1 



stock in the receiving country, the result being that prices are 1 

 depressed in the former, and elevated in the latter country 

 owing to the diminution and augmentation, respectively, of the 

 volume of the currency. By this double effect, a great 

 divergence of prices of commodities and of labour in the two 

 countries is established, and it becomes profitable for the re- 

 ceiving country to receive the value of the remittances in goods 

 instead of in money. The disadvantage of this state of things 

 to the remitting country consists in its having to exchange its 

 productions on less advantageous terms than it would have 

 done, if it had no payments of a non-commercial character 

 to make. The exact measure of this disadvantage may be 

 seen from the following hypothetical case. Suppose a country 

 has a currency of 200 millions sterling and that the amount is 

 just sufficient for its requirements. If this country has to 

 make an annual payment of a non-commercial character to 

 another country to the extent of 20 millions sterling, the 

 abstraction of so much money-material depresses prices and the 

 country has to give in exchange for the commodities of other 

 countries a larger quantity of its products than it would other- 

 wise have to do. If the currency be replenished with a 

 view to establish the old scale of prices, the sum of 20 millions 

 would have to be procured by giving in exchange for it 

 commodities at the lowered prices, or in other words by giving 

 a larger quantity of goods than would have had to be given 

 at the old scale of prices. Thus, for instance, if prices were 

 depressed one-tenth, one-ninth more of commodities would have 

 to be given in return. In determining, therefore, whether 

 the payments in question amount to a " drain of the resources of 

 the remitting country" or whether they are really a " neces- 

 sary outlay " incurred for securing a large net profit, the 

 amount of such payments together with the increased cost at 

 which the quantity of money to be replaced has to be procured — 

 the two together constituting the maximum sacrifice incurred — 

 will have to be taken into account. Having regard to these 

 considerations, the following analysis will show the effect of 

 the several items of remittances to England grouped under the 

 general designation of " Home charges." 



(a) The expenditure of 21 millions Ex. under this head 

 comprises, (1) 11| millions on account of interest on the debt 

 owed by the Government of India and payments made to 

 railway companies to make good the guaranteed interest ; (2) 

 5| millions on account of charges incurred in England for the 

 army ; (3) 2| millions on account of furlough and superannu- 

 ation allowances of Indian officers ; (4) f million on account 



