89 



'' A considerable amount of imports (such as railway plant 

 and machinery) really represents the investment of English 

 capital in India, is not paid for at the time, and, consequently, 

 has no effect on the exchange of the year. Of coui'se, all 

 investments of foreign capital affect the exchange in subsequent 

 years, when profits or interest come to be remitted from India ; 

 but such investments are generally made in industries connected 

 with the international trade, and, so far as they increase Indian 

 exports, they counteract the tendency to a fall in the exchange 

 owing to the remittance of profits. It is quite possible, and 

 even probable, that an investment of foreign capital in India 

 might so increase the exports as to favorably influence the 

 exchange. For example, if one million sterling is invested 

 in jute mills, and such investment increases the exports of 

 India by £200,000 yearly, while only necessitating a remittance 

 of £50,000 yearly on account of profits, the international account 

 has been altered in India's favour to the extent of £150,000, 

 and the tendency is to raise and not to lower exchange. The 

 investment of foreign capital in tea gardens in India is a case in 

 point. The whole of the exports of tea from India are due to 

 this cause and the value of these exports is much more than 

 sufficient to cover the remittance of profits and pay for such 

 articles of import as are required in the manufacture of tea. The 

 international equation has, therefore, been altered to the advan- 

 tage of India and not to her disadvantage by these investments." 



As regards the general effect of the remittances to England 

 on the trade of India, Sir David Barbour observes : '' It is 

 commonly said that if one country has a payment to make to 

 another, the country which has the payment to make trades 

 at a disadvantage. The theory, as a theory, is unassailable. 

 But in practice there are many more important factors which 

 influence international trade, and, if the payment is made on 

 account of foreign capital judiciously invested^ the net effect of 

 the whole transaction may be to improve the relative position 

 of the country which has the payment to make. 



''Payments, for which no direct commercial equivalent is 

 received, are made in an increasing amount to England every 

 year by foreign countries, and consequently the relative posi- 

 tion of England in the international trade must be improving, 

 and England should be receiving an increasing quantity of 

 foreign produce in exchange for her exports. Yet, the facts 

 since 1873 do not bear out this contention. If we take the 

 price of a certain quantity of English exports in 1873 at £100, 

 and the price of a certain quantity of English imports at the 

 same fi*gure, the prices of the same quantities in 1886 will be 

 £62 and £69, respectively, according to Mr. Giffen's figures. 



12 



