and in Torre San Patrizio Rs. 22, or if we include the revenue the net income is Rs. 19/3/7 in the Indian village and Rs. 30/12/4 in the Italian village. Mr. Galetti's argument is that the Italian pays Rs. 8/12/4 out of Rs. 30/12/4, whereas the Indian pays only Rs. 2/3/7 out of Rs. 19/3/7. He concludes that the Indian is very lightly taxed. This argument shows, as nothing else could, the absurdity of Mr. Galetti's position. The Indian point of view is simply this, that no individual, whether in India or anywhere else in the world, should be taxed a penny if his net income is less than Rs. 20 per annum, because a person with a net income of Rs. 20 per annum is an object of charity, and not an object of taxation. The Italian could still afford to pay another Rs. 2 per annum, and yet not be so badly off as is the Indian. Can Mr. Galetti or any other statistician show anywhere in Europe a net income of Rs. 19/3/7 per head of the agricultural population out of which Rs. 2/3/7 have still to be paid as taxes? It must not be forgotten that it is out of this net income of Rs. 17 per annum that the Indian has to clothe himself, to pay the interest on his debts, and to meet the thousand and one calls on his purse. It is for spending this glorious sum of Rs. 1/7 per mensum that the Indian is being called luxurious and wasteful. This is the sum which has failed to fructify in the Indian's pocket, and which it is now considered equitable to withdraw. One need not point out that the Italian has a net income of Rs. 22 per annum after providing for the paving and lighting of his streets and after paying for the doctor and the schoolmaster, whereas the Indian is expected to meet all these charges out of his Rs. 17 per annum. Mr. Galetti has proved the Indian case as no Indian ever did.

IV

An important part of the argument is that the British government has only inherited this scheme of land revenue, which is really indigenous to the soil. If (as Mr. Curtis says) the word revenue” may be used to denote general administration the Indian point of view is most emphatically this-that the system is not inherited from the Mughals. We would have admitted the inheritance if, like the Mughals, the British government had appointed men like Mr. Gokhale, Sir Subramani Iyer, Sir Pheroze Shah Mehta, and others to such posts as Chancellorship of the Exchequer, Governorship of Canada, and so on. Where are the modern Todar Malls, Jai Singhs, and Man Singhs? Nowhere and yet, as none knows better than the British, that, too, was a part of the general administration which Akbar introduced. Sir Michael O'Dwyer, in his evidence before the Royal Decentralization Commission, drew pointed attention to the fact that the present-day government officials had unlimited powers to punish, but no powers to reward. He referred specially to grants of land and revenue. It was a part of the Mughal system to reward service generously and to make no distinctions of caste or creed. Why was that not inherited?

It may be boldly stated that from the point of view of India this partial inheritance is of no use. Would Akbar have levied the countervailing duties on piece-goods manufactured in India? Certainly not. In the face of these facts it is only very remotely true that the present system is the same old system revivified. In reality it is a new system. The government is taking what it can, and in the best way that it can, regardless of precedents and solely on grounds of expediency. The rent theory is advanced because it serves best to answer the critics, but now that the fluctuating system of assessment is coming more and more into vogue who can deny that land revenue is really a tax on tillage. For the essence of the fluctuating system is, no crops, no revenue. The very fact that government felt the necessity of having a Land Acquisition Act shows conclusively that land revenue really is a tax. The controversy on this point, however, is really endless and has no practical interest. None knows better than the government that the rent theory cannot be pushed to its logical extreme.

It must not be supposed from the above that the present writer is opposed to any and every increase in taxation. The golden rule is that no government is justified in taking more from the public than what is absolutely necessary, and, further, that the final and only judge of this necessity is not the government but the public. The purse-strings, as in all enlightened countries, must be in the hands of the people. Indians should agitate not against the incidence of the land revenue but against its wasteful consumption on pageants and brick and mortar. That is the one sane attitude to adopt. Let the government, as in the Italian village, give to people loans on 3 per cent. and pay the difference from its pocket. Let the government return a part of the revenue to each village as in Torre for education, and, most of all, let the government think of fitting the people for the changed environments of modern life. It is time that the government did some thinking.

AUTHOR'S NOTE ON THE FOREGOING CRITICISM

The question under discussion is 'How is the produce of land in India apportioned amongst various claimants? My Indian critic writes as though two sets of claimants only had to be considered:

(1) The people of India;

(2) The government.

In my treatment of the question I saw three sets of claimants to be considered :

(1) The cultivators;

(2) The land-owners; (3) The government.

The conclusion at which I arrived in India was that (1) the

cultivators (the great mass of the people) are living dangerously near the margin of subsistence, so near that an unfavourable season in any one area threatens that area with famine.

I further formed the opinion, for what it was worth, that a drastic diminution in the present cost of government would lead to results which would leave the masses not better but worse off than they now are. Any economies which will tend to invite foreign invasion, or lead to internal disorder, will react by aggravating the poverty of the masses (vide the present condition of Central Europe). Measures on the other hand which will really strike at the root of this poverty will involve heavy and increasing expenditure by government.

The defect in our revenue policy, as I see it, has been in its tendency to leave an increasing share of the produce of land in large parts of India to inure to the benefit of a comparatively small class of land-owners. If instead of doing this it had been possible for government to continue to collect the increasing share of revenue remitted to the land-owners, and if government had then spent that share on the education of the people and the development of the country, the position of the masses would, I venture to say, be greatly better than it now is.

I am frankly of opinion that the present situation can only be remedied, in so far as the people of India realize the verities of responsible government. In these papers I have tried to show what to me those verities mean. The people of India will have to raise and spend for themselves much more revenue than is now spent on education and on development. But until education and development yield their economic fruits, that is to say, lead to greater production per head, most of the additional funds required will have to be raised by taxation of the share of land revenue which, under British administration, the zamindars have been allowed to keep for themselves. This, I know, is a hard saying; but I do not see where else it can come from. The cultivator is living too near the margin of subsistence to produce it. Theoretically, no doubt, he might do so if he reduced his expenditure on ceremonies, jewellery, or lawsuits. But this will not happen for many generations, nor in any case until the education for which additional revenues are required has begun to modify his outlook.

The present attitude of Indian opinion on the subject is largely a damnosa hereditas of the days when the Company

U

began to look to the land revenues instead of to the profits of their trade, to swell the dividends of shareholders in England. That era, happily never a long one, was closed many years ago. But nothing short of responsible government will begin to bring home to a people the elementary truth that government revenue is the common stock of the people at large, and that government cannot remit revenue in favour of minorities except at the cost of the majority, unless there is positive waste which can be reduced to the same amount. One has only to turn to English newspapers to see how easily this truth is forgotten, even under a system of responsible government.

291

This study deals with:

VI

A. The financial relations of the provincial government and the district boards.

B. The limits of self-government conceded to the boards. C. Modifications of the proposals outlined in the letter to Mr. Bhupendra Nath Basu (III) as a result of the foregoing analysis and also of certain criticisms received. (August 1917.)

A

THE FINANCIAL RELATIONS OF THE PROVINCIAL GOVERNMENT AND THE DISTRICT BOARDS

§ 1. As we have seen in V, the principal revenues of the Government of India are based upon land settlements which take the form of periodic contracts between government and the landholder determined by minute statistical calculations. Except in the permanently settled areas there is, so to speak, a personal bargain between each several landholder and the government. Similarly, as explained in IV, the revenues allotted to each province are determined by bargains between the Government of India and each individual province; and these bargains are termed quasi-permanent settlements. We have now to see how the same method has also been applied to the financial relations of the provincial government of the United Provinces and the district boards. Financial relations. in India are thus characterized by this principle of periodic bargain or settlement from top to bottom. It runs through the whole system.

§ 2. The district, as already observed, is comparable to an English county. The United Provinces, which contains a population of 48,000,000, is divided into 48 districts. Each of them, therefore, contains on the average one million souls, a population approximately equal to that of the whole Dominion of New Zealand. Several of them have populations more numerous than the European inhabitants of South Africa. This may help us to realize the magnitude of the social factors with which we are dealing.