public revenues was also brought down to the lowest level.'

In 1867 definite proposals were made by General Strachey for the reform of this system, and in 1871 they were adopted by Lord Mayo, who was then Viceroy. They were based on the principle that there was only one means by which local economy and efficient financial administration could be secured; that each provincial Government must be made responsible for the management of its own local finances; a certain income capable of expansion by good administration was in each case to be assigned, and, subject to some general conditions, the manner in which that income. might be expended on the various branches of the public service was to be left to the provincial Government to determine.

The system of financial decentralisation inaugurated by Lord Mayo was largely developed during the viceroyalty of Lord Lytton, and a similar policy has been followed by his successors. The effect has been felt throughout the whole system of Indian administration. While no useful powers of financial control have been surrendered by the central Government, the provincial Governments have been freed from vexatious interference which weakened their authority and efficiency, and their relations towards the Government of India have become more harmonious. They are entrusted with the management of those branches of the revenue which depend for their productiveness on good administration, and they have now a direct and, so to speak, a personal interest in rendering that management as efficient as possible, because they know that a large portion of any increase of income that may be obtained will be

at their disposal for useful expenditure within their own provinces.

The financial arrangements between the supreme and provincial Governments vary in detail, but are in each case similar in principle. Some branches of the public administration are obviously imperial rather than provincial in their nature. The Government of India must, for instance, be responsible for the military defence of the Empire, for payment of the interest. on the Public debt, and for the charges to be met by the Home Government. Some departments, such as the Post Office, Telegraphs, and Mint, must be managed throughout India on a uniform system, and are more conveniently controlled by the central authority. Receipts and charges under the following heads are treated wholly or chiefly as imperial-Opium, Salt, Customs, Tributes from Native States, Post Office, Telegraph, Mint, the Public Debt, Railways, and Army Services. The revenues from Land, Stamps, Excise, Assessed Taxes, and other sources, are shared in varying proportions between the imperial and provincial Governments. In 1886-87, out of a total gross revenue of 77,300,000l., the provincial Governments were trusted with the expenditure of 21,000,000l. From this income they had to provide for the greater part of the expenditure incurred on the various departments of the civil administration intrusted to them; for the collection of the land revenue, for the courts of justice, jails, police, education, medical services, civil buildings and roads, and for a multitude of other charges.

An arrangement is made under which each provincial Government receives for a specified term, usually for five years, certain revenues from which it has to

meet certain charges. The amount in each case is regulated by the estimated requirements of the province. Subject to general rules and conditions, the detailed management of the assigned revenues and services is left to the provincial Governments; they have the benefit of any economies that they can effect; and they receive either the whole or a share of any increase of revenue which may accrue during the period of the arrangements between them and the Government of India. There is under ordinary circumstances a steady growth in the productiveness of the revenues administered by the provincial Governments. For example, between 1882 and 1887 there was an increase under the heads of Land Revenue, Stamps, and Excise, of about 1,900,000l., and of this sum the provincial Governments received about 900,000l. They have thus, if their management be good, an increasing income to meet increasing demands for material and administrative improvements. When the time for a new arrangement arrives, the imperial Government takes such share as it thinks fit to claim in the increase of the revenue which has accrued.

I have already quoted the opinion of Sir Henry Maine on these measures of decentralisation. I believe with him that no more important and successful reforms have been made in Indian administration since the transfer of the government to the Crown. But they have not reached their final limits. I have repeatedly insisted that the primary fact lying at the root of all knowledge about India is the immense diversity of the countries and peoples which it comprises, but it is a fact which centralisation of the Government ignores. While our empire was being gradually built up, concentration and centralisation in the administration were

often inevitable. a firm and peaceful basis, decentralisation is an essential condition of progress. The time will come when, in regard to nearly all the ordinary matters of internal administration, each great province of India will be virtually almost a separate state. Not only will this result be obtained without the sacrifice of any part of that supreme authority of the central Government which it is essential to maintain, but we shall gain a largely increased measure of political security. No central Government, as Sir Henry Maine has observed, entrusted with the charge of such an unexampled undertaking as the rule of India, can escape serious occasional errors. Under a centralised Government there is danger of generalising a local mistake. Localised, a mistake can be connected with comparative ease; it becomes dangerous in proportion to the area of its diffusion.' 1

Now that it has been constituted on

It has been said truly that India has become one of the great powers of the world. A few figures will show what she has become financially, and they will illustrate the remarkable changes of the last fifty years.2

In 1840, the gross revenues of India were 21,000,0007.; in 1857, the year before the assumption of the Government by the Crown, they were 32,000,000l.; in 1886, they were 77,000,000l. In 1840 the total value of the

1 The Reign of Queen Victoria-' India,' vol. i. P. 515.

2 Except when reference is made to expenditure incurred in sterling in England, all the figures that follow represent rupees converted into pounds at the conventional rate of two shillings to the rupee. They are really tens of rupees, not pounds sterling. The symbol now officially adopted in the Indian accounts to represent ten rupees is Rx. I have retained the old system as being more intelligible to English readers. It will be understood that the exchange value of the sovereign varies with the gold price of silver. See page 117.

foreign trade was 20,000,000l.; in 1857 it was 55,000,000l.; in 1886 it was 163,000,000l. Equally remarkable figures might be given for the public expenditure. I will give one example only; in 1840 the gross expenditure on account of all classes of public works in India hardly exceeded 200,000l.; in 1857 it had risen to nearly 3,000,000l.; in 1886, including the cost of working the railways, it was about 30,000,0007.

It is true that few of these figures are really comparable, but I give them to illustrate the magnitude of the changes that have taken place in India. One fact is sufficient to show that it is only for this purpose that such comparisons can usefully be made. Since 1840, six great provinces, covering some 450,000 square miles, with a population of nearly 50,000,000, have been added to the empire.

The immense growth of the revenues has been in no degree due to increased taxation. If, without going back to a time with which no comparisons are possible, we compare the revenues of British India in 1886 with those of twenty-five years before, we shall find that under almost every head there has been a diminution rather than an increase in the public burdens. The land revenue, measuring it by its incidence on the area assessed, is everywhere lighter than it was. The salt duties were generally higher than they are now. Heavy customs duties were levied in the former period on every article of import and export, whereas now there is almost absolute freedom of trade.

I do not propose in these lectures to speak of the present financial position of India, of surpluses, deficits, and so forth. The amount of the public income and expenditure is affected in all countries by circumstances which are constantly changing. But I shall