VALUE OF IMPORTS (in millions of pounds: I rupee Is. 6d.).

=

the expense of India's own manufactures, and must be prepared for a greater industrial output from within India herself. The imposition by mandate to Lord Elgin's Government of an Excise duty on Indian cloth manufactures was a great blunder. In the result it has conferred more benefit upon Japan than upon Lancashire, and it was a blot on the British record of fair dealing towards India. The general charge made by political Indians that Great Britain of set purpose destroyed Indian industries and then proceeded to exploit India for the benefit of England is not true, but the only weak point in the defence against the charge lies in the Excise duties on cotton goods, which have given India a genuine grievance against British fiscal administration. The removal of these duties 1 is an antecedent condition to better feeling on this subject. The ancient industries of India were all hand industries, and they have declined, not on account of political aims or fiscal policy, but on account of machinery-British and foreign as well as that imported by Indian capital. Indians have not refrained from erecting mills and factories in order to preserve their own hand industries. That may be the ideal of the dreamer Gandhi, but not of any modern practical Indian legislator. The past history of industrialism in India has been a history of Indian apathy, lack of enterprise, and want of confidence, and the greatest and most successful enterprises are in their origin European or Parsee. Capitalists of other classes have now followed this lead, but, with the exception of the cotton industry in Bombay, indigenous enterprise has been extremely timid. It is not surprising, therefore, that British enterprise and British capital have filled the breach, and that British goods have found their way into every corner of the Indian sub-continent, as indeed they have penetrated to the four corners of the earth. Certainly British

1

1 They have now been suspended preparatory to removal.

commerce and British industry owe law and order and improvement of communications to the British Government in India-an inestimable benefit-but, save for the Excise duties on cotton goods, they owe very little else by way of special favour.

British administrators in India have always laboured to stimulate local industries, and the Government of India have been anxious to promote industrial development by technical scholarships and by the establishment of technical schools and institutes. The Industries Commission appointed by Lord Hardinge's Government put forward an ambitious industrial programme, but serious financial difficulties which synchronised with the Reforms put a stop to these activities. During the last twenty years, however, since Swadeshi and boycott movements were started, partly as political leverage and partly as a genuine movement to stimulate Indian industry, it has been the fashion to charge the Government of India with culpable inertia and to give little or no weight to the backwardness of Indian enterprise itself. Indians who genuinely hold this opinion are too apt to forget the enthusiasm for arts colleges and the apathy regarding, and even opposition to, science and technical training which marked a previous generation. The fact was also overlooked that the multiplication of impecunious technical scholars is of little use until the capital to finance industries in which they can be employed is forthcoming. India up to the war was a Free Trade country in which the rising generation of politicians was showing strong leanings towards Protection in order to stimulate India's nascent industries; and now that a large measure of fiscal autonomy has been granted with the Reforms these leanings to Protection have taken definite shape in the case of iron and steel. Before the war the import duties (apart from such special cases as liquor, tobacco, drugs, and arms) were imposed solely for revenue purposes, and were on a light scale. Since the war, however, financial necessities have compelled so substantial an increase in these duties as to make them protective in the case of all commodities which can be manufactured in the country. Higher Customs duties have come to stay; Protection for Indian manufactures where they are liable to be undersold by foreign goods (British included) must be regarded as an accepted policy, and a return to complete Free Trade is no longer practical politics. There remains, therefore, only the possibility of Preference.

Any hope that India will fall in with a scheme of Imperial Preference is doomed to disappointment. India might be induced to give preference to Asiatic Colonies where there were numerous Indian settlers, but she will never give preference to the selfgoverning Dominions where Indian immigrants are not welcomed

or where Indians already settled suffer from any disabilities. It would indeed be unreasonable to expect Indians to grant preference in such cases unless these disabilities were removed.

But preference to the United Kingdom stands on a different basis. There is not any grievance on account of racial disabilities which would make such preference impossible. Indians visiting the United Kingdom are not subject to any humiliating restrictions. If successful in winning the votes of British constituencies, they can sit in the British Parliament. They are free to trade as much as they desire. The best education that British citizens can enjoy is also open to them. It is, of course, possible to argue that if one country in the world should give preference to any other it should be India to England, in recognition of the security, peace, and prosperity which British rule has conferred upon India. There is abundance of good-will in India towards British officers and British merchants, but there is not much political gratitude in the world between different peoples and races. In the case of the Dominions it is not political gratitude, but kinship, that operates to induce preference. To them England is the mother land. They have a common religion, common language, common traditions, common literature, common blood. But to Indians it is India, not England, that is the 'mother land,' and the congeries of races of which the Indian population consists have their own religions, their own languages, their own traditions, their own literature, and are alien in blood to England. The factors that make for preference in the one case tell most against it in the other.

In addition there are strong political influences on the other side. Even though among conservative Indian politicians there might be found individuals who favour preference to the United Kingdom, the weight of opposition among the more modern section would be too strong for them. Men who have persuaded themselves, no matter how wrong-headedly, that British rule has been directed towards the enrichment of England and the impoverishment of India are not likely to extend preference to British goods merely as a mark of good-will. It is thus clear beyond all question that if British goods are to enjoy preference in India it must be as the result of a free bargain by which India receives some substantial and tangible benefit from England in return for the preference; there must, in fact, be a valuable quid pro quo.

What are the chief fiscal complaints of political Indians? India's contribution to the Navy is very small-only 100,000l. a year; but they complain that, in addition to the cost of an Indian Army, India has to pay approximately 20,000,000l. a year for the British garrison, in the cost and strength of which she has no

voice. They complain that she was compelled to levy Excise duties on her most promising industry, and they complain that the Home Charges' constitute a serious annual drain' upon her resources. So far as the Excise duties on cotton are concerned, the Indian case is perfectly good.2 As regards the British Army in India, it can be argued on the British side that that Army is so essential to Indian peace and security that the charge is proper and not excessive; and it can be argued on the Indian side that India is paying for troops which, however beneficial their presence and protection to India may be, are maintained there for the protection of British lives and British interests, and that the British recruit after a short sojourn in the country returns to England a trained soldier (a fresh recruit being sent in his place at great expense) and becomes an asset of value to Great Britain and to the Empire at large, but not exclusively, or even mainly, to India. The cost for British troops as compared with an equal number of Indian is a perpetual cause of complaint. They have to be brought to India and taken back; a large proportion of them go to the hills in the hot weather. Their barracks cost much more, so do their feed and clothing. A British unit costs four times as much as an equivalent Indian unit. It is not, however, necessary to attempt an exact appreciation of the relative benefits to Great Britain, the Empire and India of the British garrison in India. The point at issue is to find what valuable consideration can be offered to India in return for the guarantee of a preference for British goods, and I know of no better consideration than that Great Britain should bear half the cost of British troops who are employed in India in the joint interest of herself, India and the Empire, leaving India, of course, to bear the cost of the Indian Army proper, which has also rendered admirable service to the Empire.

Incidentally, such an arrangement would make up for the loss due to the removal of the cotton Excise duties, and would go some way to balance that so-called 'drain.' India's Home Charges are all for good value received, and a denial of this by some Indian politicians is without substance; but where the shoe pinches is that a large sum of Indian money is annually spent outside the country instead of being spent in India. This would be largely discounted if 10,000,000l. of British money were spent in India in part payment of the cost of the British Army there. Naturally, in return for this, Great Britain would expect a very substantial preference, not less than 50 per cent. off the import duties leviable on goods imported from all other countries.

ment.

There would be nothing derogatory to India in such an arrangeIt would be a bargain between equals-not a mandate 2 Their suspension removes this grievance.

from a suzerain to a dependent. It is purely a question of fact whether this sum is worth the grant of a preference to the United Kingdom by India, and whether ths preference is worth the payment of so large a sum by Great Britain. No offhand answer is possible, for the proposition would naturally require detailed scrutiny. All that I can attempt is to put the case on each side with such observations as my Indian experience suggests, leaving it to those interests which are most deeply concerned, if they so desire, to apply the necessary scrutiny and to form their own conclusions.

On the Indian side hesitation might be felt lest the preference to British goods should seriously prejudice the development of India's own industries. To this there is a complete answer. If the duty is a revenue duty only, a half preference means some loss on Customs revenue and some benefit to the Indian consumer without any loss to an Indian producer, the commodities in question ex hypothesi not being produced in India. If, however, the commodity is one that is produced in India, the preference can be given either by halving the present duties in respect of goods from the United Kingdom or by maintaining the present duties against the United Kingdom and doubling them against goods from other countries. This latter method would give Indian manufacturers the same protection as they enjoy at present in regard to British goods, but double that protection in regard to goods imported from other countries. If the Indian is reassured that the arrangement is not going to keep back India's own industrial progress, there should be no further obstacle on her side to a preference to the United Kingdom in return for which she will receive so valuable a help to her finances as half the annual cost of the British troops. A saving of 10,000,000l. on her annual Budget means the abolition of the cotton Excise duties (a little over 1,000,000l.) and the complete remission of the provincial contributions to the Central Government (about 7,000,000l.), thus leaving at least 1,500,000l. at the disposal of the Central Government to set against any loss in Customs duties entailed by the preference. There can thus be no question about the advantage accruing to India from the bargain. The entire remission of all contributions to the Central Government would confer an immense benefit on the Provinces if wisely used by them.

The British side of the bargain is naturally not so easily demonstrable in hard cash. At a time when the British taxpayer is overburdened, and when the cry is for drastic economy, a suggestion involving an annual addition to his burden of 10,000,000l. sterling is one which at first sight it might seem sheer lunacy to put forward. But for a bargain to be successful both parties to it must be substantial gainers as compared with