THE
EVOLUTION OF PROVINCIAL FINANCE IN BRITISH INDIA
___________________________________________________________________________________
Continued…
CHAPTER VI
BUDGET
BY SHARED REVENUES
Revision of 1896-97
This
depression in Provincial Finance was alleviated to some extent at least in the revised
settlements of 1896-7 by allowing a higher standard of expenditure and of revenue to the
Provinces than was granted to them in 1892. The following table presents the old and the
new standard of expenditure with the percentage difference between them :—
|
Standard
Net Expenditure |
|
|
Provinces
|
|
Increase |
|
|
1892 |
1897 |
per
cent. |
|
Rs. |
Rs. |
|
Central
provinces |
653,300 |
710,700 |
8.8 |
Lower
Burma |
1,064,600 |
1,206,100 |
13.3 |
Assam |
467,600 |
564,900 |
20.8 |
Bengal |
2,816,700 |
3,125,500 |
10.9 |
N.W.P. |
2,215,400 |
2,428,700 |
9.6 |
Punjab |
1,384,600 |
1,537,300 |
11.0 |
Madras |
2,054,800 |
2,238,600 |
8.9 |
Bombay |
2,049,500 |
2,544,100 |
5.6 |
Total |
13,066,500 |
14,355,900 |
9.9 |
This
new and enhanced standard of expenditure called for a revision of the shares of the
Imperial and Provincial Governments in the joint revenues. But the revision had to be so
devised that while it gave larger resources to the Provinces it obviated the necessity of
making fixed assignments as much as possible; for the Government of India had learnt to
its cost that fixed assignments on a large scale tended to make the resource side of the
Provincial Finance rigid to such an uncomfortable degree that, if the variability of
expenditure surpassed the expandability of the revenue incorporated in the Provincial
Budgets, it was perforce obliged to distribute benefactions to ease
what would otherwise be a
difficult situation. Secondly, these fixed assignments also created a certain degree of
inequality as between the backward and the more advanced Provinces. In the advanced
Provinces the fixed assignments formed a comparatively smaller part of their resources
than they did in the case of the relatively backward Provinces, and, as larger expenditure
could be undertaken by the Provinces only when their revenues expanded, the advanced
Provinces, a larger part of whose resources were of an expanding nature, obtained a more
favorable treatment than the relatively backward Provinces, a large part of whose
resources were of a frozen character. This was rightly conceived by the Government of
India as the reverse of what ought to have been, having regard to the fact that the needs
of the backward Provinces were relatively more imperious than those of the advanced
Provinces. To obviate this injustice the Government of India enhanced the shares of the
backward provinces in the joint revenues by reducing per
contra the fixed assignments made at the last revision. To the Punjab it gave .4 and
to the Central Provinces .5 of the Land Revenue instead of .25 only. The share of Burma in
the Land Revenue was raised to .66, and to make provision for the enhanced expenditure due
to the addition of Upper Burma, and in lieu of the railway revenue withdrawn from it,
Burma was allowed to appropriate .5 of the Excise instead of .25 only. The financial
condition of the North-Western Provinces was not very happy. Its revenue had proved so
very unprogressive that it advanced only 2 per cent. between 1892 and 1897. The treatment
of the North-Western Provinces at the revision of 1892 was also a little unjust. The
revision had left its revenues short by 5 lakhs of its standard expenditure, to be made up
by reduction of its balances. To make amends for this the Government of India
re-distributed the shares in the Land Revenue to the advantage of the North-Western
Provinces. In addition to this the Government of India gave to that Province a grant of 4
lakhs for the year 1897-8, to enable it to establish district funds on a financially independent footing, a result accomplished long ago in
every other Province in British India. To give an equitable treatment to the backward as
well as to the advanced Provinces, it realised that an unequal treatment was the only proper way. It therefore
adopted a less liberal attitude in revising the terms of the settlements with the more
advanced Provinces of Bengal, Madras and Bombay. It allowed them a proportionately smaller
increase of expenditure than the backward Provinces, as may be seen from the figures given
above, and reduced slightly their shares in the revenues.
On
the occasion of this revision the gain to the Imperial exchequer was practically
negligible. In 1877 its total gain by retrenchment amounted to 40 lakhs a year; in 1882
the Imperial Government was so very prosperous that instead of contriving for a gain it
surrendered to the Provinces 26 lakhs of the annual imperial revenue. But in 1887 it
resumed 63 lakhs and in 1892,46 lakhs. On this occasion however its gain was nil, for what
it got from the advanced Provinces it gave to the backward ones.
Just
and liberal as the terms of the settlement were, the abnormal circumstances which
disturbed the entire period of the settlement made such heavy demands on the Provincial
resources that, ample though they were, they fell far short of the requirements of the
Provinces. The famine of 1896 and 1897 affected all the Provinces, although in unequal
degree. In the North-Western Provinces and Oudh, the
Central provinces, and Burma the effect was most severely felt. In Madras, Bengal and the
Punjab it was serious, and in Burma it was slight. On the other hand, the famine of 1899
and 1900 affected Bombay and the Central Provinces most severely, the Punjab very
seriously and the rest of the Provinces slightly. And Assam, though unaffected by either
of the two famines, suffered very severely from the great earthquake of June, 1897.
Besides famine the plague was also making its ravages and taking its toll. As a result of
these unforeseen calamities ail the Provinces were forced to incur extraordinary
expenditure on preventive measures, for which no provision was made in the standard of
revenue fixed for the period of settlement. The expenditure on these unforeseen calamities
being of an extraordinary nature was treated as imperial and defrayed from the Imperial
exchequer, but even this much succour did not prove equal to the necessity and the
Government of India was obliged to make special
grants-in-aid of the Provincial Revenues as shown on page 168.
Thus
the Government of India was not only obliged to pay for the
cost of the famine, but to grant funds to restore equilibrium and to provide for useful
public services held up or curtailed by the Provincial
Governments owing to the extraordinary circumstances of the time. All this aid from the
Imperial Government was made available because of the very prosperous condition of the
Imperial finances throughout this period. While it is better that governments in general
should always be in penury, the surpluses in the Imperial Finance proved a timely
resource, the utility of which was doubled by the commendable way in which they were
spent. Besides giving them grants for useful public works the superfluous funds of the
Imperial Government were utilised in carrying out the
following additional measures to the relief of the Provinces:
(1)
Remission of Imperial Land Revenue Rs. 50,94,000 and
reimbursement to the Provinces for their share remitted Rs. 59,81,000; in all Rs.
1,10,75,000.
(1)
The
abolition of the pandhari tax in the Central Provinces,
costing Rs. 7,000 a year.
(3) The
reduction of the patwari rate in Ajmere,
from 10 per cent. on land revenue to 6 1/4per cent.; the amount of the local revenue remitted was—Rs.
13,000, but the contribution paid to the local fund was Rs. 23,000[f1]Taking
into account these various contributions in aid of Provincial Revenues, the following
table is presented as indicative of the condition of the Provincial Finances during this
period of settlement :—
Provinces |
Provincial
Surpluses or Deficits
|
||||||
|
1897-98 |
1898-99 |
1899-1900 |
1900-01 |
1901-02 |
1902-03 |
1903-04 |
|
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
C.P. |
(a) |
12.286 |
—1,22,883 |
(a) |
22,42,408 |
—705 |
-7,40,742 |
Burma |
1.69,435 |
4.11,494 |
26.14,312 |
15,16,220 |
7,55.285 |
|
|
Assam |
—45,580 |
86,742 |
—8,15,488 |
—86.829 |
1,47,353 |
10.08,393 |
11,40.517 |
Bengal |
-3.03.250 |
2,19,449 |
7,01,899 |
4,43,224 |
6.44.170 |
6,23.640 |
87,23.496 |
N.W.P. |
(a) |
3,28,562 |
7,53,815 |
8,04.789 |
--- |
--- |
--- |
Punjab |
—2,278 |
1,15,379 |
-16,53,794 |
(a) |
14,96,350 |
10.28.770 |
6.74,880 |
Madras |
-1.57,707 |
1,60,706 |
-17.58.029 |
-3,21,013 |
40,41,297 |
-15,810 |
52,40,809 |
Bombay |
-1.29.663 |
1,00,427 |
-15,04,271 |
(a) |
58,23,235 |
-24,23,235 |
-1,23,000 |
U.P.of
Agra and Oudh |
--- |
--- |
--- |
--- |
-9,63,788 |
-64,372 |
37,11,281 |
(a)No
closing balance left because of Budget equilibrium.
Compiled
from the Annual Finance and Revenue Accounts of the Government of India. .
IMPERIAL
SPECIAL GRANTS-IN-AID TO PROVINCES*
Year |
India |
C.P. |
Assam |
Bengal |
N.W.P.
and Oudh |
Punjab |
Madras |
Bombay |
Burma |
|
|
|
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
1897-98 |
|
|
7,72,000 |
8,00,000 |
|
10,27,000 |
|
|
12,18,000 |
|
1898-99 |
|
|
5,00,000 |
18,00,000 |
17,00,000 |
10,00,000 |
5,00,000 |
16,96,000 |
48,75,000 |
|
1899-1900 |
|
|
19,32,000 |
|
|
|
95,000 |
3,49,000 |
34,37,000 |
|
1900-01 |
|
|
34,15,000 |
|
|
|
5,98,000 |
|
64,79,000 |
|
1901-02
1902-03
... |
{ {1 {2
{3 |
A
70,000 B
1,00,000 |
26,89,000
6,50,000 2,00,000
2,00,000 2,00,000 |
2,00,000
1,00,000
2,80,000
1,50,000 |
10,00,000
6,00,000 |
5,00,000
4,50,000
3,50,000 |
12,40,000
4,00,000
4,00,000
5,00,000
3,00,000 |
32,14,000
10,00,000
8,00,000
5,50,000
3,50,000 |
91,00,000
19,50,000
6,00,000
5,50,000
3,50,000 |
4,00,000 |
1903-04 |
{1 {2 {3 |
|
2,00,000
5,00,000 1,90,000 |
1,00,000
5,00,000
1,11,000 |
10,00,000
2,00,000 |
5,00,000
3,00,000
2,26,000 |
4,00,000
10,00,000
2,76,000 |
8,00,000
5,00,000
3,50,000 |
6,00,000
10,00,000
3,50,000 |
4,00,000 |
1.For
education (recurring)
2.For
use Public Works.
3.For
improving district and Other establishments.
A.
Allotment for Public Work s in Baluchistan, Rajputana and Central India.
B.
Amount taken the " India "
estimates for subsequent distribution to the provinces.
..
* Complied from the annual Financial Statements of the Government of India
Revision
of 1902-03
Settlements
made with the Provinces in 1897 should have ended in the ordinary course of time in
1902-3. The central operation in the periodic revision of the settlements was to arrive at
the standard provincial expenditure for the ensuing quinquennium and as a rough and ready
method of decision the average expenditure during the expiring quinquennium was taken as a
standard expenditure for the opening quinquennium. There is nothing grossly erroneous in
such a procedure, provided the preceding and succeeding quinquenniums
are equally normal with respect to the course of their events. But as we have seen, the
events of the past quinquennium were entirely abnormal and could not have been made the
basis of any calculations worthy of trust. To be on the safe side the Government of India
thought it desirable to await the return of normal times before undertaking wholesale
revisions of provincial settlements. The occasion of 1902-3 for revision was therefore
postponed save in the case of Burma. For, the last settlement had become unduly favourable
to that Province in comparison with the other Provinces, notwithstanding the very nice and
equitable calculations on which the settlements of 1896-7 were based. The extent to which
the revenues had exceeded its expenditure is indicated in the following table:—
|
Estimated |
|
|
|
Standard
for |
Estimates |
|
Burma |
the
Settlement |
for
1902-03 |
Difference |
|
of
1897-98 to |
|
|
|
1901-02 |
|
|
|
Rs. |
Rs. |
Rs. |
Revenues |
2,93,81,000 |
3,73,86,000 |
80,05,000 |
Expenditure |
2,93,81,000 |
3,31,86,000 |
38,05,000 |
Surplus |
|
42,00,000 |
|
The
continuance of such an outcome was deemed unfair to the Imperial and unjust to the other
Provincial Governments. The financial settlement of the Province of Burma was accordingly
revised notwithstanding the established canon of simultaneous revision, when the occasion
presented itself in 1902-3. The revision resulted in the resumption by the Government of
India of this surplus by readjusting the shares of the Province in the joint revenues. The
share in the Land Revenue was reduced from two- thirds to
one-half and that in the Excise from one-half to one-third, and a few minor heads were
added to the already provincialised heads of expenditure. By these changes the standard
revenue and expenditure of Burma for the new settlement of 1903 to 1906 assumed the
following totals :—
Adjusting |
Total |
Total
|
Assignment |
|
Revenues |
Expenditure |
|
Rs. |
Rs. |
Rs. |
Rs. |
2,78,31,000 |
53,02,000 |
3,31,33,000 |
3,31,33,000 |
Another
province whose settlement was revised was the Punjab; but the reason of it was different.
The territory covered by the North-Western Provinces was divided into the North-Western
Frontier Provinces and the United Provinces of Agra and Oudh, usually styled U.P. Along
with this some of the districts of the Punjab were separated from it and joined to the
newly created North-Western Frontier Province. This caused a readjustment of the
provincial revenues and expenditure, but not any wholesale revision of the settlement. The
changes were confined to the necessary alterations in the adjusting assignment.
Quasi-Permanent
Revision 1904-05
With
the exceptions noted above the settlements of 1897 were extended up to the end of the year
1904. The primary cause of the postponement of the revision as explained above was the
abnormality of the conditions prevailing in the year 1901-2. But there was also another
reason why the Government of India was so very anxious for the return of normal conditions
before taking any steps towards revision. It was about this time that the Government of
India contemplated to introduce permanency in Provincial Finance. The five-year budget
system which in 1881 replaced the annual budget system as the basis of Provincial Finance,
though a marked improvement in the direction of continuity and stability, was not deemed
to be quite sufficient. Under it the Provincial Governments were left free to enjoy the
fruits of their economy in expenditure and of the successful nursing of their resources
for the period of five years. Beneficial as far as it went, this time-bar was found to
exercise a most pernicious influence on Provincial Finance. Under the quinquennial budget system it so happened that the provincial Governments
as the result of feeling their way under the new conditions were parsimonious in the first
few years lest their expenditure should prove too much for their revenues, and extravagant
in the last few years lest their expenditure should shrink below the standard and leave
large margins to be cancelled by the Government of India on revision of their settlements.
No Local Government could be expected to put into execution any carefully matured and
well-thought-out scheme of improvement within the short span of a quinquennium. All that
it could do was to spend the first two or three years in working out a scheme and utilise
the last two or three years in rushing it through, as was done by most of the Provinces.
This tendency to undertake such schemes, the only merit of which was that they could be
carried through before the revision, and mainly in order to reach the standard
expenditure, was a direct consequence of the quinquennial budget system. This is by no
means an a priori conclusion. A glance at the annual surplus of the provinces will
indicate how they tend to rise in the beginning of the quinquennium and fall at the end of
it. To obviate these evils of parsimony and extavagance the
only remedy was to do away with the principle of quinquennial revision, and this the
Government of India courageously undertook to effect. The right to revise was a much
cherished right, and the Government of India had not failed to exercise it in the teeth of
ail opposition from the Provinces. It was abandoned only because its exercise was deemed
to be mischievous.
Taking
the year 1903-4 as the normal one, the Government of India decided to revise the
provincial settlements of all the different Provinces. The idea was to adjust the revenues
between the Imperial and the Provincial Governments on the basis of the total expenditure
they respectively controlled. It was found that the aggregate provincial expenditure
represented less than one-fourth of the whole, while the Imperial expenditure, which
included Army and Home Charges, aggregated in excess of three-fourths. These proportions
of expenditure were taken as the basis of the division of revenue between the Imperial and
the Provincial, and the following standard shares of revenue and expenditure under the
joint heads were agreed upon :—
Imperial
Provincial
Bengal,
U.P., Bombay, Madras 3/4 1/4
Punjab,
Burma
5/8
3/8
C.P.,
Assam
1/2
1/2
The
reasons for adopting different standard rates of division in the case of the Punjab,
Burma, C.P. and Assam was to give the backward provinces
opportunities of development in the same proportion as lay within the reach of the
advanced provinces.
Of
the settlements made in 1904-5 the Government of India declared that those made with the
Provinces of Bengal, Madras, Assam and U.P. were to be
permanent and not subject to revision in future, except when it was found that the
financial results were unfair to a Province or to others by comparison, or to the
Government of India when it was confronted by an extraordinary calamity. Owing to this
proviso their settlements were termed quasi-permanent. To obviate the recrudescence of
unfairness during the currency of the settlements the Government of India felt it
necessary to enter certain modifications in the standard ratio of division of the
joint-heads of revenue and expenditure with regard to the Provinces brought under the
quasi-permanent settlement. They were as follows :—
Revenue |
Provincial
Share |
Expenditure |
Provincial
Share |
||||
|
Bengal |
Madras
|
U.P. |
|
Bengal |
Madras |
U.P. |
Excise
Stamps Registration Irrigation |
7/16 1/2 Wholly --- |
--- 1/2, Wholly --- |
--- ½ --- Wholly |
Excise
Stamps
Registration Land Revenue |
7/16 1/2
Wholly Wholly |
--- ½
--- Wholly |
--- ½
--- Wholly |
Compiled
from the Financial Statement of the Government of India for
1904-5, p. 67.
Besides
these modifications the Government of India gave them the following grants :—
Bengal |
Madras |
United
Provinces |
1.
Addition of 4 lakhs to The assessment to Improve the pay of Ministerial establish ments. |
1.
Grant of 20 lakhs for Survey and settlements |
1.
Irrigation revenue guaranteed up to 40 lakhs. |
2.
Further addition not Exceeding 2 1/2 lakhs for For strengthening the staff of Deputy
Collector. |
2.
Grant of Rs. 75,000 a year recurring for relief of certain local bodies. |
2.
Grant of 2 1/2, lakhs a year in relief of local bodies. |
|
3.
Rs. 50,000 a year for agricultural experiment. |
3.
Half a lakh a year to reform District Board Finance. |
|
4.
Undertaking to bear charges for reorganising district administration |
|
Compiled
from the same Financial Statement of the Government of India, p. 67.
The
standard revenues and expenditure of the quasi-perma-nently
settled provinces, after taking into consideration the alterations in their respective
shares in the joint revenues, were as follows:—
STANDARD
REVENUES AND
EXPENDITURE (in thousands of rupees).
|
|
Revenue
|
||
Province
|
Expenditure |
|
||
|
|
Revenues |
Assignments |
Total |
Madras |
3,50,48 |
2,90,82 |
5,966 |
3,50,48 |
Bengal |
4,98,87 |
4,49,84 |
4,903 |
4,98,87 |
U.P. |
3,66,64 |
3,62,64 |
400 |
3,66,64 |
Assam |
72,07 |
60,07 |
1,200 |
72,07 |
The
gain to the Imperial treasury on the revenue side brought about by the revision of the quasi-permanently settled Provinces was Rs. 2,06,000. But the revision also over-burdened
the Imperial Government with a total charge of Rs. 36,000 hitherto borne by the Provincial
Budget. Thus its net gain was only Rs. 1,70,000 a year on the normal.
As in the beginning of the scheme of Provincial Budgets, the government of India thought it advisable to make to the quasi-permanently settled Provinces the following initial grants so as to give them a fair start :—
To
Bengal |
Rs.
50 lakhs. (Exclusive of 50 lakhs for Calcutta University.) |
To
Madras |
Rs.
50 lakhs. (Inclusive of 20 lakhs for survey settlement |
To
U.P To
Assam, |
Rs.
30 lakhs. (Exclusive of 1 1/4 lakhs to compensate for expenditure on the purchase of
encumbered estates.) Rs.
20 lakhs. |
Of
the remaining Provinces, Bombay and the Punjab were the next to obtain quasi-permanent
settlements with effect from 1905-6.
In
recasting their settlements the Government of India departed a little from the standard
rate of division as applied to the Provinces quasi-permanently settled in 1904-5. With
certain exceptions mentioned below the joint heads of revenue and expenditure were divided
half and half, including Irrigation in Bombay, instead of three-fourths and one-fourth
between the Imperial and the Provincial. The exceptions to this rule were the following :—
Revenue |
Provincial
Share |
Expenditure |
Provincial
Share |
||
Heads
of |
|
Heads
of |
|
||
Account |
Bombay |
Punjab |
Accounst |
Bombay |
Punjab |
Land
Revenue |
Guaranteed
Up to 189 1/4, |
3/8 |
Land
Revenue |
Wholly |
Wholly |
|
Lakhs |
|
|
|
|
Registration |
Wholly |
Wholly |
|
|
|
Irrigation |
½ |
3/5 Guaranteed up to 28 lakhs |
|
|
|
Compiled from the Financial Statement of the
Government of India
The
standard revenue and expenditure of these two provinces under the quasi-permanent
settlement was as follows :—
Province
|
Expenditure |
Revenue |
||
|
|
Revenues |
Fixed
Assignments |
Total |
|
Rs. |
Rs. |
Rs. |
Rs. |
Bombay
Punjab |
4,91,75,000
2,49,50,000 |
4,48,98,000
2,46,50,000 |
42,77,000
3,00,000 |
4,91,75,000
2,49,50,000 |
The
raising of the shares and the fixing of assignments on a liberal scale with respect to
these famine and plague-stricken Provinces left the Imperial Government a loser on the
transaction. On the basis of the new standard of revenues the Government of India lost Rs.
5,95,000 on the two Provinces together. The corresponding increase in the provincial
shares of the joint heads of expenditure, however, lessened the Imperial expenditure by
Rs. 2,21,000 a year. On the whole, therefore, the Imperial Government sacrificed a normal
gain of Rs. 3,74,000 to give permanency and stability to the finances of these two
Provinces. This was over and above the initial grant of Rs. 50,00,000 to each of them in
order to enable them to set their sails in smooth waters.
A
year after, the settlement of the Central Provinces was made quasi-permanent with effect
from April 1, 1906. The shares in the joint heads of revenue and expenditure were raised,
as they were in the case of Bombay and the Punjab, and particularly because of the
addition of Berar, which was hitherto administered directly
by the Imperial Government, from three-fourths and one-fourth to one-half between the
Imperial and the Provincial, the share in the land revenue being guaranteed up to 82 1/2
lakhs. The only exception to this rule of even division was the Registration revenue,
which was made wholly provincial. To balance the revenue with the expenditure an
assignment of Rs. 27,07,007 a year was fixed and an initial
grant of Rs. 30,00,000 was given for a fair start.
Along with the settlement of the Central Provinces it became
necessary to reorganise the budgets of the quasi-permanently settled
Provinces of Bengal and Assam owing to certain administrative changes. The two Provinces
were reconstituted into (1) Bengal and (2) Eastern Bengal and Assam. In the revision of
its financial settlement the new Province of Bengal was accorded the same proportionate
share in the joint revenues as were granted to Bombay and the Punjab—namely, a share
of a half in all the joint heads. Registration and that portion of the Land Revenue which
was derived from Government Estates under the direct management of the Imperial Government
were, however, made wholly provincial. In lieu of this favoured treatment the fixed
assignment of the Province was reduced from 49.03 lakhs to 5.72 lakhs.
In
the new Province of Eastern Bengal and Assam the principle of even distribution was
applied to all joint heads of revenue and expenditure with the exception of Registration,
which was made wholly provincial. This enhancement of
shares so greatly augmented the resource side of the Provincial Budget that the balance
had to be restored by a negative operation of a fixed adjusting assignment from the
Provincial to the Imperial funds. The following figures show the standard expenditure and
the standard revenue for the three provinces brought under the quasi-permanent settlements:—
|
|
Revenue
|
||
|
|
Revenues |
Assignments |
Total |
|
Rs. |
Rs. |
Rs. |
Rs. |
c.p. |
1,76,43,000 |
1,49,36,000 |
27,07,000 |
1,76,43,000 |
Eastern
Bengal and Assam |
2,12,19,000 |
2,18,42,000 |
6,23,000 |
2,12,19,000 |
Bengal |
4,72,73,000 |
4,67,01,000 |
5,72,000 |
4,72,73,000 |
Some
modifications were later on introduced in the settlement of the Province, so that a
positive adjustment had to be made by an assignment from the Imperial to the Provincial of
Rs. 60,000 a year.
The
only Province which was outside the pale of the quasi permanent system was Burma. The last
quinquennial settlement made with it in 1902-3 having expired, the Government of India
decided to bring it in uniformity with the other Provinces by giving it a quasi-permanent
settlement from April 1, 1907. In a spirit of perfect
impartiality it was also given an even share in the principal joint heads of revenue and
expenditure, salt being imperialised as in other provinces.
It was given an adjusting assignment of Rs. 90,68,000 a
year to cover the deficits in its standard expenditure and an initial grant of Rs.
50,00,000.
By
the year 1907 all the Provinces were brought within the pale of the quasi-permanent
settlement, and we would have expected the scheme of Provincial Finance to run its course
undisturbed by any further changes. But it so turned out, as must have been noticed, that
the quasi-permanent settlements made with Madras and U.P.
in 1904 had become a little unfair to them in comparison with the terms offered to the
Provinces subsequently dealt with. To remove this ground of injustice, which was one of
those recognised for subjecting the quasi-permanent settlements to revision, the shares of
the two Provinces in the joint heads were raised with effect from April 1, 1907, to
one-half, with the following exceptions :—
Madras |
United
Provinces |
Revenue
I.
Registration.
Wholly Provincial. 1. Land
revenue. Minimum receipt of 308 lakhs guaranteed if the provincial share fell below that
amount. II.
Expenditure
1.
Registration. Wholly provincial. 2.
Land Revenue. Wholly provincial. |
Revenue
I.
Land
Revenue, 3/8 Provincial. Minimum of 240 lakhs guaranteed. II.
Irrigation. Minimum receipt of 60 lakhs from
major irrigation works guaranteed, if the provincial share fell below that amount. |
The fixed assignments to cover the difference between the excess of standard expenditure over standard revenue were :—
To Madras -
Rs. 22,57,000
To U.P.
- Rs. 13,89,000
Thus
the scheme of Provincial Finance in British India had advanced by gradual but distinct
steps of assignment budgets, assigned revenue budgets and shared revenue budgets to a
stage the terms of which were regarded by the parties concerned as sufficiently final. How
far their expectations were fulfilled may be judged from the annual surpluses and deficits
in Provincial Finance and from the range in their deviations as indicated in the following
table:—
provincial
surpluses and deficits
Province |
1904-05 |
1905-06 |
1906-07 |
1907-08 |
1908-09 |
1909-10 |
1910-11 |
1911-12 |
|
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
C.P.* |
-701000 |
3235000 |
1750607 |
-930617 |
-3097865 |
721755 |
280556
|
1214573 |
Burma |
-1591796 |
-2613890 |
1890516 |
-129590 |
-2060678 |
2515371 |
1900297 |
-1260040 |
Assam** |
-269316 |
-3720027 |
-200140 |
-2596682 |
-2357687 |
549270 |
5539698 |
5218802 |
Bengal |
-1252818 |
-1952312 |
-1877455 |
-2256994 |
-1330371 |
3274065 |
3960612 |
8296233 |
U.P. |
-869099 |
-2879192 |
795600 |
-3587066 |
1007260 |
2045221 |
3635904 |
144240 |
Punjab |
4794387 |
-2796052 |
-661214 |
-2408818 |
-1576981 |
1300559 |
4199121 |
3398055 |
Madras |
-1402344 |
220328 |
1217745 |
—44992 |
2025109 |
1266326 |
2316383 |
2938502 |
Bombay |
4396000 |
-42892 |
1752202 |
-308925 |
-2618926 |
7137996 |
7585460 |
-541411 |
*Indudes
Berar since 1906.
**Eastern Bengal d Assam since 1906.
Compiled
from the Annual Finance and Revenue Accounts of the
Government of India.
In
judging of these results account must also be taken of the various benefactions made by
the Government of India to the Provinces by way of grants-in-aid during the same period.
These grants were as follows :—
IMPERIAL
GRANTS-IN-AID TO THE
PROVINCES
Province |
1904-05 |
1905-06 |
1906-07 |
1907-08 |
1908-09 |
1909-10 |
1910-11 |
1911-12 |
|
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
Rs. |
C.P.* |
2853710 |
6957793 |
110500 |
2752010 |
2903668 |
3588270 |
3465500 |
2080845 |
Burma |
567500 |
1845000 |
7219000 |
682000 |
215253 |
1820952 |
4232742 |
3605164 |
Assam |
|
3362916 |
327294 |
280030 |
2358947 |
4464435 |
4608965 |
6100732 |
Bengal |
24794 |
4806984 |
475548 |
1362634 |
4157393 |
5753692 |
6137013 |
11131276 |
U.P. |
136600 |
4036307 |
7641697 |
9879667 |
8770345 |
1624329 |
4513729 |
3136107 |
Punjab |
7526436 |
2467579 |
4209531 |
5541529 |
6037990 |
5839014 |
9592844 |
3101681 |
Madras |
700946 |
4430714 |
9980400 |
9473304 |
704885 |
612941 |
3691426 |
5008889 |
Bombay |
10312928 |
3427325 |
4024512 |
4574284 |
5726162 |
5797603 |
12009360 |
4935159 |
Total
... |
22122914 |
31334618 |
34982982 |
34543458 |
30874643 |
29502286 |
15475360 |
39099853 |
*Includes
bearer since 1906.
Compiled
from the Annual Finance and Revenue Accounts of the Government of India.
But
in taking account of these benefactions it must not be supposed that, barring a solitary
case or two, they were necessary in order to preserve the solvency of Provincial finance
as it was defined by the terms of the settlement made with the different provinces. Far
from being insufficient, the revenues settled upon the different Provinces proved quite
ample for their needs if we take the last years, and they are the most typical years, into
consideration.
Permanent
Settlements of 1912
Soon
after the series of quasi-permanent settlements were concluded with the different
provinces, the subject of Provincial and Central Finance in British India among others of
a like nature was investigated by the Royal Commission on Decentralisation. In its Report
issued in 1909 the existing method of allocating revenue and charges between the Imperial
and Provincial Governments was upheld in principle. Of the many adverse criticisms passed
by witnesses who appeared before the Commission only two were regarded by it as worthy of
consideration: (1) The adjusting assignment and (2)
Grants-in-aid, or doles as they were cynically termed. It
was urged, and with some truth, that the adjusting assignments impaired the elasticity in
provincial revenues by reason of the fact that while
charges grew, that part of the provincial resource, which was made up by assignments, and
in some cases it formed quite an appreciable part, remained unaltered. Secondly, it was
argued that doles were demoralising and that it would be better to replace them by shares
in growing revenue. The Commission seems to have been completely impressed by the
disadvantages of large adjusting assignments, but it demurred, and rightly so, to the
criticisms with regard to the doles. Every one extolled the benefits of decentralisation
to the Provinces, but few realised the anxieties that it involved to the Government of
India. It must have been clear that by the process of decentralisation the Government of
India had given the Provinces more or less complete freedom in distributing their funds in
any way they liked upon the services delegated to their management, while it had remained
responsible for their efficient upkeep by the provisions of the law
which governed its constitution. But
the freedom which the provinces had obtained in carrying on
the financial management of the services made over to their particular control, involved
the possibility of their fostering certain services deemed to be of immediate utility to
the people of the Provinces, and neglecting others the utility of which, though remote to
the Provinces, was nevertheless real to the country as a whole. Neglect of nationally
important services such as Education, Sanitation, Police, was especially to be avoided
during periods of plague and famine. But the Government of India could not enforce
distribution of provincial funds on such services; for one of the vital conditions of
Provincial Finance was freedom of appropriation on provincialised services, which were not
distinguished into obligatory and optional as is the case in the continental system of
local finance.
The
Government of India was indeed not as powerless as the Central Government in England
which, as is well known, cannot rectify cases of neglect by local authorities without
resort to a writ of mandamus. But the way to
bring a recalcitrant province to order, if easier, was not pleasant. For, the only way to
mend such a situation was to end it by suspending the operation of Provincial finance.
Rather than resort to such a grave measure the Government of India happily hit upon
grants-in-aid of particular services as a powerful and well-tried[f2]
corrective to the negligence of the Province, and require
it to maintain a" national minimum "in those services which it regarded as onerous rather than
beneficial.[f3]
Convinced of the virtue of grants-in-aid as a brake on decentralisation degenerating into disintegration, the Commission only recommended that measures
be taken to give Provincial Finance the greatest elasticity possible by diminishing the
assignments to the smallest magnitude possible.
Following
the recommendations of the Commission the Government of India decided to make certain
modifications in the existing allocation of revenue and
charges and to make the quasipermanent settlements permanent settlements from the year
1912. The permanent settlements did not differ from the quasipermanent settlements which they superseded in any material point so far as
the principle of allocation was concerned. The only point of difference between them in
that respect was a partial replacement of the fixed adjusting assignments by increased
shares in the following joint heads of revenue and expenditure :—
Modifications
in Shares
Revenues |
Expenditure |
||
Heads
of Account |
Provincial
Share |
Heads
of Account |
Provincial
Share |
1.
Land Revenue including the portion credited to Irrigation |
5/8
to Burma 1/2
Punjab |
1.
Land Revenue |
5/8
Burma ½
Punjab |
2.
Excise |
Wholly
in Eastern Bengal and Assam, Bombay. In C.P Bengal and U.P.3/4 |
2.
Excise |
Same
as in revenue Column. |
Assessed
Taxes |
|
|
|
3.
(P.W.D.) |
1/2 |
|
|
4.
Forest |
Wholly. |
4.
Forest |
Wholly |
5.
Major Irrigation works (excluding portion of Land Revenue credited to it). |
1/2
in Punjab, minimum of 4 lakhs guaranteed. |
5.
Major Irrigation |
½ |
6.
Major and Minor Irrigation. |
1/2
in Bengal |
6.
Major and Minor Irrigation. |
1/2/ in Bengal |
The
effect of these modifications in the shares in the joint heads of revenue and expenditure
was to reduce the adjusting assignments to the following figures :—
Province |
Assignments
in Lakhs of Rupees from Imperial to Provincial |
From
Provincial to Imperial |
Central
Provinces... Burma...
Eastern
Bengal and Assam... Bengal...
U.P.
Punjab... Madras... Bombay... |
21.40
13.12
13.55
6.77 |
18.40
19.26
21.43
9.38 |
During
the permanent as during the quinquennial and quasi-permanent settlements the grants-in-aid
of specific services, unobjected to as they were by the Decentralisation Commission, were
continued to be given to the different Provinces throughout the period although, as may be
seen from the following figures, in a continually diminishing magnitude :—
special
grants-in-aid (in
rupees)
Provinces |
1912-13 |
1913-14 |
1914-15 |
1915-16 |
1916-17 |
1917-18 |
1918-19 |
|
Burma |
2643264 2263939 |
5138256 38497G3 |
4407802 3869472 |
3795784 216979 |
3817540
2478482 |
2726008 2490 |
|
Assam |
5530991 |
3283011 |
7533878 |
6577619 |
2497661 |
1922252 |
2444730 |
Bengal |
6480800 |
7594894 |
7186436 |
6538732 |
7074773 |
9669717 |
|
6379420 |
4761028 |
3526567 |
4278654 |
3262214 |
4235205 |
4179425 |
|
U.P. |
11470603 |
8542279 |
3842624 |
3229924 |
2453969 |
2706164 |
3590530 |
Punjab |
6700924 |
2424404 |
3988117 |
5908923 |
4925830 |
4862616 |
5563665 |
Madras |
12277591 |
5066343 |
1697803 |
1220785 |
1099165 |
1483708 |
1577446 |
Bombay |
11192723 |
3996729 |
1468837 |
1200254 |
1065964 |
1154725 |
2479510 |
Total |
82283565 |
39461797 |
38640739 |
37880069 |
25856498 |
24778501 |
35453521 |
Compiled
from the Annual Finance and Revenue
Accounts of the Government of India.
It
was natural that the results of the permanent settlement should have been more anxiously
awaited for with great interest by the Provinces, for the permanent settlement had the
potentiality of a permanent gain or a permanent loss. That their anxiety on that score
could not but have been completely allayed is amply supported by the repeated surpluses
that meet the eye as it passes over the following figures of annual additions to and
deductions from their balances during the period of its currency
:—
provincial
surpluses or deficits (in
rupees)
Provinces |
1912-13 |
1913-14 |
1914-15 |
1915-16 |
1916-17 |
1917-18 |
1918-19 |
5085246 |
1881245 |
-3544416 |
-13836 |
4235704 |
4870517 |
920121 |
|
Burma |
8874174 |
914026 |
-3729808 |
1896621 |
9427702 |
12067708 |
4873587 |
Assam |
3610494 |
-2217691 |
-4550789 |
658812 |
6044904 |
2800634 |
435872 |
Bengal |
14705270 |
480842 |
-3967607 |
1028156 |
3708838 |
5280082 |
732237 |
7022199 |
-920062 |
-1870264 |
1133562 |
5919907 |
7176786 |
3643564 |
|
9588749 |
50704 |
-4611080 |
-973090 |
3427808 |
-2268311 |
3686945 |
|
Punjab |
7411069 |
—692512 |
-3730641 |
-1133541 |
500995 |
-695216 |
1185930 |
Madras |
4330275 |
-5298411 |
-1207754 |
318508 |
2571241 |
1042303 |
-972354 |
Bombay |
7083281 |
1558566 |
-2639924 |
-951099 |
122434 |
611321 |
1681066 |
Compiled
from the Annual Finance and Revenue Accounts of the Government of India.
While
the condition of Provincial Finance was thus undoubtedly prosperous, the erratic movements
in the provincial balances do not quite bear out the hope of orderly progress that was
entertained of the permanent settlement. It should be noted, however, that the period
during which the permanent settlement was current was not wholly a normal period. Part of the
permanent settlement was no doubt a peace period, but it was not even as long as a
quinquennium, and it should not on that account detract from the merits of a permanent
settlement if it disclosed the faults of the quinquennial settlements. Most of the period
covered by the permanent settlement was, however, a period of the Great War, the abnormal
events of which could not have had any but disturbing effects on Provincial Finance.
Whether
the permanent settlements would have been adequate for the purpose in view if sufficient
length of time had been allowed for conditions to have become settled it is not given to
us to say. For, from April 1, 1921, provincial Finance in British India entered on an
entirely new phase. That phase of it will be dealt with in another part. Here the study of
the growth of Provincial Finance as it developed stage by stage under the old phase comes
to an end. But this study will not be complete until we deal with the mechanism which inter-related the finances of the Central and Provincial
Governments under the old phase. But before we proceed to do so it might be of interest as
well as of value that the study of the final stage in the development of Provincial
Finance were to close with the following retrospect of provincial revenue and expenditure
which shows, as nothing else can, the small beginnings, the large strides and the vast
proportions that Provincial Finance had reached during the half century over which it had
been allowed to run its course.
GROWTH
OF PROVINCIAL FINANCE
Provinces |
Provincial
Revenues As a percentage of the total Revenues of India |
Provincial
Expenditure As a percentage of the total Expenditure of
India |
||||||||||
|
1871-2 |
1882-3 |
1892-3 |
1904-5 |
1912-3 |
1918-9 |
1871-2 |
1882-3 |
1892-3 |
1904-5 |
1912-3 |
1918-9 |
C.P.
... |
.655 |
1.055 |
.863 |
.905 |
2.52 |
1.715 |
.652 |
1.008 |
.87 |
.984 |
2.19 |
1.685 |
Burma
... |
.572 |
1.66 |
2.256 |
3.023 |
4.73 |
3.57 |
.592 |
1.914 |
2.16 |
3.31 |
4.14 |
3.15 |
Bengal
... |
2.8 |
5.9 |
4.72 |
4.12 |
5.56 |
4.00 |
2.7 |
6.68 |
4.52 |
4.26 |
4.56 |
3.84 |
1.99 |
4.16 |
3.6 |
|
|
|
2.04 |
4.4 |
3.32 |
|
|
|
|
Punjab
... |
1.66 |
1.59 |
1.888 |
2.08 |
3.96 |
3.11 |
1.55 |
2.165 |
2.03 |
1.83 |
3.47 |
2.81 |
Madras
... |
1.595 |
3.32 |
3.3 |
2.88 |
6.27 |
4.75 |
1.61 |
3.24 |
3.4 |
3.09 |
6.1 |
4.53 |
Bombay... |
1.8 |
4.9 |
4.49 |
4.05 |
6.17 |
5.45 |
1.836 |
5.08 |
4.4 |
3.77 |
5.7 |
5.00 |
Assam
... |
|
.61 |
.738 |
.597 |
1.38 |
1.00 |
|
.505 |
.617 |
.618 |
1.13 |
.857 |
U.P.
... |
|
|
|
2.99 |
5.5 |
4.15 |
|
|
|
3.01 |
4.87 |
3.94 |
|
|
|
|
2.6 |
1.9 |
|
|
|
|
2.11 |
1.775 |
|
Total
Provincial |
11.11 |
22.8 |
21.75 |
20.4 |
38.6 |
29.2 |
10.8 |
25.00 |
21.3 |
20.8 |
34.3 |
27.6 |
Complied from the Annual Finance and Revenue Accounts of the Government of India.