The Sound of Swaraj: Speeches that Defined India - Part 2

 

In the second installment of The Sound of Swaraj: Speeches that Defined India, I have chosen one of the most momentous addresses by the foremost Moderate leader, Gopal Krishna Gokhale. My purpose in publishing this speech is to highlight the importance of the Moderate national leaders’ contribution to the critique of colonial economic policies, as well as their development of democratic methods of resistance to British rule. This speech offers a striking example of how the Moderates sought to shape the future course of the Indian National Movement.

The full text of the speech is followed by a concise summary and key takeaways.

On 26 March 1902, Gopal Krishna Gokhale delivered his maiden Budget speech in the Imperial Legislative Council, with Lord Curzon presiding and Sir Edward Law presenting the financial statement. Though only his first intervention on Indian finances, the speech immediately established Gokhale as one of the foremost critics of colonial economic policy. In measured but firm language, he challenged the Government’s celebration of an unprecedented surplus of seven crores, arguing that it represented not prosperity but exploitation. These surpluses, he explained, were “currency surpluses,” produced by an artificially appreciated rupee and maintained through a rigidly high level of taxation, rather than by genuine economic growth.

Gokhale laid bare the paradox of “a suffering country and an overflowing treasury,” pointing to stagnant salt consumption, growing rural indebtedness, soil exhaustion, and widespread famine as evidence of deepening poverty. He criticized policies that privileged imperial and military expenditure—railway expansion, high officer allowances, and frontier wars—while neglecting education, irrigation, and relief for India’s struggling cultivators. In particular, he denounced the salt duty, excise on cotton goods, and the relentless rise of land revenue as unjust burdens on the poorest.

This speech, blending statistical mastery with moral conviction, remains a landmark in India’s economic nationalism and Gokhale’s enduring legacy as a “moderate” reformer with radical clarity.

Main idea of the speech:

The British Government’s financial administration in India was fundamentally unjust because it maintained artificially high taxation to generate continuous surpluses, even during famine and economic depression, thereby enriching the imperial treasury while impoverishing the Indian masses.

He argued that:

• The large surpluses were “currency surpluses,” arising from the artificially appreciated rupee, not from real prosperity.
• Continuous new taxes (on salt, land, income, excise) imposed unbearable burdens on ordinary Indians.
• Indicators used by the Government to claim prosperity (customs, excise, stamps) were misleading; true indicators (salt consumption, rural debt, crop output) showed worsening poverty.
• Imperial priorities (railways for British commerce, military expenses, high allowances for Europeans) took precedence over essential Indian needs like education and irrigation.

Thus, his thesis combined economic critique and moral appeal: taxation should correspond to people’s capacity, revenues should be used for their welfare, and India’s poverty must be acknowledged rather than hidden behind false claims of prosperity.

 

 

 First Budget Speech of Gopal Krishna Gokhale

Imperial Legislative Council – Mar 26^th, 1902

 

Your Excellency, I fear I cannot conscientiously join in the congratulations which have been offered to the Hon’ble Finance Member on the huge surplus which the revised estimates show for last year. A surplus of seven crores of rupees is perfectly unprecedented in the history of Indian finance, and coming as it does on the top of a series of similar surpluses realised when the country has admittedly been passing through very trying times, it illustrates to my mind, in a painfully clear manner, the utter absence of due correspondence between the condition of the people and the condition of the finances of the country.

Indeed, my Lord, the more I think about this matter, the more I feel—and I trust your Lordship will pardon me for speaking somewhat bluntly—that these surpluses constitute a double wrong to the community. They are a wrong, in the first instance, because they exist at all—that Government should take so much more from the people than is needed in times of serious depression and suffering.

And they are also a wrong because they lend themselves to easy misinterpretation and, among other things other things, render possible the phenomenal optimism of the Secretary of State for India, who seems to imagine that all is for the best in this best of lands. A slight examination of these surpluses suffices to show that they are mainly, almost entirely, currency surpluses, resulting from the fact that Government still maintains the same high level of taxation which they considered to be necessary to secure financial equilibrium when the rupee stood at its lowest.

The year when the rupee touched this lowest exchange value was 1894–95, the average rate of exchange realised in that year being only 13.1d (pence) to the rupee. Government, however, in the face of the falling rupee, resolutely maintained an equilibrium between their revenue and expenditure by large and continuous additions to the taxation of the country. Thus, even in the year 1894–95, when the rupee touched its lowest level, the national account-sheet showed a surplus of seventy lakhs of rupees.

From this point onwards, the currency legislation passed by Government in 1893 began to bear fruit, and the exchange value of the rupee began to rise steadily. In 1895–96, the average rate of exchange realised was 13.64d, and the surplus secured was 1.5 crores. In 1896–97 and 1897–98, the average rates of exchange were 14.43d and 15.36d respectively.

But both years turned out to be famine years, and the second was also one of a costly frontier war, necessitating extraordinary expenditure for direct famine relief and military operations—2.7 crores in the first year and 6.5 crores in the second.

The result was that 1896–97 closed with a deficit of 1.7 crores, and 1897–98 with a deficit of 5.36 crores. It will, however, be seen that if these extraordinary charges had not come upon the State, both years would have been years of surpluses, and the surplus for 1897–98 would have been close upon four crores of rupees.

In 1898–99, exchange established itself in the neighbourhood of 16d—the average rate realised during the year being 15.98d—and the year closed with a balance of 3.96 crores of rupees, after providing a crore for military operations on the frontier, thus inaugurating the era of substantial surpluses. Now we all know that a rise of 3d in the exchange value of the rupee—from 13d to 16d—means a saving of between four and five crores of rupees to The Government of India, on their Home Charges alone, secures a saving of between four and five crores of rupees, and I think this fact is sufficient in itself to explain the huge surpluses of the last four or five years. The following figures are instructive, as they show the true position of our revenue and expenditure on the new basis of an artificially appreciated rupee.

If there had been no extra charges for war and famine, the national revenue, on the basis of the new rupee, would have been found to exceed the requirements of Government by about so many crores a year. Allowing for the savings effected in consequence of the absence of a portion of the troops in South Africa and China, as also for the generally reduced level of ordinary expenditure in famine times, and taking note of the fact that the opium revenue turned out somewhat better than was expected and might reasonably be relied on, we may still put down the excess of our present revenue over our present expenditure at about five crores of rupees. This is also the figure of the amount saved by Government on their Home Charges as a consequence of the exchange value of the rupee having risen from 13d to 16d.

Now, my Lord, I submit with all respect that it is not a justifiable course to maintain taxation at the same high level when the rupee stands at 16d as was thought to be necessary when it stood at 13d. During the last sixteen years, whenever deficits occurred, the Finance Member invariably attributed them to the falling rupee and resorted to the expedient of additional taxation, explaining that that was the only way to avoid national bankruptcy.

During the first twelve years of this period, from 1885–86—when Sir Auckland Colvin told the Council in his Financial Statement almost in prophetic terms that affairs were ‘passing into a new phase,’ necessitating a reconsideration and revision of the fiscal status established in 1882—down to 1896–97, there was one continued and ceaseless struggle on the part of the Finance Department of the Government of India to maintain at all risks and hazards a ‘strong financial position’ in the face of a rapidly changing situation, and to provide by anticipation against all possible dangers, near and remote, fancied and real; and not a year passed—literally speaking—but heralded some change in the financial arrangements of the country.

The famine grant was suspended for three successive years, 1886–87 to 1888–89, then reduced for two more, and permanently so in the last year of the period. Twice during these twelve years were the Provincial Contracts subjected to drastic revision (1887–88 and 1892–93), and the total gain secured to the Imperial Treasury on such revision and by a contraction of Provincial resources was full 110 crores (64 lakhs in 1887–88 and 46 lakhs in 1892–93). Furthermore, during the period, thrice (in 1886–87, 1890–91, and 1894–95) were the Provincial Administrations called upon to pay special contributions in aid of Imperial revenues.

But the chief financial expedient employed to escape the supposed embarrassment of the time was continuous additions to the taxation of the country. Nine years out of these twelve witnessed the imposition of new taxes. First came the income-tax in 1886, and then followed in rapid succession the salt-duty enhancement of 1887–88 (June 1888), the petroleum and patwari taxes and extension of the income-tax to Burma in 1888–89, customs on imported liquors increased in 1889–90, the excise-duty on Indian beer in 1890–91, the import-duty on salt-fish in Burma in 1892–93, the re-imposition of the 5 per cent ad valorem duties on imports, excluding cotton-goods, in 1893–94, and the extension of import-duties to cotton-goods in 1894–95.

In 1896 there were changes in the tariff. The 5 per cent import and excise duties on cotton-yarns were abolished, and the import-duties on cotton-goods were reduced from 5 t0 3 ½ per cent involving a sacrifice of 60 lakhs of rupees as a concession to the clamour of Manchester, but a countervailing excise of 5 per cent was imposed on cotton-goods of all counts manufactured in Indian mills. Lastly came the imposition of countervailing duties on imports of bounty-fed sugar in 1899.

The total additional revenue raised by these measures of taxation during the past sixteen years has been no less than 12.30 crores a year.

But this is not all. The land tax, too, has come in its own automatic way for large augmentations during the period. Taking the ordinary revenue alone under this head, we find the increase has been 2.82 crores. One startling fact about these land-revenue collections is that during the six years from 1896–97 to 1901–02 (a period including the two greatest famines of the country), these collections actually averaged 19.53 million a year, as against 16.67 million, the average for the six preceding years, i.e., from 1890–91 to 1895–96.

Putting these two heads together, the total augmentation of public burdens during these years comes to over 16 crores. Such continuous piling up of tax on tax, and such ceaseless adding to the burdens of a suffering people, is probably without precedent in the annals of finance. In India, it was only during the first few years following the troubles of the Mutiny year that large additions were made to the taxation of the country; but the country was then on the flood-tide of a short-lived prosperity, and bore, though not without difficulty or complaint, the added burden.

During the past sixteen years, the country has passed through a more severe phase of agricultural and industrial depression, and yet it has been called upon to accept these fresh burdens—year after year—increasing without interruption, and all this with a view to ensuring and maintaining a ‘strong financial position’ proof against all assaults.

The broad result of this continued series of taxing measures has been to fix the taxation of the country at a level far above the actual needs of the situation. And it is the fiscal status so forced up and maintained, and not a normal expansion of revenue, that has enabled the financial administration during all these trying years not only to meet out of current revenues all sorts of charges, ordinary and extraordinary, but to present, at the close of the period, abounding surpluses which the richest nation in Europe might well envy.

A taxation so forced as not only to maintain a budgetary equilibrium but to yield as well large, continuous, progressive surpluses—even in years of trial and suffering—is, I submit, against all accepted canons of finance. In European countries, extraordinary charges are usually met out of borrowings, the object being to avoid, even in times of pressure, impeding the even, normal development of trade and industry by any sudden or large additions to the weight of public burdens. In India, where the economic side of such questions finds such scant recognition, and the principle of meeting the charges of the year with the resources of the year is carried to a logical extreme, the anxiety of the Financial Administration is not only to make both ends meet in good and bad years alike, but to present large surpluses year after year.

The Hon’ble Finance Member remarks in his Budget Statement under ‘Army Services’:

"It must be remembered that India is defraying from revenues the cost of undertaking both re-armament and the reform of military re-organisation in important departments. I believe that this is an undertaking which has not been attempted by other countries without the assistance of loans in some form or other. Even in England, extraordinary military requirements for fortifications and barracks have been met by loans for short terms of years repayable by instalments out of revenues. If, profiting by a period of political tranquillity, we can accomplish this task without the raising of a loan and the imposition of a permanent burden on future generations, I think that we shall be able to congratulate ourselves on having done that which even the richest nations of Europe have not considered it advisable to attempt."

Every word of this citation invites comment. How comes it that India is doing, in regard to these extraordinary charges, that which even the richest nations of Europe have not considered it advisable to attempt? The obvious the answer is that in those countries it is the popular assemblies that control taxation and expenditure; in India, the taxpayer has no constitutional voice in the shaping of these things. If we had any votes to give, and the Government of the country had been carried on by an alternation of power between two parties, both alike anxious to conciliate us and bid for our support, the Hon’ble Member would assuredly have told a different tale. But I venture to submit, my Lord, that the consideration which the people of Western countries receive in consequence of their voting power should be available to us, in matters of finance at any rate, through an intelligent anticipation—to use a phrase of Your Lordship’s—of our reasonable wishes on the part of Government.

But even thus—after doing what the richest nations of Europe shrink from attempting—meeting all sorts of extraordinary charges, amounting to about seventy crores in sixteen years out of current revenues—we have large, continuous, progressive surpluses, and this only shows, as Colonel Chesney points out in the March number of The Nineteenth Century and After, that more money is being taken from the people than is right, necessary, or advisable; or, in other words, the weight of public taxation has been fixed and maintained at an unjustifiably high level.

Taxation for financial equilibrium is what we all can understand, but taxation kept up in the face of the difficulties and misfortunes of a period of excessive depression, and for large, continuous, and progressive surpluses, is evidently a matter which requires justification. At all events, those who have followed the course of the financial history of the period will admit that the fact, viewed per se, that such large, continuous, and progressive surpluses have occurred during the period—as a result not of a normal expansion of fiscal resources but of a forced up and heavy taxation—does not connote, as Lord George Hamilton contends, any advancing material prosperity of the country, or argue any marvellous recuperative power on the part of the masses, as the Hon’ble Sir Edward Law urged last year. To them, at any rate, the apparent paradox of a suffering country and an overflowing treasury stands easily explained and is a clear proof of the fact that the level of national taxation is kept unjustifiably high, even when Government is in a position to lower that level.

This being my view of the whole question, it was, I need hardly say, a matter of the deepest regret that Government had not seen their way, in spite of four continuous years of huge surpluses, to take off a portion, at any rate, of the heavy burdens which had been imposed upon the country during the last sixteen years. Of course, the whole country will feel grateful for the remission of close upon two crores of the arrears of land-revenue. The measure is a bold, generous, and welcome departure from the usual policy of clinging to the arrears of famine times, till a portion of them has to be abandoned owing to the sheer impossibility of realising them, after they have been allowed to hang over the unfortunate raiyat's head, destroying his peace of mind and taking away from him heart and hope. The special grant of 40 lakhs of rupees to education will also be much appreciated throughout the country.

But my quarrel is with the exceedingly cautious manner—a caution, I would venture to say, bordering on needless timidity—in which my Hon’ble friend has framed the Budget proposals for next year. Why should he, with four continuous years of fat surpluses to guide him, and no special cloud threatening his horizon, budget for a surplus of only 11 crores, when three times the amount would have been nearer the mark, and that again, as calculated by a reasonably cautious standard? If he had only recognised the ordinary facts of our finance, as disclosed by the surpluses of the last four years, he would have, among other things, been able to take off the additional 8 annas of salt-duty, raise the taxable minimum of the income-tax to at least Rs. 1,000 a year, abolish the excise-duty on cotton goods, and yet show a substantial surplus for the year.

And, my Lord, the reduction of taxation in these three directions is the very least that Government could do for the people after the uncomplaining manner in which they have borne burden after burden during the last sixteen years. The desirability of raising the exemption limit of the income-tax has been frequently admitted on behalf of Government, and, amongst others, by yourself in Your Lordship’s first Budget Speech.

The abolition of the excise on cotton-goods is urgently needed, not only in the interests of the cotton industry, which is at present in a state of dreadful depression, in large measure due to the currency legislation of Government, but also as an act of the barest justice to the struggling millions of our poor, on whom a portion of the burden eventually falls, who have been hit the hardest during recent years by famine and plague, by agricultural and industrial depression, and the currency legislation of the State, and who are now literally gasping for relief.

In this connection, I would especially invite the attention of Government to a speech delivered at the annual meeting of the Bombay Chamber of Commerce by my friend the Hon’ble Mr. Moses—a by no means unfriendly critic of Government, and one who enjoys their confidence as also that of the public. Mr. Moses, in that speech, describes with much clearness and force the great injury which the currency legislation of Government has done to our rising cotton industry. That industry, he tells us, has now “reached the brink of bankruptcy,” with no less than fourteen mills about to be liquidated, and some of them, brand new ones, being knocked down to the hammer for a third only of their original cost. Mr. Moses also speaks of the severely adverse manner in which the new currency has affected the economic position of the mass of our countrymen.

As regards the reduction of salt-duty, I do not think any words are needed from anyone to establish the unquestioned hardship which the present rate imposes upon the poorest of the poor of our community. Government themselves have repeatedly admitted the hardship; but in these days, when we are all apt to have short memories, I think it will be useful to recall some of the utterances of men responsible for the Government of India in the matter. In 1888, when the duty was enhanced, Sir James Westland, the Finance Member, speaking on behalf of the Government of India, said:—“It is with the greatest reluctance that Government finds itself obliged to have recourse to the salt-duty.” Sir John Gorst, Under-Secretary of State for India, speaking a few days later in the House of Commons, referred to the matter in similar terms of regret.

Lord Cross, then Secretary of State for India, in his Despatch to the Government of India, dated 12th April 1888, wrote as follows:

“I do not propose to comment at length on any of the measures adopted by your government except the general increase in the duty of salt. While I do not dispute the conclusion of your Government that such an increase was, under existing circumstances, unavoidable, I am strongly of opinion that it should be looked upon as temporary and that no effort should be spared to reduce the general duty as speedily as possible to the former rate.”

His Lordship further urged upon the attention of the Government of India the following weighty considerations on the point:

“I will not dwell on the great regret with which I should at any time regard the imposition of additional burdens on the poorest classes of the population, through the taxation of a necessary of life; but, apart from all general considerations of what is in such respects right and equitable, there are, as Your Excellency is well aware, in the case of the salt-duty in India, weighty reasons for keeping it at as low a rate as possible. The policy enunciated by the Government in 1877 was to give to the people throughout India the means of obtaining an unlimited supply of salt at a very cheap rate; it being held that the interests of the people and of the public revenue were identical and that the proper system was to levy a low duty on an unrestricted consumption. The success of that policy hitherto has been remarkable; while the duty has been greatly reduced, the consumption through this and other causes has largely increased. The revenue is larger now than it was before the reforms commenced in 1877, and I see no reason to doubt that the consumption will continue to increase, if it be not checked by enhancement of the tax.”

Speaking again at a public meeting in England, Lord Cross took occasion to repeat his views that “he was convinced that the earliest occasion should be taken to abrogate the increase in the salt-tax” (February 28, 1889). In March of the same year, Sir David Barbour, speaking in the Viceregal Council with special reference to a proposal for the abolition of the income-tax, observed:

“I think it would be an injustice so gross as to amount to a scandal if the Government were to take off the income-tax while retaining the salt-duty at its present figure.”

In 1890, Sir John Gorst, in his speech on the Indian Budget in the House of Commons (August 14, 1890), remarked: “The tax (on salt) was no doubt a tax which ought to be removed and would be removed as soon as it should be financially possible to do so.” Similarly, Lord George Hamilton himself, in a speech on the Indian Budget Statement in the House of Commons (September 4, 1895), emphasized the necessity for reducing the salt-duty as early as possible, pointing out that no other tax pressed so heavily on the Indian people. In view of these repeated declarations, it is a matter for great surprise, no less than for intense regret and disappointment, that Government have not taken the present opportunity to reduce a rate of duty, admittedly oppressive, on a prime necessary of life, which, as the late Professor Fawcett justly urged, should be “as free as the air we breathe and the water we drink.”

It may be noted that the consumption of salt during the last fourteen years has been almost stationary, not even keeping pace with the normal growth of population—showing a rise of less than 6 per cent in fourteen years against a rise of 18 per cent in four years following the reduction of duty in 1882—and that the average consumption of the article in India is admittedly less than is needed for purposes of healthful existence.

My Lord, the obligation to remit taxation in years of assured surpluses goes, I believe, with the right to demand additional revenues from the people in times of financial embarrassment. A succession of large surpluses is little conducive to economy and is apt to demoralize even the most conscientious Governments by the temptation it offers for indulging in extravagant expenditure. This is true of all countries, but it is especially true of countries like India, where public revenues are administered under no sense of responsibility, such as exists in the West, to the governed. A severe economy, a rigorous retrenchment of expenditure in all branches of the Administration, consistently, of course, with the maintenance of a proper standard of efficiency, ought always to be the most leading feature—the true governing principle—of Indian finance, the object being to keep the level of public taxation as low as possible, so as to leave the springs of national industry free play and room for unhampered movement.

Such a course is also imperatively demanded by the currency policy which has been recently adopted by Government. That policy has, no doubt, given the country a stable exchange and brought relief to the Finance Member from his usual anxieties; but when the final adjustment of prices takes place, as is bound sooner or later to happen, it will be found that a crushing burden has been imposed upon the vast majority of taxpayers in the country. It is true that general prices have not been as quick to adjust themselves to the new artificially appreciated rupee as the rupee itself has been to respond to the restrictions put upon its production.

This was, however, to be expected, as the force of tradition in a backward country like India was bound to take time to be overcome. Famine conditions during the last few years also retarded adjustment, but there is no doubt that there would be a general fall of prices sooner or later corresponding to the artificial appreciation of the rupee.

When that happens, Government will be taking about 40 per cent more in taxation from producers in this land and paying to its servants a similarly augmented remuneration. This will be a terrible burden for the masses of the country to bear. Already, during the last few years of famine, they have had to suffer serious losses in converting their stock of silver into rupees when the rupee had grown dearer, but its purchasing power had not correspondingly increased.

When the expected adjustment of general prices takes place, one curious result of it will be that the Government will have made a present to moneylenders of about 40 per cent of the loans which these moneylenders have made to agriculturists—a result which surely Government could never have desired. In view of the great injury which the currency policy of Government has thus done and will do as its results unfold themselves more and more to the agriculturists and other producers of this country, I submit Government are bound to make to them such slight reparation as is possible by reducing the level of taxation as low as circumstances may permit.

My Lord, in considering the level of taxation in India and the administration of the revenues so raised, it is, I think, necessary to bear in mind two root facts: (1) that it is the finance of a country, a considerable part of whose revenues is, by reason of its political and military necessities, spent outside its borders and ipso facto brings no commercial equivalent to the country; and (2) that it is the finance of a country which is not only “poor, very poor,” as Lord George Hamilton admits, but the bulk of whose population is daily growing poorer under the play of the economic forces which have been brought into existence by British rule.

It is true that the fact of this growing poverty of our people finds no official recognition, and we have even assurances from the highest quarters of their advancing prosperity. With all due deference, however, I venture to submit that we, who live in the midst of the hard actualities of a hard situation, feel that any such comforting views of the condition of the Indian people are without warrant in the facts of the case, and we deem it our duty to urge, on behalf of the struggling masses no less than in the interests of good administration, that this fact of a deep and deepening poverty in the country should be frankly recognized, so that the energies of the Government might be directed towards undertaking remedial measures.

The Hon’ble Finance Member sees in last year’s Customs returns a sign of the advancing prosperity of the people. Now, apart from the fact that it is unsafe to draw conclusions from the returns for any single year, since the imports of particular years often only technically belong to that year, there is, I submit, nothing in the returns of last year to bear out my Hon’ble friend’s contention. The bulk of our countrymen, whose economic condition is the point at issue, have nothing to do with the imports of sugar or cotton manufactures, which now are practically only the finer fabrics. The silver imported also could not have concerned them, since last year was a famine year, and the poorer classes, instead of buying any silver, parted over large areas with the greater portion of what they possessed. The increase in the imports of petroleum only means the larger replacement of country oil by petroleum—a thing due to the enterprise of certain English companies that sell petroleum in this country and the opening up of new tracts by railways. Petroleum is also in some places now being used for cooking purposes in place of fuel.

I do not think, therefore, that the Hon’ble Member is justified in drawing from last year’s Customs returns the conclusion which he draws from them. The growth under Land-revenue, Excise, and Stamps is sometimes mentioned as indicating increasing prosperity. But the growth of Land-revenue is a forced, compulsory growth. It is a one-sided arrangement, and the people have either to pay the increased demand or give up their land and thereby part with the only resource they have. The growth of Excise-revenue, to the extent to which it is secured by increased consumption, only shows that the operations of the Abkari Department, with its tender solicitude for the interest of the legitimate consumer—a person not recognized by the State in India in pre-British times—are leading to increased drunkenness in the land. This, of course, means increased misery and is thus the very reverse of an indication of increasing prosperity. Liquor is not like ordinary articles of consumption, which a man buys more or less as his means are larger or smaller. When a man takes to drink, he will go without food and will sacrifice wife and children, if necessary, but he will insist on satisfying his craving for the spirituous poison.

Similarly, an increase of revenue under Stamps only means an increase in litigation, which undoubtedly shows that the people are quarrelling more, but which is no proof of their growing riches. No, my Lord, the only taxes whose proceeds supply any indication of the material condition of the people are the income-tax and the salt-tax—the former, roughly speaking, for the middle and upper classes, and the latter for the masses. Now, the revenue under both these heads has been more or less stationary all these years, and the salt-revenue has not even kept pace with the normal growth of the population. They, therefore, lend no support to the contention that the people are advancing in material prosperity.

My Lord, Your Lordship was pleased to deal with this question at some length in the Budget discussion of last year, and, after analysing certain figures, Your Lordship expressed the opinion that the “movement is, for the present, distinctly in a forward and not in a retrograde direction.” The limitations of the method adopted in that investigation were, however, frankly recognised by Your Lordship. I think, my Lord, the attempt to determine the average income per head for a given population is useful only for the purpose of obtaining a statistical view of the economic condition of that people. And from this point of view, our average income, whether it works out to Rs. 18 or Rs. 20 or Rs. 27 or Rs. 30 per head, is exceedingly small and shows that we are an exceedingly poor people.

But when these calculations are used for taking a dynamical view of the economic situation, the method is open to serious objection, as the necessarily conjectural character of many of the data renders them of little value for such a purpose. But, though the determination of the average income per head in a manner satisfactory to all is an impossible task, there is, I submit, ample evidence of another kind which can help us to a correct understanding of the problem. And this evidence, I venture to say, points unmistakably to the fact that the mass of our people are not only not progressing, but are actually receding in the matter of material prosperity.

I have here certain tables,* compiled from official publications, relating to (1) census returns, (2) vital statistics, (3) salt consumption, (4) the agricultural out-turn of the last sixteen years, (5) cropped area in British India, (6) area under certain superior crops, and (7) exports and imports of certain commodities, and they establish the following propositions:

(1) that the growth of the population in the last decade has been much less than what it should have been, and that in some Provinces there has been an actual decline in the population;

(2) that the death-rate per mile has been steadily rising since 1884, which points to a steadily increasing number of the people being under-fed.

(3) The consumption of salt, which already in this country is below the standard required for healthy existence, has not kept pace with even this meagre growth of population;

(4) the last decade has been a period of severe agricultural depression all over India;
(5) the net cropped area is diminishing in the older Provinces;
(6) the area under superior crops is showing a regrettable diminution;
(7) the export and import figures tell the same tale, viz., that the cultivation of superior crops is diminishing. Cattle are perishing in large numbers.

The losses of the agricultural community, owing to the destruction of crops and cattle and in other ways during the famines of the last five years, have been estimated at something like 1,500 crores of rupees. There is, again, indisputable evidence as to the fast-proceeding exhaustion of the soil through continuous cropping and, for the most part, unmanured tillage. Sir James Caird wrote strongly on the point, remarking:

“Crop follows crop without intermission, so that Indian agriculture is becoming simply a process of exhaustion.”

Dr. Voelcker expressed a similar view. The indebtedness of the agricultural classes is also alarmingly on the increase. Mr. Baines, writing about the North-Western Provinces and Oudh, says:

“Of the peasantry, it is estimated that nearly three-fourths have to go to the moneylender to enable them to tide over the interval between the spring and the autumn season.”

As regards Bombay, the MacDonnell Commission writes:

“At least one-fourth of the cultivators in the Bombay Presidency have lost possession of their lands, less than a fifteenth are free from debt, and the remainder are indebted to a greater or less extent.”

Similar evidence, I believe, is forthcoming about the Punjab and the Central Provinces.

These and similar facts, taken cumulatively, lead irresistibly to the conclusion that the material condition of the mass of the people in India is steadily deteriorating, and I grieve to say that the phenomenon is the saddest in the whole range of the economic history of the world. Here is a peasantry which, taken all in all, is inferior to no other people in industry, frugality, and patient suffering. It has enjoyed the blessing of uninterrupted peace for half a century, and at the end of the period, the bulk of them are found to be in a worse plight than they have ever been in. I submit, my Lord, that a fact so startling and so painful demands the earnest and immediate attention of Government, and I venture to believe that Government cannot afford to put off facing the situation any longer.

An inquiry into the condition of a few typical villages has been suggested, and, if undertaken, will certainly clear many of the prevailing misapprehensions on the subject. It is urged on behalf of Government that no such inquiry is needed because similar inquiries have already been made in the past. There is no doubt that inquiries of some sort have been made, and Government have in their possession a large body of valuable information on the subject—information which, unfortunately, they insist on withholding from the public. Why this should be so is difficult to understand, as the field is exclusively economic, and Government ought to welcome the co-operation of non-official students of the subject in understanding and interpreting the economic phenomena of the country.

I venture to think that if the papers connected with the Cromer inquiry of 1882, the Duffern inquiry of 1887–88, and the confidential inquiry undertaken in 1891–92 were published, much valuable assistance would be afforded to the public by Government. The same remark applies to the statistical memorandum and notes on the condition of lower classes in the rural parts furnished to the Famine Commission of 1898 by the Provincial Governments, the official memorandum referred to by Your Lordship in the Budget discussion of last year, “worked out from figures collected for the Famine Commission of 1898,” the Appendices to the Report of the Famine Commission of 1901, and the official memorandum on agricultural indebtedness referred to by the present Lieutenant-Governor of the Punjab in his speech on the Punjab Land Alienation Bill—all of which documents have been kept confidential without any intelligible excuse.

I think Your Lordship will have done much to bring about a truer appreciation of the economic situation in the country if you will see your way to publishing these valuable papers and documents, which there is really no reason for withholding from the public.

My Lord, I have so far tried to show

(1) that the huge surpluses of the last four years are only currency surpluses.

(2) that the taxation of the country is maintained at an unjustifiably high level and ought to be reduced; and

(3) that India is not only a “poor, very poor” country, but that its poverty is steadily growing, and in the administration of its finances, therefore, due regard must always be had to this central, all-important fact.

Since the close of the beneficent Viceroyalty of Lord Ripon, however, our finances have been so managed as to lend support to the view that the interests of England take precedence over Indian interests in the administration of Indian revenues. Thus, large sums have been spent out of our meagre revenues on conquest and territorial expansion, which have extended England’s dominion but have brought no benefit to the people of India. The English mercantile classes have been conciliated by undertaking the construction of railways on an unprecedentedly large scale—programme following programme in breathless succession—sometimes in spite of the protests of the Finance Member—a policy which, whatever its advantages, has helped to destroy more and more the few struggling non-agricultural industries that the country possessed and throw a steadily increasing number on the single precarious resource of agriculture.

And this railway expansion has gone on while irrigation, in which the country is deeply interested, has been more or less neglected. The interests of the services were allowed to prevail, first, in the concessions made to uncovenanted Civilians enabling them to draw their pensions at the high rate of Rs. 9-1 a rupee, and then in the grant of exchange compensation allowance to all European officers, civil and military. Military expenditure has grown by nearly 6 crores a year during the period, and will increase by 5 crores more on account of the new increase in the European soldier’s pay, and the burden of Home Charges has grown by over 3 million sterling.

And all this while the expenditure on education from Provincial Revenues rose only by a paltry 20 lakhs or so, and domestic reforms in other directions have been neglected to a greater or lesser extent. There has been much talk about the growing indebtedness of the agricultural population, but no remedial action of a really helpful character, involving any outlay on the part of the State, has been undertaken. Happily, a change for the better again seems to have come upon the Government during the last three years. Your Excellency has placed the Frontier question on a satisfactory basis, and this is all the more remarkable because a certain vigorous speech of Your Lordship’s delivered long before there was any idea of your being entrusted with the highest office in this country, had seemed to commit Your Lordship to the views of the Forward School.

The recent Resolution on the land question, however—one may disagree with the controversial part of it—is conceived in a spirit of large-hearted sympathy with the struggling poor, and if the generous principles that it lays down for the future guidance of Local Governments are loyally carried out, they will win for the Government the deep gratitude of the people.

 Summary of the speech

In his first Budget speech, Gopal Krishna Gokhale critically examined India’s financial administration, highlighting the disconnect between government surpluses and the economic distress of the people. He argued that recent surpluses, unprecedented in Indian history, were largely “currency surpluses” resulting from an artificially appreciated rupee, maintained high taxation, and not from genuine economic prosperity. Gokhale stressed that continuous additions to taxes over sixteen years, including land, salt, excise, and income taxes, had imposed an extraordinary burden on the population, particularly during periods of famine, plague, and agricultural depression. He rejected claims that increasing revenues reflected rising prosperity, citing stagnation in salt consumption, declining agricultural productivity, and growing indebtedness among cultivators as evidence of worsening poverty.

Gokhale also criticized the prioritization of imperial and military expenditures over local development, noting railway expansion, high European officer allowances, and military spending, while education and irrigation were neglected. He urged the Government to reduce taxation, particularly the salt and excise duties, as a measure of justice and economic relief. Emphasizing transparency, he called for the publication of confidential reports on agricultural and rural conditions to inform policy. Ultimately, Gokhale’s speech sought a financial policy that recognized India’s poverty, eased burdens on the people, and balanced revenue with the well-being of the populace.

 

10 key takeaways from Gopal Krishna Gokhale’s 1902 Budget Speech:

1. Surplus vs. Suffering: The large government surpluses do not indicate prosperity; they exist despite widespread poverty and hardship among the Indian people.
2. Currency Surplus: Surpluses were largely due to an artificially appreciated rupee, not increased productivity or economic growth.
3. Excessive Taxation: Continuous additions to taxes over sixteen years imposed heavy burdens on the population, especially during famines and economic depression.
4. Land Revenue Pressure: Land-tax collections increased steadily, even during periods of famine, adding to the hardship of cultivators.
5. Industry Neglect: Policies like excise on cotton goods harmed domestic industries, pushing mills toward bankruptcy.
6. Salt Duty Burden: High salt duties disproportionately affected the poorest, contradicting earlier government promises to keep it low.
7. Misleading Indicators: Growth in customs, excise, and stamp revenues do not reflect real prosperity; they often indicate forced payments or increased hardship.
8. Agricultural Decline: Soil exhaustion, falling crop yields, growing indebtedness, and loss of land highlight deteriorating rural conditions.
9. Imperial Priorities: Expenditures favored imperial expansion, military, and railways, often at the expense of local development like education and irrigation.
10. Need for Reform: Gokhale urged tax relief, transparency in official reports, and a financial policy sensitive to India’s real economic conditions.