PART II PROVINCIAL FINANCE: ITS DEVELOPMENT CHAPTER IV BUDGET BY ASSIGNMENTS 1871-72 TO 1876-77 THE origins which led to the formulation of the scheme of Provincial Budget having been presented in the foregoing part of this study, we may now proceed to examine the constitution of the scheme as it was introduced and the changes which it underwent from time to time. With his sureness of instinct Lord Mayo traced the financial deficits and surprises to the inefficiency of the Imperial and the irresponsibility of the Provincial Governments, and was led to the conclusion that the inauguration of Provincial Budgets was the only remedy equal to the malady. But it must be recalled that the situation was yet dominated by Imperialistic considerations, and while every one in charge of the affairs was desirous, even anxious, to ease the situation by some means or other, few were willing to do so at the cost of Imperial control. Even Lord Mayo was not without his Imperialistic leanings. But the force of the baffling circumstances compelled him to break through the hitherto prevailing spirit of hesitation and indecision, although the steps he took in determining the constitution of the Provincial Budget were slow and cautious. The scheme which actually came to be introduced from the financial year 1871-2 was first adumbrated in a confi dential circular of the Home Department of the Government of India, dated February 21, 1870. Enlarging upon the policy of retrenchment by which the road grant for 1869-70 fixed in the beginning at £1,236,000 came to be reduced at the close of the year to £1,021,178 and that estimated for 1870-1 at £1,000,000 came to be finally settled at £784,839 supplemented by £29,110 for Miscellaneous Public Improvements, the circular gave the Provincial Governments "to understand that the diminution that has been made in the Imperial grant for communications and roads is not a temporary diminution caused by present financial pressure. It is the result of a settled policy, deliberately adopted, independently of temporary considerations, and it is far more probable that in future years the special grant for these purposes will be reduced than that it will be increased. It therefore becomes a matter of very urgent necessity that no time should be lost in providing from local sources the funds necessary for the maintenance of the existing provincial and district roads, and for the construction of the new lines of communications which become every day more necessary." That local wants should be met by local resources had been the ideal of Indian financiers during the entire period of its reconstruction. But that the view had by that time passed beyond the stage of academic discussion is obvious, for the Circular stated that "the Governor-General in Council had fully resolved that he will insist on full effect being given to this principle" in future. Many of the Local Governments took the sentiments of the Government of India conveyed in the Circular in all the seriousness in which they were meant to be taken and had begun to develop their local resources. In the Bombay Presidency a cess of 61 per cent. on the Land Revenue was levied and twothirds of it was set aside for roads and works of public utility. The Madras Government under an old Act of 1866 levied a cess of one-half of an anna on every rupee of annual rental equal to 3 per cent. on the Land Revenue purposes of district roads. The Bengal Government had declared its intention to follow the Madras Presidency. for Encouraged by the steps taken by these Local Governments the Circular urged upon other Local Governments and Administrations in Northern India, namely, NorthWestern Provinces, Punjab, Oudh and Central Provinces, to consider the expediency of increasing their road cesses on the land revenue to 5 per cent. The object of the move evidently was to relieve the Imperial treasury of the road grant, once the Provincial Governments were in possession of adequate local revenues. In this way the Circular contemplated a very meagre scheme of Provincial Budget, incorporating only the charges on local public improvements and the revenues derived from local resources to meet them. But before it could be set into operation the financial difficulties of the Government of India called for a larger measure of relief. Bad as the position already was, there was little confidence to be placed in the stability of the opium revenue; and, while there was practised a retrenchment in expenditure, the charges for interest on public debt was found to swell enormously. In the midst of such a precarious situation the Government of India decided to reduce the hitherto prevailing rate of the income tax in order to silence the outcry raised against it by the richer classes. As a possible method of ways and means to meet the additional deficit of £1,000,000 that was expected to arise from the reduction in the income tax rate, the Government of India issued another Confidential Circular, dated August 17, 1870, in which a much wider scope was given to the contemplated scheme of Provincial Budgets. It was stated in this Circular that "If the income tax was to be reduced, the ways and means of government must be otherwise recruited . . . preferably through the agency of Local Governments, and by adopting such methods of taxation as are considered most suitable to each province and least burdensome to the people." The method of throwing the burden on Local Governments consisted in making over to them charges of certain departments of the administration more or less local in character with a net grant on them for 1870-1 reduced by a million sterling.1 It was proposed to distribute this sum among the various provinces in the proportion which the net provincial grant of each bore to the total net grant and leave them free to make up their respective quota of retrenchment either by redistribution, retrenchment, or taxation. After the concurrence of the Provincial Governments had been obtained to the plan of the Circular, it was announced by the famous Financial Resolution of December 14, 1870, as being adopted for execution from the commencement of the Financial year 1871-2 We will now proceed to analyse the constitution of the Provincial Budgets as framed by this Resolution. Taking first the expenditure side of the Provincial Budget, it may be noted that the charges for the following Imperial services were incorporated into it : *1. Jails. 2. Registration. 3. Police. 4. Education. 5. Medical services (except Medical establishments). 6. Printing. 1 Net grant means total expenditure on a service minus the receipts from the service. Appendix B of the Resolution gives a schedule of certain works for which separate funds were to be provided from the Imperial Revenue. They were Buildings and Offices of the following Depart ments: Opium (not including the Board of Revenue's office in Calcutta). Post Office. Telegraph. Karachi Harbour Improvements Reserved as Imperial for the Such Military Roads as have been till the current year provided for from the grant for "Military Works." 7. Roads. 8. Miscellaneous, Public Improvements. 9. Civil Buildings. To provide the Provincial Governments with funds to meet the above charges incorporated into their budgets the Government of India surrendered to them the receipts which accrued from services handed over to them with an additional assignment from the Imperial fisc to bring about an equilibrium. The receipts surrendered and assignments granted to the Local Governments were as follows: Assignments made to Provincial Governments for services incorporated into their Budgets by the Financial Resolution No. 3334 dated December 14, 1870. Public Works 13,777 20,230 22,635 69,984 37,954 32,217 47,421 59,644 303,862 1,060 1,556 1,741 5,383 2,920 2,478 3,648 4,588 23,374 Total 237,182 304,866 303,923 1,520,943 799,946 622,332 876,726 1,001,320 5,667,243 signments 222,459 280,846 275,332 1,256,183 688,822 554,914 794,916 946,040 5,019,512 Constructed on the basis of figures given in the Resolution of December 14, 1870. |