THE EVOLUTION OF PROVINCIAL FINANCE IN BRITISH INDIA

 PART IV: PROVINCIAL FINANCE UNDER THE GOVERNMENT OF INDIA ACT OF 1919

 

Contents

 The Necessity For A Change

The Nature Of A change  

 

PART IV

 

PROVINCIAL FINANCE UNDER THE GOVERNMENT OF INDIA ACT OF 1919

 

CHAPTER X

 

THE NECESSITY FOR A CHANGE

 

As two types of governmental systems, the Presidential and Parliamentary are often contrasted[f1]  to the advantage of the latter. For the Parliamentary type of government it has been claimed[f2]  that no other arrangement seems able quite so effectively to place the centre of authority under the control of those who are supposed to represent the popular will : that it means government by consent : that it ensures the exercise of the functions of government by a body of persons who are amenable to and whose views are in accord with those of the majority of the Legislature : that it is the only form of government which provides for a powerful Executive so very necessary for a stable government without rendering it so irresponsible as to endanger the essentials of a good government: that it throws upon the holders of high office the onus of vindicating their acts or, failing, suffer dismissal : it renders the Legislature supreme both in legislation and administration so that it forms a government not only to make life possible but also to make life good. No other form of government, it is urged, can so effectively prevent order degenerating into tyranny or progress blocked in the name of peace. So eminently has Parliamentary Government demonstrated its supreme virtue in securing orderly progress that, though originally developed as an accident in the evolution of the British Constitution, it has been most eagerly adopted as the most fundamental institution by many countries whose political convulsions have required them to prepare anew or alter the existing framework of their governmental systems.

If the fact of the Executive being a part of the Legislature be a sufficient indication of the Parliamentary type of government, then the system of government in India since 1853 may be said to be analogous to the Parliamentary system. Indeed it would hardly be possible to deny this characteristic to the Indian constitution, for the provision of the constitutional law has since then been that the additional (i.e. the Legislative) members and the ordinary (i.e. the Executive) members shall together form the Legislature for the making of the laws and regulation for the peace, order and good government of British India. [f3]  But judged in the light of its de facto consequences the Indian system falls lamentably below the de jure connotation of the class of governmental systems to which it belonged. If in other countries the record of Parliamentary government is one of submission of the Executive to the Legislature, in India it had been one of the Executive thwarting, often of flouting, the legislature. In vain may one search the proceedings of the Legislature to find the Executive ever paying deference to the wishes of the people1 Reforms have been incessantly, asked for by the legislature only to be denied with equal tenacity by the Executive.

1The following table from N. C. Kelkar's The Case for Indian Home Rule, p. 81, is illustrative of the fact :

Legislative Council

No. of Resolutions moved

No. of Resolutions withdrawn

No. of Resolutions rejected

No. of Resolutions accepted

Supreme

Madras

3

32

2

26

1

6

0

 0

Bengal

U.P.

38

22

26

10

12

12

0

0

Bihar and Orissa

5

5

0

0

C.P.

4

2

2

0

 

The reason why the Indian parliamentary system was but an empty form is to be found in the fact that it was a Parliamentary system without a Parliamentary Executive. In other words, the Executive under the system was not responsible to the legislature and was not removable by it. The Indian Legislature could neither make nor unmake the Indian Executive. The Indian Executive made peace or war as it liked without being afraid of dismissal by the Legislature. It taxed as it pleased and spent as it liked, without the slightest compunction as to the wishes of the Legislature, it undertook acts or refused to undertake them according to its own sweet will, but had no fear of a vote of censure from the legislature. The nearest approach to the Indian system of parliamentary Government is to be found in the position of the Irish Parliament which existed from 1782 to 1800. The peculiarity of the case lay mainly in the fact that while this Irish Parliament, commonly known as Grattan's Parliament, was during the period it lasted admittedly a sovereign Legislature, the Irish Executive of the time was as regards the Irish Parliament in no sense a Parliamentary Executive. The Irish  Executive, instead of being appointed and dismissed by the Irish Legislature, was in reality appointed and dismissed by the Crown on the advice of the English Ministry. In the same manner the Indian Executive was appointed and dismissed by the Crown on the advice of the Secretary of State for India who is a member of the English Ministry and was in no way responsible to the Indian Legislature.

It is true that the Executive in India was ultimately responsible to the Secretary of State for India and through him to the British Parliament. But it must not be forgotten, said Mr. Fisher, [f4]  that

"the affairs of India are in the hands of the Government of India.... Proposals may come from the Indian Government to London and be vetoed by the Imperial Government. The large lines of Indian policy may be shaped by a Secretary of State in the India Office, and a powerful Secretary of State may make his influence felt strongly on the direction of Indian affairs if he encounters no serious opposition from the Government of India. But in reality the last word lies with the Indian official opinion (i.e. the Executive in India), that a measure would not be forced upon India against the united opposition of the Indian bureaucracy."

As a matter of fact neither was the Secretary, though all-powerful in Indian affairs, inclined to restrain the Executive in India from doing what the people regarded as evil nor to constrain it to do what he thought to be for the good of the people. [f5]  Hardly can it be said that the British Parliament, wherein every member has been supposed to be a member for India, has made the acts of the Indian Executive a matter of anxious scrutiny#.  

#The salary of the Secretary of State for India being paid out of the revenues of India, Parliament, had no occasion, as it had in the case of the Colonial Secretary, to annually review his actions in the full activity of the parliamentary Session. At the end, generally after the Appropriation Bill had been read a second time, the Indian Budget used to be submitted to Parliament which, after a somewhat desultory discussion, used to pass a Resolution proclaiming in solemn terms that the Indian Accounts show certain totals of income and expenditure ! Many attempts were made to improve the control of Parliament on Indian affairs. But Parliament never cared to increase its control. In 1873 Mr. R. N. Fowler moved" that in the opinion of this House it is desirable that the Statement of the financial affairs of India should be made at a period of the Sessions when it can be fully discussed." Again in 1883 the same motion was brought forward by Mr. Fowler. Both of these attempts to furnish the House with a better opportunity to review Indian affairs fell to the ground. In 1899 the same Resolution was moved by Mr. Cladwell, M.P., with the addition that the Salary of the Secretary of State for India be placed on the British Estimates. It was opposed by Mr. Fowler, who was then the Secretary of State for India, and was in consequence lost. By the provision of the Government of India Act of 1919 the House has a better opportunity to criticise Indian affairs owing to the salary of the Secretary of State having been placed on the British Estimates.

 

On the other hand, its interference in Indian affairs has on some occasion been positively harmful to the interests of the Indian people. [f6]  Indeed, there can be no doubt that the interest of Parliament in Indian affairs since the assumption of the Government of the country by the Crown instead of increasing has considerably diminished as compared with the interest it took when the affairs of the country were in charge of the Company. [f7]  Nay, the influence of the British Parliament over Indian affairs, it may be said, has undergone a decided change for the worse, [f8] inasmuch as all its influence is exerted to strengthen the Executive in India against popular clamour rather than restraining it from flying in the face of public opinion.

It is therefore evident that the control of the Secretary of State and of Parliament over the Executive in India was only a nominal control, and the Indian Executive was in reality an uncontrolled body of bureaucrats in the exclusive charge of Indian affairs. How was this trust discharged by this irresponsible Executive ?

The answer to this question may be summed up in the statement that the Indian Executive has sacrificed progress to order. Whether we examine its actions in the field of legislation or finance, the truth of this statement becomes painfully evident.

There are very few countries in the world where there may be said to prevail so many social evils as has been the case in India. Law is a means by which society from time to time repairs its ills in order to effect its conservation. But with very few exceptions[f9]  the rule of personal law of a most pernicious character has been allowed to govern the social relations of the citizens, notwithstanding the fact that enlightened public opinion has long since raised its voice of protest against its perpetuation. [f10] So religious has been the regard of the Executive for the preservation of the personal law, notwithstanding the fact that it has disabled millions of its subjects from enjoying the most elementary rights of citizenship, that it has been careful not to allow in cases of conflict the rational provisions of the civil law to override or chasten the irrational rulings of that archaic code. [f11] Judged by the modern standard of legislation the Executive must be pronounced to be extremely conservative. In the matter of securing economic rights its response was of a very halting character, and the legislation it has been persuaded to undertake for giving security or fixity of tenure to the agricultural[f12]  or ease and comfort to the industrial[f13] population sank in comparison to what it refused to undertake for liberating the rest from a species of industrial slavery notwithstanding incessant demands for its abolition. [f14] 

Its financial system was similarly characterised by the desire to preserve peace and order by taxing the masses and exempting the classes. It has been urged that the revenue system be so altered as to give relief to the poorer classes. Indirect taxes are justified as a method of making the poorer classes pay their share of the burden of the State without their being sensible of the fact. But there is a limiting principle which forbids the imposition of certain kinds of indirect taxes. It may be said to be agreed by students of public finance that indirect taxes be such that the poor on whom they impinge rather heavily relatively speaking, must be able to adjust the burden of such taxes to their means. When such indirect taxes fall on luxuries it is possible for them to apportion for themselves the burden they need must bear by regulating their purchases. But in those cases where they fall on necessaries of life this elasticity is not possible. The pernicious character of the salt tax in India was urged as a sufficient ground for its elimination from the revenue system of India. But not only did the Executive refuse to accept the demand, it actually increased the salt tax whenever a deficit has occurred instead of tapping some other source of revenue, which it could have done with equal ease and greater justice. In 1886, to cite one example, it was admitted[f15] that

"There can, after all is said and done, be no manner of doubt, but that one great fact remains established, one great blot not only unremoved but aggravated by the course of events in recent years..... It is that..... the classes in (India) which derive the greatest security and benefit from the British Government are those who contribute the least towards it." But in the Budget of 1887-8 the Executive eschewed its own conviction and increased the salt duty to make up for the deficit caused not by any extraordinary measure of internal improvement but by an enormous act of external aggression, namely the conquest of Burma, as though the income tax of 1886 which left untouched the incomes of the Bengal zamindars, the Assam Tea planters and the Talukdars of Oudh, in making the richer classes pay, made them pay, at the very moderate rates it levied, all they could be made to pay.

But the salt tax is not the only instance of inequity under which the masses paid for the classes. The land revenue as it has been levied in India may be cited as another example of inequity in the Indian Tax System. The sources of inequity are various. There is first of all the glaring fact that in some cases the amount of the tax is permanently fixed, while in other cases the amount of the tax payable in respect of land revenue is periodically revised. Now there is no justifying circumstance why some citizens should be exempted from contributing their quota to the growing needs of the State when the same is rigorously exacted from their fellows. This is, however, only one point of injustice to those whose taxable capacity in respect of land revenue is subject to periodical revisions. There is another which consists in the adoption of a wrong measure of capacity to pay. The cardinal feature of this revisable part of the land tax in India is to be found in the basis of the tax which, as is well known to every student of Indian Finance, is a certain unit of land. Now nobody has ever suspected the pernicious effect of the system which bases the tax on a unit of land held ; but surely there can hardly be a system more mistaken in thought or more mischievous in practice. It ignores the commonplace of economists which asserts that taxes are paid not by things but by persons[f16] and if it is persons who ultimately pay the taxes then it is manifest that they must be required to contribute not according to the land they hold but in proportion to the total income derived. On the contrary the system, in undertaking to tax per unit of land, taxes the poor peasant with only one acre to cultivate and the landlord owing hundreds of acres at a uniform rate without realising that as the total incomes of the two must be vastly different this uniformity of taxation must produce a glaring inequity of treatment as between the rich and the poor.

If the revenue thus raised by sacrificing equity to the dictates of order had been spent on services promoting progress there would have been some compensation. But such was not the case.

All the revenue that was collected was spent on Services such as Police, Military and Administration which are calculated to maintain order. Such services as Education, State aid to industries, hardly found any place in the scheme of public expenditure as managed by this irresponsible Executive. But it may be asked as to why the Executive, sovereign as it was, should have stood for order and against progress ?

 

 

PERCENTAGE OF EXPENDITURE

(Excluding expenditure on commercial services, i.e., Post Office and Telegraph Dept., Railways and Irrigation). In thousands of rupees.

Periods

District Administration

Forest

Other Heads, including Opium

Debt Sources

Civil Depts.

Civil Changes

Civil Works

Army (Including Military Works and Special Defence Works)

Famine Relief and Insurance

Total

 

 

 

 

 

 

 

 

 

 

 

1877-78 to 1881-82

5.2

.8

5.6

8.9

18.7

6.8

5.8

39.2

2.6

93.6

1882-83  to 1886-87

6.0

1.2

6.6

8.2

21.4

7.5

7.6

35.6

2.3

96.4

1887-88 to 1891-92

6.0

1.3

5.4

7.6

22.1

7.5

7.3

37.7

2.8

95.7

1892-93 to 1896-97

6.1

1.3

4.9

6.4

22.5

8.4

6.9

38.5

1.6

96.6

1897-98 to 1901-02

5.8

1.4

5.5

4.3

22.6

7.8

6.8

35.2

4.8

94.2

1902-03 to 1906-07

5.9

1.6

8.2

3.1

23.2

7.3

9

37.1

1.8

97.2

1907-08 to 1911-12

6.3

1.8

7.1

3.5

25.7

7.7

8.5

35.6

2.1

98.3

1912-13 to 1916-17

6.0

1.9

6.2

2.1

28.2

7.3

9.3

35.1

1.5

97.6

From the statistics of British India, Vol. II, Financial Statistics, 1920, p. 7.

The answer is that an irresponsible government, however sovereign, is incapable of progress, for in the exercise of its sovereign powers it is hampered by two very serious limitations. [f17]  There is first of all the internal limitation which arises from the character, motives and interests of those who are in power. If the Sultan does not abolish Mahomedanism, Pope ban Catholicism, the Brahmin condemn caste, or the British Parliament declare the preservation of blue-eyed babies illegal, it is not because they cannot do things, but it is because they will not do these things. In the same way if the Executive in India did not do certain things most conducive to progress it was because by reason of its being impersonal** and also by reason of its character, motives and interests it could not sympathise with the living forces operating in the Indian Society, was not charged with its wants, its pains, its cravings and its desires, was inimical to its aspirations, did not advance Education, disfavoured Swadeshi or snapped at anything that smacked of nationalism, it was because all these things went against its grain. But an irresponsible government is powerless to do even such things as it may like to do. For its authority is limited by the possibility of external resistance. There are things which it would do but dare not do for the fear of provoking thereby resistance to its authority. Caesar dare not subvert the worship of the Roman people, a modern parliament dare not tax the Colonies, however much they would. For the same reason the Government of India dared not abolish the caste system, prescribe monogamy, alter the laws of succession, legalise intermarriage or venture to tax the tea planters. Progress involves interference with the existing code of social life and interference is likely to cause resistance.

**Impersonal because the higher and controlling grades of public services are devoid of Indian element. Although the eligibility of the natives of India for employment in public services was proclaimed as far back as 1833, the regulations made by the Secretary of State for admission to the Public Services in India has had the tendency to exclude them from the employment of the right granted to them by statute. Under the regulations made by the Secretary of State for War, candidates for Commission in the Army were to be of pure European descent and a similar regulation was adopted by the Admiralty for cadetship in the Navy, thereby excluding Indians. As to the Civil Service the Statute (Government of India Act, 1858, s. 32) laid down that all " natural-born subjects " of the Crown be admitted for examination, thereby including the natives of India. But the ruling of the Secretary of State that that examination should be held only in London had indirectly debarred many natives of the country from benefiting themselves under the statute. Regulations for admission to other public services varied. For the Indian Medical Service, candidates were to be natural-born subjects of European or East Indian descent ; for the Indian Police Service they were to be British subjects of European descent ; for the Forest Service they were to be natural-born British subjects ; for Public Works Department one-tenth might be natives of India who are British subjects.—Cf. in this connection Halsbury, Laws of England, Vol. X, pp. 588-9.

 

None the less a government which is of the people and is not detached from them can venture on the path of progress, because it is in a position to know where obedience will end and resistance will begin. But the Indian Executive not being of the people could not feel the pulse of the people. The gist of the matter is that the irresponsible Executive which had been in power in India was paralysed between these two limitations on its authority and much of what went to make life good was held up. Part of the programme it would not undertake and the other part it could not undertake. As a result of this, so far as the moral and social life of the people was concerned, the change of government by the Moghuls to a government by the British was only a change of rulers rather than a change of system. Owing to the adoption of the principle of non-interference partly by preference and partly by necessity by the British

" the natives of India found themselves under a government distinguished in no vital respect from those under which they had toiled and worshipped, lived and died through all their weary and forgotten history. From a political standpoint, the change was but the replacement of one despotism by another. It accepted the arrangements as it found them[f18]  and preserved them faithfully in the manner of the Chinese tailor who, when given an old coat as a pattern, produced with pride an exact replica, rents, patches and all." [f19] 

That there was some advancement in material progress is not to be denied. But no people in the world can long remain contented with the benefits of peace and order, for they are not dumb brutes. It is foolish to suppose that a people will indefinitely favour a bureaucracy because it has improved their roads, constructed canals on more scientific principles, effected their transportation by rail, carried their letters by penny post, flashed their messages by lightning, improved their currency, regulated their weights and measures, corrected their notions of geography, astronomy and medicine and stopped their internal quarrels. Any people, however patient, will sooner or later demand a government that will be more than a mere engine of efficiency. Under the influence of Western ideas of representative government the Indian people had for some time been demanding a change in the form of the government. A Parliamentary form of government with a Parliamentary Executive was the goal they had laid before themselves.

The popular agitation for achieving this end assumed such proportions that, in the course of time, there was presented a serious issue for the consideration of the Executive in India. How was the government of the country to be carried on ? By force or by consent, Power seldom commits suicide of its own accord. Rather, when it fails to secure the willing compliance of the people, it resorts to force. That was the resource adopted by the Executive in India. Not satisfied with the aid of the power with which the Executive was endowed by the provisions of the Criminal and Penal Codes to anticipate offences by preventive acts, it besmeared the Indian Statute Book with a set of repressive laws hardly paralleled in any other part of the world. The Criminal Law Amendment Act XIV of 1908 empowered a magistrate with special sanction of the Government to hold an ex-parte inquiry without the presence of the accused or of his legal representative and commit him for trial to be conducted without a jury. Under another provision of the same Act the Executive could declare unlawful any association which in its view interfered with the maintenance of law and order. The State Prisoners Regulations[f20]  and Acts[f21]  authorising the Executive to place under restraint any person whom it suspected but against whom it had no proof, constituted by themselves a perpetual suspension of the Habeas Corpus Act : [f22]  while under another Act[f23] the Executive was empowered to proclaim " a State of Siege " or martial law in any area and suspend therein the jurisdiction of the civil courts in favour of the military courts. The Indian Press Act of 1910 put a complete muzzle on the Press. So wide were its provisions that in the opinion of a learned judge[f24]  of one of the Indian High Courts it was "difficult to see to what length its operation might not be plausibly extended by an ingenious mind " and " that they would certainly apply to writings that might even command approval " and " much that is regarded as standard literature might undoubtedly be caught." The right of public meeting was suppressed in the same manner and with the same sterness as was the right to personal freedom and the right to freedom of discussion; for, over and above the restrictive provisions contained in the ordinary law of the land, [f25]  the executive armed itself with discretionary powers under a special enactment to prohibit any public meeting on the excuse of what it regarded as the interest of the public.

The rigour of this regime of lettre de cachet and the Bastille was quite untempered by any fear of responsibility on the part of the Executive for any excesses committed in putting these repressive laws into operation. For it is to be noted that the Executive had, coupled with the large grants of these discretionary powers to suppress the liberties of the people in order to preserve law and order, the gift of an equally generous measure of immunity to its agents in carrying out those powers. [f26] The Police Acts and the Press Act all contained provisions which barred all action in a civil court against these agents for damages to be done in pursuance of these Acts. Officers and soldiers taking part in the suppression of riots were not criminally responsible for acts done in good faith and were not to be prosecuted for other acts without the sanction of the government. [f27]  In like manner superior Executive officers could not be prosecuted for crimes committed in discharge of public functions except with the permission of the government and then only in the manner prescribed by government. [f28]  There is no wonder then if such discretionary powers, exercised extra-judicially, substituted a reign of terror in place of a regime of peace.

But it was soon found out that force was not a sure means of carrying on the government of a country. The verdict of history was well summed up by Burke[f29]  when he said :

"The use of force alone is but temporary. It may subdue for a moment, but it does not remove the necessity of subduing again: a nation is not governed which is perpetually to be conquered. (The) next objection to force is its uncertainty. Terror is not always the effect of force, and an armament is not a victory. If you do not succeed, you are without resource ; for conciliation failing, force remains, but force failing, no further hope of reconciliation is left. Power and authority are sometimes bought by kindness, but they can never be begged as alms by an impoverished and defeated violence. A further objection to force is, that you impair the object by your very endeavours to preserve it. The thing you fought for (to wit the loyalty of the people) is not the thing which you recover, but depreciated, sunk, wasted and consumed in the contest......"

Government by consent was indeed long ago accepted by the Indian Executive as a principle of political wisdom, and the changes introduced from time to time in the constitution of the Indian Legislature were avowedly for the purpose of making it reflect the popular will. The result for a time was an astonishing degree of accord between the Indian Executive and the Indian Legislature ; so much so that the regime of lettre de cachet and the Bastille had the sanction of the majority of the Indian legislature. But all this government by consent or conciliation was a camouflage. On the other hand, an analysis of the changes introduced from time to time into the constitution of the Indian Legislature clearly shows that the motive behind these changes was to make it an impotent body or a willing tool in the hands of the Executive. A Legislature as distinct from the Executive was first[f30]  inaugurated in 1853. [f31]  But in 1861 [f32]  the constitution of the Legislature then established was altered. The ground urged was that that Legislature was not a body representative of the Indian people. [f33] Its members were drawn from the official class representing the several Provincial Governments. In order to make the Legislature representative of the people, the Act of 1861 directed that it should be composed of nominated members chosen by the Governor-General from among the public, of course on the advice of the Executive. Again, by the Act of 1892 the Governor-General was directed to nominate such persons to the Legislature as were selected by public bodies in the country. These changes in the constitution of the Legislature appear to be aimed at liberalising it. But was this tendency towards making the Legislature representative accompanied with a tendency to make it more powerful as regards the Executive ? Quite the reverse. As the legislature gained in its representative character it lost in its controlling power. The powers exercised by the Legislature under the Act of 1853 were far vaster than anything possessed by the Legislature under the Act of 1861. Under the former the Indian Legislature modelled itself on the procedure of the House of Commons in England, and not only dealt with matters of legislation, pure and simple, but also with matters of administration. In the words of Sir C. Ilbert, it showed an inconvenient degree of independence by asking questions as to and discussing the propriety of the measures of the Executive Government—deeming itself competent to inquire into abuses and grievances, calling for reports and returns from local administrations, debating long on questions of public interest and introducing motions and resolutions independent of the Executive Government. In a despatch of Lord Canning at the time, he pointed out that the Legislature had become invested with forms and modes of procedure closely imitating those of the House of Commons, that there were 136 standing orders to regulate the procedure of a dozen gentlemen assembled in council, that in short, in the words of Sir Lawrence Peel, they had assumed jurisdiction in the nature of that of a grand inquest of the nation. This was deemed to be a very grave defect (!!) in the Legislature  as constituted by the Act of 1853. Its reform was therefore looked upon as very necessary for maintaining the supremacy of the Executive, and its non-popular character was made the ostensible excuse for its reconstruction. Under the pseudo representative system introduced in 1861 the Legislature was a meek body entirely in the hands of the Executive. Being composed of nominated members, division in the Legislature was directly influenced by that fact. In every legislative body a man must sit, unless he has a hereditary right, by what in modern parlance is called a mandate. That mandate usually proceeds from the authority to whom he owes his seat. The nominated members, official as well as non-official, owed their elevation to the legislature to the pleasure of the Executive, and as such were bound to support the Executive on any measure on which a division was taken. The Executive had always at its command the official block of nominated members, who gave implicit obedience to its mandates either because of its convictions or by reason of its being a part of the same. The nominated non-officials, who may be said to be opposed by conviction to the Executive, were not men of independent character and were largely concerned to make themselves agreeable to the Executive rather than make themselves reckoned with. But had they been men of independent character they could not have made themselves masters of the Executive, for by the provisions of the Constitutional law and the rules of procedure made under it, the Legislature was rendered entirely powerless to compel the Executive to do anything against its wishes. From 1853 to 1861 the Legislature dealt with both legislative and administrative questions. From 1861 the legislature met only for legislative purposes. As a consequence of this limitation the Legislature was debarred from asking a question, moving a resolution or dividing on the Budget. During the first thirty years of its existence the legislature did not even discuss the annual budget on more than sixteen occasions, and that too because some new tax legislation had been called for, and which the Executive could always carry through with the help of the nominated official block as it did every other kind of legislation it deemed necessary. The right of discussing the annual financial statement and the right of asking questions in regard to matters were first conceded to the legislature by the Rules of Procedure framed under the Indian Councils Act of 1892. But it may be doubted whether these concessions of powers to the Legislature amount to a restoration of the position which it occupied and dominance it exercised under the Act of 1853.

Even the reforms of Lord Morley fell short in the matter of according a real measure of independence and power to the Legislature over the Executive. In the reforms which he introduced in 1909 nomination, directly or after selection, was in principle replaced by election as a basis for the constitution of the legislature. At the same time the procedure of the legislature was liberalised so as to give power to the members to put supplementary questions along with interpellations, to move resolutions on the Financial Statement and on matters of general public interest. But a little analysis is enough to show that even this attempt was of a piece with the old endeavour of liberalising the Legislature without impairing the supremacy of the Executive. [f34] This supremacy of the Executive was maintained (1) by means of a permanent majority of officials of the government nominated to the legislature, and (2) by controlling the rules of procedure. Although election[f35]  was admitted by the Act of 1892 as a basis of the composition of the Legislature, the elected members were in a minority, so that they could not give effect to the wishes of the people whom they represented. They were entitled to move resolutions if permitted by the Executive[f36] but the Executive was not bound to carry them out. They served only as recommendations, and were not binding upon the Executive. This direct thwarting produced irritation between the Executive and the elected members of the Legislature. In a certain sense the reforms of 1909 were a bad piece of engineering. Before 1909 whatever conflict there was manifested outside the Legislature. For by the rules of election and procedure the Legislature was entirely muzzled : it could do no mischief. By the reforms of 1909, however, an attempt was made to make the Legislature independent and at the same time to muzzle it. This attempt, ingenious as it was, only served to bring to the surface the deep-seated conflict between the Executive and the forces agitating the minds of the people. Election procedure or business procedure governing a legislature is, in the words of Prof. Redlich, as it were a political pressure gauge, indicating the tension in the parliamentary machine and thence in the whole organism of the State. [f37] It is possible that this pressure gauge in the first instance may either be badly constructed or may become  worn out so as to give a false reading of the actual tension. But there can be no doubt that in the case of India the Executive, in the alterations which it introduced from time to time and particularly in 1909 in the election and business procedure of the legislature, had all along constructed it badly of purpose and had attempted to conceal thereby dangerous pressure of the steam in the political machine, so as to cause it to give a false reading of the situation. So long as the members of the legislature derived their mandates from the Executive, owing to the fact that all of them were nominated members, such an artifice worked well, with the entry of the elected members holding their mandates from the people, the weakness of the artifice became evident. The mortification of the elected members led them to obstruct and challenge the great fundamental principles recognised as the theoretical basis of procedure. Now if a party complained of inequality among members, of the rules of conducting proceedings, of freedom of speech or of the majority principle, it is a danger signal indicative of the existence of some serious defects in the life of the State. When such a conflict arises it is for a political statesman to judge whether he has to face a reform of the procedure of the representative assembly or a reform in the constitution of the State.

While inside the Legislative Assembly there were signs of hardening opposition and weariness which comes from sterile efforts, outside the Legislature the tide of feeling was rising more quickly, for, all the time the sense of national consciousness and the desire for political power were growing rapidly in the minds of educated Indians, no doubt, because the Legislature with its limited powers was found to be an insufficient safety valve. As a result of the realisation of this fact those who had given their thoughts to the political reconstruction of the country agreed that a mere reform of the procedure will not do. Only a reform of the constitution will save the state from anarchy.

There was, however, a considerable diversity in the reforms suggested for effecting an alteration in the constitution of India. One scheme may here be noted in passing and that was the scheme propounded by the Indian National Congress and the Moslem League, shortly known as the Congress-League-Scheme. [f38]  The scheme demanded a four-fifths majority of elected members in the Central Legislature. As to the Executive, it demanded that one-half of the total number of the Executive members should be Indians and that they should be elected by the elected members of the Legislature. The Legislature was to have complete financial and legislative powers. Nay, its recommendations, passed in the form of resolutions, were to be binding on the Executive. Such " was the latest, most complete and most authoritative presentation of the claims of the leading Indian political organisations " on behalf of the Indian people. But when we come to analyse the scheme it speaks poorly of the political genius of the Indian politicians. The scheme was formulated as a fulfilment of responsible government in British India. But in practice it was not only not a measure of responsible government, but it was deficient even to subserve the ends of good government. The scheme did not ask that the legislature should have the power to make or unmake an Executive as it pleased. If it had asked that, then the scheme would have been a scheme for responsible government. But what it asked for was to compel an Executive, which was irremovable, to conduct the administration of the country according to the orders of the Legislature. The Scheme was of a piece with that of Lord Morley in an enlarged form. He had introduced an Indian element into the Government so that Indian opinion and Indian advice might have some weight with the Executive in addition to what it exercised through the legislative organ of the Government. Those who framed the Congress-League-Scheme merely increased the Indian element in the Executive and the Legislature, and added provisions aimed at converting advice into control without realising what was to happen if the Executive refused to be bound by the wishes of the Legislature. The essence of the project was an Executive with a divided mandate legally responsible to Parliament, and practically to an elected Legislature. Such a separation of mandates, it was obvious, would have enabled the Legislature to paralyse the Executive without having power to remove it. Being without any constitutional means to change the Legislature in cases of conflict by an appeal to the Electorate it would have been obliged to carry on the Government even where it did not respect the wishes of the Legislature. The scheme was unsound, like all previous attempts at the reform of the Indian Constitution, because in it the Executive and the legislature derived their mandates from and were responsible to different powers. It was unsound because it overlooked the possibility that two mandates may not agree, in which case there would be a conflict. That conflict is inherent in a non-parliamentary executive. Some form of a Parliamentary government with a Parliamentary executive was the only way of avoiding it.

It is from this standpoint that the announcement of August 20, 1917, forms a landmark in the annals of the development of the Indian Constitution. On that date the Secretary of State for India announced in the House of Commons that—

"The policy of His Majesty's Government, with which the Government of India are in complete accord, is that of the increasing association of Indians in every branch of the administration and the gradual development of self-governing institutions, with a view to the progressive realisation of responsible government in India as an integral part of the British Empire. They have decided that substantial steps in this direction should be taken as soon as possible......"

" I would add that progress in this policy can only be  achieved by successive stages. The British Government and the Government of India, on whom the responsibility lies for the welfare and advancement of the Indian peoples, must be judges of the time and measure of each advance, and they must be guided by the co-operation received from those upon whom new opportunities of service will thus be conferred and by the extent to which it is found that confidence can be reposed in their sense of responsibility."

This momentous announcement marks the end of one epoch and the beginning of a new one. It definitely abandoned the old conception under which the Executive might, as it saw fit, consult the wishes of the legislature, which were only given an increasing share in the administration of the country and increasing opportunities for influencing and criticising, but never for controlling, the Government. Under the new conception the aim was to endow the Legislature with the power to make or unmake the government, so that it would be not only a government of the people and for the people, but by the people. The adoption of such a change of policy in the basis of the political institutions of the country involved far-reaching changes in their relations with one another, administrative, legislative and financial. The changes in the system of Provincial Finance introduced in consequence of the Reforms Act of 1919 were not caused by any inherent defects in the system as it stood at that date. On the other hand, the system was eminently workable. They were effected because the system as a whole was inconsistent with the great revolution which that Act had sought to effect in the governmental system of that country.

The nature of the changes, their extent and their adequacy will form the subject-matter of the two following chapters.

 

CHAPTER XI

 

THE NATURE OF A CHANGE

 

The announcement of August 20, 1917, spoke of progressive realisation of responsible government as the goal of the future British policy in India, and the Montague-Chelmsford Report on Constitutional Reforms surveyed the ways of giving effect to that announcement. One of the merits of that Report consisted in showing that the Congress-League-Scheme of political reforms did not embody the principle for the recognition of which they were agitating so long. Instead of inaugurating a responsible government in India, the scheme would have saddled the country with a non-parliamentary executive under a parliamentary system of government. Being convinced of their error the Congress-League politicians, be it said to their credit, abandoned their scheme in favour of the proposals contained in the Joint Report. But in their turn they demanded the introduction of a more or less complete responsible government in most of the political institutions at one stroke. But the framers of the new constitution pointed out that the emphasis on the word progressive in the announcement was as great if not greater than the emphasis laid on the word responsible. [f39] 

In consonance with this view it was decided to introduce, as a substantial step in the progress towards the realisation of the goal laid down in the announcement, a responsible government of a limited character in the Provincial Governments. The Provincial Governments in India, like the Central Government, were irresponsible governments. The changes made in the constitution of Provincial Legislatures were of the same nature as the changes in the Central Legislature, in that both were calculated to enable the Executive to consult the Legislature without being amenable to its control. Only on one occasion were the frame-works of the two machines of governments, the Provincial and the Central, constructed on a slightly different basis, and that was in the Morley-Minto Reforms of 1909. Under those reforms the Central Legislature was dominated by official members who with the members of the Executive formed a standing majority in the chamber. In the Provincial Legislatures this principle of a standing majority of official members was dispensed with. The second point of departure in the constitution of the Provincial Legislatures as compared with that of the Central Legislature consisted in the Budget procedures in the two governments. In the Central legislature the Finance Member early in each calendar year presented to the Legislature his preliminary estimates accompanied by an explanatory memorandum. On a subsequent day he made such further explanations as he thought necessary. Members of the Legislature could thereupon move resolutions regarding (a) any proposed alteration in taxation, (b) any proposed loan, or (c) any additional grant to a Local Government. The first stage in the discussion of the Budget of the Government of India was over when once these resolutions were voted upon. The second stage commenced when the estimates were taken into consideration by groups. At this stage also it was open for members to move resolutions on any heads of revenue and expenditure, except those that were declared by rules of procedure to be not open for discussion to the legislature. After the resolutions had been moved and voted upon the Finance Member took the whole discussion into consideration and made such changes as were agreeable to him and then presented his final Budget. At this, the third stage, the Finance Member explained his reasons for the acceptance of some and the non-acceptance of other suggestions made during the course of the Budget debate. A general discussion of the Budget then followed, but no resolution was allowed to be moved upon the final Budget or a vote taken. The Budget procedure in the Provincial Legislatures was a little different. There the first stage commenced with the preparation of a rough draft of the provincial estimates, accompanied by a schedule including in it all projects involving an expenditure of over 5,000 rupees, divided into two parts, the first containing all allotted, i.e. obligatory, items of expenditure and the second containing unallotted, i.e. non-obligatory, items of expenditure. The Government of India to whom this draft Budget was submitted corrected the estimate of the revenue and determined in consultation with the Provincial government the aggregate expenditure for which the latter should provide, and if need be, altered or added to the items in the first part of the schedule. When the figures of the altered revenue and the aggregate expenditure as fixed by the Government of India were communicated to the Provincial Government it marked the close of the first stage of a Provincial Budget. The second stage commenced when this draft Budget was submitted by the Provincial Government to a committee of the Provincial Legislature. The Committee was composed of officials and non-officials in equal number, the former nominated by Government and the latter elected by their fellows. It was presided over by the member of the Executive in charge of Provincial Finance; the proceedings of the committee were informal and private and decisions were by majority votes. The Committee concerned itself only with the second part of the Schedule containing non-obligatory items of expenditure and, provided it did not exceed the aggregate expenditure fixed by the Government of India, it was free to make variations and even to insert new items occasionally. On the conclusion of its labours the Committee reported the changes it made to its Government. With this ended the second stage in the Provincial Budget. The third stage began when the Provincial Estimates as a whole were presented to the Provincial Legislature by the member in charge of finance. The Budget was then considered in a committee of the whole House and resolutions moved on each group of estimates discussed. When all resolutions were debated and voted upon the result of the discussions was communicated to the Provincial Government. But the resolutions were not binding. The fourth stage commenced when the Provincial government introduced the final budget and explained its reasons for the acceptance of some and the non-acceptance of the rest of the suggestions made by the Legislature. A debate followed, but no resolutions were in order at this stage ; nor did the Legislature  divide upon the Budget. It was adopted as passed by the Executive.

From these differences in the constitution and procedure of the Central and Provincial Governments, it must not be supposed that the provincial Governments were less irresponsible with regard to their Legislatures than the Central Government was with regard to its own Legislature. The fact that since 1909 there was no majority of official members in the Provincial Legislature as there was in the Central Legislature was a matter of no moment so far as its practical consequences to the Executive were concerned ; for it is to be remembered that in practice the difference between nominated members from among the non-officials and the official members was only superficial. Both had their mandate from the government who gave them their seats in the Legislature, and as nominees of the Government they voted for the Government, so that, though not in theory, in practice the Provincial Government had as much a standing majority in Legislatures as the Central Government had in theory as well as in practice. Nor did the budget procedure of the Provincial Government mark any decided improvement over that adopted in the Central Government in the matter of giving greater control to the Legislature over the Executive. In both cases the aim was to give the members of the Legislature the privilege of discussing beforehand the question of such alteration with reference to the necessities of the Budget, only in the case of the Provincial Budget this privilege was allowed to be exercised at an earlier stage than in the case of the Imperial Budget. But in view of the fact that the Resolutions of the Legislature on the Provincial Budget, as those of the Central Legislature on the  Imperial, were only recommendations to their respective Executives, this difference between the Budget procedure of the two Governments did not impose any greater control over the one Executive than it did on the other. Again, the provision that a committee of the Provincial Legislature had been allowed the privilege of framing the non-obligatory portion of the Provincial Budget did not give the Legislature any appreciable control over the Executive. First of all, the Provincial Government could always restrict the scope of this Budget Committee by transferring any head from the class of non-obligatory expenditure to the class of obligatory expenditure. Besides this, the operation of certain other rules of Budget procedure based upon general principles of public finance tended directly to restrict the powers of the committee to put forth schemes of alternative or additional expenditure. It was rightly provided that schemes involving recurring expenditure could only be proposed with due regard to the rate of growth of recurring revenues and recurring expenditure. Owing to this rule, the committee had to drop proposals which involved recurring expenditure, but which were desirable from its standpoint. On the other hand, similar proposals made by the Executive could be easily carried through by the device freely adopted of obtaining previous sanction of the Government of India. The consequence was that in all the Provincial Budgets presented under the new rules the amount of this " unallotted " fund left to the discretion of the committee bore too insignificant a proportion to the total expenditure in the budget to make the Provincial Executive in any real degree amenable to the Provincial legislature.

No really responsible government could, however, be introduced in the provinces without first of all making a complete change in the mutual relations between the Central Government and the different Provincial Governments in India. The relation between the two which existed before the passing of the Act of 1919 was one of complete subordination of provincial Governments to the Central Government. [f40] In this bond of subordination we can discern three strands—legislative, financial, and administrative. Of these three we have seen how tight was the financial strand. The Government of India's control over revenues and expenditure was derived from Parliamentary Statutes which treated the revenues of India as one and applied them to the purposes of the Government of India as a whole. It is true that this provision was not so strictly construed as absolutely to prevent the appropriation of particular sources of income to specific purposes all-India or provincial. Or else the development of the provincial system of finance would have been impossible. But it certainly had the effect of denying to Provincial Governments any inherent legal right to the revenues which they raised. The Government of India completely controlled taxation imposed in British India, apart from the local taxes which were raised by local bodies. Taxation could only be levied by law, [f41]  but the law had forbidden a Provincial Legislature, without the previous sanction of the Government of India, to consider

" any law affecting the public debt of India or the customs duties or any other tax or duty for the time being in force and imposed by the authority of the Governor-General in Council for the general purposes of the Government of India."

This is the natural corollary of the statutory hypothecation of all-India revenues to all-India needs. The law would not inhibit a provincial legislature from exploiting for provincial purposes any new source of taxation which it had the ingenuity to discover. But even in that case the project would, before being translated into action, have to secure the assent of the Finance Department of the Government of India, which would not give its sanction without considering closely if it trespassed on the Central Government's sources of taxation. Again, the provision of the law which required that

" no governor or governor in council (of a province) shall have the power of creating any new office or granting any salary, gratuity or allowance without the previous sanction of the Governor General of India in Council " had given the Government of India a right of control over expenditure in the Provinces which was exercised through the instrumentality of a series of codes of instructions, such as the Civil Service Regulations, the Civil Account Code, the Public Works Code and the like. These codes partly dealt with the mechanism of finance such as the maintenance of a uniform system of audit and accounts, the custody of public money, remittances, economy, and such matters ; but they also imposed definite restraints upon the powers of Provincial Governments, to create new appointments or raise emoluments and other matter such as recruitment, promotions, leave, foreign service and pensions upon which the codes really constitute a digest of the case-law laid down from time to time by the Government of India which the Provincial Governments must strictly obey. If their powers of taxation and expenditure were strictly controlled the power of borrowing was never conceded to the provinces. It will be recalled that Port Trusts and Municipalities might raise loans within defined limits, but because the revenues of India were legally one and indivisible and were liable for all debts incurred for the purposes of the Government of India, Provincial Governments possessed no separate resources on the security of which they could borrow.

Even within the prescribed limits of Provincial Finance the Provincial Governments were not free from the control of the Central Government. Because the provincial settlements were based not on provincial revenues but on provincial needs, a central control was inevitable. The Government of India could not allow a Province to go bankrupt. But if the Government of India were responsible for provincial solvency they must be in a position to control provincial expenditure. Again, as regards revenues, so long as the Government of India took a share in the proceeds they had a strong motive not only in interfering in the Budget estimates of the provinces, but also in interfering in details of administration. Their interest in land revenue, for example, inevitably led them to close supervision over revenue settlements, and the control tended to become tighter in cases where expansion and development of a source of revenue, such as irrigation, depended on capital outlay.

The legislative powers of the Provincial Governments had in the same manner been made subject to statutory restrictions. There was no doubt an extensive field in which, so far as the substantive provisions of the Statute were concerned, the legislative competence of the provincial Legislatures was legally unfettered. Actually, however, the power of the local legislatures was curtailed in two ways. In the first place, owing to the fact that in their existence all the Provincial Legislatures were younger, and most of them much younger, institutions than the Central Legislature of the Governor-General, a great part of the field that would have otherwise been open to them was covered by acts of that body, which had always retained a concurrent power of legislation for the country at large. But the field yet remaining open for Provincial Governments in the matter of legislation was further restricted by the fact that the power of the Secretary of State and Parliament to control all-Indian legislation was made operative by means of executive directions, which had made it incumbent on Provincial Governments to submit for the previous sanction of the Government of India and the Secretary of State all their projects for legislation before introduction. It is true that these directions did not apply to private members' Bills ; but inasmuch as a Bill could only be introduced with the leave of the Legislature, and the Provincial Government was in most cases in a position if it chose to do so to oppose such a motion successfully, the Government of India by directions to the Provincial Governments were in a position to control all private provincial legislation almost as effectively as the Provincial Government's Bills.

In carrying on the actual work of administration every Provincial Government was by law required to obey the orders of the Government of India and keep that Government constantly and diligently informed of its proceedings and of all matters which ought, in its opinion, to be reported to that Government, or as to which that Government required information. That was because in law every Provincial Government was placed under the superintendence, direction and control in all matters relating to the Government of its Province. This administrative control of the Government of India was exercised by that Government in the interest of uniformity. It is obvious that in many respects India is one single and undivided country, in which much work had to be carried on on uniform lines. The Civil servants who executed the orders of Provincial governments having been recruited from England on terms guaranteed by the Secretary of State, many questions affecting them could not be determined by any Provincial Government. Again, the development of trade, industry and science throughout India similarly favoured the formulation and pursuit of uniform policies by the Government of India. Even with one law for the whole of India business and industry might have been left to their discretion to administer such matters as statistics, patents, copyright, insurance, income tax, explosives and mining, etc. Not only were the provincial Governments subordinated to the Central Government to follow established lines in the matters of administration, but they were not free to initiate any new policy. It was the Government of india which regarded itself as distinctly charged with the duty of framing policy and inspiring reforms for the whole of India by issuing new orders. To make them effective these orders were often accompanied by handsome grants to Provincial Governments strictly earmarked for the purpose of pushing on some particular feature of the new policy. Not seldom did the Government of India appoint new advising or inspecting officers whose task it was to see that the new energy suddenly infused  into the system was well maintained and well directed to the chosen ends.

So long as the provincial Governments continued to be bound by such strands to the Government of India there could be no responsible government in the Provinces. No government can be made to serve two masters at one and the same time. To keep the Provincial Governments subordinate to[f42]  the Government of India and also to make them responsible to popular Legislature would have been inconsistent in theory and vicious in practice. It is quite conceivable that under such a double government the wishes of the Provincial Legislature on certain matters may not coincide with those of the Government of India. On such occasions a Provincial Government may not know whom to obey. If it deferred to the wishes of the Legislature it would be failing in its duty towards the Government of India. Indeed there is on record a case of such a conflict. [f43]  There was an occasion during the currency of the Morley-Minto Reforms when the Government of Bombay were unsuccessful in their endeavours to persuade the Government of India to sanction certain charges affecting the educational staff. The proposals were locally popular and were again put forward for adoption in a resolution moved in the Bombay Legislature by an elected member. The Bombay Government thereupon accepted the resolution which was carried unanimously, and once more put forward their proposals to the Government of India on the ground that they had the Legislature's entire support. But the Government of India and the Secretary of State held that these tactics were out of order and that it was

"the duty of the Local Government in dealing with the resolutions to uphold with all their authority the decision of the Government of India,"

i.e. to have opposed the resolution even if it agreed with the Legislature in the principle thereof.

The strong ties of subordination which bound the Provinces to the Central Government were therefore the chief obstacles in the path of Provincial autonomy. In order that the Provincial Government be made subject to Provincial Legislatures, the first thing to do was to curtail the powers which the Government of India possessed of interference in provincial finance, provincial legislation, and provincial administration. As was well observed by the authors of the Report[f44]  on Constitutional Reforms:

"We have to demolish the existing structure, at least in part, before we can build the new. Our business is one of devolution, of drawing lines of demarcation, of cutting long-standing ties. The Government of India must give and the Provinces must receive ; for only so can the growing organism of self-government in the Provinces draw air into its lungs and live."

The path to provincial independence therefore lay through a satisfactory division of functions and finances between the Provincial and Central Governments. Of the two, the task of dividing the functions was comparatively an easier one. For facilitating the necessary division of functions the following principles were laid down by the Government of India. [f45] 

" 7. There are certain subjects which are at present under the direct administration of the Government of India. The Government of India maintain separate staffs for their administration and the Provincial Governments have no share in it. The category is easily recognisable, and for the most part there will not be much room for doubt as to the subjects to be included in it. At the other end of the line are matters of predominantly local interest which, however much conditions must vary between Provinces, will, generally speaking be recognised as proper subjects for provincialisation.

"8. Between these extreme categories, however, lies a large indeterminable field which requires further examination before the principles determining its classification can be settled. It comprises all the matters in which the Government of India at present retain ultimate control, legislative and administrative, but in practice share the actual administration in varying degrees with the Provincial Governments. In many cases the extent of delegation practised is already very wide. The criterion which the Government of India apply to these is whether in any given case the Provincial Governments are to be strictly the agents of the Government of India, or are to have (subject to what is said below as to the reservation of powers of intervention) acknowledged authority of their own. In applying this criterion the main determining factor will be not the degree of delegation already practised, which may depend on mere convenience, but the consideration whether the interests of India as a whole (or at all events interests larger than those of one Province), or on the other hand the interests of the Province essentially preponderate.

"The point is that delegation to an agent may be already extensive, but that circumstance should not obscure the fact of agency or lead to the agent being regarded as having inherent powers of his own."

These principles, in which it was stated that " where extra provincial interests predominate the subject should be treated as central," while

"all subjects in which the interests of the provinces essentially predominate should be provincial, and in respect of (which) the Provincial governments (to) have acknowledged authority of their own,"

were accepted by the Functions Committee appointed to make a division between all-India and Provincial subjects. The recommendations made by the Committee were with minor amendments embodied in what are called Devolution Rules under section 45A of the Government of India Act of 1919, which gave effect to the policy of responsible government and are made a part of the constitutional law of the land, so that the subjects thereby devolving upon the Provinces became the services over which the Provinces gained an acknowledged authority of their own such as they never had before 1833. According to these Devolution Rules the following were declared to be

 

PROVINCIAL SUBJECTS

1. Local Self-government, that is to say, matters relating to the constitution and powers of municipal corporations, improvement trusts, district boards, mining boards of health and other local authorities established in a Province for the purpose of local self-government, exclusive of matters arising under the Cantonments Act, 1910 ; subject to legislation by the Indian Legislature as regards—

(a) The powers of such authorities to borrow otherwise than from a Provincial Government, and

(b) the levying by such authorities of taxation not included in schedule II to the scheduled Taxes Rules.

2. Medical administration, including hospitals, dispensaries and asylums, and provision for medical education.

3. Public Health and Sanitation and Vital Statistics; subject to legislation by the Indian Legislature in respect of infectious and contagious diseases to such extent as may be declared by any Act of the Indian Legislature.

4. Pilgrims within British India.

5. Education, provided that—

(a)  The following subjects shall be excluded, viz. :

     (i) The Benares Hindu University, and Aligarh Muslim University, and such other universities constituted after the commencement of these rules, as may be declared by the Governor-General in Council to be Central subjects, and

(ii) Chiefs' Colleges and any institution maintained by the Governor-General in Council for the benefit of members of His Majesty's Forces or of other public servants or of the children of such members of servants; and

(b)  the following subjects shall be subject to legislation by the Indian Legislature, namely:

(i) The control of the establishment, and the regulation of the constitutions and functions, of universities constituted after the commencement of these rules ; and

(ii) The definition of the jurisdiction of any university outside the Province in which it is situated, and

(iii) For a period of five years from the date of the commencement of these rules, the Calcutta University, and the control and organisation of secondary education in the presidency of Bengal.

6. Public Works included under the following heads, namely :

(a) Construction and maintenance of provincial buildings used or intended for any purpose in connection with the administration of the Province; and care of historical monuments, with the exception of ancient monuments as defined in Section 2(i) of the Ancient Monuments Preservation Act, 1904, which are for the time being declared to be protected monuments under Section 3(i) of that Act; provided that the Governor-General in Council may by notification in the Gazette of India, remove any such monuments from the operation of this exception ;

    (b) roads, bridges, ferries, tunnels, ropeways, and causeways, and other means of communication, subject to such conditions as regards control over construction and maintenance of means of communication declared by the Governor-General in Council to be of military importance, and as regards incidence of special expenditure connected therewith, as the Governor-General in Council may prescribe;

(c) tramways within municipal areas; and

(d) light and feeder railways and extra-municipal tramways in so far as provision for their construction and management is made by provincial legislation ; subject to legislation by the Indian Legislature in the case of any such railway or tramway which is in physical connection with a main line or is built on the same gauge as an adjacent main line.

7. Water Supplies, irrigation and canals, drainage and embankments, water storage and water power ; subject to legislation by the Indian Legislature with regard to matters of inter provincial concern or affecting the relations of a Province with any other territory.

8. Land Revenue administration, as described under the following heads, namely:

(a)  Assessment and collection of land revenue;

(b)  Maintenance of land records, survey for revenue purposes, records of right ;

(c)    Laws regarding land tenures, relations of landlords and tenants, collection of rents ;

(d)  Courts of wards, incumbered and attached estates;

(e)  Land improvement and agricultural loans;

(f)    Colonisation and disposal of Crown lands and alienation of land revenue ; and

(g)  Management of Government estates.

9. Famine relief

10. Agriculture, including research institutes, experimental and demonstration farms, introduction of improved methods, provision for agricultural education, protection against destructive insects and pests and prevention of plant diseases ; subject to legislation by the Indian Legislature in respect of destructive insects and pests and plant diseases, to such extent as may be declared by any Act of the Indian Legislature.

11. Civil Veterinary Department, including provision for veterinary training, improvement of stock, and prevention of animal diseases ; subject to legislation by the Indian Legislature in respect to animal diseases to such extent as may be declared by any Act of the Indian Legislature.

12. Fisheries.

13. Co-operative Societies.

14. Forests, including preservation of game therein ; subject to legislation by the Indian Legislature as regards disforestation of reserved forests.

15. Land acquisition; subject to legislation by the Indian Legislature.

16. Excise,   that is to say, the control of production, manufacture, possession, transport, purchase and sale of alcoholic liquor and intoxicating drugs, and the levying of Excise duties and licence fees on or in relation to such articles, but excluding in the case of opium, control of cultivation, manufacture and sale for export.

17. Administration of Justice, including constitution, powers, maintenance and organisation of courts of civil and criminal jurisdiction within the Province; subject to legislation by the Indian Legislature as regards High Courts, Chief Courts, and Courts of Judicial Commissioners, and any courts of criminal jurisdiction.

18. Provincial Law Reports.

19. Administrators-General and Official Trustees ; subject to legislation by the Indian Legislature.

20. Non-Judicial Stamps, subject to legislation by the Indian Legislature, and Judicial Stamps, subject to legislation by the Indian Legislature as regards amount of court fees levied in relation to suits and proceedings in the High Courts under their original jurisdiction.

21. Registration of deeds and documents; subject to legislation by the Indian Legislature.

22. Registration of births, deaths, and marriages ; subject  to legislation by the Indian Legislature for such classes as the Indian Legislature may determine. 23. Religious and Charitable endowments.

24. Development of Mineral resources which are Government property; subject to rules made or sanctioned by the Secretary of State, but not including the regulation of mines.

25. Development of Industries, including industrial research and technical education.

26. Industrial matters included under the following heads, namely:

(a) Factories;

(b) Settlement of labour disputes;

(c) Electricity;

(d) Boilers;

(e) Gas;

(f) Smoke nuisance ; and

(g) Welfare of labour, including provident funds, industrial insurance (general health and accident) and housing : subject as to heads (a), (b), (c), (d), and (g) to legislation by the Indian Legislature.

27. Stores and Stationery ; subject in the case of imported stores and stationery to such rules as may be prescribed by the Secretary of State in Council.

28. Adulteration of food-stuffs and other articles ; subject to legislation by the Indian Legislature as regards import and export trade.

29. Weights and Measures; subject to legislation by the Indian Legislature as regards standard.

30. Ports, except such ports as may be declared by rule made by the Governor-General in Council or by or under Indian legislation to be major ports.

31. Inland Waterways; including shipping and navigation thereon so far as not declared by the Governor-General in Council to be Central subjects, but subject as regards inland steam-vessels to legislation by the Indian Legislature.

32. Police; including railway police ; subject in the case of railway police to such conditions as regards limits of jurisdiction and railway contributions to cost of maintenance as the Governor-General in Council may determine :

a)         Regulation of betting and gambling ;

b)         prevention of cruelty to animals;

c)          protection of wild birds and animals;

d)         control of poisons, subject to legislation by the Indian Legislature;

e)         control of motor vehicles, subject to legislation by the Indian Legislature as regards licences valid throughout British India; and

f) control of dramatic performances and cinematographs, subject to legislation by the Indian Legislature in regard to sanction of films for exhibition.

34. Control of Newspapers, Books, and Printing Presses ; subject to legislation by the Indian Legislature.

35. Coroners.

36. Excluded Areas.

37. Criminal tribes ; subject to legislation by the Indian Legislature.

38. European vagrancy ; subject to legislation by the Indian Legislature.

39. Prisons ; prisoners (except State prisoners) and reformatories ; subject to legislation by the Indian Legislature.

40. Pounds and prevention of cattle trespass.

41. Treasure Trove.

42. Libraries (except the Imperial Library) and Museums (except the Indian Museum, the Imperial War Museum and the Victoria Memorial, Calcutta) and Zoological Gardens.

43. Provincial Government Presses.

44. Elections for Indian and provincial legislature, subject to rules framed under section 64 (i) and 72A (4) of the Act.

45. Regulations of medical and other professional qualifications and standards; subject to legislation by the Indian Legislature.

46. Local Fund audit, that is to say, the audit by Government agency of income and expenditure controlled by local bodies.

47. Control as defined by rule 10, of members of all-India and Provincial Services serving within the Province, and control, subject to legislation by the Indian Legislature, of public services within the province, other than all-India services.

48. Sources of Provincial revenue, not included under previous heads, whether—

 (a) Taxes included in the schedules to the scheduled

taxes Rules, or

(b) Taxes, not included in those schedules, which are imposed by or under provincial legislation which has received the previous sanction of the Governor-General.

49. Borrowing of money on the sole credit of the Province, subject to the provisions of the Local Government (Borrowing) Rules.

50. Imposition by legislation of punishment by fine, penalty, or imprisonment, for enforcing any law of the Province relating to any provincial subject; subject to legislation by the Indian Legislature in the case of any subject in respect of which such a limitation is imposed under these rules.

51. Any matter which, though falling within a Central subject, is declared by the Governor-General in Council to be of a merely local or private nature within the province.

52. Matters pertaining to a Central subject in respect of which powers have been conferred by or under any law upon a Local Government.

The second task that of allocating the revenue resources between the Central and provincial Governments was a comparatively difficult one. As the problem was conceived in the main as one of making the Provinces independent of the Government of India in matters in which it was proposed that they should acquire an authority of their own acknowledged by law it was natural for the authors of the Report on constitutional Reforms to hold that

" Our first aim...... has been to find some means of entirely separating the resources of the Central Government from those of the Provinces."

The first step in that direction was therefore to abolish the system of " divided heads " or budget by shared revenues, for there was  a concensus of opinion that this coparcenary system, in so far as it gave a handle to the Central Government to interfere in the domestic affairs of the Provinces, was a source of friction and was incompatible with provincial independence. But such a system of complete separation was fraught with two main difficulties. The first difficulty was in connection with the disposal of dividend heads. To whom should they be handed over ? At the time the scheme of complete separation was contemplated the heads of revenue which were divided in all or some of the Provinces were land revenue, stamps, excise, income tax and irrigation. The authors of the Report on Constitutional Reforms proposed[f46] 

" ......that the revenue from stamp duty should be discriminated under the already well-marked sub-heads General and Judicial ; and that the former should be made an Indian and the latter a provincial receipt. This arrangement will preserve uniformity in the case of commercial stamps where it is obviously desirable to avoid discrepancies of rates ; and it will also give the provinces a free hand in dealing with court-fee stamps and thus provide them with an additional means of augmenting their resources. Excise is at present entirely a provincial head in Bombay, Bengal, and Assam, and we see no valid reason why it should not now be made provincial throughout India...... Land revenue, which is far the biggest head of all, is at present equally shared between the Indian and all the provincial Governments, except that Burma gets rather more than one-half and the United Provinces get rather less...... Now land revenue assessment and collection is so intimately concerned with the whole administration in rural areas that the advantages of making it a provincial receipt are obvious....... Moreover, famine expenditure and expenditure on major irrigation works are for obvious reasons closely connected with land revenue, and if the receipts from that head are made provincial it logically follows that the Provinces should take over the very heavy liability for famine relief and protective works...... We were told that in the days of dawning popular government in the Provinces it would be well that the provincial government should be able to fall back on the support of the Government of India (as, if the head were still divided, it would be able to do) when its land revenue policy was attacked. [f47]  But it is just because divided heads are not regarded as merely a financial expedient but are, and so long as they survive will be, viewed as a means of going behind the provincial government to the Government of India, that we feel sure that they should be abolished. We propose therefore to make land revenue together with irrigation wholly provincial receipts. It follows that the Provinces will become entirely liable for expenditure on famine relief and protective irrigation works...... The one remaining head is income tax. We see two very strong reasons for making this an Indian receipt. First, there is the necessity of maintaining a uniform rate throughout the country. The inconveniences, particularly to the commercial world, of having different rates in different Provinces are manifest. Secondly, in the case of ramifying enterprises with their business centre in some big city, the Province in which the tax is paid is not necessarily the Province in which income is earned. We have indeed been told that income tax is merely the industrial or professional complement of the land revenue ; and that to provincialise the latter, while Indianising the former, means giving those provinces whose wealth is more prominently agricultural, such as the United Provinces and Madras, an initial advantage over a Province like Bombay, which has very large commercial and industrial interests. Another very practical argument is that the tax is collected by provincial agency and that if Provincial Governments are given no inducement, such as a share of the receipts or a commission on the collections which is only such a share in disguise, there will be a tendency to slackness in collection and a consequent falling off in receipts. We admit that these arguments have force ; but we are not prepared to let them stand in the way of a complete separation of revenues. Equality of treatment as between one Province and another must be reached so far as it is possible in the settlements as a whole, and it is not possible to extend the principle of equality to individual heads of revenue. If it should be found that receipts fall off, it may be necessary to create an all-India agency for the collection of the tax, but this we should clearly prefer to retaining it as a divided head. To sum up : we propose to retain the Indian and Provincial heads as at present, but to add to the former income tax and general stamps, and to the latter land revenue, irrigation, excise and judicial stamps. No head will then remain divided."

However, when all the existing sources of revenue were completely distributed between the Central and Provincial Governments as proposed, it was inevitable that there should be a deficit in the Budget of the Government of India. How to make up this deficit was therefore the second difficulty that was involved in replacing the system of divided heads by a system of separate heads of revenue. The authors of the Report on Constitutional Reforms were presented with many a plan for the solution of this knotty problem. In the course of their survey they observed : [f48] 

" One way of meeting it would be to maintain the basis of the present settlements, but to allot to the Government of India a certain proportion of growing revenue instead of its share of the divided heads. But this device would stereotype all the existing inequalities between the Provinces which by reason of the permanent settlement in some of them are considerable ; while it would also introduce an element of great uncertainty into the Indian Government's finance. A second was that we should take an all-round contribution on a per capita basis. But this expedient also would not obviate very undesirable variations between Provinces in the rate of levy owing to the inequality of provincial resources and of provincial needs. A third plan was to take an all-round percentage contribution based on gross provincial revenue. This is open, inter alia, to the objection that it would leave several of the Provinces with large deficits. Fourthly, we considered but rejected the proposal that Provinces which had a surplus should temporarily help others as being cumbrous and impracticable."

 

The plan recommended by the authors of the Report was[f49] 

"to assess the contribution from each Province to the Government of India as a percentage of the difference between the gross provincial revenue and the gross provincial expenditure ";

in other words, a levy on the surplus of the estimated gross revenue of the Province when all divided heads are separately allotted over its estimated normal expenditure, including expenditure on famine relief and protective irrigation. On the basis of the Budget figures for 1917-18 it was found that it would require a levy of 87 per cent[f50]  on the provincial surpluses to make up the deficit of Rs. 1363 lakhs in the Budget of the Government of India found likely to be caused by the abolition of the system of divided heads##.

 

## The way in which the proposed plan would have worked out in practice can be gathered from the following figures given in the Report, Cal. Ed. (p. 134), and based on the Budget figures for 1917-18—

(In Lakhs of Rupees)

Province

Gross Prov. Revenue

Gross  Prov. Expenditure

Gross  Prov. Surplus

Contribution (87 per cent. of Col. 4)

Net Prov. Surplus

1

2

3

4

5

6

Madras

13,31

8,40

4,91

4,28

63

Bombay

10,01

9,00

1,01

88

13

Bengal

7,54

6,75

79

69

10

United Provinces

11,22

7,47

3,75

3,27

48

Punjab

8,64

6,14

2,50

2,18

32

Burma

7,69

6,08

1,61

1,40

21

Bihar and Orissa

4,04

3,59

45

39

6

Central Provinces

4,12

3,71

41

36

5

Assam

1,71

1,50

21

18

3

Total

68,28

52,64

15,64

13,63

2,01

N.BThe Punjab figures in column 5 should be reduced and those in column 6 raised by 3 1/2 lakhs in each case to allow for the continued compensation which the province is entitled to receive for the cession of a crore of its balances to the Government of India in 1914.

 

In making these recommendations the authors of the Report were careful to observe  [f51] 

"One caveat we are bound to make. Emergencies may arise which cannot be provided for by immediate raising Government of India taxation ; and in that case it must be open to the Central Government to make a special supplementary levy upon the provisions. We must add that inasmuch as our proposals are based on war figures they should be open to revision hereafter, but not subject to change for a period of say six years, and to avoid intermediate discussion the scheme should in the meantime be regarded as part of the constitutional agreement with the Provinces. It should also be one of the duties of the periodic commission which we propose should be appointed to examine the development of constitutional changes after ten years' experience of their working or of some similar body at that time, to re-investigate the question of the provincial contributions to the Government of India."

These proposals were put before the Provincial Governments, for their opinion. The objections to a plan which appeared to make some Provinces bear a greater burden of the cost of the Central Government than others readily suggested themselves. Madras and the United Provinces seemed to pay 47.4 per cent. and 41.1 per cent. of their surpluses to the Government of India, while Bombay and Bengal appeared to escape with a sacrifice of no more than 9.6 per cent. and 10.1 per cent. of their respective surpluses. The inequity of this treatment seemed to be so very apparent that the Provinces against which a greater burden was set down raised loud protests. So impressed was the Government of India with the justice of this clamour that in its letter[f52]  to the Secretary of State it observed :

"We recommended that the initial contributions should be recognised as temporary and provisional, and that steps should be taken as soon as possible to fix a standard and equitable scale of contributions...... The whole question...... requires skilled investigation ; (the difficulty of the position was foreseen in the Report and investigation by the first statutory commission was promised, but) we propose that a Committee on Financial Relations be appointed, either by you or by us, to advise fully upon the subject, so that each province may know exactly how it stands before the new regime starts." And this recommendation was endorsed[f53]  by the Joint Select Committee of Parliament which sat on the Reform Bill. Accordingly the Secretary of State appointed a Committee under the chairmanship of Lord Meston to advise on:

a)    The contributions to be paid by the various provinces to the Central Government for the financial year 1921-22;

b)    The modifications to be made in the provincial contributions thereafter with a view to their equitable distribution until there ceases to be an all-India deficit ;

c)     The future financing of the provincial loan accounts and

d)    Whether the Government of Bombay should retain any share of the revenue derived from income tax.

After about seven weeks of investigation the Committee produced its Report[f54]  In advising on clause (a) of its terms of reference the Committee expressed its dissatisfaction of the plan set forth in the Joint Report of taking from the Provinces a fixed uniform proportion of their respective surpluses as their contributions to the Central Exchequer. The principal objection urged against the plan was that in some Provinces it left no surplus and in others no adequate surplus after the payment of their respective quotas of contributions. The Committee held, and rightly too, that

" in no case may a contribution be such as would force the province to embark on new taxation ad hoc, which to our minds would be an unthinkable sequel to a purely administrative rearrangement of abundant general resources."

The Committee felt itself bound by a limiting consideration in providing the contribution, as a result of which it felt itself obliged

" to leave each Province with a reasonable working surplus"— a surplus which it preferred " to calculate, so far as possible, with some relation to the general financial position of the Province and the more imminent claims upon its resources."

" To be able to comply with the requirements of leaving each Province with a surplus, and of inaugurating the new Councils without the necessity of resort to fresh taxation," the Committee deemed that the most equitable plan to be to take, not equal contributions as the Joint Report advised, [f55]  but unequal contributions from the surpluses of the Provinces liable to make them.

For the consummation of its plan the Committee held that the augmentation of Provincial Surpluses was an essential step. Without it, it deemed its task to be futile. The only way to augment the provincial surplus was to allocate some other source of Imperial revenue in addition to those already provincialised. To the provincialisation of the income tax, a matter which was included in clause (d) of its terms of reference so far as Bombay was concerned, the Committee being impressed by the reasoning of the Joint Report, felt bound to oppose. As an alternative it recommended that General Stamps should be provincialised, as means of augmenting provincial surpluses, along with Judicial Stamps. The effect of this transfer of General Stamps from the all-India list to the provincial list was to increase the provincial resources and diminish those of the Central Government. That deficit the Committee accepted as amounting in the year 1921-2 to ten crore, composed of six crores previously estimated by the Government of India[f56]  plus four crores for the loss of General Stamps, the revenue from which the Committee gave to the Provinces. This amount subject to certain adjustments, [f57]  which when made resulted in a clear deficit of 9,83.06 lakhs net. In strict adherence to the limiting consideration which it felt bound to respect, the Committee proceeded to fix the following ratios in which each of the nine Provinces were to contribute to make up this amount of 9,83 lakhs in the year 1921-2 —

INITIAL CONTRIBUTIONS (IN LAKHS OF RUPEES)

Provinces

Increased spending power under new distribution of Revenue

Contributions as recommended by the Committee

Increased spending power left after Contributions are paid

Madras

5,76

3,48

2,28

Bombay

93

56

37

Bengal

1,04

63

41

United Provinces

3,97

2,40

1,57

Punjab

2,89

1,75

1,14

Burma

2,46

64

1,82

Bihar and Orissa

51

nil

51

Central Provinces

52

22

30

Assam

42

15

27

Total

18,50

9,83

8,67

This ratio of initial contributions was not intended in any manner by the Committee " to represent the ideal scale on which the Provinces should have in equity to be called upon to contribute." Indeed in making its recommendations as to initial contributions the Committee paid less attention to equity of contributions and more to

" established programmes of taxation and expenditure and legislative and administrative expectations and habits, that cannot without serious mischief be suddenly adjusted to a new and more equitable ratio of contributions widely different (as an equitable ratio must admittedly be) from that of the past. It is accordingly inevitable, if such mischief is to be avoided, that the ratio for initial contributions should bear little relation to that which would be ideally equitable." But the Committee also recognised that " an initial ratio of this nature can only be defended as a measure of transition. It is necessary, but it is necessary only in order to give time to the provinces to adjust their budgets to a new state of affairs; and we are clearly of opinion that no scheme of contribution can be satisfactory that does not provide for a more equitable distribution of the burden of the deficit within a reasonable time."

The Committee therefore proceeded next to consider the question of standard contributions as distinguished from initial contributions, which were only transitional. As to what should be the ideal basis for such an equitable distribution of the burden the Committee felt quite certain ; for it stated that

" to do equity between the provinces it is necessary that the total contribution of each to the purse of the Government of India should be proportionate to its capacity to contribute."

Two questions were involved in translating this principle into practice. What is the total contribution of a province to the purse of the Government of India ? Secondly, what is the measure of the capacity of a Province to contribute ? With regard to the first the Committee observed that

"the total contribution of a Province to the purse of the Government of India will consist in future of its direct contributions towards the deficit, together with its indirect contribution (as at present) through the channels of customs, income tax, duties on salt, etc.";

in other words, the pressure of the taxes from within its jurisdiction for the benefit of the Central Government. With regard to the second the Committee held that

"the capacity of a Province to contribute is its taxable capacity, which is the sum of the incomes of its taxpayers, or the average income of its taxpayers multiplied by their number."

The Committee was frank in its avowal of the fact that the data available was not sufficient for a direct quantitative evaluation either of the total net contribution which a Province made to the Government of India or of its capacity to contribute, and held that it was

" useless to attempt to state a formula, to serve as a basis for a standard ratio of contributions, capable of automatic application from year to year by reference to ascertained statistics."

None the less the Committee did not abandon the ideal basis it had selected for fixing the standard contributions. For it observed :

"We are able, after surveying such figures as are available and after close inquiry into the circumstances of each Province, to recommend a fixed ratio of contributions which in our opinion represents a standard and equitable distribution of the burden of any deficit. In arriving at this ratio we have taken into consideration the indirect contributions of the Provinces to the purse of the Government of India, and in particular the incidence of customs duties and of income tax. We have inquired into the relative taxable capacities of the Provinces, in the light of their agricultural and industrial wealth and of all other relevant incidents of their economic positions, including particularly their liability to famine. It should be observed that we have considered their taxable capacities not only as they are at the present time, or as they will be in the immediate future, but from the point of view also of the capacity of each Province for expansion and development agriculturally and industrially, and in respect of imperfectly developed assets such as minerals and forests. We have also given consideration to the elasticity of the existing heads of revenue which will be secured to each Province, and to the availability of its wealth for taxation."

After estimating, to the best of its ability, the weight which should be given to each of these circumstances, the Committee recommended the following fixed ratio as representing an equitable basis for the relative contributions of the Provinces to meet the deficit in the Budget of the Government of India:

standard contributions

Province

Per cent. Contribution to Deficit.

Madras

17

Bombay

Bengal

United Provinces

13

19

18

Punjab

Burma

Bihar and Orissa

9

61/2   

10

Central Provinces

5

Assam

2 1/2

Total

100

The Committee agreed that there should be an interval of time sufficient to enable the Provinces to adjust their budgets to the new conditions before they should in equity be called upon to contribute according to this standard ratio. [f58]  But the Committee thought that the interval allowed for adjustment should not be unduly prolonged.

"The initial ratio which," the Committee said, "we have proposed is a practical necessity, but the Provinces which will be called upon to pay thereunder more than they should pay in equity, ought not to be required to bear that burden for a longer period or to a greater extent than is required to prevent dislocation of the provincial budgets."

The Committee therefore proposed

"that contributions should be made on the standard ratio to any deficit that there may be in the seventh year of contribution, and that the process of transition from the initial to the standard ratio should be continuous beginning in the second year of contribution, and proceeding in six equal annual steps."

The following table shows the initial, intermediate, and ultimate ratios of contributions for the seven years in accordance with the recommendations of the Committee :

PERCENT. CONTRIBUTIONS TO DEFICIT IN SEVEN CONSECUTIVE YEARS BEGINNING WITH THE FIRST YEAR OF CONTRIBUTION

(rounded off to even halves)

 

1st

2nd

3rd

4th

5th

6th

7th

Province

Year

Year

Year

Year

Year

Year

Year

Madras

35

32

29

26

23

20

17

Bombay

5

7

8

9

10

12

13

Bengal

6

8,

10,

12 ,

15

17

19

United Provinces

24

23 ,

22 ,

21

20

19

18

Punjab

18

16,

15

13,

12

10

9

Burma

6

6,

6,

6

6

6

6

Bihar and Orissa

nil

1

3

5

7

8

10

Central Provinces

2

2

3

3

4

4

5

Assam

1

1

2

2

2

2

2

Total

100%

100%

100%

100%

100%

100%

100%

These recommendations were accepted by the Government of India and the Secretary of State. But when the rules in which they were embodied came before the Joint Select Committee of Parliament appointed to revise the draft rules made under the Government of India Act, for consideration, the Committee made some important alterations in the allocation of revenues and contributions from the Provinces. In its Report[f59] the Joint Committee recognised

"the intricacy of the problem with which the Financial Relations Committee had to deal, and the difficulty, amounting almost to impossibility, of arriving at any solution which was likely to be acceptable to all Local Governments...... They believe that such dissatisfaction as the proposals have aroused is inevitable in distributing resources between a Central and Provincial Governments, and that the impossibility of removing by a stroke of the pen inequalities which are the result of long-standing and historical causes have been overlooked." " None the less," the Committee desired, " on grounds of policy, to alleviate the disappointment caused by the restraints which the system of contribution laid on the employment by the provinces of their revenues. As a means of alleviating the burden the Committee suggested:

 "(1) That there should be granted to all provinces some share in the growth of revenue from taxation on incomes so far as that growth is attributable to an increase in the amount of income assessed. "

(2) That in no case should the initial contribution payable by any province be increased, but that the gradual reduction of the aggregate contribution should be the sole means of attaining the theoretical standards recommended by the Financial Relations Committee." Accordingly it is provided in the Devolution Rules that:

(15) There shall be allocated to each Local Government a share in the income tax collected under the .Indian Income Tax Act, 1918, within its jurisdiction. The share so allocated shall be three pies on each rupee brought under assessment under the said Act, in respect of which the income tax assessed has been collected. The number of pies to be specified shall be so calculated as to yield at the outset to the Local Governments collectively a sum amounting as near as may be to 400 lakhs. [f60] 

and that

(17) In the financial year 1921-2 contributions shall be paid to the Governor-General in Council by the Local Governments mentioned below according to the following scale:

 

Name of the Province

Contributions (in lakhs of rupees)

of the Province                    

 

Madras

  3,48

Bombay

 56

Bengal

63

United Provinces

2,40

Punjab

1,75

Burma

64

Central Provinces and Berar       

22

Assam

15

 

(18) From the financial year 1922-3 onwards a total contribution of 9,83 lakhs, or such smaller sum as may be determined by the Governor-General in Council, shall be paid to the Governor-General in Council by the Local governments mentioned in the preceding rule. When for any year the Governor-General in Council determines as the total amount of the contribution a smaller sum than that payable for the preceding year, a reduction shall be made in the contributions of those Local Governments only whose last previous annual contribution exceeds the proportion specified below of the smaller sum so determined as the total contribution ; and any reduction so made shall be proportionate to such excess:

 

Madras

17/90  ths

Bombay

13/90 ths

Bengal

19/90 ths

United Provinces

18/90 ths

Punjab

9/90 ths

Burma

6 /90 ths

Central Provinces  and Berar     

5/90ths

Assam

2 /90 ths

 

(19) In cases of emergency the Local Government of any Province may be required by the Governor-General in Council, with the sanction of the Secretary of State, to pay to the Governor-General in Council a contribution for any financial year in excess of the amount required by the preceding rules in the case of that year. Two more matters had to be settled in order to make the separation between Provincial and Central Finance as complete as possible. Both were connected with capital transactions. One was the question of the Provincial Loan Account. This Account represented the fund from which a Provincial Government advanced agricultural loans, loans to indebted landholders, to municipalities and other local bodies, etc. The capital was provided by the Government of India as required and was returned to it as it was repaid. The province paid the Government of India interest on the average capital outstanding in each year, recouping itself by higher rates of interest which were supposed to compensate it for bad debts. It was commonly agreed that it was the natural result of the Reforms Scheme that the Provinces should for the future finance their own loan transactions, and that joint accounts of this nature between them and the Government of India should be wound up as quickly as possible. The matter was referred to the Financial Relations Committee and on the basis of its recommendations in that behalf it was provided by Rule 23 of the Devolution Rules that :

" Any moneys which, on the 1st  day of April 1921, are owed to the Governor-General in Council on account of advances made from the provincial loan account of any Province shall be treated as an advance to the Local Government from the revenues of India, and shall carry interest at a rate calculated on the average rate carried by the total amount owed to the Governor-General in Council on this account on the 31st March 1921. The interest shall be payable upon such dates as the Governor-General in Council may fix. In addition, the Local Government shall pay to the Governor-General in Council in each year an instalment in repayment of the principal amount of the advance, and this instalment shall be so fixed that the total advance shall except where for special reasons the Governor-General in Council may otherwise direct, be repaid before the expiry of twelve years. It shall be open to any Local Government to repay in any year an amount in excess to the fixed instalment."

The other was the question of responsibility for capital expenditure on irrigation works. In this as in the matter of Provincial Loan Account it was agreed that it would be incompatible with the scheme of complete separation of Provincial Finance to hand over to the former the control of irrigation works and to make the latter responsible for the capital transaction incurred thereon. Hence the rule[f61]  that:

(1) The capital sums spent by the Governor-General in Council upon the construction in the various Provinces of productive and protective irrigation works and of such other works financed from loan funds as may from time to time be handed over to the management of Local Governments shall be treated as advances made to the Local Governments from the revenues of India. Such advances shall carry interest at the following rates, namely: (a) In the case of outlay up to the end of the financial year 1916-17, at the rate of 3.3252 per centum. (b) In the case of outlay incurred after the financial year 1916-17, at the average rate of interest paid by the Governor-General in Council on loans raised in the open market since the end of that year.

(2) The interest shall be payable upon such dates as the Governor-General in Council may fix.

  Thus was broken the financial and administrative strand which tied the Provincial Governments to the Central Government and prevented the introduction into them of responsible government. As the Provinces thereby acquired " an acknowledged authority of their own " over the services and sources allocated to them it followed that they should have the freedom to borrow in their own name, which was denied to them heretofore. Consequently the Local Government Borrowing Rules[f62]  made under the Reforms Act provided that subject to certain conditions: [f63] 

"A Local Government may raise loans on the security of the revenues allocated to it for any of the following purposes, namely:

a)    To meet capital expenditure on the construction or acquisition (including the acquisition of land, maintenance during construction and equipment) of any work or permanent asset of a material character in connection with a project of lasting public utility, provided that :

I.      the proposed expenditure is so large that it cannot reasonably be met from current revenues, and

II.    if the project appears to the Governor-General in Council unlikely to yield a return of not less than such percentage as he may from time to time by order prescribe, arrangements are made for the amortisation of the debt;

b)         to meet any classes of expenditure on irrigation which have under rules in force before the passing of the Act been met from loan funds;

c)          for the giving of relief and the establishment and maintenance of relief works in times of famine or scarcity ;

d)         for the financing of the Provincial Loan Account ; and

e)         for the repayment or consolidation of loans raised in accordance with these rules or the repayment of advance made by the Governor-General in Council."

With the cutting off of the financial and administrative strand there remained only the legislative strand which had so far debarred the growth of provincial autonomy. This legislative strand, as was pointed out before, operated through the principle of requiring previous sanction and subsequent assent of the Government of India. By the rules made under the Reforms Act a field has been marked off for the free exercise of the Legislative powers of the Provinces in which that principle has been dispensed with. So far as the field of tax legislation was concerned it was provided[f64]  that:

"The Legislative Council of a Province may, without the previous sanction of the Governor-General, make and take into consideration any law for imposing for the purposes of the Local Government any tax included in Schedule I."

This schedule comprises the following heads of taxation: —

1. A tax on land put to uses other than agricultural.

2. A tax on succession or acquisition by survivorship in a joint family.

3. A tax on any form of betting or gambling permitted by law.

4. A tax on advertisements.

5. A tax on amusements.

6. A tax on any specified luxury.

7. A registration fee.

8. A stamp-duty other than duties of which the amount is fixed by Indian legislation.

In the matter of non-tax legislation the procedure adopted by the rules has been slightly different. In tax legislation the rules stated in what cases previous sanction was not necessary. In non-tax legislation the rules required in what cases previous sanction was necessary. The effect of this difference in the requirements of the rules of previous sanction[f65]  was that while in matters of tax legislation a Provincial Government could only levy certain named taxes, in the matter of non-tax legislation it could do anything provided it did not infringe certain laws. The reasons for this difference are obvious. A widening of the basis of provincial taxation means a narrowing field for imperial taxation. Such a detrimental effect could not flow to the Government in the matter of non-tax legislation, be the non-tax legislative powers of the Provinces howsoever large. The taxing power to be granted to the Provinces had therefore to be more strictly circumscribed than the grant of legislative power. None the less it cannot be denied that the rules regarding previous sanction sufficiently loosened the legislative strand as to permit of the Provinces being autonomous in theory as well as in practice.

This autonomy is well reflected in the new Budget Procedure in the Provinces. Under the old regime the Provincial Budgets had to be passed by the Finance Department of the Government of India, the Provincial Accounts to be supervised by the Accountant-General and audited by the Controller and Auditor-General of the Government of India and appropriation reports submitted to the Finance Department of the Government of India. All this is changed under the new regime. The Provincial Budget, instead of being passed by the Finance Department of the Government of India, is framed by the Finance Department constituted in each Province under the Reforms Act[f66]  and is voted item by item by the Provincial Legislature. [f67]  The accounts of the Provinces still continue[f68]  to be supervised and audited by the officers of the Government of India, but the important point under the new regime which is the hall-mark of provincial independence is that the appropriation reports, instead of being sent to the Government of India for action, are now sent to the Committee of Public Accounts constituted from amongst the members of the Provincial Legislature which sanctioned the Budget for report that the money voted by the Legislature was spent within the scope of the grants made by the Legislature.

Thus is effected the demarcation of the field for the governance of. India into Central and Provincial. Such a demarcation of administrative and financial matters was the dream of many an Indian politician and statesman. It was urged before the Royal Commission on Decentralisation and was also urged by the late Mr. Gokhale in his political testament which  he left before he died. But all these projects were ill timed and could not be given effect to until the law of the Indian constitution had been altered. Now that such an alteration has been made the ideal of Provincial autonomy bids fair to become real. But before closing this study it may be useful to evaluate the changes of its successful working.

 

Contents                                                                              Continued....

 


 [f1]1 Cf. James Bryce, The American Commonwealth, 1910, Vol. I, Chap. XX.

 [f2]2 Cf. Sir Sidney Low, The Goveranance of England, 1914, Ch. Ill, passim.

 [f3]1 Cf. the important note by that eminent lawyer Sir Bhashyam lyengar on the Reform proposals of Lord Minto in 1908

 [f4]Fisher, H. A. L, on Imperial Administration in his The Empire and the Future, 1916, p. 58.

 [f5]The only two cases in which the Secretary of State is known to have run counter to the wishes of the Executive in India were those concerning the Punjab Drainage and Canal Act and the Indian Tariff Act of 1875. The latter was obviously detrimental to the interests of India.

 [f6]Cf. the Resolutions of the House of Commons in 1877 and 1879 condemning the Indian Tariff policy in the interest of Lancashire

 [f7]In support of this may be cited the fact that Parliament never granted a lease of power without making harassing inquiries into the affairs of the East India Company.

2         [f8]Compare the Parliament which subjected the Indian Executive to the Judicature with the Parliament that has freed that Executive from Judicial and Legislative control. Compare the Parliament which laid stringent regulations on the Europeans in India with the Parliament which not only allowed them free ingress but kept them above the control of the Magistracy. Compare the Parliament which impeached Hastings with the Parliament which supported General Dyer.

 [f9]1 Bengal Regulation of 1829 prohibiting Sati, Act V of 1843 (prohibiting slavery) : XXI of 1850 (re enacting Sec. of Reg. VII of 1832) prohibiting forfeiture of rights or property as a result of loss of caste or religion ; XV of 1856 authorising the remarriage of Hindu widows ; XXI of 1866 enabling native Converts to Christianity to obtain divorce ; XXVII of 1871 restricting unnatural practices; III of 1872 providing a form of marriage for all persons who are neither Christians, Jews, Hindus, Mahomedans, Jains, nor Sikhs.

 [f10]' It was first accepted by Warren Hastings in 1772 and was embodied in the East India Company's Act of 1780 (21 Geo. Ill, c. 70, ss. 17 and 18); the provisions have been incorporated in later Statutes.

 [f11]Cf. the provisions in favour of the personal law in the Indian Succession Act X of 1865 : the Transfer of Property Act IV of 1882, and the Indian Trust Act II of 1882.

 [f12]Cf. The Tenancy Acts of 1859, 1868, 1881 and 1885 in Bengal : Oudh Rent Act of 1868 in U.P. : the Deccan Agriculturists Relief Act of 1879 in Bombay, and the Central Provinces Tenancy Act of 1883.

 [f13]The Factory Acts did not begin in India till 1881. The Act of 1881 was amended in 1891 and replaced by another in 1911 which lays down the conditions governing factory labour in India.

1         [f14]Students of Indian economic problems will perceive that the reference is to the scandalous system of indentured labour.

 [f15]1 Cf. the speech by Sir A. Colvin on the License Tax Amendment Bill in the Supreme Legislative Council on January 4, 1886.

 [f16]Cf. the criticism by Prof. Cannan on the Terms of Reference to the Royal Commission on Local Taxation in the Memoranda chiefly relating to the classification and incidence of Imperial and Local Taxation, C. 9528 of 1899, p. 160.

 [f17]1For an illuminating discussion of this, of. A. V. Dicey, Law of the Constitution, 1915, pp. 74-82.

 [f18]1 The poll tax has been continued in Burma simply because it was found to exist there on the day of conquest.

 [f19]2 Benard Houghton, Bureaucratic Government

 [f20]1 Bengal Regulation III of 1818: Bombay Regulation XXV of 1827 ; Madras Regulation

II of 1819

 [f21]2 Act XXIV of 1850 and Act III of 1858.

2         [f22]N. Ghose, Comparative Administrative Law, 1918, p. 480.

 [f23]4 Act IX of 1857

3         [f24]"Sir Lawrence Jenkins, C. J., in re Mahomedali, I.LR. 40, Cal. 466 (1913), quoted by N. Ghose, op. cit., p. 567.

 [f25]1 Sections 108 and 144 of the Criminal Procedure Code and Sections 120A and B, 124A and 153A of the Indian Penal Code

 [f26]2 N. Ghose, op. cit., p. 601.

 [f27]3Code of Criminal Procedure Act V of 1898, Ch. IX, Sections 128, 130 and 132.

 [f28]4 lbid., sect. 197

 [f29]5 Speech on conciliation with America.

 [f30]1 Up to 1833 the Executive was also the Legislature. In 1833 a law member was added to the Executive Council, whose duties were confined to merely giving assistance to the Executive Council in the matter of making laws. By the Act of 1853 he was merged into the Executive Council.

 [f31]2 16 and 17 Victoria, c. 95.

 [f32]3 24 and 25 Victoria, c. 67.

 [f33]4By the Act of 1853 the Supreme Legislature was composed of nominated members comprising two Judges of the High Court of Bengal and four nominated officials representative of the Bengal, Madras, Bombay and N.W.P. governments in addition to the members of the Executive Council of the Government of India.

 [f34]It was Lord Morley, of world-wide fame as a champion of Liberalism by supporting the cause of Irish Home Rule, who said in introducing the political reforms in India : " If I knew that my days, either official or corporeal, were twenty times longer than they are likely to be, I should be sorry to set out for the goal of a Parliamentary system in India. The Parliamentary system in India is not the goal to which I for one moment aspire."

 [f35]It was, however, a system of selection. The only difference between the Act of 1861 and the Act of 1892 was that under the former Act the Executive Government was to nominate anyone it liked to the Legislature. Under the latter the Executive Government was to nominate " upon the advice of such sections of the community as are likely to be capable of assisting in that matter." But as the Government was not bound to appoint the person selected, the second, howsoever concealed, must really be regarded a case of nomination by the Executive as much as the first.

 [f36]3Legally the President of the Council, i.e. the Viceroy; but he is supposed to be invariably acting on the advice of the executive Council

 [f37]4 Cf. J. Redlich, Parliamentary Procedure, Vol. Ill, p. 198.

 [f38]1 This will be found in East India Constitutional Reforms, pp. Cd. 9178 of 1918, p. 98.

 [f39]1 Report of the Joint Select Committee on the Government of India Bill, p. 203 of 1919, p.s. para. 7.

 [f40]Report on Indian Constitutional Reforms, Cd. 9109 of 1918, Ch. V.

 [f41]There is, however, a glaring exception. The land revenue in India has been raised without any legislative sanction. The exclusion of land revenue from the province of the legislature practically removed between 40 and 50 per cent. of the net public revenue from any sort of control.

 [f42]The degree of subordination it should be noted varied with the status of the Provinces, for which see Joint Report, pp. 37-45.

 [f43]Joint Report, pp. 75-6.

 [f44]3 Joint Report, p. 101.

 [f45]Memorandum for the Functions Committee by the Government of India, Annexture II lo the Report of the Committee Cmd. 103 of 1919.

 [f46]Report, pp. 165-7.

 [f47]The land revenue policy of the Government has always been looked upon by the popular leaders, rightly or wrongly, with a certain degree of suspicion, and is always in danger of being attacked. For fear that the policy may be subverted under a popular Provincial Legislature to whose control land revenue as a provincial subject was subjected it provided by the Reservation of Bills Rules under Section 12(1) of the Government of India Act, 1919, that—The Governor of any Governor's province shall reserve for the consideration of the Governor-General any Bill, not having been previously sanctioned by the Governor-General, which has been passed by the legislative Council of the Province and is presented to the Governor for his assent, if the Bill appears to the Governor to contain provisions—

(e) affecting the land revenue of a Province either so as to (i) prescribe a period or periods within which any temporary settled estate or estates may not be re-assessed to land revenue, or (ii) limit the extent to which the assessment to land revenue of such an estate or estates may be made or enhanced, or

(iii) modify materialy the general principles upon which land revenue has hitherto been assessed, if such prescription, limitation or modification appears to the Governor to be likely seriously to affect the public revenues of the province.

 [f48]1 Report, p. 168

 [f49]Report, p. 169.

 [f50]The suggested imposition of an equal rate of levy is somewhat strange, for the authors of the Report had in para. 206 protested that " equality of contribution was impracticable," etc. Para. 206 of the Joint Report makes a confusion. It protests against equality of contributions, which is what it adopts in the plan it recommends.

 [f51]1 Report, p. 170.

 [f52]Dated March 5, 1919 (para. 61), on the questions raised in the Report on Indian Constitutional Reforms, pp. Cmd. 123 of 1919.

 [f53]Report of the Joint Select Committee on the Government of India Bill (part V, clause 41, para. 9)—House of Commons Return 203 of 1919, p. 12.

 [f54]Report of the Committee appointed by the Secretary of State for India to advise on the question of the Financial Relations between the Central and Provincial Governments in India, pp. Cmd. 724 of 1919, Ch. III.

 [f55]The Report of the Financial Relations Committee seems to argue that the difference between its plan of levying contributions and that suggested in the Joint Report is a difference in the basis of the contributions ; its basis being that of " increased spending power," while that of the Joint Report was " gross provincial surplus." The Financial Repations Committee pointedly criticised the method proposed in the Joint Report to assess the contribution from each province " as a percentage of difference between the gross provincial revenue and the gross provincial expenditure." There does not seem to be much difference between that scheme and the scheme of the Committee consisting of a percentage levy on what is called increased spending power of the provinces under the new distribution of the revenues between the Central and Provincial Governments. That these two are different bases of assessment seems to be the general impression (of. the speech of the Hon. Rai Bahadur Bakshi Sohan Lal on the Resolution re Provincial Contributions to the Central Exchequer, Legislative Assembly Debates, Vol. Ill, No. 8, p. 508). This of course is an error , for spending power is simply another name for gross surplus. The change made by the Committee was in proposing unequal contribution in place of equal contribution. It kept unchanged the basis of the assessment.

 [f56]Recommendations of the Government of India regarding the Demarcation between Central and Provincial Revenues, Cmd. 334 of 1919, Statement III.

 [f57]These adjustments were, with regard to the Military Police Force in Burma, the payment of pensions and leave allowances. of. Report of the Financial Relations Committee, para. 10.

 [f58]For a good piece of criticism of the basis adopted by the Financial Relations Committee in arriving at the standard ratio, see para. 12 of a rather splenetic letter from Rai Bahadur K. V. Raddi to the Reforms Commissioner, Simla, pp. Cmd. 974 of 1920, p. 58.

 [f59]Second Report of the Joint Committee appointed to revise the draft rules made under the Government of India Act, pp. 172 of 1920, pp. 2-3.

 [f60]This arrangement was subject to the following provision attached to Devolution  Rule 15:

(2) In consideration of this allocation, each Local Government shall make to the Governor-General in Council a fixed annual assignment of a sum to be determined by the Governor-General in Council as the equivalent of the amount which would have accrued to the Local Government in the year 1920-21 (after deducting the provincial share of the cost of special income tax establishments in that year) had the pie-rate fixed under sub-rule (1) been applied in that year, due allowance being made for any abnormal delays in the collection of tax.                              

(1)     The cost of special income tax establishments employed within a province shall be borne by the Local Government and the Governor-General in Council in the proportions of 25 per cent. and 75 per cent. respectively. 

(4) If in any financial year the total amount payable by a Local Government under sub-rules (2) and (3) in respect of the fixed assignment and the cost of special income tax establishments exceeds the amount of the share of income tax allocated to it under sub-rule (1), the fixed assignment for that year shall be deemed to have been reduced by the amount of such excess.

 [f61]Devolution Rule 24.

 [f62]Rules under Section 2 (2) of the Government of India Act, 1919

 [f63]The rules required that :

(1) No loan shall be raised by a Local Government without the sanction (in the case of loans to be raised in India) of the Governor-General in Council, or (in the case of loans to be raised outside India) of the Secretary of State in Council, and in sanctioning the raising of a loan the Governor-General in Council or the Secretary of State in Council, as the case may be, may specify the amount of the issue and any or all of the conditions under which the loan shall be raised.

(2) Every application for the sanction of Secretary of State...... shall be transmitted through the Governor-General in Council.

 [f64]Rules under Section 10 (3) (a) of the Government of India Act, 1919, Scheduled Taxes Rules.

 [f65]Rules under section 10 (3) (L) of the Government of India Act, 1919, Local Legislature Previous Sanction rules. It should, however, be noted that if a Provincial Bill is such that it does not require previous sanction it does not follow that it can become law under the above rules because it has been assented to by the Provincial Legislation. For, by virtue of another set of Rules' made under section 12 ( 1) of the Government of India Act, 1919, called Reservation of Bills Rules, it is provided that the Governor of a Province must reserve some and may reserve other Bills for the subsequent assent of the Governor-General before declaring them law even if the Bills be such as to require no previous sanction

 [f66]For the constitution and functions of the Finance Department of the Provinces, see Part III of Devolution rules made under Section I of the Government of India Act, 1919.

 [f67]See Rules 25 to 32 of the Rules of Business for Provincial Legislative Councils made under Section 1 1 (5) of the Government of India Act, 1919. 4

 [f68]Rules framed under Section 96D (1) of the Government of India Act.