The bulk of the Indian debt (including the whole of the sterling debt) is held by Europeans-that is to say the interest charge annually amounting to millions is drawn by foreigners. In every country, the National Debt is held by the children of the soil, not outsiders. In 1911, the estimated percentage of the rupee debt, held by Indians, was about 47.

The growth of the sterling debt-apart from other disadvantages-is primarily responsible for the exchange muddle. The Fowler Currency Committee of 1898, emphatically protested against the increase of expenditure and growth of sterling obligations The Government of India should husband the resources at their command, exercise a resolute economy and restrict the growth of their gold obligations." In deliberate defiance of this pronouncement, as I have shewn in the above table, the Government of India between 1902-12 have increased the sterling portion of the Indian Public Debt by nearly £50 millions.

Eight years of Liberal Imperialism, under Lords Morley and Crewe-notwithstanding the "Reforms"-have set a more rapid pace in the growth of the Public Debt. On the whole, the Conservatives have managed the finances of India with greater advantage to her than the Liberals. The closing of the Indian mints to the free coinage of silver in 1892-3 was accomplished by a Liberal administration-a change the Conservative Government had condemned twice in 1878 and in 1886. Lords Morley and Crewe have thrown out millions of Cash Balances into the London market with and without security at a give-away rate of interest with a lavish prodigality at the expense of the Indian taxpayer, an innovation no Conservative Secretary of State would have sanctioned. The Delhi expenditure, and the 12 millions railway programme, should make Indian politicians pause before uttering extravagant encomiums on Liberal ministers and their policies. Even the much-maligned Lord Curzon did not undertake to carry out an annual 12 millions railway programme.

The Indian Government has let slip more than one opportunity in reforming the finances on favourable terms. Some

seventeen years ago, when money was to be had in London at 2 per cent, all the Railways could have been bought without the payment of any annuities-by the issue of a consolidated loan spread over a num

ber of years at a saving of £2 to 3 millions annually in Interest Charges.

The Government of India loans of recent years have lowered the credit of India ; for they have been underwritten, their rate of interest has been raised and their figure of issue lowered. In spite of these boons to the London investors, neither the loan of January 1910, nor the bulk of the guaranteed Railway issues during the past five years were fully taken up by the public. It is high time to reconsider ways and means abolish the guarantee and profit sharing arrangements and overhaul the system of the Public Debt management. The 31⁄2 percent loan for 22 millions sterling (of June 1910) was issued at 92. Even the railway companies complain that the India Office does not permit them to choose their own time and issue a straightforward loan without a guarantee at or near par.

Port Trust loans have been successfully floated in India when they had failed in London. No kind of guarantee, direct or indirect, should find a place in the Budget of India. Perpetual borrowing should be put an end to. No huge railway programme should any longer be tolerated. tolerated. Further sterling obligations should cease: Every endeavour should be made to popularise the rupee paper and necessary loans should be floated in India.

The loan of March, 1911, was underwritten, interest 31⁄2 per cent and issue price 96. The policy of proceeding piecemeal, working in secrecy, petty and costly method of work, failure to grasp situations, disregard of market conditions, lack of a comprehensive plan, the strange conceit that wisdom begins and ends with those in office the amateur experiments of the High Priests of Simla and Whitehall-who contradict one another-: and above all, the want of effective control over the India Office, has cost India dear by throwing millions on her finances-a recurring burden on the Indian taxpayer.

The following extracts reproduced from the evidence of Mr. Alfred Clayton Coletill recently Governor of the Bank of England-before the Indian Finance Commission of 1913, throw a flood of light on the wanderings of the India Office in the financial wonderland:

"A. 3359. Ido not know what the India Bills which were in the market for a considerable time, were raised for; but they

were raised; and I should have said they might have been paid off earlier than they were paid off."

"A. 3363. I should say that to take a security at par value when it may be 10 per cent below par is bad finance. Personally this is the first time I have ever known such a thing was done."

"A. 3365. We at the Bank have never accepted Colonial Government Securities as floaters. But the India Office are taking them."

"A. 3368. The fact that it is known that India will continue to borrow annually does naturally tend to keep down the quotations for her loans in the London market. I would like to add that if India at any time requires money on a large scale, she would probably have to issue a loan with a fixed date for redemption."

"A. 3371. All the Colonial loans have a fixed date for redemption. Indian securities have gone down more than Colonial Securities."

"A. 3521. Had the financial storm centre been in London, these securities might not have been realisable at all, or if at all it would have been at a great sacrifice with a most prejudicial effect upon the financial world all round.* Lord Cromer speaking before the Welby Commission, said that it would be a good thing to have an independent and impartial Court of Arbitration, like the Judicial Committee of the Privy Council, to go into the question of the financial management of India and decide whenever a conflict of interest arises."

It is a matter of prime importance that the finances of India should be put on a more equitable and solvent basis before real reform of any kind could be achieved on an adequate scale.

[Cd. 7069] Minutes of Evidence taken before the Indian Finance Commission, 1913. Vol. I.

S. V. DORAISWAMI.

N my way back from South Africa I spent about 10 days in Portuguese East Africa, where I was able to get some idea of the condition of British Indians in Portuguese Territory. Three days of my time was spent at Lorenzo Marques and seven days at Beira. To one who has been accustomed to think with some pride of the British Empire and the benefits of justice and equity which the British flag is supposed to confer on all British subjects alike it was humiliating to find that the treatment which British Indians receive at the hands of the Portuguese is so much better than that which they receive in British Colonies.

In Delagoa Bay, both in Lorenzo Marques itself and on the railway, Indians were treated with a courtesy which is very rare in British South Africa. One or two incidents will perhaps illustrate this.

I was travelling on the railway from Lorenzo Marques to a place about 20 miles

inland where the Government Agricultural Farm is situated. The Indian gentlemen with whom I was travelling (there are no separate carriages for 'coloured persons' on the Portuguese railways) had occasion to make some complaint to the Portuguese ticket collector, who listened to their complaint with such politeness and good humour that things were at once smoothed

over.

At the Government Farm the chief offcial received us all politely and allowed us to see over the farm and chatted with us on the station platform before we left.

On the return journey a Portuguese boy of 14 or 15 got into our carriage and I confess I was agreeably surprised when he began to chat pleasantly with my Indian friends telling them how he had only just recovered from fever, etc. I was surprised because it was such a complete contrast to the behaviour of most European boys in South Africa towards Indians.

Another incident occurred in Beira, where the roads are so sandy that every one has to go about on trolleys which run on small rails. I noticed one trolley which was like a high box with ventilators at the top and I asked my Indian host what it was. He replied that four years before it was the custom for the meat to go through the town on open trolleys but when the Hindu community protested on the ground that it was offensive to them to see meat continually passing through the streets orders were at once passed prohibiting butchers from placing their meat on open trolleys. This incident spoke volumes for the considerate attitude adopted by the authorities in Beira towards their Indian fellow citizens.

Both in Lorenzo Marques and in Beira the Indians told me they had had nothing to complain of until quite recently when in certain directions the influence of Transvaal anti-Asiatic legislation was being felt in Portuguese territory.

It is impossible for one who was so short a time there to explain the reasons for this difference between Portuguese and British territory, but the following suggestions may indicate some of the reasons:

(1) There is amongst the Portuguese very little insularity or colour prejudice. The Portuguese seem to mix freely even with the natives of the country, especially in the interior, and they treat Indian merchants and traders much as they do European settlers.

(2) The Goanese element being largely Roman Catholic and consisting of Portuguese subjects helps to form a connecting link between British Indians and Portuguese. In Beira Goanese are to be found holding important official positions.

(3) The Portuguese are not very prolargely on Indians for opening up trade, gressive as colonists and have depended etc. They realise the great benefit the Portuguese territories have derived from the work of Indian traders. Further as many of the Indian merchants, especially in Lorenzo Marques, own considerable property they cannot be ignored.

(4) In Delagoa Bay I was told that more than 60 per cent. of the Portuguese were in official posts and therefore the majority of the Portuguese residents are not brought into severe competition with Indians.

(5) The British flag flies over British Consulate, which proves to be a more satisfactory court of appeal for British Indians than the parliament of a British self-governing colony. The British Consul can refer any cause of complaint to his Home Government, which can at once bring pressure to bear on the the Lisbon Government.

I wondered, after my experiences in British South Africa and Portuguese East Africa, whether Froude's ideal of an Empire really united under the British flag would ever be realised.

I

NEVER expected that the steps I suggest

ed in my article on Reduction of Armaments in the last January number of The Modern Review could be taken all at once. As steps, they could come only one after another, with intervals between; and the very first step could only follow a Confederation of the British Empire, which is still an idea. Mr. Churchill, who expected a naval holiday as a consequence of German friendliness, has been disillusionised and has exclaimed, "The nations are arming!" As a matter of fact, armaments are

increasing throughout Europe. In the present paper, I want to put forth certain ideas along the line of thought indicated by the Latin saying, "Si vis pacem, para bellum."

Germany is now the storm-centre in Europe, as France was before her power was broken down by Germany in 1870-71. Greed of territorial expansion by conquest is an instinct inherited from barbarous ancestors. The highest ethical standard of the present day wholly condemns this greed. The individual conscience of a great ruler proves sometimes, as in the case

of the present German Kaiser, a powerful barrier against war and conquest. So long as the Kaiser lives, there is hardly any chance of the fire-eaters of Germany being able to drag their country into the work of slaughter for enlarging its bounds. But the Kaiser cannot live for ever, and if he dies before permanent peace is installed throughout the world, the probability will remain of Europe being deluged with blood when the present Crown Prince rules as Kaiser. A Reuter's telegram from London, dated the 21st April 1914, announced that Dr. Carl Peters, German explorer and colonial authority, advocated the extension of German colonies, and that the Crown Prince telegraphically approved the policy advocated. As there are no unappropriated territories left in the world, how are German colonies to be extended? Whether by violent seizure or compulsory purchase, it is for the irrepressible Crown Prince to say.

From Sir Harry Johnston's article, "Germany and Alsace Lorraine" in the last January number of The Nineteenth Century and After, I quote the following significant passages:

(1) "That section of the German futurists which would prefer to any degree of colonial expansion, the conquest of Belgium still wields great influence in the highest quarters." (2) "Fortunately for the peace of the world, there is a much more reasonable party............ (3) "Men who hold reasonable views....... would favour the following solution of the Alsace-Lorraine question. They would retrocede the small area of French-speaking Lorraine-not more than 450 square miles, including Metz and the line of the Scille River-to France, in return for further concessions on the part of France in Congoland." '4) “There are still French publicists unreasonable enough to imagine that England and Russia are with them in preparing for an eventual war with Germany on behalf of the ceded provinces."

of

The dream of a recovery of Alsace and Lorraine, still indulged in by a section of the French people, is most unreasonable. Alsace and German Lorraine are Germanspeaking lands, which were conquered by France when Germany was divided and weak. They were not treated as conquered territories, but were put on an equal footing with the provinces France, the effect of which was that they became thoroughly French in sentiment, and prized their new nationality, for France was then in every way a greater country than Germany. Since their annexation by Germany in 1871, they have, however, been becoming more and more German in sentiment and culture

year by year. The Kaiser was received enthusiastically at Strassburg a few years ago, and Sir Harry Johnston now tells us. that the Alsatians and German-Lorrainers are already "dreaming of the splendid future which is awaiting a well-governed German Empire, the empire of the Germanspeaking peoples." The Zabern incident was an act of Prussian despotism which roused great indignation in Southern Germany. Does the French party, which still longs for Alsace and Lorraine, want to have them back against the wishes of most of their inhabitants? The party is again quite deluded, if it believes that England and Russia can ever be so foolish as to court German hostility by holding out any encouragement to France for the recovery of the lost provinces. The attitude of this party can only keep up the German belief that France will always remain irreconcilable. A reconciliation between France and Germany on the basis of a retrocession of French Lorraine with Metz to France in return for further cession of territory in Congo is most desirable. The strategic value of Metz induced Moltke to insist on its acquisition by Germany when Bismarck proposed a linguistic frontier between the two countries. A reconciliation with France is worth far more to Germany than continued possession of a strategic point against her.

For effectually curbing the German party that threatens European peace by aggressive action westwards, it is necessary to devise means, and this is by no means an easy task, as will appear from what follows.

The wide disparity that has grown up in about thirty years' time between Germany and France in the matter of population and industrial and commercial expansion has greatly disturbed the political equilibrium of Europe. Over a territory very nearlyequal to that of the German Empire, France has now a population of only nearly 40 millions against Germany's 65 millions. This in itself is a heavy disadvantage on the side of France. Germany's superior density of population is mainly the effect of her industrial superiority, and this industrial superiority is mainly due to her vastly larger resources in coal (including lignite), rather than to any inherent superiority of the Teutonic race which remained latent so long and has burst forth suddenly into view. Quoted below are