XI INDIA’S CLAIM TO FISCAL AUTONOMY “INDUSTRIES AND TARIFFS”

.... for equality of right amongst nations, small as well as great, is one of the fundamental issues this country and her allies are fighting to establish in this war.

David Lloyd George

“The War Aims of the Allies.” Speech delivered to delegates of the Trade Unions, at the Central Hall, Westminster, January 5, 1918.

I beg to record my strong opinion that in the matter of Indian industries we are bound to consider Indian interests firstly, secondly, and thirdly. I mean by “firstly” that the local raw products should be utilised, by secondly, that industries should be introduced and by “thirdly” that the profits of such industry should remain in the country.

Sir Frederick Nicholson

Quoted on page 300, Report of the Indian Industrial Commission, 1916-1918.

Economic bondage is the worst of all bondages. Economic dependence, or the lack of economic independence, is the source of all misery, individual or national. A person economically dependent upon another is a virtual slave, despite appearances. He who supplies food and raiment and the necessities of life is the real master.

The desire for gain dominates the world and all its activities. Even religion, as ordinarily understood, interpreted and administered, is a game of pounds and shillings, say what one may to the contrary. There are exceptions to this statement, but they are few and far between. The world does not subsist by bread alone, but without bread it cannot exist even for a minute. The generality of the world cares more for bread than for anything else, though there are individuals and groups of individuals who would not stoop to obtain bread by dishonorable means and those also who would die rather than obtain bread by the violation of their soul.

There are numerous ways in which a subject nation feels the humiliation and helplessness of her position, but none is so telling and so effective as the subordination of her economic interests to those of the dominant power. This is especially true in these days of free and easy transportation, of quick journeys, and of scientific warfare. In any struggle between nations, the victory eventually must rest with the one in possession of the largest number of “silver bullets.” It is true that silver bullets alone will not do unless there are brains and bodies to use them, but the latter without the former are helpless.

A nation may be the greatest producer of food; yet she may die of hunger from lack of ability to keep her own produce for herself. Food obeys the behest of the silver bullets. The law of self-preservation, therefore, requires only that nations be free to regulate their own household, subject to the condition that thereby they do not violate the rules of humanity or trample upon the rights of any human being.

Mr. Montagu and Lord Chelmsford have, in parts of their Report, been extremely candid. The value of their joint production lies in this candidness. In no other part, perhaps, have they been so candid as in the one dealing with “Industries and Tariff.” In Paragraph 331 they frankly admit the truth of the following observation of the late Mr. Ranade on the economic effects of British rule in India:

“The political domination of one country by another attracts far more attention than the more formidable, though more unfelt, domination which the capital, enterprise and skill of one country exercise over the trade and manufactures of another. This latter domination has an insidious influence which paralyses the springs of all the various activities which together make up the life of a nation.”

In the course of a letter addressed to the Westminster Gazette in 1917, Lord Curzon said that “the fiscal policy of India during the last thirty or forty years has been shaped far more in Manchester than in Calcutta.” This candid admission about “the subordination of Indian fiscal policy to the Secretary of State and a House of Commons powerfully affected by Lancashire influence,” is the keynote of the Indian demand for Home Rule. The authors of the Montagu-Chelmsford Report say so quite frankly and fairly in Paragraphs 332 to 336 of their report, from which we make the following extracts:

“The people are poor; and their poverty raises the question whether the general level of well-being could not be materially raised by the development of industries. It is also clear that the lack of outlet for educated youth is a serious misfortune which has contributed not a little in the past to political unrest in Bengal. But perhaps an even greater mischief is the discontent aroused in the minds of those who are jealous for India by seeing that she is so largely dependent on foreign countries for manufactured goods. They noted that her foreign trade was always growing, but they also saw that its leading feature continued to be the barter of raw materials valued at relatively low prices for imported manufactures, which obviously afforded profits and prosperity to other countries industrially more advanced. Patriotic Indians might well ask themselves why these profits should not accrue to their country: and also why so large a portion of the industries which flourished in the country was financed by European capital and managed by European skill.”

“The fact that India’s foreign trade was largely with the United Kingdom gave rise to a suspicion that her industrial backwardness was positively encouraged in the interests of British manufactures, and the maintenance of the excise duty on locally manufactured cotton goods in the alleged interests of Lancashire is very widely accepted as a conclusive proof of such a purpose. On a smaller scale, the maintenance of a Stores Department at the India Office is looked upon as an encouragement to the Government to patronize British at the expense of local manufacturers.”

There can thus be no autonomy without fiscal autonomy. In fact, the latter alone is the determining characteristic of an autonomous existence.

The one national trait which distinguishes the British from other nations of the world is their habit of truthfulness and frankness. When we say that we do not thereby mean that all Britishers are equally truthful—to the same extent and degree. But we do mean that on the whole the British nation has a larger percentage of truthful and candid persons in her family than any other nation on the face of the earth. Where their interests clash with those of others, they can be as hard, exacting and cruel as any one else in the world. But repentance overtakes them sooner than it does the others. They have a queer but admirable faculty of introspection which few other people possess to the same extent and in the same numbers. This is what endears them even to those who are never tired of cursing their snobbishness and masterful imperialism. The faculty of occasionally seeing themselves with the eyes of others, makes them the most successful rulers of men. They are as a nation lacking in imagination, but there are individuals amongst them who can see, if they will, their own faults; who can and do speak out their minds honestly and truthfully, even though by so doing they may temporarily earn odium and unpopularity.

The remarks and observations of the eminent authors of the Report relating to the fiscal relations of India and England reflect the honesty of their purpose and the sincerity of their mind as no other part of the Report does. They have entered upon the subject with great diffidence and, though expressing themselves with marked candor and fairness, have refrained from making any definite recommendations.

In this respect it will be only fair to acknowledge the equally candid opinion of Mr. Austin Chamberlain, who, in 1917, made a most significant confession by stating on an important occasion that “India will not remain, and ought not to remain content to be a hewer of wood and a drawer of water for the rest of the Empire.”

To our simple minds, not accustomed to the anomalies of official life, it seems inexplicable how, after these candid admissions, the authors could have any hesitation in recommending the only remedy by which India’s wrong could be righted and her economic rights secured in the future—viz., fiscal autonomy.

In Paragraph 335 the authors of the report give the genesis of the Swadeshi boycott movement of 1905, and very pertinently observe that “in Japanese progress and efficiency” the educated Indians see “an example of what could be effected by an Asiatic nation free of foreign control,” or in other words, of what could be achieved by India, if she had a national government of her own interested in her industrial advance. Mr. Montagu and Lord Chelmsford thus rightly observe that “English theories to the appropriate limits of the State’s activity are inapplicable in India” and that if the resources of the country are to be developed the Government must take action.

“After the war,” add the authors, “the need for industrial development will be all the greater unless India is to become a mere dumping-ground for the manufactures of foreign nations which will then be competing all the more keenly for the markets on which their political strength so perceptibly depends. India will certainly consider herself entitled to claim all the help that her Government can give her to enable her to take her place as a manufacturing country; and unless the claim is admitted it will surely turn into an insistent request for a tariff which will penalize imported articles without respect of origin.”

Further on the Report states:

“We are agreed therefore that there must be a definite change of view; and that the Government must admit and shoulder its responsibility for furthering the industrial development of the country. The difficulties by this time are well-known. In the past, and partly as a result of recent swadeshi experiences, India’s capital has not generally been readily available; among some communities at least there is apparent distaste for practical training, and a comparative weakness of mutual trust; skilled labour is lacking, and although labour is plentiful, education is needed to inculcate a higher standard of living and so to secure a continuous supply; there is a dearth of technical institutions; there is also a want of practical information about the commercial potentialities of India’s war products. Though these are serious difficulties, they are not insuperable; but they will be overcome only if the State comes forward boldly as guide and helper. On the other hand, there are good grounds for hope. India has great natural resources, mineral and vegetable. She has furnished supplies of manganese, tungsten, mica, jute, copra, lac, etc., for use in the war. She has abundant coal, even if its geographical distribution is uneven; she has also in her large rivers ample means of creating water-power. There is good reason for believing that she will greatly increase her output of oil. Her forest wealth is immense, and much of it only awaits the introduction of modern means of transportation, a bolder investment of capital, and the employment of extra staff; while the patient and laborious work of conservation that has been steadily proceeding joined with modern scientific methods of improving supplies and increasing output, will yield a rich harvest in the future. We have been assured that Indian capital will be forthcoming once it is realized that it can be invested with security and profit in India; a purpose that will be furthered by the provision of increased facilities for banking and credit. Labor, though abundant, is handicapped by still pursuing uneconomical methods, and its output would be greatly increased by the extended use of machinery. We have no doubt that there is an immense scope for the application of scientific methods. Conditions are ripe for the development of new and for the revival of old industries, and the real enthusiasm for industries which is not confined to the ambitions of a few individuals but rests on the general desire to see Indian capital and labour applied jointly to the good of the country, seem to us the happiest augury.”

The views of educated India about fiscal policy have been very faithfully reproduced in Paragraphs 341 and 342, which also we reproduce almost bodily:

“Connected intimately with the matter of industries is the question of the Indian tariff. This subject was excluded from the deliberations of the Industrial Commission now sitting because it was not desirable at that juncture to raise any question of the modification of India’s fiscal policy; but its exclusion was none the less the object of some legitimate criticism in India. The changes which we propose in the Government of India will still leave the settlement of India’s tariff in the hands of a government amenable to Parliament and the Secretary of State; but inasmuch as the tariff reacts on many matters which will henceforth come more and more under Indian control, we think it well that we should put forward for the information of His Majesty’s Government the views of educated Indians upon this subject. We have no immediate proposals to make; we are anxious merely that any decisions which may hereafter be taken should be taken with full appreciation of educated Indian opinion.

“The theoretical free trader, we believe, hardly exists in India at present. As was shown by the debates in the Indian Legislative Council in March, 1913, educated Indian opinion ardently desires a tariff. It rightly wishes to find another substantial basis than that of the land for Indian revenues, and it turns to a tariff to provide one. Desiring industries which will give him Indian-made clothes to wear and Indian-made articles to use, the educated Indian looks to the example of other countries which have relied on tariffs, and seizes on the admission of even free traders that for the nourishment of nascent industries a tariff is permissible. We do not know whether he pauses to reflect that these industries will be largely financed by foreign capital attracted by the tariff, although we have evidence that he has not learned to appreciate the advantages of foreign capital. But whatever economic fallacy underlies his reasoning, these are his firm beliefs; and though he may be willing to concede the possibility that he is wrong, he will not readily concede that it is our business to decide the matter for him. He believes that as long as we continue to decide for him we shall decide in the interests of England and not according to his wishes; and he points to the debate in the House of Commons on the differentiation of the cotton excise in support of his contention. So long as the people who refuse India protection are interested in manufactures with which India might compete, Indian opinion cannot bring itself to believe that the refusal is disinterested or dictated by care for the best interests of India. This real and keen desire for fiscal autonomy does not mean that educated opinion in India is unmindful of Imperial obligations....”

These admissions should put India’s claims for fiscal autonomy beyond the range of doubt and dispute, but so strange are the ways of modern statesmanship that consistency and logic are not the necessary accompaniments thereof.

The authors have advanced another very strong argument for the economic development of India, viz., “military value,” which makes the case conclusive. This argument has been supplied by the Great War and is so well known that we need not state it in their words.

If India is to prosper and take her legitimate place in the British Commonwealth, and in the great family of Nations of the World, it is absolutely necessary that she should be given complete fiscal freedom to manage her own affairs, develop her own industries and do her own trading. Considering her size and resources, it wounds her self-respect and makes her feel exceedingly mean and small to go begging for alms and charity every time there is a failure of rains and the cry of famine is raised.

For a nation of 315 millions of human beings living in a country which nature has endowed with all its choicest blessings, rich and fertile soil, plenty of water and sun, an abundant supply of metals and coal, willing labor, artistic skill and a power of manipulating for beauty and elegance unexcelled in the world—to exist in pitiful economic dependence is a condition most deplorable and most pathetic. We want no charity, no concessions, no favors, no preference. What we most earnestly beg and ask for is an opportunity.

For a synopsis of the findings and recommendations of the Industrial Commission mentioned in this chapter see appendix 1.