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Optimists like Mr. Webb and Sir Roper Lethbridge may be referred to the study of the question of preferential tariffs by Lord Curzon's Government in 1903. According to Sir E. F. G. Law, India's position as an exporter of raw materials is one of considerable defensive strength, "but this is not the case with every country nor by any means with regard to all classes of produce exported. On the whole, therefore, "it is more in the interest of India to leave matters as they are than to embark on a new fiscal policy, unless it can be shown that a preferential tariff will secure " very great advantages" for our exports to the British Empire. Sir E. F. G. Law had stated the chief objection to a preferential tariff fairly clearly, but the Government of India thought that he had possibly "underrated both the powers of retaliation which foreign countries possess and also their readiness to use it." India has a monopoly of Jute, till, lac, teak wood, myrobolams and Mohwa and a less complete monopoly of some other articles. "With regard however to the greater portion of our exports," they said "they compete successfully in foreign markets by reason of their cheapness rather than of their quality or kind. We cannot feel confident that the conditions and requirements of foreign industries have yet been ascertained with the precision and fullness necessary to make them a sufficiently broad and stable basis on which to rest a fiscal policy of very problematical value to India, whilst the consequences of failure might result in irreparable disaster.

The views of the Government of India on the question of preferential tariffs were published in 1904. Sir Roper Lethbridge's "India and Imperial Preference" appeared in 1907; Mr. Webb's "India and the Empire" in 1908; and Sir Roper Lethbridge's "The Indian Offer of Imperial Preference" in 1913. As both these writers confidently assert that foreign nations have not the power of taxing imports

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which shows that our jute manufactures were not indispensible to her).

It thus appears that foreign countries possess the power of retaliation.

Without crippling their own industries or ruining themselves, they may limit their purchases of those raw materials from India of which she has a monopoly and impose heavy duties on other goods for which India is not the only source of supply. They may thus do our export trade much harm. The onus of proving that they will not in any circumstances do so, rests on the advocates of Imperial Preference.

Lastly in 1913-14, we exported to foreign countries articles wholly or mainly manufactured of the value of about £ 21,051,000. The chief articles of export were chemicals, drugs and medicines worth £1,000,000; dyes and colours, excluding indigo, worth £ 319,000, hides and skins, tanned and dressed, and leather worth £351,000; metals, iron and steel, and manufactures thereof, worth £ 246,000; yarn and textile fabrics, including jute manufactures, worth

1909-10

£

Imports from the British 55,000,000 Empire.

Exports to the British 52,000,000 Empire.

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£17,880,000. The total value of the export of manufactured articles from India is not negligible. We take pride in this fact and consider it to be a sign of the economic transition in India. The further development of our manufacturing industries will give our people increased employment; it will give them higher wages and it will be a means of diminishing the numbers dependent upon agriculture. But if a preferential tariff is adopted, the export of manufactured articles to foreign countries will be seriously affected. We have a monopoly of certain classes of raw produce and the foreigner may not be able to tax their imports. But he can easily retaliate on India by taxing imports of manufactured articles.

Connected with the question of retaliation is that of the indebtedness of India to the British Empire. The imports from the British Empire annually exceed the exports to the British Empire and the export to foreign countries annually exceed the imports from foreign countries. This is shown by the following table:

1910-11 1911-12
£
£
59,000,000 63,000,000

57,000,000

1909-10

1910-11
£

£

Export to foreign countries 70,000,000 79,000,000
Imports from foreign coun- 23,000,000 26,000,000

tries.

61,000,000

Excess of imports over 3,000,000 2,000,000 2,000,000 9,000,000 24,000,000

exports.

1911-12 £ 86,000,000 28,000,000

1912-13 £ 74,000,000

47,000,000 53,000,000 58,000,000

1913-14 £

85,000,000

65,000,000 61,000,000

1912-13 1913-14 £ £ 95,000,000 101,000,000 32,000,000 36,000,000

63,000,000 65,000,000

In 1913-14, our trade with the British Empire gave us an adverse balance of 24 millions sterling, which sum does not include the Home charges which in that year amounted to £ 20 millions. As far as our commercial and financial relations with the British Empire are concerned, we are always a debtor country and our indebtedness has increased in recent years. Even the dullest intellect will perceive that it is upon exports to foreign countries that we depend for discharging our obligations to the British Empire and that, if owing to a change in our fiscal policy our exports to foreign countries should dwindle, we shall cease to be a solvent country. It is therefore absolutely necessary for India, under the circumstances, to develop her export trade with foreign countries as much as possible.

From the subject of India's indebtedness to the British Empire, we pass by a natural transition to that of currency and exchange. Our currency system is the gold exchange system in which the internal currency consists of token coins convertible into gold at a more or less constant rate for purposes of international payments. The maintenance of the gold exchange system depends upon stability in the value of the rupee, which in its turn depends upon a favourable balance of trade. It has been shown above that foreign countries possess the power to retaliate. If, as the result of the tariff wars in which India would most certainly become involved as soon as she adopted a preferential tariff, the balance of trade turned against India, her currency system The Governwould be thrown into confusion. ment of India realised the danger which the proposed change in her fiscal policy would involve, "The national solvency of India," they wrote in 1903, "depends upon the preservation of an excess of exports over imports equal to the amount of the Home charges, that is, upon maintaining a It is therefore a favourable balance of trade. " vital object with us to stimulate our exports by

every means in our power, to seek new market and develop old ones and to remove all obstacles which stand in the way of growing external demand. If, then, notwithstanding the safeguards which we possess, we should unhappily be drawn into tariff wars with powerful countries, it can not be doubted that, whichever way the ultimate victory might incline, our export, trade would, for the time being,' be injuriously affected. Such a result would be fraught with the gravest consequences. Imperial Preference would involve India in tariff wars with foreign nations, and the set-back to our trade, our revenues and our credit would immensely outweigh any benefit that we might reasonably expect from the most unconditional surrender of our opponents in the war of tariffs. We cannot sufficiently impress this danger on your attention. Even if the chances of success were greater than we conceive them to be, we hold that the certain cost of the war and the severe penalties of defeat would be too heavy a price to pay. (Letter from the Government of India to the Secretary of State for India dated the 22nd of October 1903.)

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Sir Roper Lethbridge, on the other hand, maintains that Imperial Preference, so far from endangering the financial stability of India, would increase it. It may be interesting to learn how Sir Roper proves his extraordinary thesis. The financial stability of India depends upon the maintenance of a favourable balance of trade. This Sir Roper recognises. But one of the causes of a favourable balance of trade in the case of India at the present time is a very large export trade with foreign nations. Every year we sell more raw materials to foreign nations than to the British Empire, which is positively wicked. The export of raw produce to foreign countries should cease, for it is a source of weakness to our financial system. We cannot depend upon the foreigner who in making his fiscal arrangements keeps

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his own interests in view and not those of India. Suppose the foreigner restricted his demand for our commodities. What will be the result? The balance of trade will turn against India, the exchange value of the rupee will fall and India will be plunged into financial chaos. Let us therefore be wise before it is too late and develop our export trade with the British Empire. But the British Empire takes from us goods, raw and manufactured, worth only £55,000,000 while the export to foreign countries amounts to £107,000,000 (1913-14). One would think that the fact that our exports to the British Empire were only 34 per cent of total exports in 1913-14 showed that foreign nations wanted our produce more and paid us a better price for it, whether they were interested in the financial stability of India or not. One would also like to ask whether the countries which constitute the British Empire would be willing to buy Indian produce in excess of their requirements just to make our finances stable or to please us.

One wonders if Sir Roper is aware that, by declaring that our export trade to foreign protected countries is "obviously and undeniably at the mercy of their protectionist tariffs," he convicts himself of self-contradiction or something very like it. The fear that these protectionist countries will retaliate on India, says Sir Roper, is groundless, "for the protectionist foreigner must have Indian raw materials or cripple his own industry." This means that the protectionist foreigner cannot do without our raw materials and there is no immediate danger of India losing her profitable trade with him. If that is so, then the financial system of India is stable enough so far as its stability depends upon the preservation of a substantial excess of exports to foreign countries over imports. But, 'No' says Sir Roper; we cannot depend upon the foreigner which means that the foreigner can restrict his demand for our raw materiáls.

And thus you may kill two birds with one stone. Is it required to prove that our export trade with foreign countries will not suffer under Imperial Preference? Then say that the foreigner is no more able to tax our imports than Great Britain is able to tax the raw cotton for her cotton industry or the raw wool for her woollen manufacture. Is it required to prove that the export of the bulk of our produce to foreign countries endangers the financial stability of India? Then say that our exports are "obviously and undeniably at the mercy of their protectionist tariffs."

In the end, a few words may be said about India's trade with the self-governing colonies of Great-Britain.

"The recognition of India as a sovereign State" is the title of an interesting chapter in Sir Roper Lethbridge's book, 'India and Imperial Preference.' India, he says, cannot be asked to become a member of the proposed Imperial federation except as a sovereign State ruled by the King-Emperor. This would involve a recognition of the rights of Indians as citizens of the Empire. Possessing those rights, an Indian would claim in all parts of the Empire the same privileges as any other member of the Empire. Indians do not at present enjoy these privileges in the self-governing colonies of Great Britain.

The anti-Indian attitude of these colonies is to be regretted, but race prejudices, we are told, die hard in a democracy and, further, the British colonist cannot be dragooned into goodness, In order to raise our political status, let us appeal to his self-interest. The Colonies might be pleased to reconsider our case if we offered them a valuable and tangible concession in the form of a trade preference in our markets. What we have been unable to get by political agitation and representations through the Imperial Government, we may easily secure by means of Imperial Preference. "If I were an Indian delegate and entered the Imperial Conference with a mandate to

offer Indian trade preference in return for British and Colonial trade preference plus equal treatment for British Indian subjects in all parts of the Empire," says Sir Roper Lethbridge, "I should do so with the fullest confidence of success."

One almost wishes that it were possible for India to make a tempting offer to the colonies. But the share of Great Britain's self-governing colonies in India's import trade is so small as to be negligible. The total value of the imports from Cape Colony, Natal, Transvaal, Canada, Australia and New Zealand is less than one million pounds. In 1913-14, the total value of im

THE INDIAN RAIYAT*

BY

SIR DANIEL HAMILTON

N his remarkable victory speech to the Houses of Parliament and the Empire, the King spoke thus:-"Now that the clouds of war are being swept from the sky, new tasks arise before us. We see more clearly some duties that have been neglected, some weaknesses that may retard our onward march."

These words of the King apply more appropriately to India than to any other part of the Empire, for here, the neglected duty, the failure to provide a banking system for the people, more than any other cause, has brought their onward march to a standstill.

ports from Cape Colony was £ 222, New Zealand £ 198, Canada about £ 6000, Transvaal £ 7000, Natal £148,000, Australia £ 611,000. The imports from Australia are not negligible but about 39 per cent of the imports consist of horses of which Australia is already the largest exporter to India. She has little to gain by preference in this respect; the imports from other self-governing colonies are so small that preference is out of the question. If the recognition of India as a "Sovereign State" depends upon her ability to offer to the colonies material and valuable trade concession, India will have to wait long for that recognition.

Progress of a kind there has been, but how have the people progressed? Railways have stretched out in all directions; have the lives of the people stretched out? Jute mill dividends have expanded; have the lives of the workers

*A Paper read at the Bengal Co-operative Conference on 15th February, 1919.

kept pace? Bombay is a thriving city; do the people thrive in the chawls ?

And what of the rural population? Does it march onward, or stagnate? The Maclagan Committee answer the question in these words : "The chief object of co-operation in India was to deal with the stagnation of the lower classes, more especially of the agriculturists who constitute the bulk of the population. It was found in many parts of India, as in most European countries, that in spite of the rapid growth of commerce and improvements in communications, the economic condition of the peasants had not been progressing as it should have done, that indebtedness instead of decreasing had tended to increase, that usury was still rampant, that agricultural methods had not improved, and, that the old unsatisfactory features of a backward rural economy seemed destined persistently to remain." Gentlemen, this is a serious indictment of a

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