Unless the economic situation improves again with a rapidity beyond even sanguine expectations, Government will have to lay before the Indian Legislature next winter a budget scarcely less unpleasant than the last one. Even if expenditure does not outrun the estimates, revenue can hardly fail to fall short of them. Mr. Hailey, with perhaps forced optimism, seems to have reckoned upon taxation old and new continuing to yield at much the same rate during a year which began and is likely to end in great depression as during the preceding year, a great part of which had been a "boom" year. In the same way he budgeted on a 1s. 8d. rupee, though the rate of exchange for the rupee was then under, and has only quite recently[4] risen above, 1s. 4d. This means an inevitable and considerable loss to the Government of India on all the home charges which it has to remit to London. Another deficit to be met by another increase of taxation would be a strain upon the Assembly far more trying than that to which this year's Budget subjected it. Indian opinion will press for further steps towards complete fiscal autonomy. Scarcely a single Indian is a convinced free trader. In the old Indian National Congress the desire not to estrange the sympathies of the Liberal party in England, and the lack of interest then taken by Indian politicians in economic questions, kept the issue somewhat in the background until the Extremists raised it in the form of Swadeshi and in an attempt to organise a boycott of British imported goods. The immense development of Indian industries during the war has made protection once more a very live issue, for if that development is arrested or languishes as the result of the general economic situation, the louder will be the demand for protection. Even the outcry at first raised last winter in Lancashire against the increase of the Indian import duties as an intolerable blow to British textile industries, though at once firmly checked by the Secretary of State, provoked enough irritation in India to show how deeply engrained is the suspicion that, from the days of the East India Company onward, the industrial and commercial interests of India have always been deliberately or instinctively sacrificed to those of Great Britain. Indians regard complete fiscal autonomy as one of the first steps towards the fulfilment of the pledge of self-government, and indeed as the logical consequence of the recommendation already made by the Joint Select Committee of both Houses of Parliament. To believe that in such matters the Government of India would now place itself in opposition to the views of the Indian Legislature is to ignore the whole spirit of the constitutional changes.

To the economic factors that react unfavourably upon a difficult political situation must be added the growth of labour troubles, which Extremist agitators know how to exploit to the utmost even when they do not actually foment them. Strikes are as common to-day in India as they are in England, and the epidemic has sometimes spread from industrial workers to those employed by municipalities and by the State. There have been strikes not only in the big cotton mills and jute mills and other large manufacturing industries, but also amongst postmen, and amongst railwaymen on State as well as on private-owned lines, amongst tram-car drivers and conductors, and even amongst city scavengers. Lightning strikes without any notice are of growing frequency. Some are short-lived, others very obstinate, dragging on for weeks and months. Some are grotesquely frivolous, others by no means lack justification or excuse. Intimidation often not unaccompanied by violent assaults on non-strikers is an ugly feature common to most of them. They sometimes lead to very serious riots and bloodshed. They have played a prominent part in the worst disorders of the last few years. Nowhere have they assumed at times a more threatening shape than in the Bombay Presidency, for in the cotton mills of Bombay itself and of the Ahmedabad district, which employ over 200,000 hands, are collected the largest agglomerations of factory workers in India.

Labour troubles were bound to come with the introduction of Western methods of industrial development and Western machinery. It has led, and very rapidly, to a demand for labour which the urban population could not supply. But the wages soon attracted immigrants from the more or less distant countryside, where at certain seasons of the year there is little work to be done on the land. It became the custom for an increasingly large number of rural districts to send their men into the towns, where they worked for a few months. Then they went away after they had put by a little money and came back again when they had exhausted their hoard. These migrations became more and more regular and on a larger scale as the demand for labour increased, and they constitute to-day the feature which radically differentiates the problem of Indian labour from that of British labour. There has not yet grown up in India an industrial population permanently rooted in the towns. It is still largely migratory, returning from time to time for more or less lengthy periods to field-work in the villages, which remain the real home. The Indian factory operative has not yet ceased to be a man of the country rather than of the town. Hence perhaps the conditions under which he is sometimes content to live whilst he is working in a town—in Bombay, for instance, for the most part in huge overcrowded blocks, known as chawls, ill lighted, ill ventilated, in a foul atmosphere and unspeakable dirt—may seem to him less intolerable as he can look forward to exchanging them again some day for the light and air which surround even the most squalid village hovels. If there were reason to believe that improved housing conditions such as are now assured to Bombay by the huge city improvement schemes which, under Sir George Lloyd's energetic impulse, are expanding the limits and transforming almost beyond recognition the appearance of the most congested quarters of the most congested of modern Indian cities, or even that increased wages would substantially affect the temper of Indian labour, one might look forward to the future in this respect with less apprehension. But in Bombay labour troubles have been scarcely less rife in the best- than in the worst-conducted mills. In Calcutta the British jute-mill owners have set a splendid example to Indian employers of labour, and the mill-hands, now largely imported from other provinces, not only work under the best possible conditions of light and air, but are housed in spacious quarters specially built for them, well ventilated and scientifically drained, with playing-fields and elementary schools for the swarms of children who certainly look healthy and well-fed and happy. The Birmingham mills in Madras are recognised to be, from the same point of view, second to none in the world. But the most humane and generous employers—whether European or Indian—are as liable as the most grasping and callous to see their workers suddenly carried away by a great wave of unreasoning discontent and passion.

The greater the general unrest amongst these excitable and terribly ignorant masses, the more urgent is the need for the establishment of some effective means of determining the social and economic justice of the claims of labour, as well as for the adjustment of actual conflicts by bringing employers and employed together in a friendly atmosphere. A real organisation of labour in its own sphere of interests and the constitution of responsible trades unions would probably go far to prevent labour from turning for encouragement and support to agitators who have never been workers themselves, who have no personal knowledge of its processes or of its needs, and who exploit its discontent, reasonable or unreasonable, for purposes as disastrous, if fulfilled, to its permanent interests as to those of the employers and of the whole community. A Congress which called itself the first "All-India Trades Union Congress" met this year in Bombay. The present organisation of labour in India can hardly be said to justify the title it assumed, and in answer to a deputation which waited on the Governor, Sir George Lloyd expressed a legitimate desire for more information than was contained in its high-flown address as to the status of these unions, their method of formation, their constitution, their system of ballot and election, and the actual experience in the several trades of those who claimed to represent them. That information was not and could not be furnished, because the ninety-two Trades Unions alleged to have been represented are at present little more than embryonic. Their spokesmen have not risen to the leadership of labour out of its own ranks by superior industry and knowledge. Their organisation has not been a spontaneous growth from within, but artificially promoted from without. The vast majority of unskilled workers are illiterate, and even amongst ordinary skilled labour the level of education is still extremely low. The actual workers are therefore quite unable to organise, or even to think out the simplest labour problems for themselves, and they easily become the dupes and tools of outsiders—frequently lawyers or professional politicians—who are not always disinterested sympathisers, but more often stimulate and exploit grievances which may in themselves be legitimate for purposes which have little to do with the real interests of labour.

The economic causes of the growing frequency of strikes during recent years have not yet been all explored, and Sir George Lloyd responded to a crying need when, in his reply to the deputation, he announced that the Bombay Government was about to establish a Labour Bureau under a competent official from the British Board of Trade to advise it in the interests of labour. One of the greatest difficulties in dealing with industrial disputes in India is, the Governor rightly observed, the absence of all trustworthy materials for forming an accurate judgment on the actual cost of living for the working man, and the ever fluctuating relations between the wages he receives and the expenditure he has to incur even for the mere necessaries of life.

With a two-and three-fold appreciation, during and especially since the war, in the cost both of the cotton stuffs which the working man needs even for his scanty apparel and of the foodstuffs which constitute his meagre fare, discontent grew steadily more acute, and wages, though more than once enhanced, did not always keep pace with that appreciation. If in circumstances, often of undoubted hardship, labour had been sufficiently equipped to state its own case, or had found disinterested friends to state it clearly and temperately, it would have been easier to admit that economic causes sufficed, in some cases at least, to explain, and perhaps even to justify, the increasing use of the strike weapon. But there is unhappily very abundant evidence to show that strikes would not have been so frequent, so precipitate, and so tumultuous, had not political agitation at least contributed to foment them as part of a scheme for promoting a general upheaval. The Extremists, who, with few exceptions, have no part or lot in labour, either as employers or as workers, began to carry on in Mr. Tilak's days amongst the mill-hands of Bombay an active propaganda which originally had little to do with labour. The mill-hands played an evil part in the worst excesses committed during the outbreak in and around Ahmedabad in April 1919, and twice within the last two years they have seriously threatened the peace of Bombay itself and held up for weeks together the normal life of the great city, necessitating the employment of large military forces to overawe them, and to avert through the exercise of disciplined forbearance collisions with which the police alone would have been unable to cope, and which, when once started, could probably have been quelled only at the cost of considerable bloodshed. Mr. Gandhi has a great personal hold over the factory workers, especially in Western India. Sometimes he uses it to restrain them, sometimes, though one may hope less deliberately, he works dangerously on their emotions. His influence when he preaches temperance to them on temperate lines may be all to the good, and except that, when he denounces tea also, because it is tainted with Western capitalism, he is waging war against a popular substitute for spirits, one need not quarrel with the solemn processions of mill-hands proceeding to a favourite shrine to break a symbolical teapot in the presence of the deity as a pledge of renunciation. But not all Mr. Gandhi's followers can be credited with his earnest sympathies for labour, largely inspired by his detestation of a "machine age," and he himself lapses into language that seems to preach more rigid abstention from drink than from violence.

Factory legislation has never been neglected in India, though until recently the chief impulse has had to proceed from Government itself. A great increase of public interest has taken place in the last years, and in India perhaps even more than anywhere else the activity in this respect of the League of Nations and of the International Labour Office has elicited prompt and vigorous response. The Secretary of State has created at the India Office a new department for dealing with labour and industry. India has had her own representation at international labour conferences, and the Government of India is now engaged on a new Factory Act in accordance with the draft covenants and recommendations of the Washington Conference. Indeed in some directions the Bill is in advance of Washington. The statutory definition of a child presents special difficulties in India, where physical development is more precocious than in Western countries, but, instead of making the general limit of age for juvenile work lower, the Bill proposes to raise it not to fourteen but to fifteen years, whilst still permitting the employment of younger children on special and very stringent conditions. Provisions are also made for securing longer daily intervals during the working hours as well as a weekly holiday. Further legislation will be introduced for the benefit of industrial workers, more particularly as regards Trade Union rights and compensation for accidents. But however excellent such measures may be, only the spread of education and the better organisation with it of labour itself can be expected to give any real stability to large struggling masses invested by the new economic forces that have sprung so rapidly into existence with tremendous powers for mischief, but with no individual or collective sense of responsibility.

But the most dangerous rocks ahead are the questions which directly or indirectly raise the racial issue. Even during the first session of the Indian Legislature it could be seen underlying the attitude of Indian members towards military expenditure, and military expenditure, not likely to diminish, will be a sore subject again when the next budget is introduced at Delhi. If one looks merely at the growth of such expenditure, the enormously increased cost of the British Army which, in respect of the British forces serving in India, falls upon the Indian exchequer, furnishes Indians with a specious plea for reducing the number of British troops as a measure of mere economy. But even if one could concede the Indian argument that, in a contented India marching towards self-government under the new constitution, there can no longer be the same necessity for large British garrisons to guarantee the safety of British rule, any considerable reduction of the proportion of British to Indian forces in India would disturb the foundations of our own military organisation in peace time, based for the last fifty years on a certain fixed proportion of British regulars serving at home and abroad. That an Indian territorial army would, on paper at least, be less costly is beyond dispute, and if ultimately officered entirely or almost entirely by Indians, it would meet the Indian demand for a military career for those of the educated classes who regard themselves now as shut out in practice from the profession of arms. That demand cannot be met merely by the granting of British commissions to a few Indian officers, which is already raising many difficult regimental problems not easily grasped by Indians familiar only with the civil administration. The difficulties do not arise so much out of objections taken by the British officers, however repugnant still is to most of them the idea of ever having to take orders from an Indian superior officer, as out of the feelings, even if they be mere prejudices, of the existing class of native officers and of the rank and file who belong to the old and have no liking for the new India. Most of the politically minded Indians are beginning, too, to measure the demands made upon India for her military contribution to the needs of the Empire by those that are made upon the self-governing Dominions. "We are quite willing," they say, "to bear our share of the military burdens of the Empire as equal partners in it, and"—as some at any rate add—"we recognise that in view of our geographical position, which lays us almost alone amongst the Dominions open to the dangers of invasion on our land frontiers, we require a larger army for our own defence. But even taking that into account, as well as our inability at present to make any contribution in kind to the naval defence of the Empire, can we be expected to submit to military expenditure absorbing almost half our revenues? Can you point to a single Dominion that is asked to make an annual sacrifice comparable to that? Are we not at least entitled to claim that the Indian tax-payer's money should not be spent merely on the maintenance of British garrisons that are here to-day and gone to-morrow, and of an Indian army that is so constituted as to lack all the essentials of a national army, but should go to the building up of an army really worthy to take its place on equal terms when India attains to self-government with the other armies of a commonwealth of free nations?"

The racial issue dominates in a far graver form the whole question of the status and treatment of Indians in the Dominions and Crown Colonies. For there it enters a much larger field which extends far beyond India. In India so far, in speaking of the racial issue, Indians and Europeans alike have hitherto had in mind chiefly the relations between the ruling and the subject race. When the rulers all belong to one race and come from a far distant country not to settle permanently but chiefly to maintain, each one in his own sphere and during his appointed time, the continuity of rulership over millions of subjects of another and very different race with a different civilisation, an additional element of discord is introduced into their relations. But since Great Britain achieved dominion over India the main issue between rulers and ruled has been how far on the one hand British rulers should devolve on to their Indian subjects a share in the government and administration of the country, and how far on the other hand their Indian subjects could hasten such devolution by various forms of pressure. Whatever part any purely racial antagonism may have played in the controversy, the British rulers of India have at least since 1833, and still more since the Queen's Proclamation in 1858, debarred themselves from basing on racial differences their refusal or reluctance to meet the growing aspirations of their Indian subjects. They have been content to plead the political immaturity of the Indian people and the lack of individual qualifications amongst all but a few Indians, and even these disabilities they had deliberately undertaken and expressed their anxiety to remove by the introduction of Western education. Neither colour nor descent, it was specifically declared, were to constitute any barrier. It is quite otherwise with the question of the right of Indians to immigrate into other parts of the Empire, and of the measure of rights they are to enjoy as settlers there. It brings us face to face with the racial issue pure and simple and in its widest aspects. There is an open and declared conflict between the claims of the Dominions to exclude or to restrict the rights of Indian settlers on grounds of colour and descent for the avowed purpose of maintaining the paramount ascendancy of one race over another, and the claims put forward by Indians as British subjects to have access to all parts of the Empire and to possess the same rights as other British subjects already enjoy there. Some of the arguments employed to justify the attitude of the Dominions allege inferior social standards of Indian life, but behind them and quite undisguised is the supreme argument that Indians belong to a coloured race and, in consequence, have no interests or rights that can possibly prevail against those of a superior white race.

The magnitude of the issue and the resentment which it has caused in India are, it is true, out of all proportion to the actual number of Indians who have immigrated into other parts of the Empire. The Indians are not a migratory people. Mostly engaged in agriculture, they cling, as peasants are apt to do all over the world, to their own bit of land and familiar surroundings. It is difficult even to induce them to move from one part of India to another, and, intensely conservative in their habits and outlook, with no horizon wider than their own village, they generally prefer, even under the stress of economic pressure, the ills they know of. But that does not affect the issue raised in the most acute and naked form in some of the States now forming the South African Union. To Mr. Gandhi's experiences and struggles in Natal and the Transvaal can be traced back, as I have already shown, a great deal of the bitterness which has now led him to denounce British rule as "Satanic." It is only about fifty years ago that Indians began to go across to South Africa, when the Government of Natal with the consent and assistance of the Government of India sought to engage Indians to work as indentured labourers on sugar and tea plantations. In 1911, the year of the last census, the number of Indians in the Union was about 150,000, and, immigration having been since then checked and finally stopped, they cannot have increased by more than 10 per cent during the last decade. Of the total in 1911, 133,000 were in Natal, 11,000 in the Transvaal, and 7000 in the Cape, with barely 100 in the Orange Free State. The proportion of Indians to the total European population of the Union, which was then about 1,400,000, was therefore only just over one to ten. But they had not remained merely indentured labourers as at the beginning. When their labour contracts expired many settled in the country, acquiring small plots of land as their own or becoming petty traders, artisans, etc., and, being frugal and hard-working and of a higher type than the Kaffir and other natives, they throve as a whole. The white population, who had found them at first very useful, began to see in them either dangerous competitors or an undesirable element calculated to complicate the social problems in a country in which the European formed anyhow but a small minority face to face with 6,000,000 natives. Both the old Boer Government in the Transvaal and the Colonial Government of Natal set to work to curtail by legislative enactments and local regulations the rights which Indians had been at first allowed to enjoy, and to assimilate their treatment to that of the lowest and most backward natives. The Indians were systematically subjected to the disabilities and indignities against which Mr. Gandhi for the first time led them to organise a violent agitation and finally to offer passive resistance.