Rulers of India: The Earl of Mayo

by William Wilson Hunter

This well-jointed system of Provincial and Imperial Finance continues to be the basis of Indian Finance to this day. It has received further developments since Lord Mayo's time, but its principles remain unchanged. Sir John Strachey thus summarised the state of things which preceded it:—

'For many years before Lord Mayo became Viceroy, the ordinary financial condition of India had been one of chronic deficit, and one of the main causes of this state of affairs was the impossibility of resisting the constantly increasing demands of the Local Governments for the means of providing many kinds of improvement in the administration of their respective Provinces. Their demands were practically unlimited, because there was almost no limit to their legitimate wants. The Local Governments had no means of knowing the measure by which their annual demands upon the Government of India ought to be regulated. They had a purse to draw upon of unlimited, because of unknown, depth. They saw on every side the necessity for improvements, and their constant and justifiable desire was to obtain for their own Provinces and people as large a share as they could persuade the Government of India to give them out of the general revenues of the Empire. They found by experience, that the less economy they practised, and the more importunate their demands, the more likely they were to persuade the Government of India of the urgency of their requirements. In representing those requirements they felt that they did what was right; and they left to the Government of India, which had taken the task upon itself, the responsibility of refusing to provide the necessary means.

'The Government of India had totally failed to check the constant demands for increased expenditure. There was but one remedy: namely, to prevent the demands being made; and this could only be done by imposing on the Local Governments a real and an effectual responsibility for maintaining equilibrium in their local finances. There could be no standard of economy until apparent requirements were made absolutely dependent upon known available means. It was impossible for either the Supreme or Local Governments to say what portion of the provincial revenues was properly applicable to local wants. The revenues of the whole of India went into a common fund, and to determine how much of this fund ought fairly to be given to one Province and how much to another, was impracticable.'

'The distribution of the public income,' Major-General R. Strachey wrote, 'degenerates into something like a scramble, in which the most violent has the advantage. As local economy leads to no local advantage, the stimulus to avoid waste is reduced to a minimum. So as no local growth of the income leads to an increase of the local means of improvement, the interest in developing the public revenues is also brought down to the lowest level.' It is right to add that the reforms by which Lord Mayo put an end to this unprofitable state of things were in a large measure due to the initiative of General Richard Strachey, supported by the administrative authority and experience of his brother, Sir John Strachey. But the question of Local Finance first presented itself to Lord Mayo during his inquiries in the India Office, and he discussed it at Madras on his way out to Calcutta.

Lord Mayo's third and heaviest task was the permanent readjustment of the revenues to the expenditure. He accomplished this task partly by new taxation, but chiefly by economy and retrenchment. On his arrival in January, 1869, Lord Mayo found two Despatches awaiting his consideration. One was a Despatch from his predecessor, Lord Lawrence, urging on the Secretary of State the imposition of an income tax; or, more strictly, the expansion of the certificate tax into an income tax for the year 1869-70 then about to begin. The other was a Despatch from the Secretary of State sanctioning the proposal. Lord Mayo's first measure with a view to raising the revenues of India was, therefore, to carry out this decision which had been arrived at before he reached India, and to levy an income tax. By efforts to equalise the salt duty in certain provinces, and at the same time to develop new sources of salt supply, and to cheapen the cost of carriage, he laid the foundation of a further increase of revenue, with the least possible addition to the burdens of the people.

It was, however, to economy rather than to increased taxation that Lord Mayo looked for a surplus. Indeed, he strongly felt the necessity of abandoning some of the old objectionable forms of Indian taxation, such as the export duties; and he made a beginning by abolishing the export duty on wheat. On the other hand, every Department of Expenditure was keenly scrutinised, and severely cut down to the lowest point compatible with efficiency. As a matter of fact, and notwithstanding the new income-tax, the total revenue which he levied from India during his three years of office averaged nearly a million less than the revenue levied during the year 1868-69 preceding his Viceroyalty; while the expenditure averaged about five millions per annum less than that of the year preceding his Viceroyalty. The following table exhibits the results of the system of vigilant economy by which Lord Mayo converted a series of years of deficit into a series of years of surplus. For purposes of reference to the Parliamentary accounts it reproduces the conversion at the then official rate. It does not, accordingly, show the exact balance in sterling, as worked out for the table [above].

Indian Revenue and Expenditure under Lord Mayo
(at the then official rate of ten rupees to the pound).

Year.	Revenue.		Ordinary Expenditure.
1868-69 1869-70 1870-71 1871-72	£51,657,658 50,901,081 51,413,685 50,109,093	Year of Deficit preceding Lord Mayo's Rule. Year of equilibrium; his first year of office. Years of Surplus; his last two years of office.	£54,431,688 50,782,413 49,930,695 46,984,915

Lord Mayo did not live to see the permanent fruit of his labours. But I cannot conclude this brief sketch of them more fitly than by a letter which the Financial Secretary to the Government of India wrote to me three years after Lord Mayo's death, when his work had been tested by the touchstone of time.