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The Problem of Government Finance in British India: Taxation, Borrowing and the Allocation of Resources in the Inter-war Period

Published online by Cambridge University Press:  28 November 2008

Neil Charlesworth
Neil Charlesworth
Affiliation:
University of Glasgow
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Extract

It isan axiom of India's economic history that government financial resources during the last half-century of the British period were inadequate. ‘The poverty of India was matched by the poverty of its government’ writes Dharma Kumar in The Cambridge Economic History and she estimates that ‘except during the two wars of the twentieth century, the tax revenues amounted to a mere 5 to 7 per cent of the national income'. Raymond Goldsmith's assessment is of an even lower proportion realized by taxation and he further believes that the scanty share of government expenditure in national product declined after the first world war. In most of the historiography, this situation is seen as a notable shortcoming created by imperial rule, the inevitable product of the passivity of the ‘night-watchman state’. Reviewing financial policy in 1939, P. J. Thomas described its predominant characteristic as ‘conservatism’, marked by ‘extreme reluctance to venture on new experiments in raising revenue’, ‘the low burden of public debt’ and ‘inadequate expenditure on social services’.3 These features could have played an important role in constricting India's economic and social development, particularly in the inter-war period of the twentieth century. Financial weaknesses then may have undermined the 'new industrial policy' of the post-first world war era4 and in the 1930s superficially present a crucial contrast with Asia's other major industrializing power, Japan, where government appeared to stimulate the economy impressively by massive borrowing and expenditure.5

Type
Articles
Information
Modern Asian Studies , Volume 19 , Issue 3 , July 1985 , pp. 521 - 548
Copyright
Copyright © Cambridge University Press 1985

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References

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