England’s Debt to India: A Historical Narrative of Britain’s Fiscal Policy in India

453 Pages·2012·1.225 MB·English

by  Lajpat Rai

England’s Debt to India
A Historical Narrative of Britain’s
Fiscal Policy in India
By
LALA LAJPAT RAI
“The toad beneath the harrow knows
Exactly where each tooth-point goes.
The butterfly upon the road
Preaches Containment to the toad”
WWW.HINDUSTANBOOKS.COM
2012
First Published in 1917

AS A MARK OF THE AUTHOR’S DEEP RESPECT
AND
INDIA’S GRATITUDE,
THIS BOOK IS DEDICATED
TO
THOSE BRAVE, HIGHMINDED, AND HONEST ENG-
LISHMEN AND ENGLISHWOMEN WHO HAVE NOT
HESITATED TO SPEAK THE TRUTH ABOUT THE EF-
FECTS OF THE BRITISH RULE IN INDIA THOUGH BY
DOING SO THEY EARNED THE DISLIKE OF
THEIR COUNTRYMEN,
AND
ON WHOSE TESTIMONY, PRINCIPALLY, THIS
BOOK IS BASED.
LAJPAT RAI

“India will not remain, and ought not to remain con-
tent to be a hewer of wood and a drawer of water for the
rest of the Empire.”
— J. AUSTEN CHAMBERLAIN,
Secretary of state for India,
in the London Times,
March 30, 1917.

FROM THE PUBLISHER
Recently I got access to scanned copy of the book
“England's Debt to India” by Lala Lajpat Rai published in
New York in year 1917. I think it is a very vital resource for
understanding true picture of economic effects of British
rule in India. Therefore I am republishing this book with
aim to providing a authentic historical resource available
to people who want to know the truth without prejudice
of current political interests.
This book analyze economic effects of British Rules
in India taking an impartial view of the subject. This book
contains extensive quotation from contemporary English
economists and politicians which can help in understand-
ing true picture of Economic effects of British rule in In-
dia. This book also analyze growth of Railways and it eco-
nomic effects. I believe that this book will help in clearing
many misconceptions about British Rule in India.
There are some very significant development which
I would like to mention here which happened after pub-
lishing of this book in 1917. A very few people know that
a very big cause of India’s post independence poverty is
the interest of the loan of 1800 crores1 for which respon-
sibility of repayment was inherited by Government of In-
dependent India as per Transfer of Power Agreement.2 To
1 I lost the book in which I read details of this settlement. But this subject
was discussed in all economics books of 1960’s which deals with subject
of Public Finance.
2 Dr. Rajender Prasad’s “India Divided”, published in 1946, reprinted by
Penguin Books in 2010 in India, p. 401-405. This book puts estimate of
public debt at Rs. 2000 crore (refer to table XLVII on p. 405)
really appreciate value of 1800 crore rupee in 1947 you
will have to take into account that exchange rate of Brit-
ish Pound was at 13.50 rupee per pound, exchange rate
for American dollar was 5.00 rupee per dollar, and Pure
Gold was selling at 88.62 rupee per 10 grams. Now since
all currencies British pound, American dollar and Indian
rupee have devaluated due to inflation we will have to take
value Pure Gold as a benchmark. Reader will have to re-
member that in last 60 years gold mines all over world are
producing gold worldwide at cost much less then prevail-
ing gold price and increasing availability of gold world-
wide. So in no way true value would have gone up in last
60 years but reduced but we are assuming to remain the
same as it was in 1947. In June 2012 pure gold is being
traded at Rs. 30,000 per 10 grams. Taking pure gold price
as benchmark the value of debt inherited by Government
of Independent in India comes at 6,09,274 crore rupee at
current rates.
Out of Debt of 1800 crore rupee inherited, 650 crore
rupee was to be paid to Britain. Out of this 1800 crore
rupee loan Pakistan was to pay Rs. 300 crore to India, out
of which it have not paid even a single rupee till now. 3
Maintaing people’s expectation of tax cuts, and paying
interest on 1800 crore at 3 percent per annum was a re-
ally difficult task in hand for Government of Independ-
ent India. For this very drastic steps were taken — Gold
Import was banned to save foreign exchange, Income tax
was increased highest slab being at 60 percent and addi-
tionally National Saving Certificates of 10 percent needed
3 Union Budget, 2012-13
to be purchased compulsorily. Employee Provident Fund
was introduced with aim of financing governments Debt
repayment to Britain. Indian Government kept financing
repayment of interest and principal with fresh loans and
continuing it still. Interest rate have varied from 3 percent
in 1947 to 18-20 percent in 1985-90 to 12 percent in 2012.
If we take average rate of interest at 12 percent the loan
would have become 28 lakh crore rupee. Total govern-
ment loan is 40,70,320.68 crore rupee.4
Drain of wealth is still happening from India to Brit-
ain and USA. When a skilled person migrate to Britain
or London, along with him goes rare skills which were
acquired on indian money ( weather his father’s or tax
payer does not matter), Britain take back more than half
of remuneration for these skill in term of exorbitant prices
of accommodation and heavy taxes. The saving of these
people also remains in Britain, this way Britain is able to
keep all remuneration of the skills in Britain. This skill
help Britain take world's money to Britain by exporting
products developed by these skills. India spend money on
harboring skills and Britain make money on that. In the
end when parents living in India dies these people sell an-
cestral properties built by savings of generations and take
that money to Britain. Next generation which is born in
Britain is surprisingly lacking in education and skill and
end up taking petty jobs. It looks like even a good earning
person in London can't afford good education for their
kids, otherwise it would have not been the case. After one
or two generations decedents of these people are in state
4 Annual Financial Statement, p. 6, Union Budget 2012-13
penury.
When a rich person emigrate to Britain along with
him goes saving of many generations. At least half of the
money a person took with him taken over by government
in terms of taxes and exorbitant price he pays for ordi-
nary accommodation which would have not got any buy-
ers if Indian people would not take indian money there.
Taxes are very high in Britain and USA, government uses
tax income for welfare of native people and Indians don't
get benefited by these welfare schemes. After one or two
generation when money the family took from India is ex-
hausted NRIs have to live in humiliating conditions and
take up jobs which Indians are ashamed to associate there
name to.
Hope this book will bring some positive change in
thinking of Indian people.
Jasvant Singh
5 July 2012
Delhi