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with any property which he may have (cash savings, gold and silver articles, etc.) , or to get more deeply into debt. There is clear evidence that recourse to all three of these methods has been general during the past eighteen months. The Provincial Governments have done their utmost to meet the situation by remissions of land revenue, canal dues, etc., and by forcing reductions of lent. But their own financial difficulties impose limits on their powers in this direction, while even a total remission of their levies would not fill the gap ; I may turn now to the effects on the budgetary and financial position. The economic depression has caused a drop of unparalleled magnitude in India's Trade and consequently in Government revenue. The average value of India's post-war trade in merchandise (i.e., for the ten years ending March 31, 1930), was, exports, 325 crores (about million sterling) and imports, 242 crores (about £18H million sterling) showing a favourable balance of 83 crores (£62 million sterling). For 1931-2, however, the figures had dropped to less than one-half, namely, exports, 160 crores (£l2O million sterling), imports, 125 crores (£92 million sterling), favourable balance, 35 crores (£2B million sterling), while, as I shall explain later the figures up to date for the current year are much worse. The two significant facts here are, first, the drop in the total values, and secondly, the drop in the favourable balance. It is the former which mainly affects the budgetary position with which I will deal first. The drop in values indicates that customs revenue on which we rely for two-thirds of our tax revenue, would without increasing the rates of the duties have been halved. The general falling off in trade is equally affecting income-tax receipts, while railway revenue has dropped in a manner which is causing most serious embarrassment to the Government's finances. I may indicate the magnitude of our railway interests by saying that the Government of India has 752 crores, or £564 million sterling, invested in its railways, and that in a normal year the gross traffic receipts from this system should be about 110 crores, or £83 million sterling annually. The receipts will probably be less than 80 crores, or £60 million sterling for the current year. To meet the situation of which I have just given the salient features, the Government has had to take drastic measures both to restrict expenditure and to increase taxation. But the scope for economies in the case of the Government of India is limited. The main charges of the Central Budget are for Debt Services and Defence. Out of a total budgetary expenditure in 1929-30 of about £100 million sterling, the cost of ordinary civil administration was only about £9 million sterling. Army expenditure accounted for about half the balance. The case of military expenditure is particularly worth noting, because it affords a good illustration of the difficulty of adjusting post-war standards to an economic level which has fallen much lower than the pre-war level. Pre-war military expenditure was 29 crores, say £21 million sterling, but the post-war military budget four years ago had been stabilized at 55 crores, or £4H- million sterling, nearly twice the pre-war figure. And yet we now maintain 16,000 less British troops in India than we had before the war. The difference is mainly accounted for by the higher standard of efficiency which the war proved it necessary to maintain, to higher rates of pay and to other special features such as the addition of war pensions. We have for 1932-3 reduced the figure to 464 crores, or about £34| million sterling, including cuts in pay. We cannot get "it appreciably lower without reducing fighting troops on a large scale. The dangers of such a course just now are obvious. On the civil side we have made severe economies but this has meant cutting down administrative services and Public Works expenditure to a low level which cannot safely be maintained. The scope for economies being thus limited it has, in order to fill the gap been necessary to impose very heavy increases in taxation. To explain shortly what has been done I may say that, while our normal tax revenue has since the war averaged about 75 crores (£56 million sterling), I have been forced during the last two years to impose new taxes calculated to yield 34 crores (£2s| million sterling), an increase of nearly 50 per cent. Yet, on present indications even this may prove insufficient if the present low level of prices continues. The figures which I have given indicate how great are the budgetary difficulties, but the intrinsic position is not fully revealed by these figures. In order to explain this one must turn to the second point, the balance of trade. Before the war India could, taking the average of the ten pre-war year figures, rely on a favourable balance of exports over imports of merchandise of about 72 'crores (£54 million sterling). I have already given figures showing that for the ten post-war years to the end of March, 1930, the average favourable