Mss Eur F90/31, no.35

Survey of India's financial position; Massey right in thinking there is annual deficit of £1 million; likely to be great differences in Council on subject, and Lawrence wishes to obtain Cranborne's views; reasons for opposing increase in salt tax; rise in wages largely confined to vicinity of railways and large towns, and largely counterbalanced by price increases; poverty of classes who used to depend on service employment and whose status precludes manual labour; little scope remains for military reductions; new police force costly, but cannot now be upset, or its cost further reduced.

[Remaining pages misfiled: turn to folio 112 in Lawrence's letter of 5 October]

Massey's belief in possibilities of local taxation fallacious; England much wealthier than India and can bear heavy local as well as central taxation, but India cannot; reasons why local taxes would be unpopular or could not be made to yield more than at present; proposes income tax combined with licence tax on trades and professions, briefly outlining details; this would be unpopular but it would be 'fair and just, and would touch those who now as a rule pay little or no taxation'; loans should be confined to strictly productive public works (i.e. canals and railways where a return on investment can be expected), otherwise borrowing will simply increase debt without any prospect of reduction; Indian revenue will not increase by £1 million p.a.; recent increase due to accidental factors, in reality Indian revenues are inelastic; gives statistics showing most Indian expenditure on public works produces no return; only absolutely essential public works should be sanctioned; requests Cranborne to indicate his wishes on Indian finance.