V. General Statement of the Receipts and Disbursements and 36 BY THE UNDER-SECRETARY OF STATE FOR INDIA RELATING TO THE ACCOUNTS of the GOVERNMENT OF INDIA (Central Government) for 1925-26 and the ESTIMATES for 1926-27 and 1927-28, I. INTRODUCTORY. SEPARATION OF CENTRAL AND PROVINCIAL FINANCES. The Government of India Act, 1919, was designed inter alia to secure a greater measure of independence for Provincial Governments, and to this end provision was made, in the Act and in Rules subsequently published under authority of the Act, for the delimitation of the functions of Government as between the Government of India and the chief Provincial Governments, and for the definite assignment to each of these Provincial Governments of specific revenues of their own. Effect has been given to these measures of devolution in the nine Governor's Provinces viz. Madras, Bombay, Bengal, the United Provinces, the Punjab, Bihar and Orissa, the Central Provinces, Assam and Burma, and in the Province of Coorg. As regards these provinces the functions of Government have been classified as either "central subjects" 66 "provincial subjects." A general authority to control all matters coming under the latter head, subject to certain expressed provisos, is devolved upon the Local Governments concerned. The sources of revenue available to Local Governments for the purpose of defraying their administrative charges consist, in the main, of the receipts from those provincial subjects which are revenue-producing, the principal heads being Land Revenue, Irrigation, Stamp Duties and Excise. In addition, a local Government is given a small share in any expansion of Income Tax (otherwise a "central source of revenue) that may be due to an increase of the total assessed incomes within the Province over that of 1920-21. When the division of the sources of revenue was made between the Central and Provincial Governments, it was realized that the Central Government would be left insufficiently provided. It was therefore arranged that an annual contribution should be made by eight of the local Governments to the Central Government. The annual contributions fixed at the outset aggregated 983 lakhs of rupees. They were not, except in case of emergency and with the sanction of the Secretary of State, to be subject to increase and, should reduction of the aggregate be found possible, reductions were to be made in fixed proportions from the quotas of the several Provinces. The general policy which has been pursued in the matter is a progressive reduction of the provincial contributions with a view to their ultimate cessation. The amounts unremitted on 31st March, 1927, and the reductions proposed for 1926-27 and 1927-28 are shown on pages 27 and 28. The revised financial arrangements outlined above came into force from the 1st April, 1921, as from which date all "provincial " revenue and expenditure ceased to be included in the estimates and (28083) Wt. 8589/650 675 9/27 Harrow G.4 43 In the case of Coorg the accounts of the Central Government. separation was made on 1st April, 1924. "Finance and Revenue Accounts of the Government of India," commencing with that for 1921-22, exhibit separately the revenue and expenditure of the Central Government and of each of the Provincial Governments. The Central Government and each Provincial Government issues annually a separate volume containing its own budget estimate for the forthcoming year and, in most cases, a revised estimate for the closing year. This Memorandum, however, deals with the Accounts and Estimates of the Central Government only, except where otherwise stated. SEPARATION OF RAILWAY FINANCE FROM GENERAL FINANCE. In accordance with a Resolution passed in the Legislative Assembly in September, 1924, Railway Finance has been separated from the general finances of Government with effect from the year 1924-25. EXCHANGE ACCOUNTING. The Government of India's accounts are now kept in rupees. Since the 1st April, 1920, sterling transactions have, for the purpose of the Accounts and Estimates, been converted into rupees on a uniform basis of 2s. to the rupee, equivalent to Rs.10 to the £. The actual market value of the rupee, however, has varied considerably from that rate. As a result, the rupee figure shown for any item of English expenditure (as converted at Rs.10 to the £) does not correctly represent the actual charge incurred in making that expenditure. For instance, when a disbursement of £1,000 is made in England, the amount shown in rupees in the accounts as a disbursement in England will be Rs.10,000. But (at the rate of 1s. 6d. to the rupee assumed for the budget estimate of 1927-28) a disbursement of £1,000 represents a real charge of Rs.13,333. The balance of Rs.3,333 is treated as a disbursement on account of "exchange." The procedure by which this is effected is described in the following paragraph. 66 All exchange credits or debits arising in respect of remittances and cognate transactions, owing to the remittances, etc., having been effected at rates differing from the conventional conversion rate," are recorded in the first instance under a suspense head. The exchange credits or debits arising from outlay incurred in England in respect of the various heads of the revenue and capital accounts are included in the respective accounts, being calculated monthly on the basis of the average telegraphic transfer rates (Calcutta on London); and those relating to Provincial Governments are charged against those Governments. The suspense head of account referred to above is then reduced by the totals of these exchange adjustments arising from outlay in England; and it is considered with reference to the circumstances of each year whether the resulting balance should be written off to revenue or kept in suspense against the possibility of opposite results in succeeding years. The method of accounting to be adopted with effect from 1927-28 as a result of the passing of the Currency Bill is under consideration. 5 Rates of Exchange for the three years under review.-The average of the daily rates (telegraphic transfer, Calcutta on London) for 1925-26 was Rs.13 2743 to the £. The respective rates assumed for the purpose of compiling the Estimates have been :For the Budget Estimate of 1926-27, Rs.13:3333 to the £ (1s. 6d. to the rupee). For the Revised Estimate of 1926-27, Rs.13 3798 to the £ (1s. 51d. to the rupee). For the Budget Estimate of 1927-28, Rs.13 3333 to the £ II. REVENUE, AND EXPENDITURE CHARGED TO GROSS REVENUE AND EXPENDITURE. The Gross Revenue and Expenditure of the Government of India for the three years to which this Memorandum refers are as follows: The circumstances in which these estimates show equated revenue and expenditure is explained on pages 8 and 9. In these figures all receipts are included in the total of revenue and all outlay in the total of expenditure, with the main exceptions that the working expenses of railways, irrigation works and posts. and telegraphs, and the surplus profits paid to certain railway companies are treated not as expenditure but as a deduction from revenue. NET REVENUE AND EXPENDIture. The figures of Gross Revenue just given include the net receipts of railways and other commercial undertakings without any deduction on account of interest charges, the total receipts from the sale of opium, and the receipts of certain spending departments; while the figures of Gross Expenditure include the interest charges of commercial undertakings, and the cost of cultivation and manufacture of opium. This method of compilation may cause the revenue available for administrative purposes and the expenditure on such purposes to appear greater than they really are. A statement of the net revenue and expenditure of the Central Government for the three years under review is therefore given in the table below, which shows the net revenue derived from commercial undertakings, after deducting all expenditure including interest charges, and net figures under other heads of revenue and expenditure obtained by deducting (1) the cost of cultivation and manufacture of opium from sale receipts, and (2) the receipts of the spending departments from the gross expenditure incurred by them. The cost of the establishments maintained for the collection of revenue other than opium is not shown as a deduction from revenue, but as a separate head of expenditure. 28083) B |