May 11.
Whatever may be the difficulties in composing the political situation in the Provinces for the due inauguration of their autonomy, India has the advantage of facing them in a time of satisfactory economic conditions. "Relative ease and Prosperity" is the authoritative assessment applied by the "Economist" in commenting on the addresses of chairmen of leading exchange banks who have been impelled from their association with Indian finance to expound the economic position of that country. The "Economist's" remarks under the caption "Recovery in India" have a curiously apt pertinence for those who desire to study the Process of recovery in China and to establish the principles on which that recovery may find full express sion. "There is, of course, a marked similarity between India and China. Both countries have roughly the same area, if Manchuria be ignored considering Chinese territory. India's 338 million can be com-
Pared with China'
400 million. India has only 40 towns carrying population each of 100,000. or over. Whereas England has 70 per cent.
India has only 102 per cent. of her population in urban areas, and China, so far as can be judged is much in the same condition.
India's 500,000 villages have their counterparts in China. Dependent on agriculture are 71 Per cent. of the Indian people; Sir Arthur Salter estimates that 78 per cent. of the people of China live on the land. The report of the Rockefeller Foundation for 1936 says that the Chinese farmer "constitutes 85 er cent. of the population." China has advantages in the general superiority of her cultivators. Mr. C. F. Strickland who knows India well has recorded that the Chinese farmer's honesty and commonsense, "'as measured by repayments to the existing credit societies, exceed the standard of any non-European race which I know, and are equal to those of the best European peasantry". India has advantages in the ability of her rural classes to command the services of a _highly-organized administration which can maintain Jaw and order and ensure security for the farmer against banditry with, greater certainty than is always. possible in China. On the other hand, despite the support of cooperative credit societies and. restrictive legislation the indebtedness of the Indian peasant and farmer to the moneylender is more serious than in China.
Carrying this comparison _to financial conditions it may be useful to observe that both countries have complex banking and monetary system, Foreign owned exchange banks, domestic commercial banks, private bankers and money-lenders come, into the picture here as in' India, Both peoples, taught long experience of external aggression, are traditional~ ly inclined to hoard gold and silver. In both countries the introduction of paper currency in recent years has been remarkably effective in breaking down the hoarding habit and encouraging investment in post office savings banks. In both there is a wide range of money rates in that exchange bankers may lack opportunities for remunerative em= ployment of funds while the rural cultivators are in debt and forced, to pay exorbitant interest rates. India like China has a managed currency which creates the need, for tific control through a central bank. India's Reserve Bank has been duly established and is functioning for that purpose. China's plans for a similar buttress; to her currency reform are in the making. Each system requires favourable balance of _international payments. In India, ever since the time of the Mahrattas from whom the present raj borrowed for expansion and adaptation to. modern conditions its land revenue machinery and other modes of taxation, the welfare of the rural classes has been recognized as the dominant concern of the Government, In China, the institution of the National Economic Council and, the Generalissimo's conception of the People's Economic Reconstruction programme are inspired by the same consideration. Rural rehabilitation is, in fact, the basis of industrial development—a lesson. India and China are both learning.
In this light the bankers' comments as presented by the "Economist" have special interest for China, although they deal with India, Lord Catto for example to the shareholders of the Mercantile Bank of] India said:
'The prosperity of India depends mainly on' the condition of the cultivators, who make up the bulk of her huge population. They cultivate small-holdings and they Teserve part of their crops for their own consumption and sell the rest. Part of the money they receive is spent on fixed charges like rent, rates and interest on Joans, for they are almost always in debt, The balance they spend fon the purchase of cotton cloth and on other simple necessities of life. At the best of times the never much, and in bad times it is apt to disappear. Therefore the price of primary commodities is of Paramount importante for the cultivator and for India as a whole.
Index numbers show a good advance in 1936. Taking 100 as the JSigure for 1929, then 1933 showed 1.7, the nadir of depression, Jan. 1936 showed 65.2 and Jan. 1937
69.5—in other words the recovery during 1936 alone was greater than during the whole period from 1933 to Jan. 1936, This has enhanced the value of exports and given India 1936 a "favourable balance of payments exclusive of her net ports of gold" as the "Economist points out. The commentator pro ceeds:
The channel, in fact, by which credit percolates in India from ite central source to the countless emall borrowers scattered all. over the country, is over-long and tortuous. There are so. many intermediate Parties that the paradox becomes possible of cheap money in the centre and usurious rates of interest inthe villages, To remedy this tone of the fundamental problems of Indian banking, and it affects the Dig exchange and indigenous banks as well as the general population.
is not a problem peculiar 10 India.
That last sentence links the thought which precedes it with China. Distribution of credit and, perhaps, the better education of the rural classes will make some contribution to the solution of the problem but of immediate importance for China is the tackling of the difficulties created for the farmer and peasant by the oppressiveness of the system of land tenure and by inequitable, erratic and crushing—taxation. Therein lies one of the most important obligations which the Gov ernment of China has to accept in carrying to completion its program~ economic and monetary reform,
Text read from the printed page and cleaned; old type leaves the occasional error.