Updated: February 1, 2021 2:50:51 pm
In 1859, as the British Crown was still recovering from the injuries caused to it by the mutiny of 1857, it appointed a Scottish businessman to find a solution to India’s financial crisis. James Wilson, better known at that time as the founder of The Economist newspaper, had a credible presence in England for his firm grasp over economic theory and policy as well as a practical knowledge of commercial affairs. Karl Marx in his ‘Capital’ had described Wilson as ‘an economic mandarin of high standing’.
Wilson would go on to present the first-ever budget in India in 1860. He is credited with introducing a financial budget in India framed upon the English model. Although Wilson’s budget did receive some criticism for not taking into consideration Indian conditions, it did lay down the foundations of the way in which several economic institutions in India would go on to function, especially that of the income tax.
Who was James Wilson?
Wilson was born in Hawick, a town at the Scottish borders in 1805, to a Quaker family. At the young age of 16, he became an apprentice at a hat factory. While he worked through the day, Wilson would spend the nights reading up on economics.
His father, a woollen manufacturer, went on to buy the factory for Wilson and his brother. In 1824, the two brothers shifted the business to London where it flourished.
During the economic crisis of 1837, Wilson lost most of his wealth. He sold most of his remaining property to avoid bankruptcy.
A decade later in 1853, Wilson founded the Chartered Bank of India, Australia and China, which later became the Standard Chartered Bank in 1969.
A strong critic of the Corn Laws which imposed heavy restrictions on imported food and grain, Wilson in 1843 founded The Economist as a newspaper to campaign for free trade.
Wilson’s intellectual engagements with the economic issues of the time were reflected in his writings including ‘The influence of Corn laws’ (1839), ‘Fluctuations of currency’ (1840) and ‘Capital, currency and banking’ (1847).
He entered the House of Commons as a Liberal member of Parliament from Westbury in 1847. Given his economic expertise, Wilson was appointed Secretary of the Board of Control, which oversaw the activities of the EIC in British India. Incidentally, he played a leading role in the organisation of railway construction in India during this period. He also served as the Financial Secretary to the Treasury from 1853 to 1858.
In August 1859, Wilson resigned from his seat in the Parliament as he was sent off to India, to remodel the country’s financial system which remained battered after the Mutiny.
What were the changes brought about by Wilson’s budget of 1860?
The crisis being faced by the British empire post the Mutiny is well evidenced by the enormous increase in annual military expenses. “The annual expenditure for the army, military police, new levies, police, and military public works went up from R. 13.2 crores (1856-57), to Rs. 17.2 crores (1857-58) and Rs. 24.7 crores (1858-59) and in the same period the debts of the government of India increased by 36 percent,” writes historian Sabyasachi Bhattacharya in his book, ‘The Financial foundations of the British Raj: Ideas and interests in the reconstruction of Indian public finance (1858-1872).
Reacting to the needs of the time, Wilson wrote, “reforms become possible only when an emergency arises. Such an emergency has now arisen and reform and changes are now possible that have not been possible in our day.”
As the Indian Finance Member, the man appointed to solve the Mutiny crisis, Wilson resolved to introduce major institutional changes and hoped to ensure the influence of economic principles in the financial management of India. The major proposals made by Wilson included taxing the trading classes, a government paper currency, reform of the financial system with budgets, estimates and auditing, creation of a civil police, and a department for public works and roads. He is also credited for having set up a military finance commission and a civil finance commission.
Wilson presented his budget on February 18, 1860. He introduced three kinds of taxes- income tax, license tax and tobacco duty. However, only the first one went through, as the other two were dropped on the demand of the governor-general of India, Charles Canning.
The budget did receive some criticism, chief among them being from the governor of Madras, Charles Trevelyan, found Wilson to be too ‘theoretical’ with a tendency to ignore ‘Indian conditions’. Wilson’s biographer, Walter Bagehot, however, acknowledged the thought put by him in formulating the budget: “Although the people had to be gently led towards the path of economic science, yet he wished to show the kindest consideration towards the thought and sentiments springing from their historical antecedents.” Bhattacharya in his book notes that Wilson “took enormous care to establish the view that income tax was in consonance with the ancient Hindu laws codified in Manusmriti.”
Wilson died the same year he presented the budget, having contracted dysentery in the scorching heat of Calcutta. Despite the prominent public role he played in the economic history of India, he was buried inconspicuously at the Scottish cemetery in Mullick Bazaar in Calcutta. It was only in 2007 that the grave happened to be discovered by C P Bhatia, a joint commissioner of income tax who was researching for a book on India’s taxation history.
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