Persia a very doubtful quantity, and the
Ameer of Afghanistan far more eager to sign a treaty of alliance with
Soviet Russia than to bring to a friendly conclusion the long-drawn
negotiations which the Government of India has sent the head of its
foreign department to conduct at Kabul. The appointment of a Committee
to visit the North-West Frontier and to study the situation on the spot
was admirably calculated to carry the practical education of Indian
legislators a long step farther. In regard to other matters, too,
Government gave and gained time for reflection by referring them, before
committing itself to any definite pronouncement of policy, to special
committees in which points at issue could be thrashed out much more
effectively and with less heat than if only discussed in full house.

Nothing, however, could alter the awkward fact that Government had been
compelled to confront the Legislative Assembly at its first session with
a Budget showing a deficit and making calls upon the Indian tax-payer
absolutely unprecedented in the annals of British-Indian State finance.
The deficit amounted to nearly 19 crores of rupees on a Budget of 130
crores,[3] and the Financial Member, Mr. Hailey, who had only recently
succeeded to the financial department, had to admit that the deficit
could only be met by increased taxation. That the estimates of the
previous year had been so largely exceeded was due beyond dispute to the
growth of military expenditure, which, for the current financial year,
has been put down at 62 crores, or very nearly half the total
expenditure for which provision has to be made. This Budget, moreover,
not only came at a time of general economic depression, but coincided
with the operation of the new financial arrangements between the
Provinces and the Government of India, which have deprived the latter of
the facilities it had formerly for mitigating its own financial
necessities by adjusting to them the doles paid out of the Central
Exchequer to the several Provincial Exchequers. Under the new system
various revenues have been definitely allocated to the Provincial
Governments for their own free disposal, and in return they have to make
fixed annual contributions to the Central Exchequer. These contributions
are in no case to be subject to increase in the future, but on the
contrary to be reduced gradually and to cease at the earliest possible
moment compatible with the irreducible requirements of the G