ously granted L100,000,000 in
1917 towards Imperial war expenditure, and another L140,000,000 of
Indian money went into the two Indian war loans and issues of Treasury
notes. But the increase in India's actual military expenditure during
the war was small, as the Imperial Exchequer continued to bear all the
extra cost of the Indian forces employed outside India, and the last
Indian war budget, 1918-19, showed an excess of only about L23,000,000
over the last pre-war budget, 1913-14--an increase easily met by
relatively small additional taxation. Moreover, the Indian export trade,
after a temporary set-back on the first outbreak of hostilities,
received a tremendous impetus from the pressing demand for Indian
produce at rapidly increasing prices, and the lucrative development of
many new as well as old industries and of natural resources too long
neglected. The balance of trade which before the war had generally been
slightly against India then shifted rapidly, and the scale turned
heavily in her favour till the end of the war. The total value of the
supplies of all sorts, foodstuffs, raw materials, and manufactured
products, sent out from India to other parts of the British Empire and
to Allied countries has been estimated at some L250,000,000.

For India as a whole the war years were fat years, though the wealth
poured into the country was, as usual, very unevenly distributed, and
some sections of the population were very hard hit by the tremendous
rise in the cost of living. Lean years were bound to come in India as
elsewhere when the war was over. But the reaction would hardly have led
to such a serious crisis had it not been for complications which have
arisen out of the peculiarities of a unique exchange and currency
system. This system presumes a gold standard, but it is in reality a
gold exchange system by which, in the absence of an Indian gold
currency, the exchange as between the Indian silver rupee and the
British gold sovereign has to be kept at the gold point of the legally
established rate of the rupee to the sovereign by delicately balanced
operations directed from Whitehall. These consist in the sale of
"Council bills" at gold point by the Secretary of State for India when
the balance of trade is in favour of India, and in the sale of "Reverse
Councils" at gold point by the Government of India when the balance of
trade is against India.

The system worked fairly well until the second year of the war, wh