The Partition of Bengal and the Inadequacy of Revenues

Why was Bengal partitioned in 1905?

In the author's account, Bengal, which then included Bihar and Orissa, was too large to govern efficiently, and Muslim-majority East Bengal had been left neglected. Lord Curzon's creation of a separate eastern province opened a path to development through the port of Chittagong and freedom from absentee landlords based in West Bengal.

The Partition of Bengal The Partition of Bengal in 1905 was another turning point of historic significance. The province of Bengal, including Bihar and Orissa, was too large to be governed efficiently. Due to poor communications and resultant isolation, East Bengal with the majority of Muslim population remained neglected and backward. The reorganisation of the province by Lord Curzon through the creation of the province of East Bengal opened up socio-economic liberation of its people. The development of Chittagong port boosted prospects of tremendous growth of trade, flourishing business and job creations. Freedom from the control of the absentee landlords, residing in the West Bengal, was also a great prospect for agricultural development in the new province. The division of the judicial system, press, lawyers, pressmen and workers brought about new opportunities for progress. Broadly speaking, the partition of Bengal was an opening for incredible economic and human development in East Bengal. The end to generations-long exploitation by absentee landlords of West Bengal resulted in prosperity and freedom of the residents of the eastern province from heavy disguised taxation.

Why was the partition of Bengal annulled in 1911?

The author writes that the All-India Congress and Hindus fiercely resisted the partition, and a boycott of British goods was launched to undo it. The resulting economic pressure and losses to British industrialists led the Crown to reverse the partition in 1911, but, he argues, the political separation it had set in motion could not be undone.

All-India Congress and Hindus, however, fiercely resisted the Partition. For undoing the division, Mahatma Gandhi launched the movement of boycott of British goods. Eventually, the mounting economic pressure and losses incurred by the British industrialists compelled the Crown to annul its decision of the Partition in 1911. Nonetheless, unstoppable series of events had already come about. The revocation of the partition of Bengal failed to reverse the political process of alienation between the Hindus and the Muslims. The dreams of freedom inspired by the partition of Bengal never petered out. A hindsight review of history reveals that the partition of India in 1947 and that of Pakistan in 1971 had their geneses in the Partition of Bengal.

How did the 1947-48 budget shape the partition of India?

The author describes Liaquat Ali Khan's 1947-48 budget, the Poor Man's Budget, as a masterstroke. It abolished the salt tax and raised revenue from wartime business profits. He argues that the backlash from Hindu capitalists led the Congress, under Sardar Patel, to accept partition, tipping history towards the creation of Pakistan.

iii. The Partition of India a. The last budget of undivided India for fiscal year 1947-48, presented by Liaquat Ali Khan as the finance minister, was the masterstroke of economic innovation and a dramatic surprise to the financial experts of the Congress. The finance minister was alive to the enormity of the challenge of the post-World War II fiscal deficit and the miseries of the masses. The exponential war finances and the unprecedented volume of procurements from India during World War II had left behind wide budget deficits. The spiralling inflation, flowing from the war spending, had resulted into windfall profits for the big business but abject poverty for common people. The Bengal famine of 1943 had taken its toll of nearly 2 million lives. The formidable challenge before the finance minister was to raise additional tax revenues of Rs. 485 million without burdening public at large.

b. “Poor Man’s Budget” proposals had a far-reaching impact on the developing events. The abolition of the Salt Tax was a much-awaited relief to every household. The lower middle classes, too, had a sigh of relief on raising of the minimum threshold of taxable income. Most of the additional revenue was proposed to be raised from direct taxes on the windfall profits of the big business. A special income tax, in the nature of excess profits tax, was proposed on the business profits exceeding Rs. 100,000. Wartime inflation had resulted in immense revaluation of capital assets/property. Capital gains tax was, therefore, proposed on capital gains. Increase in the corporation tax and export duty on tea were also proposed.

c. The redistributive role of proposed taxation, however, provoked strong uproar among the Hindu capitalists who had been the main beneficiaries of the war inflation. The Congress was in a fix. It had always been advocating social justice, but its finances came mainly from the Hindu capitalists. “The Hindu capitalists class felt that if the Muslims had any share in political power in India, they would inevitably be on the side of social reform, equality of opportunity and less inequality in the distribution of wealth and income”. Thus, a turning point came about; the Congress lobby under the leadership of Sardar Patel not only practically abandoned opposition to the partition of India but also supported the partition of Punjab and Bengal. Taxation proposals under the Indian budget for 1947-48 had tipped the scales of history in favour of the creation of Pakistan.

Why is revenue the lifeblood of a state?

The author argues that a state's capacity to deliver depends on its revenue, echoing Edmund Burke's view that a state's revenue is, in effect, the state itself. He cites the Soviet Union, whose fiscal system collapsed before the union broke apart, as proof that empires fall when their revenues prove inadequate.

2. Revenue is life blood of a state i. The capacity of the state to deliver depends upon the state revenues. Edmund Burke said, “The revenue of the state is the state.” It may be recalled that the fiscal system of the Soviet Union had already collapsed before the Union fragmented despite abundance of its resources. Indirect taxes such as the turnover tax/sales tax were the mainstay of the Union revenues. Ordinarily, the decline in revenue from indirect taxes is sharper in a stagnant or declining economy. Additionally, the Afghan war was also taking its heavy toll. The historic economic crisis in the Soviet Union, thus, rapidly degenerated into soaring fiscal deficits. By 1988, the Soviet Union’s fiscal deficit had exceeded 10% of its GNP. Eventually, debts swelled to unsustainable proportions. Consequently, the Union crumbled chiefly due to its fiscal failure. History is replete with the stories of the fall of the empires due to the inadequacy of revenues

Frequently asked questions

Who partitioned Bengal in 1905?

Lord Curzon, by reorganising the province and creating a new province of East Bengal. The author sees the change as an opening for economic and human development in the east.

How is the partition of Bengal linked to 1947 and 1971?

The author argues that even after the 1911 reversal, the alienation and hopes of freedom it created never faded, and that both the partition of India in 1947 and the separation of 1971 had their roots in the Partition of Bengal.

What was the Poor Man's Budget of 1947?

The last budget of undivided India, presented by Liaquat Ali Khan as finance minister. It ended the salt tax, raised the taxable income threshold, and proposed a special tax on large business profits, a capital gains tax and higher corporation tax, to raise Rs. 485 million without burdening ordinary people.

Why did the Soviet Union collapse, according to the author?

Chiefly because of fiscal failure. He explains that it relied on indirect taxes, which fell sharply as the economy stagnated, while the Afghan war added costs. Its deficit passed 10 percent of GNP by 1988 and its debts became unsustainable.

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Read the full argument in the book How Constitutions Flourish or Fail by Mian Ashiq Hussain.