File 1262/1915 Pt 2 'Persia: Financial assistance: The Moratorium' [‎326v] (416/424)

by the attractive rate of interest proposed, and this without producing" so
large a response as to admit of the argument that injury to Indian finance as
such was more than counterbalanced by assistance thus gained by Empire.
We should be placed in most unsatisfactory relation towards Presidency The name given to each of the three divisions of the territory of the East India Company, and later the British Raj, on the Indian subcontinent.
Banks and public who are supporting us in connection with our own 1 per
cent, loan if further offer of such attractive terms were made immediately
after flotation of that loan. Embarrassing question of concessions in regard
to our 3.V per cent, loan would also be thrust into immediate prominence.
Treasury proposal as regards small investor is no new suggestion. We
offer special inducements to him in our own loan now under subscription, and
if successful, procedure now experimentally adopted will be extended hereafter.
Here again, special appeals to this class immediately after our own experiment
in this direction would entail serious confusion.
Finally, the risk to exchange in remittance of funds thus obtained would
be directly proportionate to success of such a loan. In this crisis India is
giving loyally and unsparingly all the assistance her circumstances permit,
but it is illusory to assume that she has indefinite amount of loanable capital
to offer. Offer of Home Government would fail, we are convinced, as ours
has already done, to attract traditional hoards of India. Long experience
has shown that capital for investment in this class of security is strictlv
limited and is barely sufficient for our own direct needs and for those of
quasi-public bodies such as corporations and port trusts.
A\ e have had to have recourse to underwriting to guarantee success of
our present loan and even so we depend on London for part of our resources.
Next year our requirements in India may possibly be even larger and would
certainly be prejudiced by the suggested competition of His Majesty's
Government.
Immediately on receipt in India we republished copy of notification of
Home War Loan recently issued and put no obstacle in the way of the
natural flow of subscriptions in the normal course and on ordinary terms,
and we believe the amount of such subscriptions is not inconsiderable. For
the above-mentioned reasons, however, we only oppose any extraordinary
measure for obtaining further contributions from India.
ENCLOSURE No. 10 :—Treasury to India Ojjicc.
No. 19,920. Treasury Chambers,
Sir, 29th September 1915.
I have laid before the Lords Commissioners of His Majesty’s Treasury
Sir L. Abrahams’ letter of the 20th ultimo enclosing copy of a telegram from
the Government of India on the subject of the issue in India of a War Loan
guaranteed by the Imperial Government.
2. In reply Their Lordships direct me to request you to inform the
Secretary of State for India in Council that, in the view of the attitude of the
Indian Government. They agree that it will be undesirable 10 press the
matter at the present time.
3. lam, however, to observe that They are by no means convinced that the
practical difficulties apprehended by the Government of India are insuperable
(e.g., the difficulty of exchange could be met by the Imperial Government only
withdrawing funds when and in so far as the state of exchange permitted)
and They greatly regret the decision which has been arrived at.
4. But, abandoning for the time being the suggestion of an Indian War
Loan My Lords must impress on the Government of India the necessitv of
making greater efforts than they have hitherto made to provide for their own
domestic requirements by internal loans and so avoiding recourse to the
London market.
5. While my Lords appreciate the reluctance of the Government of India
to increase the rate of interest offered upon internal Government loans, the
policy of keeping those rates permanently below the rates which have to be
offered upon the highest security in the rest of the world is not one which
can be indefinitely maintained, nor can their Lordships contemplate continued