Page:Indian Journal of Economics Volume 2.djvu/614

 ing would be advantageous, because it would permit of & eonsider&ble marginal increment of e&pital to be borrowed from the public in &ny one year st higher rate of interest without the necessity of paying higher iuterest on the whole. Suppose, for ex&mpe, that in pe&ee times the Government of India will be able to borrow thirty erores in any year if it offers 4 per (rent interest, and that it eoul borrow fifty erores st 5 per cent. The extra I per cent will have to be paid on the whole fiy erores, so that to obtain an additional twenty erores in any year it has to pay permanently fifty l&khs per annum interest. other hand if the Government of India borrow only thirty erores and to use it its own purposes partly to lend to provinces such as can would would railway to supplement On the rere to partly for construction and what they borrow whole be less. For their own loans the provinces have to pay 'interest at various rates from 4 directly the cost to India as a per cent (say for Bengal) to 6 per cent. might be 5 per cent. The additional would be paid only on twenty The average 1 per cent erores, however; and, the Punjab, and probably have to pay. well afford such rates handsome' benefit from have been assured by irrigation thus the permanent annual cost of raising the extra twenty erores would be only 25 lakhs per annum. - It may' be questioned whether the provinces could afljord to borrow at 5 or 6 per cent, which are the the United Provinces rates which Burma, for example, would The reply is that they could of interest, and yet reap a the capital outlay. I engineers very highly placed in Government Service that there are many irrigation canal projects in both the United Provinces and the Punjab, estimates of which made on a very conservative basis show net revsnus of 6 per cent, which would. &tinoat oy