The following points highlight the top six economic ideas of Gopal Krishna Gokhale. The economic ideas are: 1. Indian Finance 2. Decentralisation of Power 3. Land Revenue 4. Public Expenditure 5. Education 6. Trade.

Economic Idea # 1. Indian Finance:

With regard to Indian Budget, Gokhale held the view that, it should be passed item by item. In such a case, people having sound knowledge of Indian conditions would get an opportunity to express their opinion on various items of expenditure. Suggestions made by non-official members should be referred to a committee of control.

Gokhale was not in favour of surplus budgets. He held that a policy of surplus budget was unsound. He believed that a surplus budget would demoralize even the most conscientious government for resorting to wasteful expenditure. He thought that a succession of surplus budgets would made the government indulge in extravagant expenditure.

He thought it would be, “Specially true of countries like India where public revenues are administered under no sense of responsibility, such as exists in the West, to the governed.” Gokhale was against using the budget surpluses for repaying the debt incurred for the construction of Railways. As the railways were a commercial undertaking, it should meet its debt commitments from its own income and not from the proceeds of taxation.


The finances of the local bodies and provinces were poor. So Gokhale suggested an equitable distribution of tax revenue between the centre and provincial governments and local bodies. So he suggested that land revenue, excise and revenue from forests might be given to the provinces. Opium, salt, customs, post and telegraphs might be given to the Imperial government. The quinquennial revenue settlement might be given to the local bodies.

Economic Idea # 2. Decentralisation of Power:

Gokhale was an advocate of decentralisation of power. He suggested the creation of punchayats at the village level and then local boards and district councils. He suggested the creation of a council of members in the provinces to assist the Governors. He held that the provincial legislation should discuss important matters relating to finance and the budgets.

In 1896, the British Government decided to increase the duty on salt to meet the deficit of 1.5 million pounds which arose as a result of the annexation of Burma. Gokhale opposed this as it would place a heavy burden on the poor. Again in 1879, the government removed the 5 percent import duty on textiles and in 1896 imposed 31/2 percent excise duty on Indian cotton goods. Gokhale attacked these two measures.

Economic Idea # 3. Land Revenue:

Gokhale suggested certain reforms in land revenue system also. He suggested that in the Ryotwari areas, where the cultivators paid revenue directly to the government, the revenue should not be more than 20 percent of the gross produce.

Economic Idea # 4. Public Expenditure:


Gokhale was highly critical of large increase in public expenditure. He pointed out that India’s monetary resources were mis-spent in extending northern and north eastern frontiers and in using troops for imperial purposes. He charged that the British government was looking after the interests of British traders and it did not bother about the Indian tax payer. So he emphasised the need for controlling public expenditure in India.

A Royal Commission was appointed in 1895, “to enquire into the administration and the management of the military and civil expenditure, and the apportionment of charges between the government of the United Kingdom, and of India for the purposes in which both are interested.”

Gokhale was one of the non-official witnesses of this commission.

He divided his evidence into 3 parts:


The first one dealing with the machinery of control,

The second with the progress of expenditure and

The last portion dealing with the apportionment of charges between England and India.

Gokhale pointed out that in England and other countries, public expenditure was controlled by tax payers. But in India, there was no popular control over the public expenditure. The Indian tax payers had no voice over this matter.

With regard to progress of expenditure, Gokhale expressed the view that ever since the transfer of power from the East India Company to the crown, there was a tremendous growth of public expenditure. The average expenditure increased to Rs. 73 crores from Rs. 3 crores.

As far as the apportionment of charges between the United Kingdom and India was concerned, Gokhale suggested that the India office charges should be shared on 50:50 basis, the army charges should be paid by the crown, the public debt of India should be charged to the crown and the crown should pay a reasonable share of the cost of maintaining the British army stationed in India.

Gokhale suggested the following remedies to check the growth of public expenditure:

(1) The expenditure should be incurred with a spirit of economy. It should not be allowed to exceed the normal revenue except under conditions of war, famine etc.

(2) Military expenditure should be cut down and the size of the army should be maintained to the extent of Indian requirements.


(3) More number of Indians should be employed in public services. Indians should be paid salaries at same rate as were being paid to the Englishmen.

(4) The audit should be made independent. The audit report should be laid before the parliament so that effective criticism of the financial administration maybe possible.

Economic Idea # 5. Education:

Gokhale stated that an illiterate nation could not make any progress. So educational facilities should be extended to all in the country. The expenditure on education must be an imperial charge. Education must receive same attention as army and railways.

Economic Idea # 6. Trade:

Gokhale criticised free trade policy. He pointed out that a number of countries adopted protection for the growth of the economy. Gokhale suggested that for the development of industries, protection was necessary.