We require to know the magnitude of possible _variation_ in these items, rather than the absolute amount of the various annual payments which India has to make, in order to gauge the possible balance of indebtedness against her. The greatest stress is commonly placed on the first of them—the trade balance. But in the normal state of affairs receipts and payments only balance after account has been taken of capital transactions; and if a certain amount of new capital has been flowing in every year, a slackening of this flow affects the balance as adversely as a reduction in the volume of exports affects it. In 1907–8 the adverse balance of indebtedness was largely due to a change in the trade balance;—on the one hand, goods ordered during the boom continued to pour into Bombay for some weeks after they had become unsaleable, thus continuing for a time a large supply of bills on India, while, on the other hand, the failure of the monsoon and consequent anticipations of a scanty harvest cut off a considerable part of the normal supply of trade bills on London. But even on this occasion the adverse balance arose to a considerable extent out of changes in capital transactions under items (ii.) and (iii.). The acute stringency in the international money markets, occasioned by the position in America, made it necessary for Exchange Banks and others to reduce below their normal level their short–period borrowings (direct or indirect) in London for use in India; and this stringency also caused the flow of new investment to India to fall short of its usual volume. Thus, of the adverse balance of some £25,000,000 which had to be met between September 1907 and September 1908, perhaps £18,000,000 was due to a change in the trade balance and £7,000,000 to a diminution of new capital transactions and to the non–renewal of some short–period loans.[75] It is not easy, however, to argue from the experience of 1907–8 as to what will happen in the future. The volume of trade has expanded very greatly since that time,[76] and the absolute variation in the favourable balance between good years and bad is likely to be correspondingly greater. In addition, the growth of banking in the intervening period has been on a very great scale; and there is, therefore, greater room for disturbance in the short–period loan market. If, moreover, the internal banking position in India is as weak as in Chapter VII. I make it out to be, a serious breakdown there may embarrass the Exchange Banks in London, however intrinsically sound the position of these Banks may really be, in their efforts to assist the Indian market.