28. These are the relevant considerations. But any conclusion as to the possible magnitude of the adverse balance at which one can arrive on the basis of them is little better than a guess. I will give my guess for what it is worth. I think the £40,000,000, which I have fixed as the maximum figure of what is required for the redemption in sterling of such notes and rupees as may be presented, is more than sufficient to meet the adverse balance that is at all likely to emerge in any single year. But I do not think it certain that this sum would be adequate to the necessities of two successive bad years. On the other hand, it is necessary to bear in mind that by the second bad year there would have been time for a very great reduction in the volume of imports, on account of the greatly reduced purchasing power of the people, and that this might go a long way towards righting the balance; also that, if there was a considerable liquidation of short–period loans in the first year, it would not be necessary to repeat this to anything like the same extent in the second year. In short, the _natural_ forces tending towards equilibrium would begin in the second year to show themselves more strongly. Nor is it necessary to accumulate reserves in advance for every eventuality. Two bad years in succession are not very likely; and, if they do come, the Secretary of State will have ample time to make his arrangements for borrowing. I think it a sufficient concession, therefore, if the £40,000,000 be given as the proper limit, not as before of the aggregate sterling resources of all kinds, but of the Gold Standard Reserve and the sterling branch of the Paper Currency Reserve (_i.e._ excluding the Cash Balances). In a country such as India, where all available resources are required for capital expansion, and where it is not sound or humane policy to burden the present overmuch for the sake of the future, it is nearly as important to avoid extravagance in the reserve policy as to avoid undue parsimony. As the rupee and note circulation is increased, the proportion of reserves ought to grow, of course, _pari passu_. But in existing circumstances to hold much more than £40,000,000 in sterling in the Gold Standard Reserve and the Paper Currency Reserve together would border on extravagance. If the reserves were somewhat lower than this, I do not think it would necessarily be blameworthy to leave them so, provided it would prove a very burdensome thing to raise them. For the expedient of a loan is always available.[77] My conclusion, rather, is that the reserves should be allowed to reach some such figure as this by the natural processes of growth, before sums are diverted from them to other purposes.