UPSC History Expansion Company and Bengal Nawabs NCERT Extracts - British Economic Policies in India

NCERT Extracts - British Economic Policies in India

Category : UPSC

 The Structure of Government


  • Having acquired the vast empire of India, the East India Company had to devise suitable methods of government to control and administer it. The administrative policy of the Company underwent frequent changes during the long period between 1757 and 1857.
  • However, it never lost sight of its main objects which were to increase the Company's profits, to enhance the profitability of its Indian possessions to Britain, and to maintain and strengthen the British hold over India; all other purposes were subordinated to these aims. The administrative machinery of the Government of India was designed and developed to serve these ends.
  • In 1772 the Company ended the Dual Government and undertook to administer Bengal directly through its own servants.
  • The East India Company was at this time a commercial body designed to trade with the East. Moreover, its higher authority was situated in England, yet, it had come to wield political power over millions of people. This nomalous state of affairs posed many problem for the British Government.
  • Merchants kept out of the East by the monopoly of the Company, the growing class of manufacturers and, in general, the rising forces of free enterprise in Britain wanted to share in the profitable Indian trade and the riches of India which the Company and its servants alone were enjoying,
  • The exclusive privileges of the Company were also attacked by the rising school of economists representing free trade manufacturing capitalism.
  • In his celebrated work. The Wealth of Nations^ Adam Smith, the founder of classical economics, condemned the exclusive companies,
  • The first important parliamentary act regarding the Company's affairs was the Regulating Act of 1773.
  • This Act made changes in the constitution of the Court of Directors of the Company and subjected their actions to the supervision of the British Government.
  • The defects of the Regulating Act and the exigencies of British politics necessitated the passing in 1784 of another important act known as the Pittas India Act,
  • It established six Commissioners for the affairs of India, popularly known as the Board of Control, including two Cabinet Ministers.
  • The Board of Control was to guide and control the work of the Court of Directors and the Government of India.
  • The Act placed the Government of India in the hands of the Governor-General and a Council of three, so that if the Governor-General could get the support of even one member, he could have his way.
  • The Act clearly subordinated the Bombay and Madras Presidencies to Bengal in all questions of war, diplomacy, and revenues. With this Act began a new phase of the British conquest of India.
  • The Company, having saved its monopoly of the Indian and Chinese trade, was satisfied. Its directors retained the profitable right of appointing and dismissing its British officials in India.
  • The Pitt's India Act laid down the general framework in which the Government of India was to be carried on till 1857, later enactments brought about several important changes which gradually diminished the powers and privileges of the Company.
  • By the Charter Act of 1813, the trade monopoly of the Company in India was ended and trade with India was thrown open to all British subjects.
  • But trade in tea and trade with China were still exclusive to the Company. The Government and the revenues of India continued to be in the hands of the Company.
  • The Charter Act of 1833 brought the Company’s monopoly of tea trade and trade with China to an end.


British Economic Policies in India, (1757-1857)


  • The British manufacturers put pressure on their government to restrict and prohibit the sale of Indian goods in England. By 1720, laws had been passed forbidding the wear or use of printed or dyed cotton cloth.
  • Other European countries, except Holland, also either prohibited the import of Indian cloth or imposed heavy import duties.
  • The servants of the Company monopolised the sale of raw cotton and made the Bengal weaver pay exorbitant prices for it. Thus, the weaver lost both ways, as buyer as well as seller.
  • The British Government was determined to protect its rising machine industry whose products could still not compete with the cheaper and better Indian goods.
  • The Industrial Revolution in Britain completely transformed Britain's economy and its economic relations with India.
  • British industry developed and expanded rapidly on the basis of modern machines, the factory system and capitalism.
  • Britain had already evolved the colonial pattern of trade which helped the Industrial Revolution which, in turn, strengthened this pattern: the colonies and underdeveloped countries exported agricultural and mineral raw materials to Britain while the latter sold them its manufactures.
  • Britain had a government which was under the influence of commercial and manufacturing interests and which, therefore, fought other countries detenninedly for markets and colonies.
  • As C. Dutt pointed out later in 1901 in his famous work, The economic history of India, the effort of the Parliamentary Select Committee of 1812 was "to discover how they (Indian manufactures) could be replaced by British manufactures and how British industries could be promoted at the expense of Indian industries".
  • The Government of India now followed a policy of free trade of British goods.
  • Indian handicrafts were exposed to the fierce and unequal competition of the machine- made products of Britain and faced extinction.
  • The free trade imposed on India was, however, one-sided. While the doors of India were thus thrown wide open to foreign goods, Indian products which could still compete with British products were subjected to heavy import duties on entry into Britain.
  • As a result of such prohibitive import duties and development of machine industries, Indian exports to foreign countries fell rapidly.
  • Instead of exporting manufactures, India was now forced to export raw materials like raw cotton and raw silk which British industries needed urgently, or plantation products like indigo and tea, or foodgrains which were in short supply in Britain.
  • Thus, the commercial policy of the East India Company after 1813 was guided by the needs of British industry. Its main aim was to transform India into a consumer of British manufactures and a supplier of raw materials.
  • The Drain of Wealth - The British exported to Britain part of India's wealth and resources for which India got no adequate economic or material return.
  • Even the worst of previous Indian government had spent the revenue they extracted from the people inside the country. Whether they spent it on irrigation canals and trunk roads, or on palaces, temples and mosques, or others, it encouraged Indian trade and industry and generates employment.
  • The British, consequently, spent a large part of the taxes and income they derived from the Indian people not in India but in Britain, their home country.
  • They sent home nearly 6 million pound between 1758 and 1765. This amount was more than four times the total land revenue collection of the Nawab of Bengal in 1765.
  • By the end of the 18th century, the drain constituted nearly 9 per cent of India's national income. The actual drain was even more, as a large part of the salaries and other incomes of English officials and the trading fortunes of English merchants also found their way into England.
  • While the exact amount of the annual drain has not been calculated so far and historians differ on its quantum, the fact of the drain, at least from 1757 to 1857, was widely accepted by British officials.
  • John Sullivan, President of the Board of Revenue, Madras, remarked : "Our system acts very much like a sponge, drawing up all the good things from the banks of the Ganges, and squeezing them down on the banks of the Thames".
  • By the end of the 19th century it constituted nearly 6 per cent of India's national income and one-third of its national savings.
  • The wealth drained out of India played on important part in financing Britain's capitalist developments and early industrialisation.


Development of Means of Transport and Communication


  • The British rulers realised that a cheap and easy system of transport was a necessity, if British manufactures were to flow into India on a large scale and her raw material secured for British industries.
  • They introduced steamships on the rivers and set about improving the roads. Work on the Grand Trunk Road from Calcutta to Delhi was begun in 1839 and completed in the 1850s.
  • The British bankers and investors looked upon railway development in India as a channel for safe investment of their surplus capital.
  • The earliest suggestion to build a railway in India was made in Madras in 1831. But the wagons of this railway were to be drawn by horses.
  • Construction of steam-driven railways in India was first proposed in 1834 in England.
  • It was decided that the Indian railways were to be constructed and operated by private companies who were guaranteed a minimum of five per cent return on their capital by the Government of India.
  • The first railway line running from Bombay to Thana was opened to traffic in 1853.
  • Lord Dalhousie was an ardent advocate of rapid railway construction. In a famous note, written in 1853, he laid down an extensive programme of railway development.
  • The railway lines were laid primarily with a view to linking India's raw material producing areas in the interior with the ports of export.
  • The first telegraph line from Calcutta to Agra was opened in 1853. Lord Dalhousie introduced postage stamps.


Land Revenue Policy


  • In fact, nearly all the major changes in the administration and judicial system till 1813 were geared to the collection of land revenues.
  • The Permanent Settlement
  • In 1773, it decided to manage the land revenues directly. Warren Hastings auctioned the right to collect revenue to the highest bidders. But his experiment did not succeed.
  • Permanent Settlement was introduced in Bengal and Bihar in 1793 by Lord
  • It had two special features. Firstly, the zamindars and revenue collectors were converted into so many landlords.
  • They were not only to act as agents of the Government in collecting land revenue from the ryot but also to become the owners of the entire land in their zamindaris.
  • Their right of ownership was made hereditary and transferable.
  • Secondly, the zamindars were to give 10/llth of the rental they derived from the peasantry to the state, keeping only 1/11th for themselves. But the sums to be paid by them as land revenue were fixed in perpetuity.
  • At the same time, the zamindar had to pay his revenue rigidly on the due date even if the crop had failed for some reason; otherwise his lands were to be sold.
  • John Shore was the man who planned the Permanent Settlement.
  • The British officials realised that as they were foreigners in India, their rule would be unstable unless they acquired local supporters who could act as a buffer between them and the people of India.
  • So they brought into existence a wealthy and privileged class of zamindars which owed its existence to British rule and which would, therefore, be compelled by its own basic interests in support it.
  • Collection of revenue through a small number of zamindars seemed to be much simpler and cheaper than the process of dealing with lakhs of cultivators.
  • The Permanent Zamindari Settlement was later extended to Orissa, the Northern Districts of Madras, and the District of Varanasi.
  • In part of Central India and Awadh the British introduced a temporary zamindari settlement under which the zamindars were made owners of land but the revenue they had to pay was revised periodically.


Ryotwari Settlement

  • The establishment of British rule in South and South-Westem India brought new problems of land settlement.
  • Many Madras officials led by Captain Alexander Reed and Thomas Munro recommended that settlement should, therefore, be made directly with the actual cultivators.
  • It was tried on a small scale by Captain Alexander Read in some of the areas that were taken over by the company after the wars with Tipu Sultan.
  • Subsequently it was developed by Thomas Munro all over south India.
  • Thomas Munro was governor of Madras (1819-26).
  • Under Ryotwari Settlement, the cultivator was to be recognised as the owner of his plot of land subject to the payment of land revenue.
  • The supporters of the Ryotwari system claimed that it was a continuation of the state of affairs that had existed in the past. Munro said: "It is the system which has always prevailed in India".
  • The Ryotwari Settlement was in the end introduced in parts of the Madras and Bombay Presidencies in the beginning of the 19th century.
  • The settlement under the Ryotwari system was not made permanent. It was revised periodically after 20 to 30 years when the revenue demand was usually raised.
  • The ryot's rights of ownership of his land were also negated by three other factors :
  • In most areas the land revenue fixed was exorbitant; the ryot was hardly left with bare maintenance even in the best of seasons. In Madras the Government claim was fixed as high as 45 to 55 per cent of gross production in the settlement.
  • "The Government retained the right to enhance land revenue at will.
  • The ryot had to pay revenue even when his produce was partially or wholly destroyed by drought or floods.


Mahalwari System

  • Mahal - In British revenue records mahal is a revenue estate which may be a village or a group of villages.
  • A modified version of the zamindari settlement, introduced in the Ganga valley, the North-West provinces, parts of Central India, and the Punjab, was known as the Mahalwari System.
  • The revenue settlement was to be made village by village or estate (mahal) by estate with landlords or heads of families who collectively claimed to be the landlords of the village or the estate.
  • In the Punjab a modified Mahalwari System known as the village system was introduced. In Mahalwari areas also, the land revenue was periodically revised.
  • The British by making land a commodity which could be freely bought and sold introduced a fundamental change in the existing land systems of the country.


Some Important Facts


  • When Warren Hastings went back to England in 1785, Edmund Burke accused him of being personally responsible for the misgovemment of Bengal. This led to an impeachment proceeding in the British Parliament that lasted seven years.

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