Contents

Structure of Govt & Economic policies of British Empire in India 1757-1857...................1

Structure of Government........................................................................................................ 1
The Company Rule (17731858)......................................................................................... 2
British Economic Policies in India 1757-1857......................................................................3
Development of means of Transport & Communication....................................................4
Land Revenue Policy................................................................................................................ 5

Structure of Govt & Economic policies of British Empire in

India 1757-1857
Administrative machinery of GoI was designed and developed to:Increase companys profits
Enhance the profitability of its Indian possessions to Britain
To maintain & strengthen British hold over India
Maintenance of law & order for undisturbed trade & exploitation of Indias resources.

Structure of Government
1765 British had little intention of making any innovations in its administration. Desire only to carry on profitable trade
& collect taxes for remission to England
1765-1772-Dual government in Bengal; Indian officials (had responsibility but no power) allowed to function as before
but under the overall control of British Governor & British officials
1772-Company Ended Dual government & undertook to administer Bengal directly through its own servants.
Problems cropping up in administration of India
EIC higher authority was situated many thousands of km away from India. Yet it had come to wield political power over
millions of people.
Serious questions: Relation of EIC & its possessions to the government in Britain?
How were the companys authorities in Britain to control officials & soldiers stationed in faraway India?
Single centre of control in India over the far flung British possessions in Bengal, Madras & Bombay?
What was happening in Britain?

Companys wealth excited the jealousy of the other sections of British society.
Trading class - Intended to destroy companys trade monopoly & [Attacked Companys administration of Bengal]
By making the company unpopular & then to displace it.
EICians boycotted by aristocracy & condemned as exploiters & oppressors of Indian people.
1767-Parliament passed an Act obliging the company to pay to the British treasury 400,000 per year.
Political class - Afraid that the powerful company & its rich officials might gain influence in Britains politics.

Reorganization of relations between British states & companys authorities

British govt To control basic policies of companys Indian adm. so that interests of British upper classes protected.

EIC - Retained monopoly of eastern Trade. Details of Indian administration were left to the Directors of Company.

The Company Rule (17731858)

Regulating Act of 1773
Constitutional importance of Regulating Act as:

1st step taken by British Govt to control & regulate the affairs of EIC in India
Political & administrative functions of Company recognized for 1 st time
Foundations of central administration in India laid down

Act made changes in constitution of Court of Directors of Company & subjected their actions to supervision of British
govt.
Regulating Act soon broke down in practice. It had not given British govt effective & decisive control of the company.
Features of the Act
1. Designated Governor of Bengal as Governor-General of Bengal & created an Exe. Council of 4 members to assist
him. 1st such Governor-General - Lord Warren Hastings.
2. Made Governors of Bombay & Madras presidencies subordinate to Governor-general of Bengal
Earlier 3 presidencies were independent of one another.
3. Provided for establishment of a SC at Calcutta (mprising 1 chief justice & 3 other judges.
4. Prohibited the servants of Company from engaging in any private trade/accepting bribes from the natives.
5. Strengthened the control of British Government over Company by requiring the Court of Directors (governing body
of the Company) to report on its revenue, civil, & military affairs in India.
Pitts India Act of 1784
To rectify defects of Regulating Act of 1773, British Parl. passed the Amending Act of 1781 [Act of Settlement]
Next important act was Pitts India Act of 1784.
Act gave the British govt supreme control over companys affairs
Features of the Act

Distinguished between commercial & political functions of the Company.

Allowed Court of Directors to manage commercial affairs & new body Board of Control to manage political
affairs. System of double government established. Act placed GoI in hands of Governor Gen. & a Council of 3 so that
if Gov Gen. could get the support of even 1 member, he could have his way.
Empowered BoC to supervise & direct all operations of civil & military govt/revenues of British possessions in India.

Act was significant for 2 reasons:

Companys territories in India were for 1st time called British possessions in India
British govt was given the supreme control over Companys affairs & its administration in India.
EIC became the instrument of British national policy, India was to be made to serve interests of all sections of ruling
classes of Britain.

Company saved its monopoly of Indian & Chinese trade. Directors retained its right of appointing & dismissing its British
officials in India.
Charter Act of 1813-Trade monopoly of company in India was ended & trade with India thrown open to all British
subjects. But trade in tea with China was exclusively in EICs hands.
Charter Act of 1833
Laws made under the previous acts were called as Regulations while laws made under this act were called as Acts. Final
step towards centralization in British India. Ended companys monopoly of tea trade & trade with China.
Features of the Act

Made Governor-General of Bengal as Governor-General of India & vested in him all civil & military powers.
For 1st time, GoI having authority over entire territorial area possessed by British in India.
Lord William Bentick was 1st governor-general of India.
Governor- General of India was given exclusive legislative powers for entire British India. Deprived the Governor of
Bombay & Madras of their legislative powers.
Ended the activities of the EIC as a commercial body, which became a purely administrative body.
Provided that companys territories in India were held by it in trust for His Majesty, His heirs and successors.
Introducing a system of open competition for selection of civil servants, & stated that Indians should not be debarred
from holding any place, office & employment under Company.
However, this provision was negated after opposition from Court of Directors.

Above Acts of Parl. completely subordinated Company & its Indian administration to the British government.
Supreme authority in India was delegated to Governor-General in Council. (As) day to day adm. of India could not be run
from a distance of 6,000 miles.
Governor General having the authority to over-rule his council on important questions, became real, effective ruler of
India, functioning under the control of British govt.
Primary objective of Bengal govt :- (From British perspective)

It must ensure its political safety

It must render possession of India as advantageous as possible to EIC & British nation.
India was to bear the full cost of its own conquest + foreign rule

British Economic Policies in India 1757-1857

Commercial Policy
1. Why Indian rulers tolerated/encouraged the establishment of companys factories in India?
1600 1757

EICs role in India of trading corporation [British Goods/precious metals exchanged for Indian textiles & spices &
sold abroad] in export of Indian manufacturers & encouraged their production
EIC tried constantly to open new markets for Indian goods in Britain & other countries.

Why British manufacturers were jealous of the popularity of Indian textiles in Britain?
Change in Dress fashions- Light cotton textiles replacing coarse woolens of English. British manufacturers put pressure
on their govt to restrict & prohibit the sale of Indian goods in England
All European countries except Holland either prohibited the import of Indian clothes or imposed heavy import duties.
1720 Laws had been passed forbidding the wear or use of printed or dyed cotton cloth.
However, Indian silk & cotton textiles held their own in foreign markets, until mid-18 th century when English textile
industry began to develop on the basis of new & advanced technology.
Battle of Plassey-1757
Landmark- What changed after Battle of Plassey?
Pattern of the companys commercial relations with India underwent a qualitative change.

Company could use its political control over Bengal to acquire monopolistic control over Indian trade & production &
to push its Indian trade.
It also utilized the revenues of Bengal to finance its export of Indian goods.

Exports to Britain went up from 1.5 million in 1750-51 to 5.8 mn in 1797-98.

How was trade of raw cotton monopolized by EIC?
At Buyers end

Indian weavers were forced to sell its product @ cheaper rate (even @ loss). Many of them were compelled to work
for company @ low wages & were forbidden to work for Indian merchants.
Company eliminated its rival traders (Both Indian & foreign) & prevented them from offering higher wages /prices to
Bengal handicraftsmen.

At sellers end
Subsequently, British govt was determined to protect its machine industry whose products could still not compete with the
cheaper & better Indian goods. Indian textiles had to pay heavy duties on entering England.
Real blow to Indian handicrafts after 1813- when they lost not only their foreign markets but their market in India also.
IR in India- Development & rapid expansion of British industry on basis of modern machines, factory system &
capitalism (IR was aided by:-Britain had come to capture & monopolize many foreign markets by war & colonialism =>
Expansion in export markets + colonial pattern of trade [-colonies & underdeveloped countries exported agricultural &
mineral raw materials to Britain while latter sold them finished product]
Cotton textile industry main vehicle of Industrial revolution in India
2. Capital accumulation in hands of biz class (wealth drawn from colonies) used in financing industrial expansion
3. 1740 to 1780 Britains population doubled =>Availability of cheap labour
4. Britain had a govt (under influence of commercial & manufacturing interests) fought other countries determinedly for
markets & colonies
5. Demands for increased production were met by development in technology- New inventions like & steampower,
production was concentrated in factories.
Note It was not these inventions which produced IR. Rather it was the desire of manufacturers to production rapidly for
the expanding markets.
How did Industrial Revolution change Indo-Britain economic relations?
With IR Rise of powerful class of manufacturers had an important impact on Indian adm & its policies. Interest of this
class very different from EIC. Since the profits of this class came from manufacturing & not trading, it wanted to
encourage not import of manufacturers from India but export of its own product to India + import of raw material from
India
Exports of British cotton goods to East - 156 in 1794 to 110,000 in 1813 (700 times)
1813- Abolishing EICs monopoly in trading with India
In India

India had to admit British goods free or at nominal tariff rate [policy of free trade or unrestricted entry of British
goods.] Indian handicrafts were exposed to the fierce & unequal competition of the machine-made products of Britain
& faced extinction.
GoI tried to increase number of purchasers of British goods by following a policy of fresh conquests & direct
occupation of princely states like Awadh

In Britain
Indian goods was subject to heavy import duties on entry into Britain.

Indian hand-made goods were unable to compete against the much cheaper products of British mills (which had been
rapidly improving their productive capacity by using inventions & wider use of steam power)

Imports of British cotton goods alone from 1,100,000 in 1813 to 6,300,000 in 1856.
Indian exports to foreign countries fell rapidly. Prohibitive import duties + Development of machine industries
Change - Instead of exporting manufactures, India was now forced to export raw material like cotton & raw silk which
British industries needed urgently or plantation products like indigo, tea, foodgrains
Commercial policy of EIC- (after 1813) was guided by the needs of British industry. Its main aim was to transform India
into a consumer of British manufacturers & a supplier of raw material.
Drain of wealth from India
By the end of 18th century Drain constituted 9 % of Indias national income.
By the end of 19th century- 6 % of national income & 1/3rd of national savings

Development of means of Transport & Communication

1814- 1st railway engine designed by George Stephenson
Cheap & easy system of transport was a necessity for these reasons: Access to vast + hitherto untapped market
To facilitate the export of Indian raw material & food stuffs
Administer country more effectively& efficiently from internal rebellion/external aggression by enabling more
rapid mobilization & movement of troops
IR construction backed by - British Bankers & investors looked upon railway development in India as safe investment +
British steel manufacturers regarded it as an outlet of their products (rails, wagons, engines, other plants & machinery) +
Textile manufactures
Rapid development during 1830s-1840s
It was decided that IR were to be constructed & operated by private companies who were guaranteed a minimum 5 %
return on their capital by GoI
1869 6000 km Built by guaranteed companies & then state enterprises
After 1880 private enterprise + state agency
By 1905 45,000 km of railways had been built
3 important points
1. Over Rs 350 cr (nearly entire amount) invested in them was provided by British investors. (Indian capital
contributing a negligible share)
2. Page 74- NCERT Read
3. In their planning, construction & management, eco. & pol. development of India was not kept in forefront.
Railways lines-primarily with a view to linking Indias raw material producing areas in the interior with the ports
of export. Railway rates were fixed to favor imports & exports & to discriminate against internal movement of
goods.
British also established an efficient & modern postal system & introduced the telegraph.
1853- 1st telegraph line from Calcutta to Agra
Postal rates (payment to be made when a letter was posted)-cut down & made uniform across any distance

Land Revenue Policy

Land revenue System before British Rule (Hide)
Tax from land was major source of revenue for kings & emperors from ancient times.
During Kingship, land was divided into Jagirs, Jagirs were alloted to Jagirdars, these Jagirdars split the land they got and
allocated to sub-ordinate Zs. Zs made peasants cultivate the land, in-return collected part of their revenue as tax.
Land Revenue Systems in British India
Zamindari system + Ryotwari system + Mahalwari system
Zi System = Permanent Settlement System

Introduced by Cornwallis in 1793 through Permanent Settlement Act.

Introduced in provinces of Bengal, Bihar, Orissa and Varanasi.
Zs recognized as owner of the lands + Rights to collect the rent from peasants. Right of ownership was made
hereditary & transferable. Cultivators reduced to low status of mere tenants & were deprived of rights to the soil.
Realized amount would be divided into 11 parts. 1/11 to Zs & 10/11 to EIC. Z had to pay his revenue rigidly on the
due date even if the crop had failed for some reason; otherwise his land were to be sold.
If the rental of a Zs estate increased owing to extension of cultivation/improvement in agriculture/his capacity to
extract more from tenants, he would keep the entire amount of increase. The state would not make any further demand
on them.
Backgrounder
1765- EIC acquired the Diwani or control over revenues of Bengal, Bihar & Orissa
1773 Company decided to manage the land revenues directly

Gross produce of Bengal-100; Govt-45 % & Zs & other intermediaries- 15 % & Actual cultivator- 40 %
Because of High & impossible land revenue demand of the Zi lands were put up for sale between 1794 & 1807
Before 1793 Zs of Bengal & Bihar did not enjoy proprietary rights over most of the land. Indian Z was subordinate to
EIC
Decision to recognize Z as proprietors of land was basically determined by political, financial & administrative
expediency
1. Clever states craft Need to create political allies/ local supporters who will act as a buffer between them &
people
Popular revolts in Bengal in last quarter of 18th century, Zs as a class supported the foreign govt in opposition to
rising movement of struggle
2. Financial security Permanent Settlement guaranteed stability of income. Collection of revenue through a small
number of Zs much cheaper & simpler than the process of dealing with lakhs of cultivators.
Before 1793, actual collection varied from year to year Introduced instability in companys revenues. Bengal revenue
had to finance its army engaged in wars of expansion, civil establishment in Bengal, Madras & Bombay & the purchase of
manufactures of Export.
3. PS Expected to increase agricultural production
Ryotwari Settlement

Introduced by Thomas Munro in 1820.

Major areas of introduction include Madras, Bombay, parts of Assam and Coorgh provinces of British India.
Ownership rights handed over to the peasants. British Government collected taxes directly from the peasants.
The revenue rates of Ryotwari System were 50% where the lands were dry and 60% in irrigated land.

Settlement under Ryotwari system was not made permanent. It was revised periodically after 20-30 years when
the revenue demand was usually raised.

Backgrounder
Establishment of British rule in South & South Western India brought new problems of land settlement. Officials believed
that in these regions there were no Zs with large estates with whom settlement of land revenue could be made &
introduction of Zi system would upset the existing state of affairs.
Reed & Munroe recommendations:1. Company was a financial loser in permanent settlement- As it had to share the revenue with Zs & could not claim
a share of growing income from land
2. Cultivator was left at the mercy of Z who would oppress him at will
Criticism
Ryotwari settlement system did not bring into existence a system of peasant ownership.
What actually happened Large number of Zs had been replaced by 1 giant Z state & peasants were merely
govt tenants whose land was sold if they failed to punctually pay land revenue. Govt later claimed Land revenue
was a rent & not a tax.
Ryots rights of ownership of land were also negated by 3 other factors :1. In most areas, land revenue fixed was exorbitant; ryot was hardly left with bare maintenance .Govt claim was
fixed as high as 45 to 55 %
2. Govt retained the right to enhance land revenue @ will
3. Ryot had to pay revenue even when his produce was partially or wholly destroyed by drought/floods
Mahalwari System

Introduced in 1833 during the period of William Bentick.

Introduced in Central Province, North-West Frontier, Agra, Punjab, Gangetic Valley, etc of British India.
Mahalwari system had many provisions of both the Zamindari System + Ryotwari System.
In this system, land was divided into Mahals. Each Mahal comprises one or more villages.
Ownership rights were vested with the peasants.
The villages committee was held responsible for collection of the taxes.
Land revenue was periodically revised

By making land a commodity which could be freely bought & sold, British introduced a fundamental change in the
existing land system of country. Stability & continuity of the Indian villages were shaken. Entire structure of rural society
began to break up.
The Impact on socio-economic structure of the Indian society
1. Recognition of the individual ownership on land created 2 types of land-owning classes - Zamindars & peasantproprietors.
2. Inequality of wealth between these two classes resulted in growing poverty in the society.
3. Peasants were the worst sufferers
4. Since land had become a saleable property land-holders were often compelled to dispose of their property to meet the
revenue demand of the government.
5. New revenue policy gave rise to new land-owners who became the collaborators of the British administration in India.