Economic and Commercial Policy

The British conquerors was entirely different from the previous conquerors. Through laws and administrative ,economic and fiscal policies.British government in England and company’s administration in india used their power to the advantage of British manufacturers and to the detriment of the Indian socio-political  and economic  fabric. The gradual  “ development of underdevelopment” has been traced through  the three stages of British Colonialism by R.P Dutta in his classic work “India Today”



The East India Company was purely trading company dealing with import of goods and precious metals into India and export of spices and textiles.

1757-1813(the Mercantilist Phase):-

  1. The East India Company monopolized trade and began direct plunder of india’s wealth.

  2. They could impose their own prices that had no relation to the cost of production.

  3. This was the phase of buccaneering capitalism whereby wealth flowed out of the barrel of the trader’s guns.

  4. The company used its political power to monopolize trade and dictate terms to the weavers of Bengal

  5. The company used revenue of Bengal to finance exports of Indian goods.

1813-1858(The Industrial Phase)

  1. The commercial policy of the East india company after 1813 was guided by the needs of British industry.

  2. The British mercantile industrial capitalist class exploited india as industrial revolution in Britain completely transformed Britain’s economy.

  3. Charter Act of 1813 allowed one way free trade for British citizens resulting in Indian markets flooded with cheap and machine-made trade  imports .Indian lost not only their foreign markets but also their market in india

  4. India was now forced to export raw materials consisting of raw cotton,Jute and Silk,oilseeds ,wheat,indigo and tea and import finished product.

  5. Indian product had to complete with British products with heavy import duties on entry into Britain.

1860 and After (Finance Colonialism)

  1. The essence of 19th century colonialism lay in the transformation of india into a supplier of food stuffs and raw materials to the metropolis,a market for metropolitan manufacturers and a field for investment of British Capital

  2. Started with the emergence of the phase of Finance Capitalism in Britain.The rebellion of 1857 was the key factor in the change of the nature of the colonialism,

  3. The British introduced roads and railways ,post and telegraph,banking and other services under the “guaranteed interests” schemes( government paid a minimum dividend even if profits were non-existent ).Various investments by  the British capitalists were also made in india

  4. As a result of this,the burden of British public debts kept on increasing and india became , in the real sense,a colony of Britain.

Drain of Wealth Theory

  1. C.Dutta and Dadabhai Naoroji first cited the drain of wealth theory ,Naoroji brought it to light in his book titled ” poverty and un-British Rule in india “

  2. C. Dutta blamed the British policies for Indian economic ills in his book. “Economic History of India’(1901-03).

  3. “Drain of Wealth” refers to a portion of national product of india, which was not available for consumption of its people.

  4. “Drain of Wealth” began in 1757 after the Battle of Plassey when the company’s servants began to extort fortunes from Indian rulers, Zamindars, Merchants and common people and send home.

  5. In 1765, the company acquired the Diwani of Bengal and began to purchase the Indian goods out of the revenue of Bengal and exported them. These purchase were known as company’s investment.

  6. Duty- free inland trade provide British merchants a competitive edge over their Indian counterparts

Land Revenue Systems

Permanent Settlement

  1. Introduced in Bengal ,Bihar,Orissa and district of Banaras and Northern districts of Madras by Lord Cornwallis in 1793.

  2. John Shore planned the permanent settlement .

  3. It declared Zamindars as the owners of the land. Hence ,they could keep 1/11th of the revenue collected to themselves while the British got a fixed share of 10/11th of the revenue collected. The Zamindars were free to fix the rents.

  4. Assured of their ownership, Zamindars stayed in towns and exploited their tenants.

Ryotwari System

  1. Introduced in Bombay,Madras and Assam,Munro(Viceroy) and Charles Reed recommended it.

  2. In this , direct settlement was made between the government and the ryot (Cultivator)

  3. The revenue was fixed for a period not exceeding 30 years, on the basis of the quality of the soil and nature of the was based on the scientific rent theory of Ricardo.

  4. The position of Cultivator became more secure but the rigid system of revenue collection often forced him into the clutches of the money lender

  5. Beside,the government itself became a big Zamindar and retained the right to enhance revenue at will,while the cultivator was left at the mercy of its officers

Mahalwari System

  1. Modified version of Zamindari settlement t introduced in the Ganga Valley ,NWFP,parts of Central India and Punjab.

  2. Revenue settlement was to be made by village or estates with landlords.In western Uttar Pradesh, a settlement was made with the village communities,which maintained a form of common ownership known as Bhaichara,or with  Mahals, which were group of villages.

  3. Revenue was periodically revised.

Impact of Land Revenue system

  1. The land settlements introduced market economy and did away with customary rights.Cash payment of revenue encouraged money lending activity.

  2. It sharpened social differentiation. Rich had access to the courts to defend their property

  3. Forcible growing of commercial crops proved hazardous for the peasants because they had to buy food grains at high prices and sell cash crops at low prices.

  4. The stability of the Indian villages was shaken and the setup of the ruler society began to break up.