British Economic Policy

What to remember

• British economic policy served the needs of Britain: three land revenue systems (Permanent Settlement, Ryotwari, Mahalwari) raised money for the Company, while free trade and the drain of wealth turned India into a supplier of raw material and a market for British goods.
• Handicrafts declined (deindustrialisation), farming was commercialised, and famines and rural debt grew; modern industry came late and slowly.
• Education, press and missionary activity were shaped by the colonial state, but they also produced a new educated class that built Indian nationalism.

1. Land revenue settlements

The Company became the Diwan of Bengal, Bihar and Orissa in 1765. It needed steady revenue, so it tried different systems.

Permanent Settlement (Zamindari), 1793. Introduced by Lord Cornwallis in Bengal, Bihar and Orissa. The zamindars were made owners of the land, and the amount they had to pay to the state was fixed forever (about ten-elevenths of the collection went to the government). If a zamindar failed to pay by a fixed day (the *sunset law*), the estate was auctioned. The state got stable income; the cultivators lost rights and often paid heavy rents. Many zamindars lived in towns (absentee landlords).

Ryotwari system. Developed by Alexander Read and Thomas Munro; it began in the Baramahal and then in the Ceded Districts and was extended to Madras in 1820 and Bombay. The settlement was made directly with the cultivator (*ryot*), who was recognised as the owner and could not be removed if he paid. The revenue was revised every 20 to 30 years and was very high, about one-half of the produce in early years.

Mahalwari system. Developed by Holt Mackenzie and made law in 1822 (Regulation VII). It was introduced in the North-Western Provinces, central India and Punjab, with changes. The unit was the village or *mahal*; the village headmen or landlords were jointly responsible for payment. It was revised in 1833.

Andhra connection. In 1802 the Northern Circars (coastal Andhra) were settled on the Permanent Settlement with large zamindars such as the estates of Vizianagaram and Pithapuram. The Ceded Districts of Rayalaseema (given by the Nizam in 1800) were settled under Ryotwari by Thomas Munro. So coastal Andhra had zamindari areas, and Rayalaseema had ryotwari areas, which shaped later peasant politics. Sir Arthur Cotton's anicuts on the Godavari (at Dowleswaram) and the Krishna (at Vijayawada) transformed the delta farming.

2. Commercialisation, debt and famine

Farmers were pushed to grow cash crops such as indigo, cotton, jute, opium and sugar for export. Money rent and the need to pay cash made them borrow from moneylenders and lose land. Famines were frequent in the later 19th century. The Famine Commissions (Strachey 1880, Lyall 1898, MacDonnell 1901) laid down the Famine Codes. Protests included the Indigo revolt (Bengal, 1859-60) and the Deccan riots of 1875 against moneylenders, followed by the Deccan Agriculturists Relief Act (1879).

3. Drain of wealth and free trade

The "drain of wealth" means the one-way flow of Indian wealth to Britain without return: salaries and pensions of British officers, interest on debt, profits of the Company, and the "Home Charges". Dadabhai Naoroji (*Poverty and Un-British Rule in India*) first stated the theory; R.C. Dutt (*Economic History of India*) and Ranade, G.V. Joshi and others supported it.

Trade policy changed with British industry. Charter Act of 1813 ended the Company's monopoly of Indian trade (except tea and China), and the Charter Act of 1833 ended its commercial functions. British goods entered India with low duties, while Indian goods faced high duties in Britain.

4. Deindustrialisation

Indian handicrafts, especially textiles, lost both the foreign and home markets. Cotton and silk weavers of Dhaka, Murshidabad, Surat and the Andhra coast, such as Machilipatnam (Masulipatnam), which had been famous for painted and printed cloth, declined. Cheap machine-made British cloth and heavy duties were the main causes. Many artisans moved to agriculture, which raised pressure on land. The old craft towns shrank.

Modern industry came late: the first cotton mill in Bombay (1854), the first jute mill at Rishra, Bengal (1855), coal mines at Raniganj, and the Tata Iron and Steel Company at Jamshedpur (1907). Railways started in 1853 (Bombay to Thane) under Dalhousie; they helped the movement of raw material and army, and were largely financed by guaranteed British capital. The telegraph and the uniform postal system (1854) also expanded.

5. Education

The Despatch of 1854 is called the "Magna Carta" of Indian education. The purpose was to create clerks and a class "Indian in blood but English in taste". Women's and mass education stayed weak. Still, English education taught new ideas of liberty and equality. In Andhra, C.P. Brown's Telugu dictionary and work on old manuscripts, and Colin Mackenzie's collection of local records, helped preserve the Telugu heritage.

6. The press

The Vernacular Press Act was aimed at Indian-language papers and let the government demand a bond; it was repealed under Ripon. The press, including papers like *The Hindu* (Madras, 1878) and the Telugu paper *Andhra Patrika* (1908), built public opinion and taught political ideas.

7. Christian missionaries

The Charter Act of 1813 allowed missionaries to work in India. The Baptist mission at Serampore (William Carey) printed books in Indian languages. Missionaries opened schools, hospitals and orphanages and spoke against sati, infanticide and caste. In Andhra, Lutheran missionaries worked at Guntur, and the Baptists at Nellore, and they opened schools and colleges. The missionaries also made converts, which caused suspicion among conservatives and, to an extent, led to reform movements within Hinduism. Social reforms like the abolition of sati (1829) and the Widow Remarriage Act (1856) followed.

8. Economic effects in brief

Britain used India as a source of raw cotton, indigo, jute and opium, and as a market for its textiles. India's exports changed from finished goods to raw materials, while imports became finished goods. The trade surplus of India with other countries paid for the Home Charges. The Indian population depended more on land: the share of workers in agriculture increased, and per-capita income stayed very low. Money lending and land sales created a class of landless labour. The new roads, canals and railways mainly served commerce and the army, though irrigation works in Andhra, Punjab and elsewhere did give real benefits to farmers.

Exam traps

• 1. Permanent Settlement was with zamindars; Ryotwari with the cultivator; Mahalwari with the village.
• 2. Ryotwari is linked with Munro and Read; Mahalwari with Holt Mackenzie.
• 3. Wood's Despatch (1854) came before the universities of 1857, not after.
• 4. Macaulay's Minute (1835) supported English; Wood's Despatch (1854) supported vernacular schools also.
• 5. Lytton passed the Vernacular Press Act (1878); Ripon repealed it (1882).
• 6. The Charter Act of 1813 ended the Company's trade monopoly (except tea and China trade); the 1833 Act ended all trade.
• 7. Naoroji wrote *Poverty and Un-British Rule*; R.C. Dutt wrote *Economic History of India*.
• 8. Northern Circars (coastal Andhra) got zamindari; Ceded Districts (Rayalaseema) got ryotwari.

One-liners

• 1. The Company got the Diwani of Bengal in 1765.
• 2. Cornwallis introduced the Permanent Settlement in 1793.
• 3. The Sunset Law was part of the zamindari system.
• 4. Thomas Munro is linked with the Ryotwari system.
• 5. Regulation VII of 1822 started the Mahalwari system.
• 6. The Deccan Agriculturists Relief Act was passed in 1879.
• 7. Macaulay's Minute was in 1835.
• 8. Wood's Despatch was in 1854.
• 9. Calcutta, Bombay and Madras universities began in 1857.
• 10. The first railway ran from Bombay to Thane in 1853.
• 11. Hickey's Bengal Gazette began in 1780.
• 12. Arthur Cotton built the Godavari anicut at Dowleswaram.

Practice questions

1. The Permanent Settlement of 1793 was introduced by

   1. Lord Dalhousie
   2. Lord Wellesley
   3. Thomas Munro
   4. Lord Cornwallis
   Answer

   D. Lord Cornwallis

   It was introduced in Bengal, Bihar and Orissa.

2. Under the Permanent Settlement, the revenue was settled with the

   1. village community
   2. ryot
   3. tahsildar
   4. zamindar
   Answer

   D. zamindar

   Zamindars became owners of land and paid a fixed sum.

3. The Ryotwari system was associated with

   1. Lord Cornwallis
   2. Holt Mackenzie
   3. R.M. Bird
   4. Thomas Munro and Alexander Read
   Answer

   D. Thomas Munro and Alexander Read

   It was first tried in Baramahal and the Ceded Districts.

4. The Mahalwari system was developed by

   1. Holt Mackenzie
   2. Cornwallis
   3. Macaulay
   4. Thomas Munro
   Answer

   A. Holt Mackenzie

   Regulation VII of 1822 started it.

5. In which region was the Mahalwari system mainly introduced?

   1. Northern Circars
   2. Bengal
   3. North-Western Provinces
   4. Madras
   Answer

   C. North-Western Provinces

   It covered the Ganga valley and Punjab with changes.

6. The 'sunset law' meant that

   1. taxes were due at the end of the year
   2. farmers had to stop work at sunset
   3. the army marched at sunset
   4. a zamindar's estate was auctioned if payment was late after sunset on the due date
   Answer

   D. a zamindar's estate was auctioned if payment was late after sunset on the due date

   Failure to pay on the due day led to loss of the estate.

7. Rayalaseema's Ceded Districts were mainly settled under the

   1. Permanent Settlement
   2. Mahalwari system
   3. Ryotwari system
   4. Inam system
   Answer

   C. Ryotwari system

   Munro's ryotwari was used there after 1800.

8. The Northern Circars were settled with large zamindars in

   1. 1882
   2. 1857
   3. 1765
   4. 1802
   Answer

   D. 1802

   This brought the Permanent Settlement to coastal Andhra.

9. The author of Poverty and Un-British Rule in India was

   1. Dadabhai Naoroji
   2. Gokhale
   3. R.C. Dutt
   4. Ranade
   Answer

   A. Dadabhai Naoroji

   Naoroji put forward the drain theory.

10. The 'drain of wealth' refers to

    1. British investment in Indian mills
    2. the one-way transfer of Indian wealth to Britain
    3. payment of tribute to the Mughals
    4. gold leaving Indian temples
    Answer

    B. the one-way transfer of Indian wealth to Britain

    Salaries, pensions, interest and profits left India without return.

11. Which Act ended the East India Company's monopoly of Indian trade, except tea and China?

    1. Charter Act of 1833
    2. Charter Act of 1813
    3. Regulating Act of 1773
    4. Pitt's India Act of 1784
    Answer

    B. Charter Act of 1813

    The 1833 Act ended the Company's remaining trade.

12. The Deccan Agriculturists Relief Act was passed in

    1. 1879
    2. 1861
    3. 1905
    4. 1857
    Answer

    A. 1879

    It followed the Deccan riots of 1875 against moneylenders.

13. The first Indian railway line ran from

    1. Bombay to Pune
    2. Calcutta to Delhi
    3. Bombay to Thane
    4. Madras to Arakkonam
    Answer

    C. Bombay to Thane

    It opened in 1853 under Dalhousie.

14. The first cotton mill in Bombay started in

    1. 1807
    2. 1907
    3. 1935
    4. 1854
    Answer

    D. 1854

    Cowasji Davar set up the mill.

15. Macaulay's Minute (1835) supported

    1. English as the medium of higher education
    2. Sanskrit and Arabic colleges
    3. only vernacular schools
    4. education for women only
    Answer

    A. English as the medium of higher education

    It favoured Anglicist views and 'filtration'.

16. Wood's Despatch of 1854 is called the

    1. Declaration of Education
    2. Charter of Indian reform
    3. Magna Carta of Indian education
    4. Bill of Rights
    Answer

    C. Magna Carta of Indian education

    It created education departments and universities.

17. Hickey's Bengal Gazette, the first newspaper in India, began in

    1. 1799
    2. 1823
    3. 1878
    4. 1780
    Answer

    D. 1780

    It was started by James Augustus Hickey.

18. The Vernacular Press Act was passed by

    1. Lord Ripon
    2. Lord Lytton
    3. Lord Metcalfe
    4. Lord Curzon
    Answer

    B. Lord Lytton

    It was passed in 1878 and repealed in 1882.

19. The press restrictions of 1823 were imposed by

    1. Charles Metcalfe
    2. Lord Wellesley
    3. John Adam
    4. Lord Ripon
    Answer

    C. John Adam

    Adam's regulation required licences.

20. Who is called the 'liberator of the Indian press'?

    1. Charles Metcalfe
    2. Lord Canning
    3. John Adam
    4. Lord Lytton
    Answer

    A. Charles Metcalfe

    He removed press restrictions in 1835.

21. A major reason for the decline of Indian handicrafts in the 19th century was

    1. closure of all ports
    2. ban on cotton growing
    3. lack of skilled weavers
    4. competition from cheap machine-made British goods
    Answer

    D. competition from cheap machine-made British goods

    Free entry of British goods and high duties on Indian cloth hurt artisans.

22. Which Andhra port town was famous for painted and printed cotton cloth that declined under British rule?

    1. Kurnool
    2. Machilipatnam
    3. Tirupati
    4. Vizianagaram
    Answer

    B. Machilipatnam

    The old coastal textile trade weakened.

23. A result of the Permanent Settlement was

    1. rights of cultivators were weakened
    2. farmers became owners of all land
    3. zamindars were removed from the villages
    4. the state revenue became very flexible
    Answer

    A. rights of cultivators were weakened

    Zamindars were owners, and tenants had little protection.

24. A main weakness of the Ryotwari system was that

    1. it removed all taxes on cash crops
    2. it gave land to the village chiefs alone
    3. it fixed rent forever
    4. high and rigid revenue demand burdened the farmer
    Answer

    D. high and rigid revenue demand burdened the farmer

    Revisions every 20-30 years often raised the demand.

25. Commercialisation of agriculture in the 19th century led to

    1. debt of farmers and dependence on moneylenders
    2. fall of cash crop prices only
    3. end of all rural markets
    4. free irrigation for all
    Answer

    A. debt of farmers and dependence on moneylenders

    Farmers needed cash for revenue, so they borrowed.

26. The purpose of Macaulay's 'filtration theory' was that

    1. private schools would be closed
    2. education would pass from upper classes down to the masses
    3. teachers would be trained abroad
    4. all children would get free schools
    Answer

    B. education would pass from upper classes down to the masses

    The educated few were expected to carry knowledge to others.

27. The effect of English education on India's politics was that it

    1. limited use of the press
    2. stopped the reform movements
    3. gave a class that learned ideas of liberty and nationalism
    4. ended caste at once
    Answer

    C. gave a class that learned ideas of liberty and nationalism

    The new educated class led the nationalist movement.

28. Why did the British allow missionaries from 1813?

    1. Indians demanded foreign teachers
    2. The Mughals had asked for them
    3. The Charter Act opened India to missionary work
    4. The Company wished to end trade
    Answer

    C. The Charter Act opened India to missionary work

    The 1813 Act removed barriers to missionaries.

29. Which pair is correctly matched?

    1. Colin Mackenzie - Hunter Commission
    2. Sir Arthur Cotton - Godavari anicut at Dowleswaram
    3. Thomas Munro - Krishna Barrage at Prakasam
    4. C.P. Brown - railway at Madras
    Answer

    B. Sir Arthur Cotton - Godavari anicut at Dowleswaram

    Cotton's anicuts improved irrigation in the deltas.

30. Statements: 1. The Ryotwari system was made with village zamindars. 2. The Permanent Settlement fixed the revenue demand forever. Which is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    B. 2 only

    Ryotwari was made with the cultivators.

31. Statements: 1. Mahalwari was based on village-level responsibility. 2. Holt Mackenzie is linked with it. Which is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    C. Both 1 and 2

    Both are correct.

32. Statements: 1. The Charter Act of 1833 ended the Company's trade functions. 2. The Charter Act of 1813 allowed missionaries to work in India. Which is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    C. Both 1 and 2

    Both are standard facts.

33. Statements: 1. The first jute mill was at Rishra, in Bengal. 2. TISCO was set up in 1907 at Jamshedpur. Which is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    C. Both 1 and 2

    Both are correct.

34. Statements: 1. Calcutta, Bombay and Madras universities began in 1857. 2. Wood's Despatch came after the three universities were founded. Which is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    A. 1 only

    The Despatch of 1854 led to universities in 1857.

35. Statements: 1. It was repealed by Lord Ripon. 2. The Vernacular Press Act applied to English-language papers. Which is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    A. 1 only

    It was aimed at Indian-language papers.

36. Statements: 1. Dadabhai Naoroji supported British economic policy. 2. R.C. Dutt wrote about the drain of wealth. Which is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    B. 2 only

    Naoroji criticised British policy.

37. Statements: 1. The Deccan riots were against zamindars in Bengal. 2. Famine Commissions framed Famine Codes. Which is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    B. 2 only

    The Deccan riots were against moneylenders.

38. Statements: 1. Indigo revolt occurred in Bengal. 2. It was against indigo planters. Which is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    C. Both 1 and 2

    Both are correct.

39. Statements: 1. Thomas Munro is linked with the Ryotwari system. 2. Cornwallis introduced the Ryotwari system. Which is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    A. 1 only

    Cornwallis introduced the Permanent Settlement.

40. Statements: 1. It was proposed by Macaulay. 2. The Wardha Scheme of 1937 promoted basic education. Which is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    B. 2 only

    Basic education was a Gandhian idea.

41. Statements: 1. Rayalaseema was part of the Ceded Districts. 2. Coastal Andhra's Northern Circars had zamindari estates. Which is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    C. Both 1 and 2

    Both are correct.

42. Statements: 1. Metcalfe's Act of 1835 removed restrictions on the press. 2. Wellesley introduced press censorship in 1799. Which is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    C. Both 1 and 2

    Both are correct.

43. Statements: 1. Andhra Patrika was an English-language paper of Bengal. 2. Hickey's Bengal Gazette began in 1780. Which is/are correct?

    1. 1 only
    2. 2 only
    3. Both 1 and 2
    4. Neither 1 nor 2
    Answer

    B. 2 only

    Andhra Patrika was a Telugu paper.