Colonial economy part 1

Britain’s relationship with her Indian colony was one of political subordination, but economic exploitation formed the core of this relationship. This process of colonization was geared clearly to benefit the mother country, even at the cost of the colony.

Colonial exploitation was carried on broadly through three phases.

The first phase :-

(1757-1813) of ‘mercantilism’ was one of direct plunder in which surplus Indian revenues were used to buy Indian finished goods to be exported to England.

second phase  :-

(1813-1858) of free trade India was converted into a source of raw

material and a market for British manufactured goods.

The third phase :-

(1858 onwards) was one of finance imperialism in which British capital controlled banks, foreign trading firms and managing agencies in India.

The first phase :-

This ‘First Phase’ is generally dated from 1757, when the British East India Company acquired the rights to collect revenue from its territories in the eastern and southern parts of the subcontinent,

The British had come to India in the seventeenth century, purely as a trading company, The primary function of the British East India Company in this period was to buy spices, cotton and silk from India and sell them at huge profits to the large market these goods enjoyed in Britain.

This meant that large quantities of bullion would flow out of Britain into India to pay for these commodities. Despite efforts, it seemed difficult to find British goods that could be sold in India in exchange, to stem this outflow of bullion.

Besides the expenditure on buying commodities, the Company also spent very large amounts on the wars that it had to fight with other European powers, all in search of the same goods to trade in. These included the Portuguese, the Dutch and the French.

Thus the acquisition of ‘diwani’ (right to collect revenue) in Bengal, after the Battle of Buxar, which followed the Battle of Plassey, opened the way for the Company to raise money for its expenditure in India.

LAND REVENUE POLICIES

After the diwani of Bengal, Bihar and Orissa was granted to the East India Company in 1765, the maximization of revenue from the colony became the primary objectiveof the British administration. Agricultural taxation was the main source of income for the company, which had to pay dividends to its investors in Britain.

In 1772, the Governor of Bengal, Warren Hastings, introduced a system of revenue farming in the province of Bengal. In this system European District Collectors would ‘farm’ out the right to collect revenue to the highest bidder.

                                          This system was a total failure and ruined the cultivators because of the arbitrarily high revenue demands.

To undo this disaster, Cornwallis introduced the system of Permanent Settlement in 1793. Under this system, ‘zamindars’, who earlier only had the right to collect revenue, were established as the proprietors or owners of land. The state’s demand for land revenue was permanently fixed But if the zamindars were unable to pay the full tax on time, their lands would be taken away and auctioned by the state. Through this system, the state tried to create an enterprising class of landowners, who would try to improve crop production in their fields to earn profits. Besides, it would be simpler for the state to deal with a limited number of zamindars than with every peasant, and

                             a powerful section of society would become loyal to the British administration. But this system led to greater impoverishment of the tenant-cultivator because of the burden of high revenue assessment.                               

                             It also caused great difficulty for zamindars, many of whom were unable to pay the revenue on time and lost theirlands. A large number of traditional zamindar houses collapsed. The system also encouraged subinfeudation i.e. many layers of intermediaries between the zamindar and cultivator, adding to the woes of the peasantry.

the Ryotwari System was started by Alexander Read in 1792, for the Madras Presidency. Later it was introduced in the Bombay Presidency as well. Under this system, revenue was initially collected from each village separately, but later each cultivator or ‘ryot’ was assessed individually.

Thus, peasants not zamindars were established as property owners.

                                     Although this system increased the revenue collected by the state, the assessments were faulty and the

peasants overburdened by the taxes. The landed intermediaries continued to flourish.

In the north and northwest of India the Mahalwari Settlement was followed after 1822 where the state made settlements with either the village community or, in some cases, the traditional ‘taluqdar’. Each such fiscal unit was called a ‘mahal’. Under this system, some recognition was given to collective proprietary rights.

As a result of the revenue policies of the British, agriculture stagnated and peasants almost became tenants at will. They also increased the number of landed intermediaries, and strongly entrenched the figure of the moneylender in the countryside. Landlords and zamindars became an important class and collaborators of British colonial rule.

The greed for incomes from land revenue also led the Company to pursue an aggressive policy of territorial expansion in India.