Pre British  Before the arrival of the British, the economy was largely based on

agriculture and it was a

Economy self- reliant economy.
 Besides agriculture, other aspects like industry, trade, etc were also reflected
in the developing economy.
 In the book ‘Robinson Crusoe’, Daniel Defoe has written that “Indian clothes
have intruded into our homes, cupboards and bedrooms.’ This statement of
Defoe is an indication of the holistic development of the Indian economy.
Impact on Different Land Revenue systems. – Even during British rule, land revenue
was
agricultural considered as the major source of State revenue .Acknowledging India’s
regional diversity,
sector. three major systems were implemented- Permanent settlement, Ryotwari
system and Mahalwari system.
Permanent Other names:-Zamindari, Maalgujari, Istamrari system, Beesvedari, etc.
Settlement  Backdrop – The Permanent settlement was introduced in 1793 by the then
Governor General Lord Cornwallis in regions of Eastern India like Bengal,
Bihar and Orissa, Varanasi in Uttar Pradesh and also in Northern Karnataka. It
came as a backdrop of experiences and policies that were prevalent in those
region over time.
 After obtaining the Diwani of Bengal, Bihar and Orissa in 1765 CE, the
Company administration appointed their own diwans . Like, Mohmmad Raza
Khan in Bengal, Raja Shitab rai in Bihar, etc. They were in charge of revenue
collection.
 Warren Hastings (1772-84) –When Dual government came to an end at this
time, new experiments again took place and the post of diwans’ were
cancelled and the ‘Board of Revenue’ was established for running the revenue
system that was now directly under the control of Governor General.
 After some time a system was made whereby recovery was done on a
contractual basis (Farming system/Izara system etc) through public auction.
 Meanwhile, in 1776, Warren Hastings appointed the ‘Amini Commission’ (A
revenue commission of enquiry) for giving out different information
regarding land revenue.
 Beginning – The idea regarding the Permanent settlement was first given by
Phillip Francis, who was a member of Warren Hasting’s executive.
 Dispute regarding the nature. – There were several disputes at the
beginning of this system some which are ,as follows:-
 James Grant- According to him, the government should be the owner of the
land.
 John Shore- According to him, the zamindar was considered as the owner of
the land. The then Governor General Lord Cornwallis, supported the idea of
John Shore and the zamindar himself was considered as the owner of the land.
 In 1790 CE, this tax system was implemented on a 10-year basis, but in 1793
it was made permanent.
Major Features
Region – In the beginning ,this system was implemented in Bengal and Bihar,
later it was developed in the Northern districts of Orissa and Madras and in
Varanasi (By Jonathan Duncan)
  Permanent settlement was enforced in 19% area of British India. (51% -
Ryotwari, 30%-Mahalwari)
Rate of Revenue – 89% to the government (10/11) portion and 11% (1/11)
portion to the zamindars.
Ownership –Even though the zamindars were considered as the owners of
land, they were land -owners only till the time they paid on time, otherwise
the land was auctioned under the Sunset clause.
 The zamindars were expected that they would issue patta to the tenants, but
many zamindars did not issue patta because there was no government control
on this.
Impact on the company – The establishment of a permanent source of
revenue (definite income)
-getting a class of loyal support in the form of zamindars.
Impact on the Zamindars – They did were benefited but there were many
restrictions on zamindari rights in the form of Property Act (1793), Sunset
Law (1794), etc.
 After the implementation of this system, there was an increase in legal
disputes, the cause being a large number of middlemen, disputed land, etc.
Impact on peasants – Adversely affected on a large scale.
Ryotwari system  Even before the British rule in India, there was a system based on individual
farmers, or direct arrangement with farmers.
 In the Ryotwari system under the British rule, a revenue pact was made with
the farmers. (Permanent- with the Zamindars, Mahalwari- with the
Mahal/village)
The reason for implementation – External – Utilitarian ideas had their
influence at this time and emphasis was being laid on putting an end to
middlemen and making arrangements with the farmers for direct production.
Internal –The experiences of permanent settlement (failure to a certain
extent), the commercialization of agriculture, the absence of the zamindar
class in the South, the geographical condition of the South etc.
Structure – The credit for implementing this system in the beginning is given
to Alexander Reed and Thomas Munro. Colonel Munro implemented the
Ryotwari system for the first time in Baramahal district of TN. This was an
initial experiment.
 Later on In 1820, Munro (The Governor of Madras) implemented it in the
Madras Presidency. [Besides this, it was also implemented in East Bengal,
Assam and parts of Coorg.]
 It was implemented in 1825 in Bombay Presidency by Elphinstone.
Area – The Ryotwari system was implemented in about 51% of India’s total
area.
features
 Peasants paid the tax directly to the government.
 The government used to give pattas to the Ryots.
 Before imposing tax, the land was surveyed and its value was determined.
 On a principled basis, the rate of land revenue was kept at ½ the part,
although practically it was much more
Impact
 Under this system also the peasants were adversely impacted. While they
were the Ryots of the Zamindars in Permanent Settlement, in this system they
were the Ryots of the company.
  They were also exploited by the moneylenders.
Mahalwari  Under this Settelement, a mahal/village was made the basis of land system. A
common
Settlement responsibility was fixed and also there was an arrangement with the
representative/ Numberdar/Lumberdar of the entire gram panchayat. In one
way, it was an altered form of the Zamindari system.
 Causes– It was implemented in accordance with the geographical conditions
of the region where the village communities held influence since a very long
time and they were governed like a community.
Beginning Holt MacKenzie – He is believed to be the originator of the
Mahalwari system. He had recommended this system on the basis of his
administrative experiences in North West India. (1819)
 Martin Bird – It was he who implemented this system in many regions of
Northern India. This is the reason why he is called the father of the Mahalwari
system in North India.

 Area – About 30% of British India’s area (Punjab, Central State, Western U.P.,
some districts of Deccan, etc)
 Rate of tax – At first the rate was 2/3 part (66%), later Bentick made it 60%,
and at some places it was 50% also.
 Impact – The company definitely gained, but in some regions the
representatives became very powerful and regional revolts gained strength.
The peasants were in a bad situation.
Commer-  Meaning and Objective – The commercialization of agriculture means the
market
cialization of orientation of agriculture. We can say that in the Indian context, it was linked
to the
agriculture British colonialism, the peasants were forced to produce such crops that could
fulfill the demands of raw materials of the industries in England.
 In reality, this commercialization was not a natural process, but a process that
had been imosed on the Indian peasants.
 Causes (External) – The requirements of the British industries: During the
decade of 1860, due to the Civil war in America, cotton stopped arriving in
Britain hence a lot of emphasis was laid on the production of cotton in India.
 Internal – The impact of the British land revenue system-Due to the cash
recovery of revenue and the indebtedness of the peasants, peasants found
cash crops as a viable alternative.
 The cultivation of crops was done according to the unique regional features of
India, for example cotton was grown in the black soil region of Bombay
Presidency, jute was grown in Bengal, sugarcane in the United Provinces, etc.
 The development of transport and communication sources-Roads, posts and
telegraph system, the opening of a sewage system(suez canal in 1869), etc.
aided the process of commercialization
Different Phases
 First phase (Prior to 1857)
 Major crop
1. Opium- (Important from the viewpoint of trade with China)
2. Indigo- Used for dyeing in the textile industry of Britain. (In the beginning
indigo was imported from the West Indies. But when Britain’s influence over
there came to an end, it was imported from India.
  Other crops-Silk, Sugarcane etc.
 Second phase- (After 1857) In this phase, the commercialization of
agriculture gained pace.
 Major crop
1. Cotton
 Cotton was the major crop that was commercialized.
 Cotton was made to grow on an extensive scale in the Deccan region. (In the
beginning, cotton was imported from America for the cotton textile centers of
Lancashire, Manchester, etc)
2. Jute
 Its production began in the Bengal region as per the British colonial
requirements.
 There was a huge foreign investment in jute farming.
Impact
 Negative
 The negative impact was more and the outward manifestation had an adverse
impact on self reliant economy, Indians were not being able to survive the
competition as a result peasant indebtedness grown due to paucity of food
grains, famine, etc.
 The cause for the decline of traditional industries- The traditional unity of the
agricultural sector and cottage industries came to an end and the process of
deindustrialization became rapid.
 Positive
 The integration of the Indian economy with the global economy.
 Capitalist change in the economy.
 Some areas of India began to be developed as special agricultural areas.
 The advent of some new crops and the increase in the production of some
others.
 The advent of new technology in the agricultural sphere on a limited scale.
Industrial Sector  Meaning- It refers to the process of social and economic change caused by the
removal
(Deindustr- or reduction of industrial activity and employment in a country or region .
ialization)  Deindustrialization is not a new thing. Even during the Industrial revolution,
there was a decline in crafts in England and other industrial nations and there
was a compensatory increase in the development of modern industries and
employment opportunities. In the Indian context, the traditional industries
certainly declined, but the growth of modern industries also remained
stagnant.
The conditions prior to the British – India showed characteristics of a
developing economy.
 Crafts can be seen in two forms-
1. Urban craft was of high quality and was demanded globally.
2. Rural craft was suited for the rural economy.
 The ‘mulmul’ of Dhaka, shawls of Kashmir and the famous products of many
other regions were also much in demand both at local levels and global levels.
 It can be concluded that, Indian crafts prior to the British were in a developed
stage. Evidence for this was given in Daniel Defoe’s Robinson Crusoe, “Indian
clothes have….”
Causes for the decline
 Political – The pitiful state of the domestic ‘Rajwadas’. (Many crafts reduced
their prestige and the demand for products decreased)
 Ill intended British policies.
Economic – Agricultural sector–The traditional unity of the agriculture and
crafts industry broke down due to the process of agricultural
commercialization.
Industrial Sector – British control over Indian raw material.
 The lack of heavy industry.
 State protection to British industries.
 The exploitation of craftsmen/artisans in various ways- The artisans were
given an initial amount, but focus was on maximum production, and this was
a major cause for the decline of the craft industry. The middlemen also
exploited the artisans.
Trading Sector  The one sided trading policy of the British under which the objective was to
establish India as an exporter of raw material and an importer of ready made
goods.
Some rules
 Tariff policy - The exemption given to British imports (Nominal taxes were
levied on British imports into India, whereas a heavy tax was imposed on
India’s exports to Britain.)
 An additional 15% tax was imposed on the printed and dyed clothes in 18 th
century.
 In 1720, the import of cotton and silk textiles was banned in Britain.
 Holland did not put a ban on the import of Indian textiles, but it imposed a tax
of about 300% customs duty.
Other causes – The development of Railways: Due to this, raw material was
available from the interior regions also and it became possible to send
finished/readymade goods to remote areas. In this context, it has been said
that the Indian villages were self reliant but the Railways penetrated in and
the intrinsic structure of villages was torn apart.
 The spread of European thinking and fashion along with Western ideas.
The Nature of the decline.
 There is a dispute regarding the manner in which the decline happened.
 According to British historians, the destruction of handicraft industries in
India was a natural outcome of the capitalist system and modern industries.
English policies were not responsible for this decline, but the instability of
Indian politics, the weaknesses of its social and economic system and
undeveloped transport and communication system were responsible for it.
 According to Indian historians, the traditional system was broken down
without the establishment and development of the capitalist system and
modern industries were also not developed.
 Some other ideas-Marx – Cotton clothes were flooded in the house…
Impact
 All spheres of the economy were adversely affected.
 The statement of the Governor General, William Bentick (1834)- “The bones of
the cotton weavers are bleaching the plains of India .”
Limited Dev. Cotton textile industry – The first textile mill was established in Bombay in
1853, by a
of modern Parsi named Kawasji Nanabhai.
industries  Major capital inflow in the cotton textile industries was from Indian
capitalists.
Jute Industry.
 The first factory was established in 1855 CE in Sirsa, Shrirampur (Bengal).
 It was Dominated by European capitalists.
 1884- The establishment of the Indian Jute Mill Association.
Iron and Steel Industry.
 1889- The establishment of the Bengal Iron and Steel factory.
 1907- The establishment of TISCO by Jamshedji Tata.
Other developments.
 1913- Chamberlain commission (Finance and currency related)
 1892- Frederick Nicholson first gave the suggestion for a government
controlled committee.
 1898- The Indian Currency mission (Fowler Commission)
 1916- First Industrial Commission. (It was made under the chairmanship of
Thomas Holland. Keeping in mind the then requirements of the Indian
industries, some positive suggestions were made at the time of the First
World War.)
 1921- First Indian Fiscal Commission.
 1932- Ottawa pact (Under this ,Indian goods were given more protection with
regard to custom duty in comparision with British goods during the economic
depression.)
 Vitale commission- Related to Labour Reforms.
Development of Railways
Objective – The development of railways in India was not inspired by
economic development but by the British commercial and military interests.
Process of construction and development
 The development of Railways can be seen in three phases-
First phase (1850-69) Old Guarantee system
 Under this system, the construction of Railways was to be done under the
surveillance of the Private companies, but the control was to be in the hands
of the government.
 The government used to guarantee a minimum of 4.5% to 5% annual interest
rate on the capital of private companies, the government would compensate if
the profit was less than this.
Second phase (1869-82) Direct State control
 In this phase, the government directly did the work of constructing the
Railways and the government used to finance them by taking loans on which
it used to give 4% interest.
 This policy was unsuccessful and smaller railway lines could develop in this
phase and later on the private system was again adopted.
Third phase (1882-1924)/ New Guarantee Scheme.
 This was a revamped version of the first phase in which the capital of the
government as well as the private companies was used.
 In the new guarantee scheme an annual interest rate of only 3.5% was given.
(It was 4.5-5% in the old scheme)
 The report of the Ackworth committee (1924)- On the basis of this, the
railway budget was separated from the general budget.
Others
 The maximum investment was done in the Railways only. (Compared to other
spheres)
 The first rail ran between Bombay and Thane was started in 1853.
Some statements
 Marx- ‘ The railway system will become the forerunner of the modern
industries.’
 Tilak- ‘ There is no use of the Railways in British India, it is like beautifying
some other person’s wife.’
 G.S. Iyer- ‘ The development of the Railways is like a multi dimensional
illness.’
 Sehchar Patrika- ‘The development of Railways in India is like a manacle .