British Policies and Their Economic Impact in India: Land Revenue, Deindustrialisation and Drain of Wealth

These British economic policies and impact in India notes for OPSC/UPSC cover the three phases of colonial economic policy, the zamindari, ryotwari and mahalwari settlements, commercialisation of agriculture, deindustrialisation, railways, the drain of wealth and famines. For OAS prelims the chapter is a steady source of fact questions on systems, areas, persons and dates, and for mains it explains why colonial rule left India poor, with a direct Odisha link in the 1866 famine.

Phases of British Economic Policy in India

Historians divide colonial economic exploitation into three overlapping phases, each tied to the interests of British capital at that stage.

Land Revenue Systems in British India

The British treated land revenue as the main source of state income and tried three different settlements. Each created a different set of rural classes.

Permanent Settlement (Zamindari System), 1793

Lord Cornwallis introduced it in Bengal and Bihar in 1793 after a ten-year settlement (1790). It was later extended to the Banaras division and the northern districts of Madras. Zamindars were recognised as owners of land and had to pay a revenue fixed in perpetuity (roughly ten-elevenths of the rent collected went to the Company). Tenants (ryots) were reduced to tenants with no ownership.

• The sunset law auctioned an estate if revenue was not paid by sunset on the due date, so many old zamindari families lost their estates to new buyers.
• Zamindars were expected to issue pattas to ryots, but there was no official check and many did not.
• The Company gained a stable income, but zamindars invested little in agriculture. Absentee landlordism and layers of sub-tenants grew, and rich peasants called jotedars strengthened their position in villages.
• The Bengal Tenancy Act of 1885 gave occupancy rights to tenants after a fixed period of holding.

Ryotwari System

Captain Alexander Read began the experiment in Baramahal in 1792, and Thomas Munro extended it to the Madras Presidency from about 1820. It spread to Bombay after Elphinstone’s period, with surveys in the 1830s. The settlement was made directly with the individual cultivator (ryot), who was treated as the owner, got a patta and paid revenue directly to the government. Land was surveyed and assessed, and the demand was revised every 20 to 30 years. The state’s claim was often as high as half the produce, which pushed peasants towards moneylenders, mortgage and loss of land.

Mahalwari System

Holt Mackenzie’s plan led to Regulation VII of 1822 for the North-Western Provinces. The settlement was made with the village community or the body of landlords (the mahal), which was jointly responsible for revenue. It covered the North-Western Provinces, parts of the Central Provinces, Punjab and Awadh. The Saharanpur Rules of 1855 reduced the state’s share to about 50 per cent of net assets.

Commercialisation of Agriculture in Colonial India

Cash crops were grown for export or for British industry, not for local food needs. Peasants had to pay revenue in cash, so they sold crops cheaply to merchants and borrowed from moneylenders.

Tinkathia System and Champaran

Under the Tinkathia system in Champaran, tenants were forced to grow indigo on three kathas out of every twenty kathas of land. Raj Kumar Shukla persuaded Gandhi to visit, and the Champaran Satyagraha followed in 1917. Dubla Hali was a bonded-labour arrangement in south Gujarat.

Rural Indebtedness

Debt to moneylenders grew in all settlement areas. The Deccan Riots of 1875 were directed against moneylenders, and the Deccan Agriculturists’ Relief Act (1879) was passed in response. The Land Improvement Loans Act (1883) and Agriculturists’ Loans Act (1884) were later relief measures, and the Punjab Land Alienation Act (1900) restricted transfer of land to non-agriculturists.

Deindustrialisation and Decline of Handicrafts

Indian cotton and silk goods once had markets across the world, but Britain protected its own industry with heavy duties on Indian goods. After the Industrial Revolution and the end of the Company’s monopoly in 1813, cheap machine-made cloth entered India at low duties. Weavers and spinners were ruined, and towns such as Dhaka and Murshidabad declined. William Bentinck remarked in 1834 that the bones of the cotton weavers were bleaching the plains of India. India shifted from exporting finished goods to exporting raw cotton, jute, indigo and opium.

Modern Industry in the Second Half of the 19th Century

The first modern cotton mill was started at Bombay by Cowasjee Nanabhoy Davar in 1854, the first jute mill at Rishra near Calcutta in 1855, and Ahmedabad mills followed in 1861. The Tata Iron and Steel Company was set up in 1907. Growth was slow because of imperial preference for British goods, lack of tariff protection, and the cotton excise duty imposed to protect Lancashire.

Railways in Colonial India

Dalhousie’s Railway Minute of 1853 planned the network. The first line ran from Bombay to Thane on 16 April 1853, and Howrah to Hooghly opened in 1854. Companies were guaranteed a minimum return, about 5 per cent, which was paid from Indian revenues if necessary. Karl Marx wrote in 1853 that railways would be the forerunner of modern industry in India. The lines linked raw-material areas with ports and served troop movement; they did not link internal markets with each other, and most equipment and steel were imported.

Drain of Wealth Theory: Home Charges and Economic Nationalists

The drain of wealth meant the transfer of India’s surplus to Britain without return. It began after Plassey (1757) and took the form of unrequited exports: India had an export surplus, but the surplus paid for Home Charges and profits.

Naoroji said that what was drained was “potential surplus” that could have developed India if invested there. Imperialist writers argued that India’s entry into the world capitalist market was itself progress. Tilak, Dutt and Ranade supported the drain theory, while Sir Syed Ahmed Khan did not.

Famines and Famine Policy

Famines became frequent and deadlier because of commercialisation, high revenue demand and poor relief. The Campbell Commission (1866) followed the Orissa famine, the Strachey Commission (1880) led to the Famine Code of 1883, and later commissions were the Lyall Commission (1898) and the MacDonnell Commission (1901). The famine of 1876-78 across Madras, Mysore, Hyderabad, Bombay and other regions is regarded as among the worst.

Economic Impact of British Rule in Odisha: Odisha Angle

Na-anka Durbhiksha, 1866

The Orissa famine of 1866, called the Na-anka Durbhiksha, killed an estimated one million people, roughly a third of the province’s population. The monsoon closed the ports, there were no roads or railways to bring in grain, and officials were slow to respond. The Campbell Commission reported on it and drew up lessons that shaped later famine policy.

Paika Rebellion, 1817

The paikas of Khurda, led by Bakshi Jagabandhu Bidyadhar, rose in 1817. Their rent-free lands were resumed after British rule began in 1803, and the shift from cowrie shells to silver currency and the salt monopoly added to the unrest.

Land Revenue and Infrastructure

The British took coastal Odisha in 1803 and settled it for short periods rather than permanently, while the hill tributary states (garjats) stayed under their chiefs. Irrigation canals were attempted in the 1860s, but rail links to Cuttack and Puri came only in the 1890s, after the great famine.

British Economic Policies MCQ and PYQ Practice