General Awareness Establishment of British Empire

Economic and Commercial Policy

- The British conquerors were quite different from the previous conquerors.
- Through laws and administrative, economic and fiscal policies, the British government in England and Company’s administration in India used their powers to the advantage of British manufacturers and to the detriment of the Indian socio-political and economic fabric.

Phases of Economic Policy in India

In the beginning, the East India Company was a purely trading company dealing with import of goods and precious metals into India and export of spices and textiles.

Phase I: 1757-1813 (The Mercantilist Phase)
- The East India Company monopolised trade and began direct plunder of India’s wealth.
- They could impose their own prices that had no relation to the costs of production. This was the phase of buccaneering capitalism whereby wealth flowed out of the barrel of the trader’s guns.
- The company used its political power to monopolise trade and dictate terms to the weavers of Bengal.
- The company used revenue of Bengal to finance exports of Indian goods.

Phase II: 1813-1858 (The Industrial Phase)

The commercial policy of the East India Company after 1813 was guided by the needs of the British industry:
- The British mercantile industrial capitalist class exploited India as Industrial Revolution in Britain completely transformed Britain’s economy.
- Charter Act of 1813 allowed one way free trade for British citizens resulting in Indian markets flooded with cheap and machine made imports. Indians lost not only their foreign markets hut their markets in India too.
- India was now forced to export raw materials consisting of raw cotton jute and silk, oil seeds, wheal, indigo and tea, and import finished products.
- Indian products had to compete with British products with heavy import duties on entry into Britain.

Phase III: 1860 and After (Finance Colonialism)

The essence of 19th century colonialism lay in the transformation of India into a supplier of foodstuffs and raw materials to the metropolis, a market for metropolitan manufacturers and a field for the investment of British capital.
- Started with the emergence of the phase of Finance Capitalism m Britain. The rebellion of 1857 was the key factor in the change of the nature of the colonialism.
- 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 nonexistent).
- 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.

Finance Imperialism

- The stage of ‘finance imperialism’ can be said to have started from the latter half of the 19th century.
- Some worldwide developments caused a new development in the British policy in India.
- The most important development was the eclipse of Britain as the only industrial power of the world since other European nations succeeded in industrialising themselves.
- Britain, of course, kept India as her most important colony where British capital could hope to maintain a haven.
- For her survival, Britain decided to make massive investments in various fields (rail, road, postal system, irrigation, European banking system, and a limited field of education, etc.) in India by plundering Indian capital.
- The capital plundered from the Indian people was invested in this country as the British capital was raised in India and finally, the public debt which was really a big hoax to raise funds.
- When political power was handed over by the East India Company to the British Government in 1858, it declared that it had inherited a debt of £ 70 million from the Company.
- The debt swelled to £ 884 million before the Second World War (1939-45). Similarly, the uneconomic as well as extravagant system of railway construction also caused public debt to fan out.
- All this involved a higher dose of taxation. With the opening up of the country, private capitalist investment from Britain came to knock at our doorsteps. But unfortunately, such British investment was not meant for India’s industrial development.
- The basic motive behind investment was the commercial penetration of India, its exploitation as a source of raw materials, and markets for British manufactures.
- This was, in fact, one of the principal contradictions of imperialism-colonialism in India.

Drain of Wealth Theory

- R 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”. While R C Dutt blamed the British policies for Indian economic ills in his book ‘Economic History of India’ (1901-03).
- Drain of wealth refers to a portion of national product of India, which was not available for consumption for its people.
- In the 50 years before the battle of Plassey, the East India Company had imported bullion worth £ 20 million into India to balance the exports over imports from India. British government adopted a series of measures to restrict or prohibit the imports of Indian textiles into England.
- A major drain of wealth began in 1757 after Battle of Plassey, when the company’s servants began to extort fortunes from Indian rulers, zamindars, merchants and common people and sent home.
- In 1765 the company acquired the Diwani of Bengal and began purchase the Indian goods out of the revenue of Bengal and exported them. These purchases were known as Company’s investment.
- Duty free inland trade provided British merchants a competitive edge over their Indian counterparts.

Land Revenue System

Permanent Settlement

- Introduced in Bengal, Bihar, Orissa, and districts of Benaras and Northern districts of Madras by Lord Cornwallis in 1793.
- John Shore planned the Permanent Settlement.
- 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.
- Assured of their ownership, many zamindars stayed in towns (absentee landlordism) and exploited tenants.

Ryotwari Settlement

- Introduced in Bombay, Madras, and Assam.
- Munro (Viceroy) and Charles Reed recommended it.
- In this, a direct settlement was made between the government and the ryot (cultivator).
- The revenue was fixed for a period not exceeding 30 years, on the basis of the quality of the soil and the nature of the crop. It was based on the scientific rent theory of Ricardo.
- The position of the cultivator became more secure but the rigid system of revenue collection often forced him into the clutches of the moneylender.
- Besides, 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 Settlement

- Modified version of Zamindari settlement introduced in the Ganga valley, NWFP parts of Central India and Punjab.
- 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 groups of villages.
- Revenue was periodically revised.

 
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