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Quick recap: Economic impact of British rule on one page

Economic impact of British rule · Quick recap · Fact-checked on · how we check

Written with AI from the sources listed at the bottom of this page, then fact-checked by a separate AI.

Both parts of the chapter condensed for quick revision: the Permanent Settlement, Ryotwari and Mahalwari, commercialisation and rural debt; the drain of wealth, deindustrialisation, railways and the guarantee system, the first modern industries and famine policy.

This chapter follows how British rule remade India's economy between the grant of the Diwani in 1765 and the early twentieth century. Part 1 covered the land: who paid the revenue, how much and for how long, and what that did to peasants. Part 2 covered the wider economy: the drain of wealth, the decline of crafts, railways, the first modern industries and famines. One thread joins them: the economy was organised to give the state a large, steady revenue and Britain cheap raw materials and an open market.

After Warren Hastings's revenue farming (1772) and yearly settlements (1777) failed, Cornwallis made the Permanent Settlement in 1793: the Zamindars of Bengal and Bihar became owners of the land and their revenue was fixed for ever, under the sunset law. Many old families lost their estates at auction, layers of intermediaries grew up and tenants had little security until the Rent Act of 1859 and the Tenancy Act of 1885. In Madras and Bombay the Ryotwari system system of Read and Munro settled with each cultivator, with revision every twenty to thirty years and the state acting as landlord. In the North-Western Provinces the Mahalwari system system (Regulation VII of 1822, revised by Regulation IX of 1833) settled with the village or estate as a whole.

Revenue in cash on fixed dates drove the Commercialisation of agriculture: indigo (and the indigo revolt of 1859–60), cotton, jute, opium and tea. The cotton boom of the American Civil War (1861–65) collapsed after the war, and debt to the moneylender became the heaviest rural burden. Peasants of Poona and Ahmednagar rose against moneylenders in the Deccan Riots of 1875, followed by the Deccan Agriculturists' Relief Act (1879); the Punjab Land Alienation Act (1900) limited the transfer of land to non-agricultural groups.

Economic impact of British rule at a glance
ItemKey facts
Permanent SettlementCornwallis, 1793; zamindar as owner; revenue fixed for ever; sunset law; Bengal and Bihar
RyotwariRead and Munro (Baramahal 1792); Madras from 1820, Bombay; individual ryot; revised every 20–30 years
MahalwariHolt Mackenzie, Regulation VII of 1822; Regulation IX of 1833; village or estate; lambardar
Rural debtDeccan Riots 1875; Deccan Agriculturists' Relief Act 1879; Punjab Land Alienation Act 1900
Drain of wealthNaoroji, Poverty and Un-British Rule in India (1901); home charges; R. C. Dutt; Ranade
Trade and craftsCharter Acts 1813 and 1833; one-way free trade; deindustrialisation
Railways and postDalhousie's minute 1853; Bombay–Thane 16 April 1853; guarantee system; Post Office Act 1854
IndustryBombay cotton mill 1854; Rishra jute mill 1855; TISCO 1907
Famine policyCommissions of 1880 (Strachey), 1898 (Lyall), 1901 (MacDonnell); Famine Codes; Bengal 1943

The Drain of wealth was the share of India's product sent to Britain with nothing in return; the Home charges paid in London were its largest item. Dadabhai Naoroji (Poverty and Un-British Rule in India, 1901), R. C. Dutt (The Economic History of India) and M. G. Ranade turned it into a critique of colonial rule. After the Charter Acts of 1813 and 1833 opened India to British goods, one-way free trade and Lancashire's machine cloth caused Deindustrialisation, pushing artisans onto the land.

Dalhousie's railway minute (1853) and the first train from Bombay to Thane (16 April 1853) began a network built by private companies under the Guarantee system and laid out mainly to link the interior with the ports. The telegraph and the Post Office Act of 1854 completed the new communications. Modern industry began with Bombay's first cotton mill (1854), the Rishra jute mill (1855), coal and plantations, and reached steel with TISCO (1907), but without tariff protection it stayed small. Famines, above all 1876–78, led to the Famine Commissions of 1880 (Strachey), 1898 (Lyall) and 1901 (MacDonnell) and the Famine Codes. The early nationalists' economic critique drew all these strands together.

Exam traps

Recap

Practice questions

Q1. Under which land revenue system was the revenue demand fixed for ever?

  1. Ryotwari
  2. Mahalwari
  3. Permanent Settlement
  4. Revenue farming of 1772
Show answer

Answer: C. Permanent Settlement

(c) is correct: Cornwallis's settlement of 1793 fixed the demand for ever. (a) and (b) were revised periodically; (d) Hastings's farming of 1772 was for five years only.

Q2. Match List I (person) with List II (associated with):
List I: 1. Thomas Munro 2. Holt Mackenzie 3. Cornwallis
List II: A. Mahalwari B. Permanent Settlement C. Ryotwari
Select the correct answer using the code given below.

  1. 1-A, 2-C, 3-B
  2. 1-C, 2-A, 3-B
  3. 1-C, 2-B, 3-A
  4. 1-B, 2-A, 3-C
Show answer

Answer: B. 1-C, 2-A, 3-B

(b) is correct: Munro with Ryotwari, Holt Mackenzie with Mahalwari, Cornwallis with the Permanent Settlement. (a) swaps Munro and Mackenzie; (c) swaps Mackenzie and Cornwallis; (d) gives the Permanent Settlement to Munro.

Q3. Consider the following statements:
1. The Deccan Riots of 1875 were directed mainly against moneylenders.
2. The Punjab Land Alienation Act of 1900 fixed the land revenue of Punjab permanently.
Which of the statements given above is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2
Show answer

Answer: A. 1 only

Only 1 is correct. The 1900 Act limited the transfer of land from agricultural to non-agricultural groups; it did not fix revenue, so statement 2 is wrong and (b), (c) and (d) are wrong.

Q4. Who among the following wrote The Economic History of India?

  1. Dadabhai Naoroji
  2. R. C. Dutt
  3. M. G. Ranade
  4. G. V. Joshi
Show answer

Answer: B. R. C. Dutt

(b) is correct. (a) Naoroji wrote Poverty and Un-British Rule in India; (c) Ranade wrote Essays on Indian Economics; (d) G. V. Joshi was an economic critic but did not write this book.

Q5. Consider the following statements:
1. The Charter Act of 1833 ended the East India Company's commercial business.
2. The home charges included interest guaranteed to railway companies.
Which of the statements given above is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2
Show answer

Answer: C. Both 1 and 2

(c) is correct: both statements are true. The 1833 Act ended the Company's trade, and guaranteed railway interest was paid in London as part of the home charges. So (a), (b) and (d) are wrong.

Q6. Arrange the following in chronological order:
1. The Permanent Settlement
2. The first passenger train in India
3. The Deccan Riots
4. The Tata Iron and Steel Company
Select the correct answer using the code given below.

  1. 1-2-3-4
  2. 1-3-2-4
  3. 2-1-3-4
  4. 1-2-4-3
Show answer

Answer: A. 1-2-3-4

(a) is correct: 1793, 1853, 1875 and 1907. (b) puts the Deccan Riots before the first train; (c) puts the train before 1793; (d) puts TISCO before the riots.

Q7. The first Indian Famine Commission, whose report appeared in 1880, was chaired by

  1. James Lyall
  2. Antony MacDonnell
  3. Richard Strachey
  4. John Woodhead
Show answer

Answer: C. Richard Strachey

(c) is correct: Strachey chaired the commission set up after the famine of 1876–78. (a) Lyall's commission was 1898; (b) MacDonnell's 1901; (d) Woodhead chaired the Famine Inquiry Commission on the Bengal famine of 1943.

Q8. Which of the following were consequences of British economic policy in nineteenth-century India?
1. A larger share of the population came to depend on agriculture.
2. Indian-owned industry came to dominate jute and tea.
3. Revenue in cash on fixed dates pushed peasants towards crops grown for sale.
Select the correct answer using the code given below.

  1. 1 and 2 only
  2. 1 and 3 only
  3. 2 and 3 only
  4. 1, 2 and 3
Show answer

Answer: B. 1 and 3 only

(b) is correct. Statement 2 is wrong: jute and tea were dominated by European capital, while Indian enterprise was strongest in cotton textiles; so (a), (c) and (d), which include 2, are wrong.

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