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A PROJECT REPORT ON IMPACT OF BRITISH ADMINISTRATION
IN INDIAN ECONOMY
LEGAL HISTORY-II

Submitted by:-
Aaditya Vasu
2013001
SEMESTER 2
nd

DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY,
VISAKHAPATNAM



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Index
Page No.
1. Acknowledgement____________________________________________ (3).
2. Introduction_________________________________________________ (4).
3. Reasons for Coming to India____________________________________ (5).
4. Economic Impact_____________________________________________ (6).
4.1 Textile Industry and Trade___________________________________ (6).
4.2 Land Revenue Policy and Land Settlement______________________ (7).
4.3 Commercialization of Agriculture_____________________________ (10).
5. Conclusion__________________________________________________ (14).
6. Bibliography_________________________________________________ (16).













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Acknowledgement
Writing a project is one of the most significant academic challenges I have ever faced. Though
this project has been presented by me but there are many people who remained in veil, who gave
their all support and helped me to complete this project.
First of all I am very grateful to my subject teacher Dr. Vishwachandranath Madasu Sir, without
the kind support of whom and help the completion of the project was a herculean task for me. He
donated his valuable time from his busy schedule to help me to complete this project and
suggested me from where and how to collect data.
I am very thankful to the librarian who provided me several books on this topic which proved
beneficial in completing this project.
I acknowledge my friends who gave their valuable and meticulous advice which was very useful
and could not be ignored in writing the project. I also owe special thanks to my parents for their
selfless help which was very useful in preparing the project & without whose support this project
wouldnt have been prepared.

Aaditya Vasu
Reg No- 2013001
2
nd
Semester









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Introduction
Around the 18th Century a number of significant events took place in the world. One such event
was the Industrial Revolution which took place in England. It gradually spread to other countries
of Europe also. We have read about the Industrial Revolution that took place in England, and
also read about the discovery of new sea and trade routes. One such sea route to India was
discovered by a Portuguese called Vasco da Gama in 1498. As a result, the English, French,
Portuguese and the Dutch came to India for trade. They also used it to spread missionary
activities in India. Do you know that the beginning of modern period in Indian history began
with the coming of these European powers to India? In this lesson you will be reading about the
coming of the British to India and the impact it had on the economic, social and cultural spheres
as well.
The Indian economy under British rule underwent a phase of arrested development. This was so,
inspite of the fact that most pre-requisites for economic development were met by India even
prior to the British advent. These were; a prosperous agriculture, significant indigenous
industry, sizable exports, abundance of minerals and ores, and above all, a surplus which could
be invested. Thus, India had the potential for economic growth. With the advent of the British
came modern business, technology, capital, and the political institution. The obvious question
that follows is that, why did not India experience any significant economic progress. The answer
to this lies in the nature of colonial relationship between Britain and India.
1












1
Economic-Impact-of-British-Colonial-Rule-in-India.pdf


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Reasons for Coming to India
The European and the British traders initially came to India for trading purposes. The Industrial
Revolution in Britain led to the increase in demand for raw materials for the factories there. At
the same time, they also required a market to sell their finished goods. India provided such a
platform to Britain to fulfill all their needs. The 18
th
century was a period of internal power
struggle in India and with the declining power of the Mughal Empire, the British officials were
provided with the perfect opportunity to establish their hold over Indian Territory. They did these
through numerous wars, forced treaties, annexations of and alliances with the various regional
powers all over the country. Their new administrative and economic policies helped them
consolidate their control over the country. Their land revenue policies help them keep the poor
farmers in check and get huge sums as revenues in return. They forced the commercialization of
agriculture with the growing of various cash crops and the raw materials for the industries in the
Britain. With the strong political control, the British were able to monopolies the trade with
India. They defeated their foreign rivals in trade so that there could be no competition. They
monopolized the sale of all kinds of raw materials and bought these at low prices whereas the
Indian weavers had to buy them at exorbitant prices. Heavy duties were imposed on Indian goods
entering Britain so as to protect their own industry. Various investments were made to improve
The transport and communication system in the country to facilitate the easy transfer of raw
materials from the farms to the port, and of finished goods from the ports to the markets. Also,
English education was introduced to create a class of educated Indians who would assist the
British in ruling the country and strengthen their political authority. All these measures helped
the British to establish, consolidate and continue their rule over India.

Fig (1): Currency Used by the East India Company.


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ECONOMIC IMPACT
The Industrial revolution has helped the English merchants accumulate a lot of capital from the
countries of Asia, Africa and America. They now wanted to invest this wealth in setting up
industries and trade with India. The mass production of goods through machines that we witness
today was pioneered through the Industrial Revolution which occurred first in England during
the late 18th and the early 19th century. This led to a massive increase in the output of finished
products. The East India Company helped in financing and expanding their industrial base.
During this time there was a class of manufacturers in England who benefited more from
manufacturing than trading. They were interested in having more raw materials from India as
well as sending their finished goods back. Between 1793 and 1813, these British manufacturers
enjoyed. Ultimately, they succeeded in abolishing the East India Companys monopoly of Indian
trade. With this India became an economic colony of Industrial England. Let us learn more about
the economic impact on various Indian industries and trade. The Company Servants captured the
trade in Commodities like salt, betel-nut and tobacco which had so long been banned to all
European traders.

Textile Industry and Trade

Earlier, Indian handloom had a big market in Europe. Indian textiles such as cotton, linen, silk
and woolen goods already had markets in Asia and Africa. With the coming of industrialisation
in England, the textile industry there made important headway. There was now a reverse of the
direction of textile trade between Britain and India. There was a massive import of machine
made clothes from English factories to Indian markets. This import of large amount of products
manufactured by mechanical looms in England led to increase threat for the handicraft industries
as the British goods were sold at a much cheaper price.
The British succeeded in selling their goods at a cheap price as foreign goods were given free
entry in India without paying any duty. On the other hand, Indian handicrafts were taxed heavily
when they were sent out of the country. Besides, under the pressure of its industrialists, British
government often imposed a protective tariff on Indian textiles. Therefore, within a few years,
India from being an exporter of clothes became an exporter of raw cotton and an importer of


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British clothes. This reversal made a huge impact on the Indian handloom weaving industry
leading to its virtual collapse. It also created unemployment for a large community of weavers.
Many of them migrated to rural areas to work on their lands as agricultural laborers. This in turn
put increased pressure on the rural economy and livelihood. This process of uneven competition
faced by the Indian handloom industry was later dubbed by the Indian nationalist leaders as de-
industrialization.
The main aim of the British was to transform India into a consumer of British goods. As a result,
textile, metal work, glass and paper industries were soon out of work. By 1813, the Indian
handicrafts lost both their domestic as well as foreign market. Indian goods could not compete
with the British factory-made products where machines were used. These markets were now
captured and monopolised by Britain by means of war and colonization. From an exporter India
became an importer of these goods. They extracted money from the Indian rulers, merchants,
zamindars and even the common people. Added to this drain were the profit made through trade
and also the salaries of the officials. It was evident that their economic policies were meant to
serve the interests of the East India Company and later the British Empire.

Land Revenue Policy and Land Settlements
Since ancient times, the main source of livelihood for the people were agriculture. Hence, land
tax had formed a principal source of revenue for all the emperors all over the world. In the 18th
century, the main occupation of the Indian people were agriculture. During British rule, revenue
from land kept on increasing, and the reasons for this were many. Earlier the British had come to
trade with India. Gradually they wanted to conquer the vast territory of India for which they
needed a lot of money. They also needed money for trade, projects of the company as well as for
the cost of running the administration. The British carried out a number of land revenue
experiments which caused hardship to cultivators. They extracted taxes from the farmers to
finance their policies and war efforts. Direct and indirect means were carried out to bring about
this collection of revenue for the British. This affected the lives of the people who could not meet
their daily needs because they had to provide the landowners and the collectors their share in the
produce. Local administration failed to provide relief and natural justice to the rural poor. Lord
Cornwallis introduced the Permanent Settlement in Bengal and Bihar in 1793. It made the
landlord or zamindar deposit a fixed amount of money in the state treasury. In return they were


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recognised as hereditary owners of land. This made the zamindar the owner of the land. The
amount of revenue to be paid to the Company was fixed for a period of time which made the
British financially secured. Now they knew in advance as to how much revenue was coming in
from the State. Over the next century, partly as a result of land surveys, court rulings and
property sales, the change was given practical dimension
2
. An influence on the development of
this revenue policy were economic theories which regarded agriculture as the engine of
economic development and consequently stressed the fixing of revenue demands in order to
encourage growth. The zamindar also knew how much revenue was to be paid. So to get surplus
revenue for themselves they asked the peasants to increase production. But, if the zamindar
failed to pay the fixed revenue on time his land was sold off to another zamindar. The British
stood to benefit from this settlement as the new class of zamindars that emerged became their
political allies. They supported the British in times of need and acted as a buffer between them
and the peasants. This class, in fact, supported the British against the freedom movement. In the
remnant of the Mughal revenue system existing in pre-1765 Bengal, zamindars, or "land
holders," collected revenue on behalf of the Mughal emperor, whose representative, or diwan
supervised their activities
3
. In this system, the assortment of rights associated with land were not
possessed by a "land owner," but rather shared by the several parties with stake in the land,
including the peasant cultivator, the zamindar, and the state. The zamindar served as an
intermediary who procured economic rent from the cultivator, and after withholding a percentage
for his own expenses, made available the rest, as revenue to the state.
4
Their previous income
from land revenue, and that of the Moghul state, was now appropriated by the British as land tax.
However, in the Bengal presidency (i.e. modern Bengal, Bihar, Orissa and part of Madras) the
second layer of Moghul property rights belonging to Moghul tax collectors (zamindars) was
reinforced
5
. All zamindars in these areas now had hereditary status, so long as they paid their
land taxes, and their judicial and administrative functions disappeared
6
. In the Moghul period the
zamindars had usually kept a tenth of the land revenue to themselves, but by the end of British

2
"The Terms of Trade between the United Kingdom and British India, 18581947", Economic Development and
Cultural Change. Pg.54
3
Metcalf and Metcalf, 2006. Pg.20 (e-book)
4
Metcalf and Metcalf, 2006. Pg.78 (e-book)
5
Land Reform in Principle and Practice, Oxford University Press, 1969 , Pg.158
6
Even in the Mughal Period many Zamindars had held hereditary status because they were from Hindu families
which had been local chieftains in Pre-Mughal time. Other Zamindars have life time status.


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rule their income from rents was a multiple of the tax they paid to the state. In Bihar, for
instance, five-sixths of the total sum levied by 1950 was rent and only one-sixth revenue
7
.
In 1822, the British introduced the Mahalwari Settlement in the North Western Provinces,
Punjab, the Ganga Valley and parts of Central India. Here the basis of assessment was the
product of a mahal or estate, which may be a village or a group of villages. Here all the
proprietors of mahal were jointly responsible for paying the sum of revenue assessed by the
government. Unfortunately it brought no benefit to the peasants as the British demands were
very high.
The Ryotwari Settlement was introduced in the beginning of the 19th century in many parts of
Bombay and Madras Presidencies. Here the land revenue was imposed directly on the ryots, the
individual cultivators, who actually worked on the land. The peasant was recognized as the
owner of the land as long as he was able to pay the revenue but the exploitation continued with
the high revenue demands.

Mahalwari System
In this s0 ystem, the basis of assessment was the produce of mahal or estate or all the proprietors
of a mahal were jointly and severally responsible, in their persons and property, for the sum
assessed by the government on the mahal.
This settlement was made with the old village community jointly and severally. It was a
two-fold settlement.
The ownership and occupancy right was reserved for the individual peaseants and
cultivation was to be done individually.
The peasants were jointly responsible for paying the land revenue to the state.
The mahalwari system was first adopted in Agra and Awadh, and later extended to other
added (ceded) and conquered parts of the United Provinces.

Ryotwari System

7
Ibid


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First introduced in Tamil Nadu (former Madras) by Thomas Munro and Captain Reed;
and then it was gradually extended to Maharashtra (former Bombay Presidency), East
Bengal and portions of Assam and Coorg (part of Present Karnataka).
Under this system, the ryots were given the ownership and occupancy rights in land and
they were individually responsible for the payment of land revenue to the state. Thus a
system of present proprietorship was introduced.
Main Features
a) Assessment upon individual cultivators
b) Measurement of field and an estimate of produce.
c) Fixing of government demand at 55% of the produce.
This System led to perpetual struggle between the money-lenders and the cultivators.
The zamindari system had revolutionized the relations between the landlords ( revenue
farmers) and tenants; the ryotwari syatem revolutionized the relations between the
creditors and debtors and thus introduced another grasping and exploiting elements into
the rural society
The Primary aims of the ryotwari system were the regular collection of revenue and
amelioration (improvement) of the condition of the ryots. The first aim was realized, but
the second remain unfulfilled.
It was officially stated that the ryots could not be ejected so long as he paid the rent.

Commercialization of Agriculture
Another major economic impact of the British policies in India was the introduction of a large
number of commercial crops such as tea, coffee, indigo, opium, cotton, jute, sugarcane and
oilseed. Different kinds of commercial crops were introduced with different intentions. Indian
opium was used to balance the trade of Chinese tea with Britain in the latters favor. The market
for opium was strictly controlled by British traders which did not leave much scope for Indian
producers to reap profit. Indians were forced to produce indigo and sell it on the conditions
dictated by the Britishers. Indigo was sent to England and used as a dyeing agent for cloth
produced in British towns. Indigo was grown under a different system where all farmers were


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compelled to grow it on 3/20th part of their land
8
. Unfortunately cultivation of Indigo left the land
infertile for some years. This made the farmers reluctant to grow it. In the tea plantations
ownership changed hands quite often. The workers on these plantations worked under a lot of
hardships.
Commercialization of agriculture further enhanced the speed of transfer of ownership of land
thereby increasing the number of landless laborers. It also brought in a large number of
merchants, traders and middlemen who further exploited the situation. The peasant now
depended on them to sell their produce during harvest time. Because the peasants now shifted to
commercial crops, food grain production went down. So, less food stock led to famines. It was
therefore not surprising that the peasants revolted. You would read about it in detail in the
coming chapters. There was an enormous drain of wealth from our country to Britain due to the
various economic policies. Additional financial burden was placed on India due to expenditures
on salaries, pensions and training of military and civilian staffs employed by the British to rule
India. If this wealth was invested in India it could have helped enormously improved the
economy in this country. Let us learn how the economic policies implemented by the British
changed the social structure of Indian society. At this time, the East India Company's trade with
China began to grow as well. In the early 19th century demand for Chinese tea had greatly
increased in Britain; since the money supply in India was restricted and the Company was
indisposed to shipping bullion from Britain, it decided upon opium, which had a large
underground market in China and which was grown in many parts of India, as the most
profitable form of payment
9
. However, since the Chinese authorities had banned the importation
and consumption of opium, the Company engaged them in the First Opium War, and at its
conclusion, under the Treaty of Nanjing, gained access to five Chinese
ports, Guangzhou, Xiamen, Fuzhou, Shanghai, and Ningbo; in addition, Hong Kong was ceded
to the British Crown. Towards the end of the second quarter of the 19th century, opium export
constituted 40% of India's exports.
10



8
Metcalf and Metcalf, 2006 , (e-book)
9
Peers 2006, Pg.49
10
Peers 2006, pg. 49


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Fig (2): Places where Merchants from London trade in the Early Stage of their rule in India.















Balance in current Balance in 1948-9 Per-Capita Balance at


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Prices
( annual average)
prices.
( million)
1948-9 prices.
()
1835-54 4.5 n.a. n.a.
1855-74 7.3 50.0 0.21
1875-94 13.4 80.0 0.30
1895-1913 16.8 77.6 0.26
1914-34 22.5 59.2 0.19
1935-46 27.9 66.1 0.17
1948-57 -99.9 -97.6 -0.21( India and Pak)
1958-67 -472.7 -384.7 -0.67(India and Pak)

Table 1: Indias Balance on Merchandise and Bullion, 1835-1967
Source: Constant price figures for 1948 onwards deflated by the national income deflator, earlier years by the
price index of M. Mukherjee, National Income of India, Statistical Publishing Society, Calcutta, 1969. The
Indian surplus is understated, and deficit overstated because imports are recorded c.i.f. and exports f.o.b.
















Conclusion


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There has been a good deal of controversy amongst statisticians about the rate of growth of income in
India in the colonial period. The argument is politically colored and the statistics are poor. For the
last fifty years of British rule there is enough statistical information to make rough estimates of the
growth of national income. My own estimates, which are based largely on work by Blyn and
Sivasubramonian, show no increase in per capita income over the years 1900-46. Other observers
have estimates which show some growth over this period as well as in the period from 1857
11
.
Although I think my estimates are the best available, I have enough skepticism about the basic
agricultural data to believe that the other estimates could be right for the wrong reasons and that there
may have been some rise in per capita income from 1857 to 1947.
There are no estimates for the movement in income from Clive's conquest to the Mutiny, but there
could not have been much net progress in real income per head before the development of railways,
modern industry, irrigation and the big expansion in international trade, and there are reasons for
thinking that there was some decline. From the beginning of British conquest in 1757 to
independence, it seems unlikely that per capita income could have increased by more than a third and
it probably did not increase at all. In the UK it there was a tenfold increase in per capita income over
these two centuries. The most noticeable change in the economy was the rise in population from
about 170 million to 420 million from 1757 to 1947.
However, there were some significant changes in social structure and in the pattern of output. The
social pyramid was truncated because the British lopped off most of the top three layers of the
Moghul hierarchy, i.e. the Moghul court, the Moghul aristocracy and quasi-autonomous prices (a
quarter of these survived), and the local chieftaincy (Zamindars who survived in about 40 per cent of
India). In place of these people the British installed a modern bureaucracy which took a smaller share
of national income. The newcomers had a more modest life-style than the Moghuls, but siphoned a
large part of their savings out of the country and provided almost no market for India's luxury
handicrafts. The modern factory sector which they created produced only 7.5 per cent of national
income at the end of British rule and thus did little more than replace the old luxury handicrafts and
part of the village textile production.
The British reduced the tax squeeze on agriculture and turned warlords into landlords, but the new
order had little dynamism. A good deal of the old fuzziness about property rights remained, and
landlords were still largely parasitic. The bigger zamindars copied the Moghul lifestyle by
maintaining hordes of retainers and huge mansions, the smaller landowner's ambition was to stop

11
National Income of India, N Mukherjee


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working and enhance his ritual purity by establishing a seedy gentility. Very little incentive was
provided for investment and almost nothing was done to promote technical change in agriculture. At
the bottom of society the position of sharecropping tenantry and landless labourers remained
wretched. In urban areas a new Westernized 'middle class' of Indians emerged and became the major
challenge to the British raj.

























Bibliography


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Web sources
1. Economic Impact of British Colonial Rule in India.PDF (pg.4)
2. historyforupsc.blogspot.com, 11.48 A.M., 22
nd
March, 2014.7
Books
1. Appleyard, Dennis R. (2006), "The Terms of Trade between the United Kingdom and
British India, 18581947", Economic Development and Cultural Change 54: 635654
(pg.8)
2. National Income of India by M. Mukherjee (pg. 11 & 12)
3. Peers, Douglas M. (2006), India under Colonial Rule 17001885, Harlow and
London: Pearson Longmans. (.pg.10)
4. Outlines of Indian Legal and Constitutional History by M.P. Jain. ( Partly Used)