Updated December 20, 2022
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The major difference between the British colonists in India and earlier invaders was that none of the earlier invaders made any structural changes in Indian economy or drained away India’s wealth as tribute. British rule in India caused a transformation of India’s economy into a colonial economy, i.e., the structure and operation of Indian economy were determined by the interests of the British economy.
There were three stages of British colonialism where, there was hardly any aspect of the Indian economy that was not changed for better or for worse during the entire period of British rule down to 1947. Here we have to tried to put the whole scenario arose during British colonialism through different points.
Discussed below are some of the Important and Interesting Points on “Economic Impact of British Rule” in context with Different phases of British Colonialism and Land Revenue System. These Points will Help You Strengthening Your Modern Indian History Section.
First phase – The Mercantile phase (1757-1813)
1. The East India Company used its political power to monopolize trade and dictate terms to trades of Bengal.
2. Imposition of inflated prices of goods led to buccaneering capitalism whereby wealth flowed out of barrel of the British trader’s gun.
3. Revenue of Bengal were used to finance exports to England.
Second Phase – The Industrial phase (1813-1858)
4. India was exploited as a market for British goods.
5. Act of 1813 allowed one-way trade for the British, as a result the Indian markets flooded with cheap and machine-made imports. Indian traders lost foreign as well as home market.
6. Indians were forced to export raw materials and import finished goods.
7. Heavy import duty on Indian products to England to discourage them in the market.
Third phase – Financial phase (1860 onwards)
8. British consolidated their position in India and Made India a market for Manufacturers in India and made a market for Manufacturers and suppliers of foodstuffs and raw materials.
9. introduction of railways (1853), Post and Telegraph (1853), Banking System (Avadh) Commercial Bank 1881).
10. Heavy British investment in India and burden on public debt increases.
11. Industries came into existence (Tata iron and steel in 1907).
British Rule Causes Drain of Wealth
12. Dada Bhai Naoroji cited in his book “Poverty and UN-British Rule in India”. R.C. Dutta in his book “Economic History of India” (1901) blamed British policies for Indian Economic ills.
13. Drain of wealth theory refers to a portion of national product of India which was not available for consumption to its people.
Effects of British Rule on India and Indian People
14. It stunted the growth of Indian and checked and retarded capital formation in India.
15. It financed capitalist development in Britain.
16. India was kept as a zone of free trade without allowing it to develop the ability to compete.
17. Plantations mines, jute mills, banking, shipping, export-import concerns a system of interlocking capitalist firms managed by foreigners. It drained resources from India.
Impact of British Rule Regarding on land revenue system
The land Revenue system was also affected by British rule which directly or indirectly affected the economy of India. So, here we have tried to present you the “Economic Impact of British Rule” through different land revenue systems and how it was affected by British rule.
(a). Permanent Settlement/Istamarari (Sthayi) Bndobast
18. Introduced in Bengal, Orissa, Bihar and districts of Banaras & Northern districts of Madras by Lord Cornwallis.
19. John Shore planned the permanent Settlement.
20. 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.
21. Assured of their ownership, many zamindars styed in towns (absentee landlordism) and exploited their tenants.
(b). Ryotwari System
22. Introduced in Bombay and Madras. Munro (viceroy) and Charles Reed recommended it.
23. In this, a direct settlement was made between the government and the ryot (cultivation).
24. The revenue was fixed for a period not exceeding 30 years, on the basis of the equality of the soil and the nature of the crop. It was based on the scientific rent theory of Ricardo.
25. The position of the cultivator became more secure but the rigid system of the revenue collection often forced him into the clutches of the moneylender.
26. Besides this, 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.
(c). Mahalwari System
27. Modified version of zamindari settlement introduced in the Ganges valley, NWFP, parts of Central India and Punjab.
28. Revenue settlement was to made by village or estate with landlords. In western Uttar Pradesh, a settlement was made with the village communities, which maintained a form of common ownership known as Bhaichare, or with Mahals, which were groups of villages.
29. Revenue was periodically revised.
(d). Colonial Impact of Land Revenue System
30. The land settlement introduced market economy and did away with customary rights. Cash payment of revenue encouraged money-lending activity.
31. It sharped social differentiation. Rich had access to the courts to defend their property.
32. Forcible growing of commercial crops led the peasant to buy food grains at high prices and sell cash crops at low prices.
33. The stability of the Indian villages was shaken and the entire set up of the rural society began to break up.
So, it can be observed from above points that British rule had affected Indian to a large extent. Indian economy was changed for better or for worse during the entire period of British rule down to 1947