Emergence of the Colonial Economy | ISC Class 11 History Notes

This note covers the colonial economy in India: how the English East India Company came to control the revenue of Bengal, the railways and the telegraph, the land taxes laid on peasants, the fate of weavers and other craftspeople, the first cotton mills of western India, and the forest laws and their effect on forest communities.

What was the colonial economy, and how did it begin?

Colonialism is the practice where one country takes control of another region, establishes settlements there, and imposes its own political, economic and cultural systems. The controlled region is a colony.

Definition: The colonial economy in India was an economy that British rule reshaped, from a self-sufficient agricultural system supplemented by craft and manufacture into a supplier of raw materials for British industry and a market forced to buy British goods.

What was India's economy like before colonial rule?

India traded with the Greeks and the Romans over two millennia ago. Historical estimates, by the economist Angus Maddison in particular, suggest that India contributed at least one-fourth of the world GDP until the 16th century. GDP, or gross domestic product, is the value of the goods and services that a country, or the world, produces in one year.

How did a trading company become a ruler?

The English East India Company was a trading company with a royal charter from Queen Elizabeth I, which gave it special powers, such as the right to raise a private army. In the 17th century it set up footholds on the coast, Surat, Madras, Bombay and Calcutta being among the first.

At Plassey in 1757, Mir Jafar, the military commander of the Nawab (ruler) of Bengal, had conspired with Robert Clive of the Company. His forces, the majority of the Nawab's army, stood aside, so the Company won despite smaller numbers.

On 12 August 1765 the Mughal emperor appointed the Company the Diwan of Bengal, its chief financial administrator, with the right to collect revenue in Bengal, Bihar and Odisha. Before 1765 the Company had paid for goods bought in India by importing gold and silver from Britain. Now the revenue of Bengal could pay for goods bought for export, and within five years the value of those goods doubled.

In 1858 the British Crown took direct control of India from the Company.

How did the railways and the telegraph develop, and whom did they serve?

How did the railways begin?

The first passenger train in India ran on 16 April 1853 from Bombay to Thane, about 34 kilometres, on the Great Indian Peninsula Railway. A line from Howrah to Hoogly opened in Bengal in 1854.

Lord Dalhousie, the Governor-General (the senior British official in India), planned the network in 1853, and the private companies that built the lines were guaranteed a minimum return, usually about 5 per cent, on their capital. The telegraph, which sends messages instantly along wires, also spread; its first experimental line ran from Calcutta to Diamond Harbour in 1850 to 1851.

How was cotton carried before and after the railways?

Before the railway age, cotton from the Deccan travelled by bullock cart and by boat, and Mirzapur was a collection centre. Once the railways came, cotton was no longer carried only on carts and boats, though the older modes were not fully displaced.

An illustration of 1862 shows cotton bales piled at the Bombay terminus of the Great Indian Peninsula Railway, ready for shipment to England. A loaded bullock cart waits to carry bales from the railway station to the port.

A coloured map from the Imperial Gazetteer Atlas of India. Its reference note shows British India in red, territories permanently administered by the Government of India in pink, Native States and territories (the princely states) in yellow, and railways as a line symbol. Divisions labelled include Kashmir, the Punjab, Rajputana Agency, the United Provinces, Bengal, the Central Provinces, Hyderabad, Mysore, Upper Burma and Lower Burma.

See Fig. 4.16 in your NCERT textbook

Whom did the railways serve?

The railway network is often cited as a colonial blessing. The railways did bring people closer together and integrated India's internal market. But the network was designed primarily to move raw materials from the interior to ports for export and to distribute British manufactured goods throughout India.

Another purpose was to move armies quickly from their cantonments (army bases) to fight a distant rebellion or war.

Why did the Company introduce the Permanent Settlement in 1793?

Why did the Company change its approach to land revenue?

Land revenue is the tax that the state collects from land. As Diwan, the Company had to organise its revenue resources to meet its growing expenses, yet it still saw itself mainly as a trader. It wanted a large revenue, tried to raise it as much as it could, and bought fine cotton and silk cloth as cheaply as possible.

Bengal soon faced a deep crisis. Artisans deserted villages because they had to sell their goods to the Company at low prices, and peasants could not pay what was demanded.

In 1770 to 1772, coming on top of two years of crop failure, harsh revenue targets caused a catastrophic famine. The Company required farmers to pay a high rate of cash taxes on the produce of their lands regardless of harvest conditions. The famine killed nearly one-third of Bengal's population, an estimated 10 million people.

What did officials hope to achieve?

After about two decades of debate, officials decided that agriculture, trade and revenue could all grow if investment in agriculture were encouraged. This meant securing rights of property and fixing the revenue demand permanently.

They hoped for a regular flow of revenue and assured profits for investors. They also hoped for a class of yeomen farmers (prosperous independent farmers) and rich landowners, with the capital and enterprise to improve agriculture and loyal to the Company.

Definition: The Permanent Settlement was the arrangement introduced in Bengal in 1793, when Charles Cornwallis was Governor-General, under which rajas and taluqdars were recognised as zamindars and had to pay a revenue demand fixed in perpetuity.

How did the Permanent Settlement work, and how did zamindars and jotedars respond?

What were its terms?

The settlement was made with the rajas and taluqdars of Bengal, who were classified as zamindars. The term raja (literally king) was often used for powerful zamindars, and a taluqdar was one who holds a taluq, a territorial unit. A zamindar's estate is a zamindari.

• A zamindar was not the landowner in the village but a revenue collector of the state, whose revenue demand was fixed in perpetuity.
• One zamindar had several villages, sometimes as many as 400, and the Company fixed the total demand for the whole estate.
• The zamindar collected rent from the villages, paid the revenue to the Company and kept the difference. Rent was what the ryots (peasants) paid to the zamindar.
• If a zamindar failed to pay regularly, his estate could be auctioned.

Boxes labelled Company, Zamindar (controls numerous villages), Ryot, Jotedar (a rich ryot, also a trader and moneylender) and two Under-ryot boxes are joined by arrows. The side text says zamindars paid revenue to the Company, and each village ryot paid rent to the zamindar. Jotedars gave out loans to other ryots and sold their produce. Ryots gave out some land to under-ryots on rent.

See Fig. 9.5 in your NCERT textbook

Why did zamindars default?

1. The initial demand was very high, because the Company feared it could never claim a share of later increases in income when prices rose and cultivation expanded.
2. It was imposed in the 1790s, when prices of agricultural produce were depressed, so ryots found it hard to pay the zamindar.
3. The revenue was invariable, whatever the harvest, and under the Sunset Law a zamindari could be auctioned if payment did not arrive by sunset of the due date.
4. The settlement at first limited the zamindar's power to collect rent: his troops were disbanded and his courts (cutcheries) were placed under a Collector appointed by the Company.

How did zamindars keep their estates?

In 1797 the estates of the Raja of Burdwan were auctioned. Over 95 per cent of the sale was fictitious, because many purchasers were the raja's own servants and agents. Over 75 per cent of the zamindaris changed hands after the Permanent Settlement, yet the authority of zamindars did not collapse.

The method was a fictitious sale through benami purchases, which are made in the name of a fictitious or insignificant person while the real beneficiary remains unnamed.

1. The raja transferred some of his zamindari to his mother, because the Company had decreed that the property of women would not be taken over.
2. His agents withheld the revenue demand and let unpaid balances accumulate.
3. When part of the estate was auctioned, the zamindar's men bought it, outbidding others, but refused to pay the purchase money, so it was resold.
4. This was repeated endlessly, exhausting the state and the other bidders, until the estate was sold at a low price back to the zamindar.

Such transactions happened on a grand scale. Between 1793 and 1801 four big zamindaris of Bengal, including Burdwan, made benami purchases, and over 15 per cent of the total sales at the auctions were fictitious.

Who were the jotedars?

A group of rich peasants called jotedars consolidated their position in the villages. By the early nineteenth century they had acquired vast areas of land, sometimes several thousand acres, and controlled local trade and moneylending.

A large part of their land was cultivated through sharecroppers, who handed over half the produce. Jotedars resisted attempts to raise the revenue demand (jama) of the village and were often among the purchasers at auctions. Their rise weakened zamindari authority.

How did the three revenue settlements differ?

After 1810, agricultural prices rose and the income of Bengal zamindars grew, but because the demand was fixed the state could claim no share. In territories annexed in the nineteenth century the government made temporary revenue settlements, so the Permanent Settlement was rarely extended beyond Bengal.

Officials were also influenced by the economist David Ricardo. His Ricardian ideas held that a landowner should claim only the average rent of the time, and any surplus should be taxed. Otherwise cultivators were likely to turn into rentiers, people who live on rental income from property, and their surplus income was unlikely to be invested in the land.

A mahal is a revenue estate in British records, which may be a village or a group of villages. Holt Mackenzie felt that the village was an important social institution in north India and had to be preserved. Read and Munro felt that the south had no traditional zamindars, so they settled directly with cultivators.

Note: The three names tell you who the state settled with: the zamindar (Permanent Settlement), the village or mahal (mahalwari) and the ryot (ryotwari). Do not call the ryotwari settlement of the Bombay Deccan permanent, because its demand was revised at each resurvey.

Within a few years it was clear that all was not well with the new systems. Revenue officials, driven by the desire to increase income from land, fixed too high a demand, so peasants could not pay, ryots fled, and villages became deserted in many regions.

How did revenue demands and commercial crops affect peasants?

How did the first Deccan settlement lead to debt?

The Bombay Deccan is a region of western India. Its first revenue settlement, in the 1820s, demanded so much that in many places peasants deserted their villages. Collectors, keen to show efficiency, seized the crops of defaulters and fined whole villages.

Prices fell sharply after 1832 and did not recover for over a decade and a half. A famine in 1832 to 1834 killed one-third of the cattle of the Deccan, and half the human population died. Peasants borrowed, since revenue could rarely be paid without a loan from a moneylender, and by the 1840s officials found alarming indebtedness everywhere.

What was the cotton boom, and why did it end in distress?

Before the 1860s, three-fourths of the raw cotton imported into Britain came from America. When the American Civil War broke out in 1861, Bombay export merchants gave advances to urban sahukars (moneylenders who were also traders), who extended credit to rural moneylenders. Deccan ryots found seemingly limitless credit.

A line graph with years from 1860 to 1868 on the horizontal axis and an index from 0 to 500 on the vertical axis. The line starts at 100, rises steeply to a peak just below 500 between 1862 and 1864, then falls to between 100 and 200 and rises slightly at the end. The caption says it shows the rise and fall in cotton prices.

See Fig. 9.15 in your NCERT textbook

Some rich peasants gained, but for the large majority cotton expansion meant heavier debt. By 1865 American production had revived and Indian cotton exports to Britain declined, so merchants and sahukars stopped long-term credit and demanded repayment. At the next settlement the revenue demand rose by 50 to 100 per cent, and the moneylender now refused loans.

Why did moneylenders enrage the ryots?

A custom held that interest could not be more than the principal, the original sum lent. Under colonial rule this broke down: in one case before the Deccan Riots Commission, a moneylender charged over Rs 2,000 as interest on a loan of Rs 100.

1. A Limitation Law of 1859 made loan bonds (written documents recording a loan) valid for only three years, to check the build-up of interest.
2. Moneylenders forced the ryot to sign a new bond every three years, entering the unpaid balance, the loan plus accumulated interest, as the new principal.
3. As debts mounted, the ryot gave over his land, carts and animals.
4. He then took land on rent and animals on hire, signing a deed of hire stating that his animals and carts did not belong to him.

What happened in 1875?

On 12 May 1875 ryots at Supa, a market village in Poona (present-day Pune) district, attacked shopkeepers and demanded their bahi khatas (account books) and debt bonds. They burnt them, looted grain shops and in some cases set fire to sahukars' houses.

The revolt spread to Ahmednagar and over two months covered 6,500 square kilometres. Troops were called in and 951 people were arrested.

Worried by the memory of the Great Rebellion of 1857, the Government of India pressed Bombay to set up a commission. Its report, presented to the British Parliament in 1878, blamed the moneylenders, not the government demand.

What was the indigo system?

By the late eighteenth century the Company was trying to expand the cultivation of opium and indigo, and over the next century and a half cultivators were persuaded or forced to grow other crops Europe needed, such as jute in Bengal and tea in Assam. Indigo is a plant that gives a deep blue dye. In 1788 about 30 per cent of the indigo imported into Britain came from India, and by 1810 the share was 95 per cent.

Under nij cultivation the planter grew indigo on land he controlled, using hired labour. Under the ryoti system, ryots signed a contract (satta) and received cash advances at low interest, committing at least 25 per cent of their holding to indigo.

The planter provided seed and drill, the ryot did the sowing and care, and a new loan followed each delivery, so the cycle of loans never ended. The price was very low, and indigo on the best soils exhausted them so that rice could not be sown after it.

In March 1859 thousands of Bengal ryots refused to grow indigo, and the Indigo Commission held the planters guilty of coercive methods. Indigo production then collapsed in Bengal and planters shifted to Bihar.

What happened to weavers and artisans, and how was the traditional economy disrupted?

What was the age of Indian textiles?

Before machine industries, silk and cotton goods from India dominated the international textile market, and the finer cottons often came from India. By the 1750s the network of trade controlled by Indian merchants was breaking down.

European companies gained concessions and then monopoly rights, and the old ports of Surat and Hoogly declined while Bombay and Calcutta grew. The gross value of trade through Surat slumped from Rs 16 million in the last years of the seventeenth century to Rs 3 million by the 1740s.

What did the Company do to weavers?

After the 1760s Company power did not at first reduce textile exports, because Indian fine textiles were in great demand in Europe. Once it held political power, the Company asserted a monopoly right to trade and tried to remove competition and secure regular supplies.

1. It appointed a paid servant, the gomastha, to supervise weavers, collect supplies and examine the quality of cloth.
2. It stopped weavers from dealing with other buyers, one way being to give them advances, after which they had to hand the cloth over to the gomastha.

The gomasthas were outsiders who marched into villages with sepoys (Indian soldiers in British service) and punished weavers for delays, often beating and flogging them. The price weavers received was miserably low.

In many places in Carnatic and Bengal weavers deserted villages, and over time many began refusing loans and taking to agricultural labour.

How did Manchester imports hurt weavers?

English industrial groups pressed the government to impose import duties on cotton textiles, so that Manchester goods could sell in Britain without competition. They also persuaded the Company to sell British manufactures in India. Indian textiles faced heavy duties in Britain, while British goods entered India with minimal tariffs (import duties).

In the nineteenth century India's textile exports fell sharply, while Britain's imports into India grew even more sharply. Piece-goods are woven cloth, as distinct from yarn, the thread.

At the end of the eighteenth century there had been virtually no import of cotton piece-goods into India. Weavers lost their export market, and the local market was glutted with cheap imports. By the 1850s reports from most weaving regions told of decline and desolation.

By the 1860s weavers also could not get enough good raw cotton. When the American Civil War cut off supplies, Britain turned to India, the price of raw cotton shot up, and weavers had to buy at exorbitant prices.

How was the traditional economy disrupted?

Skilled artisans were reduced to poverty and forced back to subsistence agriculture (farming for the family's own food) on increasingly overtaxed land. India's share of the world GDP kept declining throughout colonial rule, reaching hardly 5 per cent at the time of Independence.

Village councils had managed community affairs and public works. The British replaced them with a centralised bureaucracy designed primarily to facilitate tax collection and maintain order. British codes of law disregarded customary laws, and the courts were expensive, time-consuming and held in a foreign language.

Famines recurred. In the Great Famine of 1876 to 1878, up to 8 million Indians perished, mostly in the Deccan plateau. The administration continued to export grain to Britain, about one million tonnes of rice alone per year during the three years of the famine.

According to several Famine Commissions and other reports, the total number of human victims of famines under British rule is estimated at anywhere between 50 and 100 million.

How did modern industries grow in western India?

When did the first factories come up?

The first cotton mill in Bombay came up in 1854 and went into production two years later. By 1862 four mills were at work with 94,000 spindles and 2,150 looms. A spindle is the part of a machine on which thread is spun, and a loom is a machine for weaving cloth.

The first jute mill in Bengal came up in 1855, and the first cotton mill of Ahmedabad was set up in the 1860s.

Note: The dates 1854 and 1856 belong to the same Bombay mill: it came up in 1854 and went into production two years later. Do not treat them as two mills.

Who set up the industries, and where did the capital come from?

Many business groups began with trade with China. The British in India exported opium to China and took tea from China to England, and many Indians were junior players in this trade, providing finance, procuring supplies and shipping consignments.

In Bombay, Parsis such as Dinshaw Petit and Jamsetjee Nusserwanjee Tata gathered their initial wealth partly from exports to China and partly from raw cotton shipments to England. They built huge industrial empires.

As colonial control over trade tightened, Indian merchants were barred from trading with Europe in manufactured goods and had to export mostly raw materials and food grains.

Till the First World War, European Managing Agencies controlled a large sector of Indian industry. Three of the biggest were Bird Heiglers and Company, Andrew Yule and Jardine Skinner and Company. They set up and managed joint-stock companies, which raise capital from many investors. In most instances Indian financiers provided the capital while the European Agencies made all investment and business decisions.

How did cotton mills change in the early twentieth century?

When Indian businessmen set up industries in the late nineteenth century, they avoided competing with Manchester goods. The early mills made coarse yarn, used by Indian handloom weavers or exported to China.

1. As the swadeshi movement, which urged people to use Indian goods and boycott foreign cloth, gathered momentum, industrial groups pressed for more tariff protection.
2. From 1906 yarn exports to China declined, because Chinese and Japanese mills flooded its market, so Indian mills shifted from yarn to cloth, and cotton piece-goods production doubled between 1900 and 1912.
3. In the First World War British mills were busy with war production, Manchester imports into India declined, and Indian mills supplied jute bags, army cloth, tents and boots.
4. After the war, Manchester could never recapture its old position in the Indian market.

What was the economic impact of the mills, and what limited industrial growth?

Where did the mill workers come from?

In 1901 there were 584,000 workers in Indian factories, and by 1946 over 2,436,000. In most industrial regions workers came from the districts around, and over 50 per cent of the workers in the Bombay cotton industries in 1911 came from the neighbouring district of Ratnagiri. Most often mill workers moved between village and city.

Industrialists usually employed a jobber, very often an old and trusted worker, to recruit people from his village. He helped them settle and gave money in a crisis, but also demanded money and gifts.

Why did the economic impact stay limited?

Large industries formed only a small segment of the economy, and about 67 per cent of them in 1911 were in Bengal and Bombay. Only 5 per cent of the industrial labour force worked in registered factories in 1911, and 10 per cent in 1931. The rest worked in small workshops and household units.

Iron and steel started much later than textiles, with the first iron and steel works in India set up at Jamshedpur in 1912.

A map of India with a circle for each region, labelled Punjab, United Provinces, Bihar, Central Provinces, Bengal, Bombay and Madras. The caption says the circles show the size of industries in the different regions. The two largest circles lie over Bengal and Bombay, and the others are small.

See Fig. 24 in your NCERT textbook

What happened to handloom weaving?

Cheap machine-made thread wiped out hand spinning in the nineteenth century, but weavers survived. Production of handloom cloth, woven on hand-worked looms, almost trebled between 1900 and 1940.

Weavers adopted the fly shuttle, a mechanical device that places the weft (horizontal threads) into the warp (vertical threads). By 1941 over 35 per cent of handlooms had one, and in regions like Travancore, Madras, Mysore, Cochin and Bengal the proportion was 70 to 80 per cent.

Weavers of finer cloth were better placed, because the rich bought it even when the poor starved. Mills could not imitate specialised weaves, so saris with woven borders and the lungis and handkerchiefs of Madras were not easily displaced. Even so, weavers who expanded production did not necessarily prosper.

What was the colonial forest policy, and how did it affect local communities?

How did forest communities live?

Some tribal people practised jhum cultivation, or shifting cultivation: they burnt the vegetation on a forest patch, spread the ash to fertilise the soil, scattered seed, and moved on after harvest, leaving the field fallow for several years.

Others hunted and gathered, as the Khonds of Odisha did, or herded animals, as the Van Gujjars of the Punjab hills and the Gaddis of Kulu did.

What did the colonial forest policy do?

The British extended control over all forests and declared them state property. Some were classified as Reserved Forests because they produced timber the British wanted. There people could not move freely, practise jhum, collect fruits or hunt animals, and many jhum cultivators had to move elsewhere for work.

A Forest Department was set up in 1864. The Indian Forest Act of 1865 asserted state control, and a new Act of 1878 divided forests into reserved, protected and village forests.

The Forest Department needed labour to cut trees for railway sleepers and transport logs. It gave jhum cultivators small forest patches on condition that villagers worked for it and looked after the forests. These forest villages supplied cheap labour.

The British effort to settle jhum cultivators was not very successful. Jhum cultivators in north-east India insisted on their practice and, after protests, were allowed to continue shifting cultivation in some parts of the forest.

What was the economic impact on forest communities?

As traders and moneylenders came into the forests more often, tribal people became dependent on them. Interest was usually very high, so market and commerce often meant debt and poverty. Silk growers of Hazaribagh were paid Rs 3 to Rs 4 for a thousand cocoons, which were sold at five times the price at Burdwan or Gaya.

From the late nineteenth century, tribals were recruited through contractors, on miserably low wages, for the tea plantations of Assam and the coal mines of Jharkhand. In the 1920s about 50 per cent of the miners at Jharia and Raniganj were tribals.

What was the political impact on forest communities?

Tribal chiefs lost much of their administrative power, had to follow British laws and had to pay tribute to the British.

In the Rajmahal hills the British saw forest people as savage and encouraged forest clearance to enlarge land revenue. In the 1770s they followed a brutal policy of extermination against the Paharias, the hill people.

They then settled the Santhals, a tribal people, in Damin-i-Koh, an area demarcated by 1832 and declared to be the land of the Santhals. Santhal villages grew from 40 in 1838 to 1,473 by 1851, and the Paharias were pushed into the barren upper hills.

Many tribal groups reacted against the forest laws by disobeying the new rules and at times rising in open rebellion, as Songram Sangma did in Assam in 1906 and as in the forest satyagraha (a non-violent protest) of the 1930s in the Central Provinces. Other tribal revolts were those of the Kols in 1831 to 1832, the Santhals in 1855 to 1856, the Bastar Rebellion in 1910 and the Warli Revolt in 1940.

Birsa, a leader of the Mundas, a tribal group of Chottanagpur, was arrested in 1895 and died in 1900. His movement forced the government to bring in laws so that dikus (outsiders such as moneylenders) could not easily take over tribal land.

How did different groups experience the colonial economy?

• Zamindars. Motive: keep estates despite a very high fixed demand. Action: fictitious sales and the loyalty of ryots. Outcome: they were not easily displaced and, as prices recovered, consolidated their power.
• Jotedars. Motive: control village trade and credit. Action: resisted zamindars and were often among the buyers of auctioned estates. Outcome: zamindari authority weakened.
• Deccan ryots. Motive: pay revenue and survive. Action: borrowed, grew cotton on advances, then burnt bonds in 1875. Outcome: troops and arrests, and a Commission that blamed moneylenders.
• Weavers. Motive: earn a living. Action: took advances, deserted villages or left weaving, and later adopted the fly shuttle. Outcome: decline in many regions, though handloom output almost trebled between 1900 and 1940.
• Indian merchants and mill owners. Motive: invest earnings from trade. Action: set up mills and avoided Manchester's goods. Outcome: European Managing Agencies controlled a large sector till the First World War.
• Forest communities. Motive: keep forest livelihoods. Action: disobeyed the new rules or rebelled. Outcome: forest villages, some permitted jhum, and laws to protect tribal land after Birsa.

What do sources and historians tell us about the colonial economy?

The Fifth Report of 1813, which ran to 1002 pages, was one of a series on the Company's administration submitted to the British Parliament. Recent research indicates that, intent on criticising the Company's maladministration, it exaggerated the collapse of zamindari power and overestimated the scale on which zamindars lost land.

Francis Buchanan, a physician in the Bengal Medical Service from 1794 to 1815, surveyed districts for the Company and travelled through the Rajmahal hills in 1810 to 1811. He was critical of forest dwellers and felt that forests had to be turned into agricultural land.

The Deccan Riots Commission report of 1878 reflects a persistent reluctance of the colonial government to admit that popular discontent was ever on account of government action. Official reports must be read alongside newspapers, unofficial accounts, legal records and, where possible, oral sources.

The drain of wealth is the wealth taken out of India by the colonisers. Dadabhai Naoroji compiled from British reports, in Poverty and Un-British Rule in India (1901), the wealth estimated to have been drained out of India, and Romesh Chunder Dutt did a similar exercise in his Economic History of India.

A more recent estimate by Utsa Patnaik, for 1765 to 1938, comes to 45 trillion US dollars in today's value, extracted through taxes and by charging Indians for railways, the telegraph and even wars.

What is the timeline of the colonial economy?

Glossary

• Diwan — The chief financial administrator of a territory; the Company became Diwan of Bengal in 1765.
• Land revenue — The tax that the state collects from land, fixed under colonial revenue settlements.
• Zamindar — Under the Permanent Settlement, a revenue collector of the state who paid a fixed demand and kept the difference from rents.
• Ryot — A peasant; the spelling used in British records for raiyat.
• Jotedar — A rich peasant of rural Bengal who controlled local trade and moneylending and used sharecroppers.
• Mahal — A revenue estate in British records, which may be a village or a group of villages.
• Sahukar — A moneylender who also acted as a trader in the Deccan countryside.
• Gomastha — A paid servant of the Company who supervised weavers, collected cloth and checked its quality.
• Piece-goods — Woven cloth, as distinct from yarn, the thread from which it is woven.
• Managing Agency — A European firm that mobilised capital, set up joint-stock companies and made their investment decisions.
• Jobber — A trusted worker employed by industrialists to recruit new mill hands from his village.
• Jhum cultivation — Shifting cultivation, in which a forest patch is burnt, sown and harvested, then left fallow.
• Reserved Forests — Forests that produced timber the British wanted, where movement, jhum, hunting and collecting fruit were barred.

Common errors and misconceptions

• Misconception: The railways were built mainly to serve Indian needs. Correct: They were designed primarily to move raw materials to ports and distribute British goods, and most of the cost was paid by Indian tax revenue.
• Misconception: The Permanent Settlement made zamindars improving landlords. Correct: Zamindars were revenue collectors who often failed to pay the high fixed demand, and many estates were auctioned.
• Misconception: The Permanent Settlement spread across all of India. Correct: It was rarely extended beyond Bengal, and temporary settlements were made in territories annexed in the nineteenth century.
• Misconception: Mahalwari and ryotwari settlements are the same. Correct: Mahalwari was made with the village or mahal, ryotwari directly with the ryot.
• Misconception: All handloom weaving disappeared after Manchester imports arrived. Correct: Handloom cloth production almost trebled between 1900 and 1940, helped by the fly shuttle.
• Misconception: Indian businessmen controlled Indian industry before the First World War. Correct: European Managing Agencies controlled a large sector, and in most instances Indian financiers provided the capital while the European Agencies made all investment and business decisions.
• Misconception: The forest laws only affected the cutting of timber. Correct: They also barred jhum, hunting and collecting fruit in Reserved Forests and created forest villages that supplied labour.

Exam-style questions with model answers

Q1. Who was the Permanent Settlement made with, and what condition did it set for the revenue demand? [2 marks]

1. It was made with the rajas and taluqdars of Bengal, who were classified as zamindars.
2. The revenue demand was fixed in perpetuity, and a zamindar who did not pay regularly could have his estate auctioned.

Q2. Distinguish between the mahalwari and the ryotwari settlements. [3 marks]

1. In mahalwari the unit was the village or mahal, and the estimated revenue of each plot was added up for the village; in ryotwari the revenue was settled directly with the ryot after his fields were surveyed separately.
2. Under mahalwari the village headman was charged with collecting and paying the revenue, whereas under ryotwari the cultivator himself was the party to the settlement.
3. Mahalwari was devised by Holt Mackenzie for the North Western Provinces; ryotwari was tried by Alexander Read, developed by Thomas Munro and spread over the south.

Q3. In 1811 to 1812 piece-goods accounted for 33 per cent of India's exports, but by 1850 to 1851 they were no more than 3 per cent. By 1850 cotton piece-goods were over 31 per cent of the value of Indian imports, and by the 1870s over 50 per cent. (a) What do these figures show about exports and imports of cloth? [2] (b) Give two reasons for the change. [2] [4 marks]

1. Piece-goods fell sharply as a share of India's exports, from 33 per cent to no more than 3 per cent.
2. Cotton piece-goods grew as a share of imports, to over half the value of Indian imports by the 1870s.
3. English industrial groups pressed for import duties on cotton textiles so that Manchester goods could sell in Britain without competition, and persuaded the Company to sell British manufactures in India.
4. Machine-made imports were so cheap that weavers could not easily compete with them.

Q4. Raw cotton imports into Britain from America were over 2,000,000 bales in 1861 and 55,000 bales in 1862. Between 1860 and 1864 cotton acreage in the Bombay Deccan doubled, and ryots were offered Rs 100 as an advance for every acre planted with cotton. After 1865 American supplies revived, and the next revenue settlement raised the demand by 50 to 100 per cent. Explain how these changes led to the Deccan revolt of 1875. [5 marks]

1. The American Civil War cut British imports from America from over 2,000,000 bales to 55,000 bales, so Britain turned to India for cotton.
2. Bombay merchants gave advances to sahukars, who passed credit on to rural moneylenders, so ryots found easy credit and were given Rs 100 as an advance for every acre of cotton, and cotton acreage doubled between 1860 and 1864.
3. The boom helped some rich peasants, but for the large majority cotton expansion meant heavier debt.
4. After 1865 American cotton revived and Indian exports fell, so moneylenders stopped long-term credit and demanded repayment, while the revenue demand rose by 50 to 100 per cent.
5. Ryots, enraged that moneylenders refused loans and broke customary norms, attacked sahukars in 1875 and burnt their account books and bonds.

Q5. Explain how the Company's control and Manchester imports affected Indian weavers. [5 marks]

1. Once it held political power, the Company claimed a monopoly right to trade and appointed gomasthas to supervise weavers, collect supplies and examine cloth.
2. One way of stopping weavers from dealing with other buyers was the system of advances, after which they had to hand their cloth to the gomastha.
3. Gomasthas were outsiders who punished weavers for delays, often by beating and flogging, and the price paid was miserably low, so many weavers deserted villages or took to agricultural labour.
4. Manchester imports, helped by import duties in Britain, collapsed the export market and glutted the local market with cheap machine-made cloth.
5. When American supplies were cut off, the price of raw cotton shot up and weavers could not buy good cotton at fair prices, and later Indian factories flooded the market with machine goods.

Q6. Describe how colonial forest policy affected forest communities. [6 marks]

1. The British declared forests state property and classified some as Reserved Forests that produced timber they wanted.
2. In Reserved Forests people could not move freely, practise jhum, collect fruits or hunt, so many were forced to move in search of work.
3. Forest villages gave jhum cultivators small patches of land in return for labour for the Forest Department, which thus got cheap labour.
4. Tribal chiefs lost much of their administrative power and had to follow British laws and pay tribute.
5. Traders, moneylenders and contractors drew tribals into debt and into plantation and mine work on miserably low wages.
6. Many tribal groups disobeyed the rules or rebelled, as in the revolt of Songram Sangma in Assam and the forest satyagraha in the Central Provinces.

Q7. In 1901 there were 584,000 workers in Indian factories, and by 1946 there were over 2,436,000. Only 5 per cent of the total industrial labour force worked in registered factories in 1911, and 10 per cent in 1931. (a) How far did factory employment grow between 1901 and 1946? [2] (b) What do the 1911 and 1931 shares show? [2] [4 marks]

1. Factory employment grew from 584,000 to over 2,436,000.
2. That is more than four times the 1901 number.
3. The shares show that only a small proportion of industrial workers were in registered factories, though the share rose from 5 to 10 per cent.
4. The rest worked in small workshops and household units, so small-scale production predominated.

Key takeaways

• The colonial economy turned India from a self-sufficient agricultural economy with crafts into a supplier of raw materials for British industry and a market for British goods.
• The railways integrated the internal market but were designed primarily to carry raw materials to ports and British goods inland, and most of the cost was paid from Indian tax revenue.
• The Permanent Settlement of 1793 fixed the revenue of zamindars in perpetuity, but a high demand led to defaults and many auctions, which zamindars countered with fictitious sales.
• Mahalwari settled revenue village by village and was revised periodically; ryotwari settled directly with the ryot, and in the Bombay Deccan the land was resurveyed every 30 years, so the demand was not permanent in either.
• In the Bombay Deccan, a high revenue demand, debt and the collapse of the cotton boom led the ryots to attack moneylenders in 1875.
• Company control, Manchester imports, dear raw cotton and factory-made goods hit weavers hard in the nineteenth century, though handloom cloth production later almost trebled between 1900 and 1940.
• Western Indian cotton mills grew from 1854, with capital that came partly from the China trade, but European Managing Agencies controlled a large sector and most industrial workers stayed outside registered factories.
• Colonial forest policy made forests state property, created Reserved Forests and forest villages, and pushed many tribal people into debt and plantation work, while many groups disobeyed the rules or at times rose in revolt.

Test yourself

What did the Company gain when it became Diwan of Bengal in 1765?

It became the chief financial administrator of the territory and gained the right to collect revenue in Bengal, Bihar and Odisha.

Why was the Permanent Settlement rarely extended beyond Bengal?

After 1810 prices rose, but the fixed demand meant the state could claim no share of the higher income, so temporary settlements were made in territories annexed in the nineteenth century. Many officials, influenced by David Ricardo, also thought that the state should tax any surplus above the average rent, and that the history of Bengal confirmed his theory, because the zamindars there seemed to have turned into rentiers living on rental income.

What were nij and ryoti cultivation of indigo?

In nij cultivation the planter grew indigo on land he controlled, using hired labour. In the ryoti system ryots signed a contract and received advances to grow it.

What was the job of a jobber in a mill?

A jobber recruited new workers from his village for industrialists, helped them settle in the city and gave them money in a crisis, but also demanded gifts and money.

What were Reserved Forests?

They were forests that produced timber the British wanted, where people could not move freely, practise jhum, collect fruits or hunt animals.

What did the Deccan Riots Commission conclude about the cause of the revolt?

It reported that the government revenue demand was not the cause of peasant anger and blamed the moneylenders instead.