Bipan Chandra Summary: Structure of Govt. & the Economic Policies of the British Empire in India | Famous Books for UPSC Exam (Summary & Tests) PDF Download

Administrative Policies of the East India Company

The East India Company, after acquiring a vast empire in India, had to establish suitable methods of governance to control and manage it effectively. This involved adapting administrative policies over the years to achieve its main goals, which were to increase profits, enhance the profitability of Indian possessions for Britain, and maintain British control over India.

East India Company

Objectives of the East India Company

• Profit Maximization:

  The primary aim of the East India Company was to increase its profits through trade and governance in India.

• Enhancing British Interests:

  Another key objective was to boost the profitability of Indian territories for the benefit of Britain.

• Maintaining British Control:

  The Company focused on sustaining and strengthening British dominance over India, prioritizing this over all other purposes.

Focus on Law and Order

• Maintaining Stability:

  The Company emphasized maintaining law and order to ensure uninterrupted trade and resource exploitation in India.

Evolution of Administrative Structure

• Early Governance in Bengal:

  Initially, the Company officials aimed to continue profitable trade and tax collection without introducing significant changes in Bengal's administration.

• Dual Government Period (1765-1772):

  During this time, Indian officials operated under British control, highlighting a division of power and responsibility.

• Transition to Direct Administration:

  The Company took over direct administration of Bengal in 1772, but challenges arose due to inherent issues in commercial governance.

Challenges Faced by the East India Company

• Political Power Dynamics:

  The Company, primarily a commercial entity, faced challenges in wielding political power over millions in India from a distant English authority.

• Control and Coordination:

  Establishing effective control over officials and territories in India, including Bengal, Madras, and Bombay, presented logistical hurdles.

Commercial Exploitation and Criticisms

• Profit-driven Practices:

  Company officials engaged in illegal trade practices and exploitation, leading to immense personal wealth gains.

• Social Backlash:

  The Company's prosperity fueled resentment among other British groups, prompting efforts to break the Company's trade monopoly and condemn its officials.

Understanding the Conflict Between the British East India Company and British Government

In the 18th century, the British East India Company faced opposition from British political figures due to concerns about its power and influence in India. This conflict led to significant changes in how the Company was governed and supervised by the British Government.

Targets and Motives

• Targets: Clive and Warren Hastings were the main targets of criticism by those opposed to the Company.
• Motives: Opponents aimed to discredit the Company by condemning its officials (referred to as "nabobs") to reduce its popularity and influence.

Political Interests and Control

• Benefit Seekers: Many ministers and members of Parliament sought personal gain from Bengal's acquisition and wanted the Company to pay tribute to the British Government.
• Control Concerns: British politicians feared that the Company's power and wealth could corrupt British politics and society.

Corruption and Influence

Parliamentary politics in the late 18th century were highly corrupt, with the Company and its officials buying seats in the House of Commons.
There was a fear that the Company, with its Indian resources, could gain excessive influence over the British government.

Challenges and Reforms

• Opposition to the Company's exclusive privileges grew, especially from advocates of free-trade capitalism like Adam Smith.
• The British Government intervened through the Regulating Act of 1773 to oversee the Company's operations more closely.

Regulating Act of 1773

• Changes: Altered the structure of the Company's governing body and allowed British Government supervision.
• Provisions: Introduced a Governor-General in India and established a Supreme Court in Calcutta for administering justice.

Despite these efforts, the Regulating Act faced challenges in effectively controlling the Company's actions, highlighting the ongoing struggle for oversight and balance of power between the Company and the British Government.

Evolution of British Governance in India

In the historical context of British governance in India, the structure and dynamics of power underwent significant changes. Let's delve into the transformation that occurred through key legislative acts and administrative developments.

The Regulating Act of 1773

• The Regulating Act of 1773 in India altered the power dynamics by placing the Governor-General at the mercy of his Council.
• Under this act, three Council members could outvote the Governor-General on any issue, leading to potential deadlocks in decision-making.
• Warren Hastings, the first Governor-General under this Act, frequently clashed with his Council members, causing administrative disruptions.
• The Act failed to address the growing conflict between the East India Company and its opponents in England.
• The administration of Indian territories by the Company was plagued by corruption, oppression, and economic mismanagement.

Pitt's India Act of 1784

• Due to the shortcomings of the Regulating Act and evolving British political needs, Pitt's India Act of 1784 was passed.
• This Act granted the British Government supreme control over the East India Company's affairs and administration in India.
• It established a Board of Control consisting of six Commissioners, including two Cabinet Ministers, to oversee Indian affairs.
• The Board of Control guided the Court of Directors and the Government of India and could issue direct orders in critical matters.
• The Act restructured the governance in India, placing power in the hands of the Governor-General and a Council of three members.
• The Act also subordinated the Bombay and Madras Presidencies to Bengal in areas of war, diplomacy, and revenues.

Impact and Implications

• The Pitt's India Act marked a significant shift in British colonial control over India, aiming to streamline governance and centralize authority.
• The East India Company's monopoly on trade was preserved, with the Company serving as a tool of British national interests.
• The Act ensured that the British ruling classes across various sectors benefited from India's resources and strategic importance.
• The Directors of the East India Company retained the power to appoint and dismiss British officials in India, maintaining their influence. 

British Control and Economic Policies in India (1757-1857)

The British established a firm grip over India through various Acts of Parliament and economic policies aimed at maximizing their economic benefits and controlling the Indian subcontinent.

Changes in Governance

• The Pitt's India Act of 1786 gave the Governor-General authority to overrule the Council on matters crucial for safety, peace, and the Empire's interests in India.
• The Charter Acts of 1813 and 1833 gradually eroded the East India Company's powers, ending its trade monopolies in India and China.
• The Company's debts were taken over by the Government of India, which also guaranteed a 10% dividend to its shareholders.
• The Governor-General in Council became the de facto ruler of India, under the British Government's oversight, with Indians having no say in the administration.

Administrative Structure

• The British administration in India excluded Indians from positions of authority, with power vested in the Court of Directors of the Company, the Board of Control representing the British Government, and the Governor-General.
• The Governor-General, with the power to overrule his Council, effectively governed India on behalf of the British Government.

Purposes of British Rule

• The primary aim of British rule was to economically exploit India for the benefit of British interests, including the East India Company and manufacturers in Britain.
• India was expected to bear the costs of its conquest and foreign rule, with economic policies designed to maximize British gains at India's expense.

Economic Policies

• From 1600 to 1757, the East India Company operated as a trading corporation, importing goods into India in exchange for Indian products, primarily textiles and spices, which were sold abroad.
• The Company's profits stemmed from the export of Indian goods, leading it to seek new markets for Indian products in Britain and other countries.
• This strategy boosted Indian manufacturing and trade, demonstrating why Indian rulers supported the establishment of the Company's factories in India.

Impact of British Trade Policies on Indian Textiles

During the 18th century, British manufacturers felt threatened by the popularity of Indian textiles in England, leading to changes in dress fashion and attempts to restrict Indian textile trade.

Impact on British Market

• The British government, under pressure from local manufacturers, passed laws to ban Indian textiles, imposing heavy fines and duties on their import.

Company Influence and Exploitation

• After the Battle of Plassey in 1757, the East India Company gained more control over Bengal, using its power to manipulate trade and exploit Indian weavers.
• The Company forced weavers to sell at low prices, restricted their freedom to work for others, and monopolized resources, leading to exploitation and financial losses for the weavers.

Decline of Indian Textile Industry

• The British government protected its own industrial growth by imposing high duties on Indian textiles entering England, impacting the Indian market negatively.
• With the Industrial Revolution in Britain, British industry flourished, leading to a decline in Indian handicrafts as they struggled to compete with the cheaper British goods.

Overall Impact

• The Industrial Revolution propelled Britain's economy forward, transforming its economic ties with India and drastically altering the socio-economic landscape.
• This period marked a significant shift towards modern machines, factories, and capitalism, which fueled Britain's industrial expansion at the expense of Indian artisans.

British Industrial Revolution

The Industrial Revolution in Britain was a pivotal period in history that transformed society through rapid economic growth, technological advancements, and significant societal changes. Let's break down the key factors that contributed to this revolutionary era.

Expansion of British Overseas Trade

• British trade grew extensively over centuries by dominating foreign markets through wars and colonization.
• Export markets in regions like Africa, the West Indies, India, and more fueled Britain's industrial expansion.
• The colonies and underdeveloped nations provided raw materials to Britain, which, in turn, sold manufactured goods back to them.

Capital Accumulation and Investment

• Britain had accumulated significant capital, mainly in the hands of merchants and industrialists, facilitating investments in new machinery and factories.
• Wealth extracted from colonies like India played a crucial role in financing industrial growth.

Population Growth and Labor Supply

• The rapid increase in the British population after 1740 provided the growing industries with a larger and more affordable labor force.
• Population doubled within fifty years after 1780, meeting the demand for labor in expanding industries.

Government Influence and Market Expansion

• The British government, influenced by commercial and manufacturing interests, aggressively competed for markets and colonies with other nations.

Technological Advancements

• Technological developments, including inventions like the spinning jenny and steam engines, drove industrial growth.
• Manufacturers capitalized on existing technology and drove new inventions to meet the demands of expanding markets.

Societal Impact of the Industrial Revolution

• The Industrial Revolution fundamentally altered British society, leading to rapid economic progress and laying the foundation for modern living standards.
• Disparities in living standards between advanced and underdeveloped nations widened due to the absence of industrialization in the latter.

Impact of the Industrial Revolution on Society and Trade Relations

The Industrial Revolution brought about significant changes in Britain, transforming its social structure and trade relationships. Let's delve into the key points and elaborate on the implications of this period.

Urbanization and Social Classes

• Urban Growth: As industries flourished, more men moved to factory towns, leading to increased urbanization.
• New Social Classes: Two distinct classes emerged—the industrial capitalists who owned factories and the laborers who worked for daily wages.
• Living Conditions: The laboring poor faced challenges, uprooted from rural life to live in crowded, unsanitary cities with inadequate housing.
• Working Conditions: Workers endured long hours (up to 14-16 hours a day) in factories and mines, with low wages and even children as young as 4 or 5 working in harsh conditions.
• Improvements: It wasn't until the mid-19th century that some improvements in living standards and incomes began to occur.

  Impact on Indian Trade Relations

• Rise of Manufacturers: A powerful class of manufacturers in Britain sought to promote exports of their products to India and import raw materials.
• Conflict with the East India Company: British manufacturers clashed with the East India Company to expand their trade interests, leading to the abolition of the Company's trade monopoly in 1813.
• British Dominance: Following the end of the monopoly, British goods flooded Indian markets, threatening traditional Indian industries.
• Government Policies: The British government in India enforced policies favoring free trade, promoting British goods and aiming for modernization in India to boost consumption of Western products.

Consequences for India

• Economic Colonization: India faced becoming an economic colony of industrial England, with Indian handicrafts struggling against machine-made British products.
• Trade Practices: India had to accept British goods at minimal tariffs, while British officials advocated reducing land revenue to facilitate Indian purchase of foreign goods.
• Modernization Efforts: Efforts were made to modernize India to enhance the demand for Western goods among the Indian populace.

Impact of British Colonial Trade Policies on Indian Handicraft Industry

During the colonial period, Indian hand-made goods faced significant challenges due to the emergence of British mills, which were rapidly advancing their production capacity through innovations like steam power. Let's explore how these trade dynamics affected Indian industries:

Protection of Indian Industry

If a government prioritized Indian interests, it would have shielded Indian industries with high tariffs and adopted Western techniques, as seen in the histories of Britain, France, Germany, and the USA.

Impact of British Imports

British goods flooded Indian markets without hindrance, leading to a sharp rise in foreign imports. For instance, British cotton imports surged from £110,000 in 1813 to £6,300,000 in 1856.

Discriminatory Trade Practices

While Indian products faced heavy duties entering Britain, British goods enjoyed free access to Indian markets. Even when British industries surpassed Indian handicrafts technologically, Indian exports faced high tariffs in Britain.

Prohibitive Import Duties

Indian goods encountered exorbitant duties in Britain, leading to a drastic decline in Indian exports. For instance, Indian calicos faced a 67% duty, Indian muslins 37%, and Indian sugar over three times its cost price.

British Commercial Policy Critique

British historian H.H. Wilson criticized the unfairness of British trade policies, highlighting how prohibitive duties and decrees stifled Indian industries to benefit British manufacturers, ultimately leading to the demise of Indian production capabilities.

During the period of British colonization in India, the economic policies implemented by the East India Company had significant effects on the Indian economy. Let's break down the key points and implications of these policies in simpler terms.

Impact of British Economic Policies

• Shift in Export Focus

  Instead of exporting finished goods, India was compelled to export raw materials like raw cotton, raw silk, indigo, tea, and food grains that were essential for British industries.

• Opium Trade

  British merchants promoted the sale of Indian opium in China for profits, despite its harmful effects. This trade brought significant revenues to the British and the Company's administration in India.

• Objective of British Trade Policy

  The primary aim of the East India Company was to make India a consumer of British goods and a supplier of raw materials for British industries.

Drain of Wealth

• Definition of Economic Drain

  The British systematically transferred a portion of India's wealth to Britain without providing adequate economic benefits in return. This practice was unique to British rule.

• Utilization of Revenues

  Unlike previous Indian rulers who reinvested revenues within the country, the British redirected a substantial part of the taxes and income extracted from India back to Britain, depleting India's resources.

• Initial Drains from Bengal

  The drain of wealth from Bengal began in 1757 when Company officials started sending immense fortunes extracted from various Indian sources back to Britain, significantly surpassing local revenue collections.

• Company's Control and Exploitation

  The East India Company, especially after acquiring control over Bengal's revenues, intensified the drain by purchasing Indian goods with these revenues and exporting them to England, significantly impacting Bengal's economy.

Economic Drain and Development of Transport in Colonial India

In colonial India, there was a significant outflow of wealth to England, known as the economic drain. This was due to various factors such as salaries of English officials, trading fortunes of English merchants, and more. Additionally, the development of transport infrastructure played a crucial role in British economic interests in India.

Economic Drain from India to England

• British officials and merchants in India sent a large portion of their earnings back to England, contributing to the economic drain.
• Estimating the exact amount of this drain remains challenging, but it was widely acknowledged by British authorities between 1757 and 1857.
• Lord Ellenborough, a prominent figure, openly admitted that India was sending millions of pounds annually to Britain with minimal returns.
• John Sullivan, another official, compared the economic system to a sponge, absorbing wealth from India and transferring it to England.

Development of Transport Infrastructure

• Transportation means in India were limited to bullock carts, camels, and packhorses until the mid-19th century.
• Recognizing the need for efficient transport for trade, the British introduced steamships on rivers and initiated road improvements, including the Grand Trunk Road project.
• Significant progress came with the introduction of railways, a technology rapidly expanding in England during the 1830s and 1840s.
• Railways were seen as vital for British interests in India, facilitating the movement of goods, raw materials, and troops across the vast subcontinent.

Development of Railways in Colonial India

The history of railway development in colonial India is a tale of evolving transportation methods and the interplay of economic, political, and imperial interests. Let's delve into the key points that shaped the railway system in India during this period.

Railways in Colonial India

Early Railway Development in India

• The Beginning: In 1831, the idea of constructing a railway in India surfaced in Madras, initially envisioning horse-drawn wagons. The shift to steam-driven railways was proposed in 1834 in England.
• Government Support: England's railway supporters, financiers, and merchants trading with India, along with textile manufacturers, advocated for the construction and operation of Indian railways by private companies. These companies were guaranteed a minimum return on their investment by the Government of India.
• First Railway Line: The first railway line, connecting Bombay to Thana, commenced operations in 1853.

Lord Dalhousie's Vision

• Rapid Expansion: Lord Dalhousie, Governor-General from 1849, championed extensive railway development. In 1853, he outlined a plan for four main trunk lines to connect inland regions with major ports and interlink different parts of the country.

Evolution of Railway Construction

• Transition to State Initiatives: By 1869, over 4,000 miles of railways had been constructed by guaranteed companies. However, this system was costly and sluggish, prompting the government to undertake new railway projects as state ventures.
• Public-Private Partnership: Post-1880, railways were built through a mix of private and state efforts. By 1905, nearly 28,000 miles of railways were operational.

Key Aspects of Indian Railway Development

• British Investment Dominance: The bulk of the over 350 crore rupees invested in Indian railways came from British investors, with minimal Indian capital contributions.
• Financial Challenges: For the initial 50 years, railways were financially unprofitable ventures, unable to generate returns on invested capital.
• Imperial Focus: The planning, construction, and management of railways prioritized British economic, political, and military interests in India over local needs.
• Economic Impact: Railway lines primarily served to link India's raw material producing regions to export ports, neglecting the requirements of Indian industries for market access and raw material sources.
• Rate Disparities: Railway rates were structured to benefit imports and exports, disadvantaging internal movement of goods. Some railway lines were constructed at high costs to further British imperial objectives in regions like Burma and North-Western India.

British Colonial Policies in India

During the British colonial rule in India, several key policies were implemented that significantly impacted the lives of the Indian population. Let's delve into these policies and their implications.

The British Postal System and Telegraph Introduction

• The British established an efficient postal system and introduced the telegraph in India.
• In 1853, the first telegraph line from Calcutta to Agra was opened, revolutionizing communication.
• Lord Dalhousie introduced postage stamps, replacing the previous system where cash payment was required when posting a letter.
• Postal rates were standardized, with a uniform rate of half an anna charged for letters across the country.
• Before these reforms, postage rates varied based on distance, sometimes costing as much as four days' wages of a skilled Indian worker.

Land Revenue Policy

• The burden of financing the East India Company's trade, administration costs, and expansion wars fell heavily on Indian peasants or ryots.
• The British heavily taxed the Indian population to sustain their operations in India.
• Historically, the Indian state had collected a share of agricultural produce as land revenue, either directly or through intermediaries like zamindars.

The Permanent Settlement

• In 1765, the East India Company gained control over Bengal, Bihar, and Orissa's revenues (Dewani).
• Initially, the Company attempted to continue the old revenue collection system but later opted for direct management.
• Revenue collection was auctioned to the highest bidders, introducing instability in revenue collection.
• This instability affected cultivation efforts as both farmers (ryots) and revenue collectors (zamindars) were uncertain about future assessments.

Permanent Settlement in Bengal and Bihar

During the late 18th century, a significant land revenue system known as the Permanent Settlement was established in Bengal and Bihar by Lord Cornwallis in 1793. This system introduced key changes in the relationship between landowners, cultivators, and the government.

Conversion of Zamindars into Landlords

Under the Permanent Settlement:

• Zamindars and revenue collectors became landlords.
• They were tasked with collecting land revenue and became the owners of the land in their zamindaris.
• Their ownership rights were made hereditary and transferable.
• Cultivators were reduced to mere tenants, losing traditional rights to the land.

Changes in Rights and Status

Impacts on cultivators:

• Cultivators lost rights to pasture, forest lands, irrigation canals, fisheries, and homestead plots.
• Protection against rent increases was removed.
• Cultivators were left vulnerable to the decisions of zamindars.

Revenue Distribution and Obligations

Revenue sharing and obligations:

• Zamindars were required to give 10/11th of their rental income to the state.
• They retained only 1/11th for themselves.
• Revenue payments were fixed perpetually, regardless of increases in income.
• Zamindars had to pay revenue even in case of crop failures.

Initial Fixation of Revenue

Setting revenue rates:

• Revenue rates were set arbitrarily without consulting zamindars, leading to high rates.
• This approach aimed to maximize revenue for the government.

Recognition of Zamindari Rights

British recognition of zamindari rights:

• Pre-1793, zamindars did not have full proprietary rights over the land.
• The British mistakenly equated zamindars with landlords in England.
• Zamindars were considered tenants of the East India Company, not independent landowners.

Comparison with British Landlords

Differences from British landlords:

• British landlords owned land in relation to both tenants and the state.
• Zamindars, however, were subordinated to the state and paid a significant portion of their income as tax.
• Zamindars risked losing their land if they failed to pay revenue on time.

Land Settlement Systems in Colonial India

In colonial India, the British introduced different land settlement systems to manage land revenue collection and establish control. Let's simplify and elaborate on these systems:

Zamindari Settlement System

• The British decided to recognize zamindars as the owners of land due to political, financial, and administrative reasons.
• They wanted local allies to support their rule and act as a buffer between them and the Indian population.
• Creating a wealthy class of zamindars ensured support for the British government against movements for freedom.
• The Permanent Settlement in 1793 aimed at stabilizing the Company's income by fixing land revenue and simplifying its collection through a small number of zamindars.
• It was expected to boost agricultural production as zamindars would be motivated to improve productivity without fear of increased revenue demands.
• The system was extended to various regions like Orissa, parts of Madras, and Varanasi.

Temporary Zamindari Settlement

• In certain areas like Central India and Avadh, a temporary settlement was introduced where zamindars owned land but had to pay revised revenues periodically.
• Another group of landlords emerged when land was granted to those who served the foreign rulers faithfully.

Ryotwari Settlement System

• Introduced in South and Southwestern India, this system bypassed zamindars and settled land revenue directly with cultivators.
• Advocates argued that under the Permanent Settlement, the Company shared revenues with zamindars, leading to financial losses and oppression of cultivators.
• The Ryotwari system recognized cultivators as landowners, subject to paying land revenue, ensuring direct accountability and ownership.
• Proponents believed it reflected traditional practices and provided a fairer system for cultivators.
• Introduced in Madras and Bombay Presidencies in the early 19th century
• Under this system, the revenue demands were periodically revised every 20 to 30 years
• Peasants did not gain ownership rights and were subject to high revenue demands
• The government treated land revenue as rent rather than a tax
• Peasants had to pay revenue even in case of crop failures due to droughts or floods.

Mahalwari System

• A modified version of the zamindari settlement
• Introduced in the Gangetic valley, North-West Provinces, parts of Central India, and Punjab
• Revenue settlements were made village by village or estate by estate
• Land revenue was periodically revised in Mahalwari areas

Impact of British Policies

• British policies transformed land into a commodity that could be bought and sold
• Land became salable, mortgagable, and alienable
• Peasants lost control over their land and could lose it if they failed to pay revenue
• The introduction of private ownership aimed to ensure revenue collection and encourage land improvement

Consequences

• The traditional stability of Indian villages was disrupted
• Rural society began to undergo significant changes
• The new systems shifted power away from local communities and towards centralized authorities
• Peasants faced economic hardships due to high revenue demands and lack of ownership rights