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Grant of Diwani and Financial Powers

On 12 August 1765, the Mughal emperor appointed the East India Company as the Diwan of Bengal. As Diwan, the Company became the chief financial administrator of the territory under its control. Now it had to think of administering the land and organising its revenue resources. This had to be done in a way that could yield enough revenue to meet the growing expenses of the company. A trading company had also to ensure that it could buy the products it needed and sell what it wanted.Grant of DiwaniGrant of DiwaniOver the years the Company also learnt that it had to move with some caution. Being an alien power, it needed to pacify those who in the past had ruled the countryside, and enjoyed authority and prestige. Those who had held local power had to be controlled but they could not be entirely eliminated.

Growth of Revenue

The Company had become the Diwan, but it still saw itself primarily as a trader. It wanted a large revenue income but was unwilling to set up any regular system of assessment and collection. The effort was to increase the revenue as much as it could and buy fine cotton and silk cloth as cheaply as possible. Within five years the value of goods bought by the Company in Bengal doubled. Before 1865, the Company had purchased goods in India by importing gold and silver from Britain. Now the revenue collected in Bengal could finance the purchase of goods for export.

Growth of Problems for Common People

Soon it was clear that the Bengal economy was facing a deep crisis. Artisans were deserting villages since they were being forced to sell their goods to the Company at low prices. Peasants were unable to pay the dues that were being demanded from them. Artisanal production was in decline, and agricultural cultivation showed signs of collapse. Then in 1770 a terrible famine killed ten million people in Bengal. About one-third of the population was wiped out.

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FAQs on Grant of Diwani and Financial Powers - Social Studies (SST) Class 8

1. What is the significance of the Grant of Diwani and Financial Powers in class 8?
Ans. The Grant of Diwani and Financial Powers in class 8 refers to the transfer of administrative and financial control to the British East India Company by the Mughal emperor Shah Alam II. It marked the beginning of British control over the revenue administration of Bengal, Bihar, and Orissa.
2. How did the Grant of Diwani and Financial Powers impact the British East India Company?
Ans. The Grant of Diwani and Financial Powers allowed the British East India Company to take over the collection of revenue in Bengal, Bihar, and Orissa. This gave the company immense financial power and control over the resources of the region, which further strengthened their position in India.
3. Who granted the Diwani rights to the British East India Company?
Ans. The Diwani rights were granted to the British East India Company by the Mughal emperor Shah Alam II in 1765. This grant gave the company the authority to collect revenue and administer the region on behalf of the emperor.
4. What were the consequences of the Grant of Diwani and Financial Powers for the Indian economy?
Ans. The Grant of Diwani and Financial Powers had significant consequences for the Indian economy. It led to the drain of wealth from India to Britain, as the British East India Company exploited the resources and collected revenue for their own benefit. This exploitation had a detrimental effect on the Indian economy, leading to poverty and stagnation.
5. How did the Grant of Diwani and Financial Powers pave the way for British colonial rule in India?
Ans. The Grant of Diwani and Financial Powers was a crucial step in the establishment of British colonial rule in India. It gave the British East India Company the financial and administrative control they needed to expand their influence and assert their authority over the region. This paved the way for further British conquests and the eventual establishment of direct British rule in India.
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