Land Revenue Systems and Economic Impact of British Rule Notes

The economic policies of the British East India Company and later of the Crown changed the Indian economy completely. The land revenue systems decided who owned the land and how much the farmer had to pay, and they shaped rural India for more than a century. For the UPSC, this topic is asked in the Prelims through the names of the systems, their creators and regions, and in the Mains through questions on the drain of wealth, de-industrialisation and the commercialisation of agriculture. This note explains the three land revenue systems, the economic effects of British rule and the early growth of modern industry in simple language.

Why Land Revenue Was Important for the British

Land revenue was the largest source of income of the colonial government, and it paid for the army, the administration and the wars of the Company. After the Company got the Diwani of Bengal in 1765, it tried many experiments to collect the maximum revenue with a minimum of cost. The main aim was not the welfare of the farmer but a steady and regular income. This is why the revenue demand was very high, often one-third to one-half of the produce, and it had to be paid in cash even when the harvest failed.

The Three Land Revenue Systems

The Permanent Settlement (1793)

Lord Cornwallis made the zamindars the owners of the land, and the revenue demand was fixed for ever; the Company took about 10/11 of the collection and the zamindar kept about 1/11. The famous Sunset Law said that if a zamindar did not pay the dues before sunset on the fixed date, his estate would be auctioned. The result was that many old zamindars lost their lands, and a new class of absentee landlords and moneylenders rose. The Company gained a fixed income, but it lost the benefit when the prices and production increased later. The peasants were at the mercy of the zamindars, and the rural society became very unequal.

The Ryotwari System

In this system, the government made a direct settlement with the cultivator, who was treated as the owner so long as he paid the revenue. It was started in Madras under Thomas Munro and Alexander Read and extended to Bombay. The demand was high, between 33 and 50 per cent of the produce, and was fixed for a period of 20 to 30 years. The main problem was the heavy and uncertain demand and the power of the revenue officials, so the peasants often borrowed from moneylenders. This led to the Deccan Riots of 1875.

The Mahalwari System

Under this system, the revenue was fixed for the whole village or estate (mahal), and the village headman or landlords were responsible for collecting and paying the amount. Holt Mackenzie suggested it in 1822, and Regulation IX of 1833 under Robert Merttins Bird improved it. The land in the villages was surveyed and the rights of each cultivator were recorded. It was thought to be fairer than the earlier systems, but it was complicated and costly to manage.

Commercialisation of Agriculture

The British encouraged farmers to grow cash crops like indigo, cotton, jute, opium, tea, sugarcane and oilseeds for the market, since they needed raw materials for their industries. The farmers did not gain much, because the profit went to the traders and moneylenders, and the area under food crops decreased. This increased the danger of famine. Indigo planters forced the peasants to grow indigo, which caused the Indigo Revolt of 1859-60 in Bengal. The Great Famine of 1876-78 and the many famines that followed, which were investigated by the Famine Commissions, showed the weakness of the policy.

De-industrialisation and the Decline of Handicrafts

Before British rule, Indian cotton and silk textiles, such as the muslin of Dhaka, were famous in the world. After the Industrial Revolution, cheap machine-made British goods entered India with little or no import duty, while Indian goods faced heavy duties in Britain. The Charter Act of 1813 ended the Company's monopoly of trade in India, except in tea and trade with China, and opened the market for private British traders. As a result, Indian handicrafts declined, many artisans lost their jobs and returned to agriculture, and the old centres of crafts like Dhaka and Murshidabad became poor. India changed from an exporter of finished goods to an exporter of raw materials and an importer of manufactured goods.

The Drain of Wealth

The drain of wealth means the one-sided transfer of India's resources to Britain without a matching return. The idea was first explained by Dadabhai Naoroji, who raised it in 1867 and discussed it in his book Poverty and Un-British Rule in India (1901). R. C. Dutt in the Economic History of India and other nationalists supported the theory. The main parts of the drain were the Home Charges (salary, pension and expenses of British officers and the India Office in London), the interest on public debt and railways, profits of British businessmen, and the cost of the army used in British wars outside India. The drain made India poor and was a main subject of the early nationalist criticism, as it showed that British rule was an economic burden.

Railways, Telegraph and Early Industry

The first railway line ran from Bombay to Thane in 1853 during the time of Lord Dalhousie. The railways were built mainly to carry raw materials to the ports and to move the army, with a guaranteed profit for British companies, but they also linked the country and helped the growth of nationalism. The first modern cotton mill was started in Bombay in 1854 and the first jute mill at Rishra in Bengal in 1855. The Tata Iron and Steel Company was set up in 1907 at Jamshedpur by Jamsetji Tata, as a result of the Swadeshi spirit. Modern industry grew slowly, because the government did not protect Indian industry and followed a policy of free trade that favoured Britain.

Effects on Indian Society

• The old zamindars and village economy broke down, and new classes like moneylenders and absentee landlords came up.
• Poverty, debt and landlessness of the peasants increased, and they rose in revolts such as the Santhal rebellion and the Indigo Revolt.
• A modern middle class and a working class developed in towns, and they later led the national movement.
• The economy of India became linked with the world market, but on unequal terms.

Mains Angle: Evaluate the Land Revenue Policies

A common Mains question asks you to evaluate the British land revenue policy. A good answer has three parts. First, state the aim: a stable income for the colonial state. Second, compare the systems on the basis of the owner of the land, the burden on the peasant and the regional spread, using a small table. Third, give the results: the peasants lost security, rural debt grew, the commercialisation increased famine risk, and a class of intermediaries came between the state and the cultivator. You can add that the Permanent Settlement created a loyal class of zamindars who supported British rule, and that the revenue policy was one of the main causes of agrarian revolts in the 19th century, like the Santhal Hul of 1855-56 and the Pabna revolt of 1873. In the conclusion, mention that the nationalists used these facts to build the economic critique of colonial rule.

Practice Questions

• Q1. Which system fixed the land revenue permanently? Answer: The Permanent Settlement of 1793.
• Q2. In which system was the village the unit of settlement? Answer: The Mahalwari system.
• Q3. Who explained the drain of wealth in Poverty and Un-British Rule in India? Answer: Dadabhai Naoroji.
• Q4. Which Act of 1813 opened Indian trade to private British traders? Answer: The Charter Act of 1813.
• Q5. Where was the first Indian jute mill set up in 1855? Answer: Rishra, near Calcutta.

Quick Revision

• Permanent Settlement: Cornwallis, 1793, zamindars, Bengal-Bihar-Odisha.
• Ryotwari: Munro and Read, Madras and Bombay, direct with the peasant.
• Mahalwari: Holt Mackenzie, village as the unit, North India.
• Drain of wealth: Dadabhai Naoroji and R. C. Dutt.
• First railway 1853; first cotton mill 1854; TISCO 1907.

Read this note with the notes on the Revolt of 1857 and the notes on Moderates and Extremists.

Frequently Asked Questions (FAQ)

Who introduced the Permanent Settlement and when?

Lord Cornwallis introduced the Permanent Settlement in Bengal in 1793.

What was the Sunset Law?

It said that a zamindar's estate would be auctioned if he did not pay the revenue before sunset on the due date.

Who started the Ryotwari system?

Thomas Munro and Captain Alexander Read started the Ryotwari system in Madras, and it was later extended to Bombay.

What is the Mahalwari system?

In the Mahalwari system, the revenue was settled with the village community (mahal) or its headman, and it was used in North India.

Which region had the Permanent Settlement?

The Permanent Settlement was in Bengal, Bihar, Odisha and parts of Banaras.

What is the drain of wealth theory?

It states that India's wealth was transferred to Britain without a return. Dadabhai Naoroji and R. C. Dutt explained it.

Which book was written by Dadabhai Naoroji on the drain?

Dadabhai Naoroji wrote Poverty and Un-British Rule in India (1901).

What is the commercialisation of agriculture?

It means growing cash crops like indigo, cotton and jute for the market, instead of food crops for local use.

Which Act ended the East India Company's trade monopoly in India?

The Charter Act of 1813 ended the Company's monopoly of trade in India, except in tea and trade with China.

When was the first railway line opened in India?

The first line between Bombay and Thane opened in 1853.

What led to the Deccan Riots of 1875?

Heavy revenue demand under the Ryotwari system and the debts to moneylenders led to the Deccan Riots.

Why is this topic important for the UPSC?

It is asked in the Prelims through names and regions of land systems, and in the Mains through questions on colonial economic policy and its effects.