The work deals on the various impact of British Administration on Indian Economy.

1. 1
Page1
A PROJECT REPORT ON ‘IMPACT OF BRITISH ADMINISTRATION
IN INDIAN ECONOMY’
LEGAL HISTORY-II
Submitted by:-
Aaditya Vasu
2013001
SEMESTER 2nd
DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY,
VISAKHAPATNAM

2. 2
Page2
Index
Page No.
1. Acknowledgement____________________________________________ (3).
2. Introduction_________________________________________________ (4).
3. Reasons for Coming to India____________________________________ (5).
4. Economic Impact_____________________________________________ (6).
4.1 Textile Industry and Trade___________________________________ (6).
4.2 Land Revenue Policy and Land Settlement______________________ (7).
4.3 Commercialization of Agriculture_____________________________ (10).
5. Conclusion__________________________________________________ (14).
6. Bibliography_________________________________________________ (16).

3. 3
Page3
Acknowledgement
Writing a project is one of the most significant academic challenges I have ever faced. Though this
project has been presented by me but there are many people who remained in veil, who gave their
all support and helped me to complete this project.
First of all I am very grateful to my subject teacher Dr. Vishwachandranath Madasu Sir, without
the kind support of whom and help the completion of the project was a herculean task for me. He
donated his valuable time from his busy schedule to help me to complete this project and suggested
me from where and how to collect data.
I am very thankful to the librarian who provided me several books on this topic which proved
beneficial in completing this project.
I acknowledge my friends who gave their valuable and meticulous advice which was very useful
and could not be ignored in writing the project. I also owe special thanks to my parents for their
selfless help which was very useful in preparing the project & without whose support this project
wouldn’t have been prepared.
Aaditya Vasu
Reg No- 2013001
2nd Semester

4. 4
Page4
Introduction
Around the 18th Century a number of significant events took place in the world. One such event
was the Industrial Revolution which took place in England. It gradually spread to other countries
of Europe also. We have read about the Industrial Revolution that took place in England, and also
read about the discovery of new sea and trade routes. One such sea route to India was discovered
by a Portuguese called Vasco da Gama in 1498. As a result, the English, French, Portuguese and
the Dutch came to India for trade. They also used it to spread missionary activities in India. Do
you know that the beginning of modern period in Indian history began with the coming of these
European powers to India? In this lesson you will be reading about the coming of the British to
India and the impact it had on the economic, social and cultural spheres as well.
The Indian economy under British rule underwent a phase of arrested development. This was so,
inspite of the fact that most pre-requisites for economic development were met by India even prior
to the British advent. These were; a prosperous agriculture, significant indigenous industry,
sizable exports,abundance of minerals and ores, and above all, a surplus which could be invested.
Thus, India had the potential for economic growth. With the advent of the British came modern
business, technology, capital, and the political institution. The obvious question that follows is
that, why did not India experience any significant economic progress. The answer to this lies in
the nature of colonial relationship between Britain and India.1
1 Economic-Impact-of-British-Colonial-Rule-in-India.pdf

5. 5
Page5
Reasons for Coming to India
The European and the British traders initially came to India for trading purposes. The Industrial
Revolution in Britain led to the increase in demand for raw materials for the factories there. At the
same time, they also required a market to sell their finished goods. India provided such a platform
to Britain to fulfill all their needs. The 18th
century was a period of internal power struggle in India
and with the declining power of the Mughal Empire, the British officials were provided with the
perfect opportunity to establish their hold over Indian Territory. They did these through numerous
wars, forced treaties, annexations of and alliances with the various regional powers all over the
country. Their new administrative and economic policies helped them consolidate their control
over the country. Their land revenue policies help them keep the poor farmers in check and get
huge sums as revenues in return. They forced the commercialization of agriculture with the
growing of various cash crops and the raw materials for the industries in the Britain. With the
strong political control, the British were able to monopolies the trade with India. They defeated
their foreign rivals in trade so that there could be no competition. They monopolized the sale of all
kinds of raw materials and bought these at low prices whereas the Indian weavers had to buy them
at exorbitant prices. Heavy duties were imposed on Indian goods entering Britain so as to protect
their own industry. Various investments were made to improve
The transport and communication system in the country to facilitate the easy transfer of raw
materials from the farms to the port, and of finished goods from the ports to the markets. Also,
English education was introduced to create a class of educated Indians who would assist the British
in ruling the country and strengthen their political authority. All these measures helped the British
to establish, consolidate and continue their rule over India.
Fig (1): Currency Used by the East India Company.

6. 6
Page6
ECONOMIC IMPACT
The Industrial revolution has helped the English merchants accumulate a lot of capital from the
countries of Asia, Africa and America. They now wanted to invest this wealth in setting up
industries and trade with India. The mass production of goods through machines that we witness
today was pioneered through the Industrial Revolution which occurred first in England during the
late 18th and the early 19th century. This led to a massive increase in the output of finished products.
The East India Company helped in financing and expanding their industrial base. During this time
there was a class of manufacturers in England who benefited more from manufacturing than
trading. They were interested in having more raw materials from India as well as sending their
finished goods back. Between 1793 and 1813, these British manufacturers enjoyed. Ultimately,
they succeeded in abolishing the East India Company’s monopoly of Indian trade. With this India
became an economic colony of Industrial England. Let us learn more about the economic impact
on various Indian industries and trade. The Company Servants captured the trade in Commodities
like salt, betel-nut and tobacco which had so long been banned to all European traders.
Textile Industry and Trade
Earlier, Indian handloom had a big market in Europe. Indian textiles such as cotton, linen, silk and
woolen goods already had markets in Asia and Africa. With the coming of industrialisation in
England, the textile industry there made important headway. There was now a reverse of the
direction of textile trade between Britain and India. There was a massive import of machine made
clothes from English factories to Indian markets. This import of large amount of products
manufactured by mechanical looms in England led to increase threat for the handicraft industries
as the British goods were sold at a much cheaper price.
The British succeeded in selling their goods at a cheap price as foreign goods were given free entry
in India without paying any duty. On the other hand, Indian handicrafts were taxed heavily when
they were sent out of the country. Besides, under the pressure of its industrialists, British
government often imposed a protective tariff on Indian textiles. Therefore, within a few years,
India from being an exporter of clothes became an exporter of raw cotton and an importer of British
clothes. This reversal made a huge impact on the Indian handloom weaving industry leading to its
virtual collapse. It also created unemployment for a large community of weavers. Many of them

7. 7
Page7
migrated to rural areas to work on their lands as agricultural laborers. This in turn put increased
pressure on the rural economy and livelihood. This process of uneven competition faced by the
Indian handloom industry was later dubbed by the Indian nationalist leaders as de-industrialization.
The main aim of the British was to transform India into a consumer of British goods. As a result,
textile, metal work, glass and paper industries were soon out of work. By 1813, the Indian
handicrafts lost both their domestic as well as foreign market. Indian goods could not compete
with the British factory-made products where machines were used. These markets were now
captured and monopolised by Britain by means of war and colonization. From an exporter India
became an importer of these goods. They extracted money from the Indian rulers, merchants,
zamindars and even the common people. Added to this drain were the profit made through trade
and also the salaries of the officials. It was evident that their economic policies were meant to serve
the interests of the East India Company and later the British Empire.
Land Revenue Policy and Land Settlements
Since ancient times, the main source of livelihood for the people were agriculture. Hence, land tax
had formed a principal source of revenue for all the emperors all over the world. In the 18th century,
the main occupation of the Indian people were agriculture. During British rule, revenue from land
kept on increasing, and the reasons for this were many. Earlier the British had come to trade with
India. Gradually they wanted to conquer the vast territory of India for which they needed a lot of
money. They also needed money for trade, projects of the company as well as for the cost of
running the administration. The British carried out a number of land revenue experiments which
caused hardship to cultivators. They extracted taxes from the farmers to finance their policies and
war efforts. Direct and indirect means were carried out to bring about this collection of revenue
for the British. This affected the lives of the people who could not meet their daily needs because
they had to provide the landowners and the collectors their share in the produce. Local
administration failed to provide relief and natural justice to the rural poor. Lord Cornwallis
introduced the Permanent Settlement in Bengal and Bihar in 1793. It made the landlord or
zamindar deposit a fixed amount of money in the state treasury. In return they were recognised as
hereditary owners of land. This made the zamindar the owner of the land. The amount of revenue
to be paid to the Company was fixed for a period of time which made the British financially
secured. Now they knew in advance as to how much revenue was coming in from the State. Over

8. 8
Page8
the next century, partly as a result of land surveys, court rulings and property sales, the change was
given practical dimension2. An influence on the development of this revenue policy were economic
theories which regarded agriculture as the engine of economic development and consequently
stressed the fixing of revenue demands in order to encourage growth. The zamindar also knew
how much revenue was to be paid. So to get surplus revenue for themselves they asked the peasants
to increase production. But, if the zamindar failed to pay the fixed revenue on time his land was
sold off to another zamindar. The British stood to benefit from this settlement as the new class of
zamindars that emerged became their political allies. They supported the British in times of need
and acted as a buffer between them and the peasants. This class, in fact, supported the British
against the freedom movement. In the remnant of the Mughal revenue system existing in pre-1765
Bengal, zamindars, or "land holders," collected revenue on behalf of the Mughal emperor, whose
representative, or diwan supervised their activities3. In this system, the assortment of rights
associated with land were not possessed by a "land owner," but rather shared by the several parties
with stake in the land, including the peasant cultivator, the zamindar, and the
state. The zamindar served as an intermediary who procured economic rent from the cultivator,
and after withholding a percentage for his own expenses, made available the rest, as revenue to the
state.4 Their previous income from land revenue, and that of the Moghul state, was now
appropriated by the British as land tax. However, in the Bengal presidency (i.e. modern Bengal,
Bihar, Orissa and part of Madras) the second layer of Moghul property rights belonging to Moghul
tax collectors (zamindars) was reinforced5. All zamindars in these areas now had hereditary status,
so long as they paid their land taxes, and their judicial and administrative functions disappeared6.
In the Moghul period the zamindars had usually kept a tenth of the land revenue to themselves,
but by the end of British rule their income from rents was a multiple of the tax they paid to the
state. In Bihar, for instance, five-sixths of the total sum levied by 1950 was rent and only one-sixth
revenue7.
2 "The Terms of Trade between the United Kingdom and British India,1858–1947",Economic Development and
Cultural Change. Pg.54
3 Metcalf and Metcalf, 2006.Pg.20 (e-book)
4 Metcalf and Metcalf, 2006.Pg.78 (e-book)
5 Land Reform in Principle and Practice, Oxford University Press,1969 , Pg.158
6 Even in the Mughal Period many Zamindars had held hereditary status because they were from Hindu families
which had been local chieftainsin Pre-Mughal time. Other Zamindars havelifetime status.
7 Ibid

9. 9
Page9
In 1822, the British introduced the Mahalwari Settlement in the North Western Provinces,
Punjab, the Ganga Valley and parts of Central India. Here the basis of assessment was the product
of a mahal or estate, which may be a village or a group of villages. Here all the proprietors of
mahal were jointly responsible for paying the sum of revenue assessed by the government.
Unfortunately it brought no benefit to the peasants as the British demands were very high.
The Ryotwari Settlement was introduced in the beginning of the 19th century in many parts of
Bombay and Madras Presidencies. Here the land revenue was imposed directly on the ryots, the
individual cultivators, who actually worked on the land. The peasant was recognized as the owner
of the land as long as he was able to pay the revenue but the exploitation continued with the high
revenue demands.
Mahalwari System
In this s0 ystem, the basis of assessment was the produce of mahal or estate or all the proprietors
of a mahal were jointly and severally responsible, in their persons and property, for the sum
assessed by the government on the mahal.
 This settlement was made with the old village community jointly and severally. It was a
two-fold settlement.
 The ownership and occupancy right was reserved for the individual peaseants and
cultivation was to be done individually.
 The peasants were jointly responsible for paying the land revenue to the state.
 The mahalwari system was first adopted in Agra and Awadh, and later extended to other
“added (ceded) and conquered” parts of the United Provinces.
Ryotwari System
 First introduced in Tamil Nadu (former Madras) by Thomas Munro and Captain Reed; and
then it was gradually extended to Maharashtra (former Bombay Presidency), East Bengal
and portions of Assam and Coorg (part of Present Karnataka).
 Under this system, the ryots were given the ownership and occupancy rights in land and
they were individually responsible for the payment of land revenue to the state. Thus a
system of present proprietorship was introduced.

10. 10
Page10
Main Features
a) Assessment upon individual cultivators
b) Measurement of field and an estimate of produce.
c) Fixing of government demand at 55% of the produce.
 This System led to perpetual struggle between the money-lenders and the cultivators.
 “The zamindari system had revolutionized the relations between the landlords ( revenue
farmers) and tenants; the ryotwari syatem revolutionized the relations between the
creditors and debtors and thus introduced another grasping and exploiting elements into
the rural society”
 The Primary aims of the ryotwari system were the regular collection of revenue and
amelioration (improvement) of the condition of the ryots. The first aim was realized, but
the second remain unfulfilled.
 It was officially stated that the ryots could not be ejected so long as he paid the rent.
Commercialization of Agriculture
Another major economic impact of the British policies in India was the introduction of a large
number of commercial crops such as tea, coffee, indigo, opium, cotton, jute, sugarcane and oilseed.
Different kinds of commercial crops were introduced with different intentions. Indian opium was
used to balance the trade of Chinese tea with Britain in the latter’s favor. The market for opium
was strictly controlled by British traders which did not leave much scope for Indian producers to
reap profit. Indians were forced to produce indigo and sell it on the conditions dictated by the
Britishers. Indigo was sent to England and used as a dyeing agent for cloth produced in British
towns. Indigo was grown under a different system where all farmers were compelled to grow it on
3/20th part of their land8. Unfortunately cultivation of Indigo left the land infertile for some years.
This made the farmers reluctant to grow it. In the tea plantations ownership changed hands quite
often. The workers on these plantations worked under a lot of hardships.
Commercialization of agriculture further enhanced the speed of transfer of ownership of land
thereby increasing the number of landless laborers. It also brought in a large number of merchants,
traders and middlemen who further exploited the situation. The peasant now depended on them to
8 Metcalf and Metcalf, 2006 , (e-book)

11. 11
Page11
sell their produce during harvest time. Because the peasants now shifted to commercial crops, food
grain production went down. So, less food stock led to famines. It was therefore not surprising that
the peasants revolted. You would read about it in detail in the coming chapters. There was an
enormous drain of wealth from our country to Britain due to the various economic policies.
Additional financial burden was placed on India due to expenditures on salaries, pensions and
training of military and civilian staffs employed by the British to rule India. If this wealth was
invested in India it could have helped enormously improved the economy in this country. Let us
learn how the economic policies implemented by the British changed the social structure of Indian
society. At this time, the East India Company's trade with China began to grow as well. In the early
19th century demand for Chinese tea had greatly increased in Britain; since the money supply in
India was restricted and the Company was indisposed to shipping bullion from Britain, it decided
upon opium, which had a large underground market in China and which was grown in many parts
of India, as the most profitable form of payment9. However, since the Chinese authorities had
banned the importation and consumption of opium, the Company engaged them in the First Opium
War, and at its conclusion, under the Treaty of Nanjing, gained access to five Chinese
ports, Guangzhou, Xiamen, Fuzhou, Shanghai, and Ningbo; in addition, Hong Kong was ceded to
the British Crown. Towards the end of the second quarter of the 19th century, opium export
constituted 40% of India's exports.10
9 Peers 2006,Pg.49
10 Peers 2006,pg. 49

12. 12
Page12
Fig (2): Places where Merchants from London trade in the Early Stage of their rule in India.

13. 13
Page13
Balance incurrent
Prices
( annual average)
Balance in1948-9
prices.
(£ million)
Per-CapitaBalance at
1948-9 prices.
(£)
1835-54 4.5 n.a. n.a.
1855-74 7.3 50.0 0.21
1875-94 13.4 80.0 0.30
1895-1913 16.8 77.6 0.26
1914-34 22.5 59.2 0.19
1935-46 27.9 66.1 0.17
1948-57 -99.9 -97.6 -0.21( India and Pak)
1958-67 -472.7 -384.7 -0.67(India and Pak)
Table 1: India’s Balance on Merchandise and Bullion, 1835-1967
Source: Constant price figures for 1948 onwards deflated by the national income deflator, earlier years by the
price index of M. Mukherjee, National Income of India, Statistical Publishing Society, Calcutta, 1969. The
Indian surplus is understated, and deficit overstated because imports are recorded c.i.f. and exports f.o.b.

14. 14
Page14
Conclusion
There has been a good deal of controversy amongst statisticians about the rate of growth of income in
India in the colonial period. The argument is politically colored and the statistics are poor. For the last
fifty years of British rule there is enough statistical information to make rough estimates of the growth
of national income. My own estimates, which are based largely on work by Blyn and Sivasubramonian,
show no increase in per capita income over the years 1900-46. Other observers have estimates which
show some growth over this period as well as in the period from 185711
. Although I think my estimates
are the best available, I have enough skepticism about the basic agricultural data to believe that the
other estimates could be right for the wrong reasons and that there may have been some rise in per
capita income from 1857 to 1947.
There are no estimates for the movement in income from Clive's conquest to the Mutiny, but there
could not have been much net progress in real income per head before the development of railways,
modern industry, irrigation and the big expansion in international trade, and there are reasons for
thinking that there was some decline. From the beginning of British conquest in 1757 to independence,
it seems unlikely that per capita income could have increased by more than a third and it probably did
not increase at all. In the UK it there was a tenfold increase in per capita income over these two
centuries. The most noticeable change in the economy was the rise in population from about 170
million to 420 million from 1757 to 1947.
However, there were some significant changes in social structure and in the pattern of output. The
social pyramid was truncated because the British lopped off most of the top three layers of the Moghul
hierarchy, i.e. the Moghul court, the Moghul aristocracy and quasi-autonomous prices (a quarter of
these survived), and the local chieftaincy (Zamindars who survived in about 40 per cent of India). In
place of these people the British installed a modern bureaucracy which took a smaller share of national
income. The newcomers had a more modest life-style than the Moghuls, but siphoned a large part of
their savings out of the country and provided almost no market for India's luxury handicrafts. The
modern factory sector which they created produced only 7.5 per cent of national income at the end of
British rule and thus did little more than replace the old luxury handicrafts and part of the village textile
production.
The British reduced the tax squeeze on agriculture and turned warlords into landlords, but the new
order had little dynamism. A good deal of the old fuzziness about property rights remained, and
landlords were still largely parasitic. The bigger zamindars copied the Moghul lifestyle by maintaining
11 National Income of India, N Mukherjee

15. 15
Page15
hordes of retainers and huge mansions, the smaller landowner's ambition was to stop working and
enhance his ritual purity by establishing a seedy gentility. Very little incentive was provided for
investment and almost nothing was done to promote technical change in agriculture. At the bottom of
society the position of sharecropping tenantry and landless labourers remained wretched. In urban areas
a new Westernized 'middle class' of Indians emerged and became the major challenge to the British
raj.

16. 16
Page16
Bibliography
Web sources
1. Economic Impact of British Colonial Rule in India.PDF (pg.4)
2. historyforupsc.blogspot.com, 11.48 A.M., 22nd March, 2014.7
Books
1. Appleyard, Dennis R. (2006), "The Terms of Trade between the United Kingdom and
British India, 1858–1947", Economic Development and Cultural Change 54: 635–654
(pg.8)
2. National Income of India by M. Mukherjee (pg. 11 & 12)
3. Peers, Douglas M. (2006), India under Colonial Rule 1700–1885, Harlow and London:
Pearson Longmans. (.pg.10)
4. Outlines of Indian Legal and Constitutional History by M.P. Jain. ( Partly Used)