Introduction to Land Revenue and Economic Policies of the British

When the British first arrived in India as traders, their vision was limited to commerce—buying Indian goods cheap and selling them dear in Europe. But history took a dramatic turn in 1765, when the Mughal emperor granted the East India Company the Diwani rights of Bengal, Bihar, and Orissa. With this single stroke, the Company was transformed from a merchant into a ruler. Suddenly, it was not just importing textiles and spices but also collecting taxes from millions of peasants.

And here lies the paradox of colonial India: The Company had the powers of a ruler, but the mindset of a trader. A ruler is expected to ensure stability and welfare; a trader seeks quick profits. This mismatch shaped the entire course of British economic policy in India.

The Beginning: Experiments and Famines

In the initial years, the Company simply continued the revenue system of the Bengal Nawabs. But unlike the Nawabs, who had some interest in the prosperity of their land, the Company officials were focused on immediate extraction. Their corruption, coupled with indifference, led to the catastrophic Bengal Famine of 1770, in which nearly one-third of the population perished. The tragedy revealed the dangers of treating governance as mere profit-making.

From then on, the Company began a series of experiments—first auctioning revenue rights to the highest bidder (1772), then fixing assessments temporarily, and finally introducing different models of land settlements across India:

• Permanent Settlement (1793) in Bengal, which made zamindars hereditary landlords.
• Ryotwari Settlement (1820 onwards) in Madras and Bombay, which dealt directly with cultivators.
• Mahalwari Settlement (1822 onwards) in North-Western Provinces, which made entire villages responsible for revenue.

Each system differed in form but shared the same motive—maximise revenue. None was designed to promote agricultural development or peasant welfare.

The Larger Economic Vision

Parallel to land revenue policies, the British reshaped India’s economy to serve their own industrial revolution. Before 1757, India was the world’s workshop—its textiles, handicrafts, and shipbuilding were famed across continents. But after political control was established, British policies deliberately undermined Indian industries:

• Textiles were ruined by heavy duties abroad and forced competition at home.
• Deindustrialisation set in, pushing artisans back into overcrowded agriculture.
• Commercial crops like indigo, opium, and cotton were forced upon cultivators, not for Indian needs but for British factories and Chinese trade.

Meanwhile, the Drain of Wealth ensured that India’s surplus was siphoned off to Britain—through revenue, trade, and salaries of British officials—without being reinvested in the colony.

The Social Consequences

These policies reshaped rural India. Peasants were trapped in cycles of debt, moneylenders acquired vast tracts of land, and new absentee landlords emerged. Agriculture stagnated, famines became frequent, and poverty turned structural. By the late 19th century, India—once a leading contributor to world GDP—was reduced to a supplier of raw materials and a captive consumer of British goods.

Why This Story Matters

Studying British land revenue and economic policies is not merely about remembering dates or systems like Zamindari, Ryotwari, or Mahalwari. It is about understanding how a wealthy and self-sufficient civilisation was gradually turned into a dependent colony. It explains why Indian villages, once resilient, became poverty-stricken; why industries that dazzled the world collapsed; and why nationalism in India found its first powerful voice in economic critique—Dadabhai Naoroji’s Drain Theory.

In essence, the British did not just rule India politically; they restructured its economy to feed Britain’s prosperity. This chapter, therefore, is the story of how land revenue systems and economic policies became the backbone of colonial exploitation—policies that drained wealth, disrupted society, and sowed the seeds of resistance.