Structure Of Government And Economic Policies Of British Empire In India

Structure of Government and economic policies of British Empire in India (1757- 1857) : Administrative organization, Social and Cultural policies

Structure of government under east india company (1757-1857)

When the officials of the East India Company acquired control over Bengal in 1765, they had little intention of making any innovations in its administration. They only desired to carry on their profitable trade and collect taxes for remission to England.  From 1765 to 1772, in the period of the Dual Government, Indian officials were allowed to function as before but under the Overall control of the British Governor and British officials.

The Indian officials had responsibility but no power while the Company’s officials had power but no responsibility. Both sets of officials were venal and corrupt men. In 1772 the Company ended the Dual Government and undertook to administer Bengal directly through its own servants. But the evils inherent in the administration of a country by a purely commercial company soon came to the surface.

The East India Company was at this time a commercial body designed to trade with the East. Moreover, its higher authority was situated in England, many thousands of kilometers away from India. Yet, it had come to wield political power over millions of people. This anomalous state of affairs posed many problems for the British government.

The rich resources of Bengal had fallen into the hands of the Company whose Directors immediately raised dividends to 10 per cent in 1767 and proposed in 1771 to raise the rate further to 12 ½ per cent.

The Company’s English servants took advantage of their position to make quick fortunes through illegal and unequal trade and the forcible collection of bribes and ‘gifts’ from Indian chiefs and zamindars. Clive returned to England at the age of 34 with wealth and property yielding £40,000 a year.

Merchants kept out of the East by the monopoly of the Company, the growing class of manufacturers and, in general, the rising forces of free enterprise in Britain wanted to share in the profitable Indian trade and the riches of India which the Company and its servants alone were enjoying.

They, therefore, worked hard to destroy the Company’s trade monopoly and, in order to achieve this, they attacked the Company’s administration of Bengal. They also made the officials of the Company who returned from India their special target.

These officials were given the derisive title of ‘nabobs’ and were ridiculed in the press and on the stage. They were boycotted by the aristocracy and were condemned as the exploiters and oppressors of the Indian people. Their two main targets were Clive and Warren Hastings. By condemning the ‘nabobs’, the opponents of the Company hoped to make the Company unpopular and then to displace it.

Many ministers and other Members of Parliament were keen to benefit from the acquisition of Bengal. They sought to win popular support by forcing the Company to pay tribute to the British government so that Indian revenues could be used to reduce taxation or the public debt of England.

The first important parliamentary act regarding the Company’s affairs was the Regulating Act of 1773. This Act made changes in the constitution of the Court of Directors of the Company and subjected their actions to the supervision of the British Government. The Regulating Act soon broke down in practice. It had not given the British government effective and decisive control over the Company.

The Act had also failed to resolve the conflict between the Company and its opponents in England who were daily growing stronger and more vocal. Moreover, the Company remained extremely vulnerable to the attacks of its enemies as the administration of its Indian possessions continued to be corrupt, oppressive, and economically disastrous.

The defects of the Regulating Act and the exigencies of British politics necessitated the passing in 1784 of another important act known as the Pitt’s India Act. This Act gave the British government supreme control over the company’s affairs and its administration in India. It established six commissioners for the affairs of India, popularly known as the Board of Control, including two Cabinet Ministers.

The Board of Control was to guide and control the work of the Court of Directors and the Government of India. The Act placed the Government of India in the hands of the Governor-General and a Council of three, so that if the Governor-General could get the support of even one member, he could have his way.

The Act clearly subordinated the Bombay and Madras Presidencies to Bengal in all questions of war, diplomacy, and revenues.  With this Act began a new phase of the British conquest of India. While the East India Company became the instrument of British national policy, India was to be made to serve the interests of all sections of the ruling classes of Britain.

While the Pitt’s India Act laid down the general framework in which the Government of India was to be carried on till 1857, later enactments brought about several important changes which gradually diminished the powers and privileges of the Company. In 1786, the Governor-General was given the authority to overrule his Council in matters of importance affecting safety, peace, or the interests of the empire in India.

By the Charter Act of 1813, the trade monopoly of the Company in India was ended and trade with India was thrown open to all British subjects. But trade in tea and trade with China was still exclusive to the Company. The government and the revenues of India continued to be in the hands of the Company. The Company also continued to appoint its officials in India.

The Charter Act of 1833 brought the Company’s monopoly of tea trade and trade with China to an end. At the same time, the debts of the Company were taken over by the Government of India, which was also to pay its shareholders a IOV2 per cent dividend on their capital. The Government of India continued to be run by the Company under the strict control of the Board of Control.


Economic policies of British Empire in India (1757- 1857)

Commercial Policy

After the battle of Plassey in 1757, the pattern of the Company’s commercial relations with India underwent a qualitative change. Now the Company could use its political control over Bengal to acquire monopolistic control over Indian trade and production and push its Indian trade. Moreover, it utilised the revenues of Bengal to finance its export of Indian goods.

The activity of the Company should have encouraged Indian manufacturers, for Indian exports to Britain went up from £1.5 million in 1750-51 to £5.8 million in 1797-98, but this was not so. The Company used its political power to dictate terms to the weavers of Bengal who were forced to sell their products at a cheaper and dictated price, even at a loss.

Moreover, their labour was no longer free. Many of them were compelled to work for the Company for low wages and forbidden to work for Indian merchants. The Company eliminated its rival traders, both Indian and foreign, and prevented them from offering higher wages or prices to the Bengal handicraftsmen.

The servants of the Company monopolized the sale of raw cotton and made the Bengal weaver pay exorbitant prices for it. Thus, the weaver lost both ways, as a buyer as well as a seller. At the same time, Indian textiles had to pay heavy duties on entering England. The British government was determined to protect its rising machine industry whose products could still not compete with the cheaper and better Indian goods.

Even so Indian products held some of their ground. The real blow to Indian handicrafts fell after 1813, when they lost not only their foreign markets but, what was of much greater importance, their market in India itself. The Industrial Revolution in Britain completely transformed Britain’s economy and its economic relations with India.

During the second half of the eighteenth century and the first few decades of the nineteenth century, Britain underwent profound social and economic transformation, and British industry developed and expanded rapidly on the basis of modern machines, the factory system, and capitalism. This development was aided by several factors.

Land Revenue Policy

The Permanent Settlement (1793 A.D.)

To remove the defects of the revenue system, Lord Cornwallis introduced a new system of revenue collection in Bengal, Bihar and Orissa, known as the Permanent Settlement. Under this system, the zamindar or the revenue collector of an estate became the permanent holder of the land.

The zamindar gained hereditary rights over the land. He was required to pay a fixed amount of revenue as tax to the Company by a fixed day of the year. If he failed to pay by the fixed day, his zamindari would be confiscated and sold. The cultivators now became tenants of the zamindars. They could be evicted by the zamindars for non-payment of their dues. Many of them lost their land.

The Permanent Settlement benefited the landlords more than the government. The Company was assured of fixed revenue at a fixed time no doubt, but it was deprived of a share of any additional income of the landlords from increasing cultivation on land. The cultivators were also left at the mercy of the zamindars who exploited them.

Mahalwari System

The Mahalwari System was introduced in Punjab, parts of Madhya Pradesh and Western Uttar Pradesh. It was a settlement with the village community because common ownership of land prevailed in these areas. (Mahal means group of villages.) The talukdar or head of the mahal was responsible for collecting revenue from the villages.

The Ryotwari System

In the Madras Presidency, Ryotwari System was introduced. In this system direct settlement was made between the Government and the cultivators or the ryots. Land revenue was fixed for a period of 30 years. Peasants had to pay about half of the total produce as tax.


The Drain of Wealth Policy

The British exported to Britain part of India’s wealth and resources for which India got no adequate economic or material return. This ‘economic drain’ was peculiar to British rule. Even the worst of previous Indian governments had spent the revenue they extracted from the people inside the country.

Whether they spent it on irrigation canals and trunk roads, or on palaces, temples and mosques, or on wars and conquests, or even on personal luxury, it ultimately encouraged Indian trade and industry or gave employment to Indians. This was so because even foreign conquerors, like the Mughals, soon settled in India and made it their home. But the British remained perpetual foreigners.

Englishmen, working and trading in India, nearly always planned to go back to Britain, and the Indian government was controlled by a foreign company of merchants and the government of Britain. The British, consequently, spent a large part of the taxes and income they derived from the Indian people not in India but in Britain, their home country.

The drain of wealth from Bengal began in 1757 when the Company’s servants began to carry home immense fortunes extorted from Indian rulers, zamindars, merchants and the common people. They sent home nearly £6 million between 1758 and 1765. This amount was more than four times the total land revenue collection of the Nawab of Bengal in 1765.

This amount of drain did not include the trading profits of the Company which were often no less illegally derived. In 1765 the Company acquired the Diwani of Bengal and thus gained control over its revenues. The Company, even more than its servants, soon directly organised the drain. It began to purchase Indian goods out of the revenue of Bengal and to export them. These purchases were known as ‘Investments’.

Thus, through ‘Investments’, Bengal’s revenue was sent to England. For example, from 1765 to 1770, the Company sent out nearly £4 million worth of goods or about 33 per cent of the net revenue of Bengal.

By the end of the eighteenth century, the drain constituted nearly 9 per cent of India’s national income. The actual drain was even more, as a large part of the salaries and other incomes of English officials and the trading fortunes of English merchants also found their way into England.

The drain took the form of an excess of India’s exports over its imports, for which India got no return. While the exact amount of the annual drain has not been calculated so far and historians differ on its quantum, the fact of the drain, at least from 1757 to 1857, was widely accepted by British officials.

Administrative organization


British rule in India started paramountacy in all fields of governance. Though prior rulers also made several organisations to run their Government but those were not as organized as were during British rule. British practices in the process of paramountacy have been described below:-

Civil Service

The British Raj and the Indian colonial civil service were ‘symbiotically’ related to each other. If the principal pillar on which the whole of the superstructure of the Raj rested was the Indian civil service, then also true was the fact that it, on its part, provided the irresponsible civil servants on ‘playground’ and ‘rules’ of the game with adequate room for both ruthless repression as well as skillful adjustments.


The third pillar of the British imperialism in India (the first and second being the civil service and army respectively) was the police. It was through this instrument the Mai-Baap ‘myth’ of the British administrators was created which in a way helped the British Imperialism to build a ‘cultural hegemony’ over ever quarrelling masses of India, a mere geographical expression, they claimed and legitimized. Though ‘a system of circles or thanas headed by daroga with its sepoys was rather a modern concept, evolved once again by Cornwallis, but a two-tier police administration with the Nazim or Governor at the provincial headquarters and the faujdar with a contingent of military police in the district, a primitive police system was present even in Mughal period.

With the arrival of the British on the Indian political platform, the system of official and un-official police system, working for cross-purposes, needed a change for the obvious reasons. But the daroga system introduced by Cornwallis in 1792 did not remain limited to reducing the non-official apparatus to the ‘original intention’ of the instruction.  The private system was struck off. The Zamindars and farmers were altogether divested of their local responsibility and were asked to disband their militia.

Presidency Towns

The earliest efforts in Municipal administration in India were made in the Presidency Towns of Madras, Calcutta and Bombay. In 1687, an order of Court of Directors directed the formation of a Corporation of Europeans and Indian members of the city of Madras but the Corporation did not survive. Under the Regulating Act of 1773, the Governor-General nominated the servants of the Company and other British inhabitants to be the Justices of Peace.

They were empowered to appoint scavengers for the cleaning and repairing of the streets of Calcutta, Madras and Bombay, for making assessment for those purposes and for the grant of licences for the sale of spirituous liquors.

The reason for this provision was the insanitary state of affairs in the Presidency Towns. Between 1817 and 1830, spas­modic attempts were made in Madras and Calcutta to undertake works paid out of the lottery funds and much was done with this money in laying out those towns.

On completion, the roads and drains were handed over to the Justices of Peace to be maintained by them out of their assessments. However, even for maintenance work, the funds never sufficed. In Bombay, a tax on carriages and carts was levied for the purpose of making roads. In 1840, an Act was passed for Calcutta and in 1841 for Madras.

Social and Cultural policies

Till 1813, the British followed a policy of non-interference in social, religious and cultural life of the country.

After 1813, measures were taken to transform Indian society and its cultural environs because of the emergence of new interests and ideas in Britain of the nineteenth century in the wake of significant changes in Europe during the 18th and the 19th centuries.  Some of these changes were:

  • Industrial Revolution which began in the 18th century and resulted in the growth of industrial capitalism. The rising industrial interests wanted to make India a big market for their goods and therefore required partial modernisation and transformation of Indian society.
  • Intellectual Revolution which gave rise to new attitudes of mind, manners, and morals.
  • French Revolution which with its message of liberty, equality and fraternity, unleashed the forces of democracy and nationalism.

Role of Christian Missionaries

The missionaries regarded Christianity to be a superior religion and wanted to spread it in India through westernisation which, they believed, would destroy the faith of the natives in their own religion and culture. Towards this end, the Christian missionaries

  • Supported the Radicals whose scientific approach, they believed, would undermine the native culture and beliefs.
  • Supported the Imperialists since law and order and the British supremacy were essential for their propaganda.
  • Sought business and the capitalist support holding out the hope to them that the Christian converts would be better customers of their goods.

Social changes and reforms under the British

The demand for social and religious reform that manifested itself in the early decades of the 19th century partly arose as a response to Western education and culture. India’s contact with the West made educated Indians realise that socio-religious reform was a prerequisite for the all-round development of the country.  Educated Indians like Raja Rammohan Roy worked systematically to eradicate social evils. A period of social reforms began in India during the time of Governor General Lord William Bentinck (1828-35) who was helped by Rammohan Roy.

In 1829, Sati or the practice of burning a widow with her dead husband was made illegal or punishable by law. Female infanticide was banned. However, even today, infanticide is practised in backward areas in India.  

Slavery was declared illegal. With Iswar Chandra Vidyasagar’s assistance, the Widow Remarriage Act was passed by Lord Dalhousie in 1856. Vidyasagar also campaigned against child marriage and polygamy.The cruel custom of offering little children as sacrifice to please God, practised by certain tribes, was banned by Governor General Lord Hardinge.It is important to note that since the reform movement started in Bengal, its impact was first felt here. It took time to spread it all over India.








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