About British Economic and Land Revenue Policies
After the grant of the Diwani in 1765, land revenue became the chief source of income for the English East India Company. The British introduced new land revenue systems to collect this revenue regularly and to create a class of loyal supporters. Along with these systems, British economic policies changed Indian agriculture, industry and trade, and led to the commercialisation of agriculture, de-industrialisation and the drain of wealth. This topic explains the three main land settlements and the broad economic impact of British rule.
Early Experiments in Bengal
Before the Permanent Settlement, the Company experimented with the Ijaradari (farming) system, where revenue collection was auctioned to the highest bidder. Warren Hastings introduced a five-year settlement (1772–1777), then an annual settlement with the zamindars. These experiments failed because the demand was too high and revenue collection was uncertain. The Company therefore wanted a permanent and fixed arrangement.
The Permanent Settlement (1793)
The Permanent Settlement was introduced by Lord Cornwallis in 1793 in Bengal, Bihar and Orissa. Under it, the zamindars were recognised as the owners of the land and had to pay a fixed land revenue to the Company every year, which would never be increased. The revenue was fixed at 10/11th of the estimated produce for the Company and the zamindar kept 1/11th. If a zamindar failed to pay on time, his land could be auctioned under the Sunset Law. The system was designed to give the Company a stable income, to create a loyal landlord class, and to encourage improvement of agriculture. In practice, however, it led to absentee landlordism, heavy exploitation of cultivators, and the ruin of many small zamindars, while the peasants had no rights over the land.
The Ryotwari System
The Ryotwari System was introduced in Madras in 1792 (fully by 1820) and later in Bombay by Thomas Munro and Captain Alexander Read. In this system, the land revenue was settled directly with the ryot (individual cultivator), who was recognised as the owner of the land as long as he paid the revenue. The demand was based on the type and quality of the soil and was fixed for a long period, later revised periodically. The rate was very high, often between 45 and 55 per cent of the produce, which forced the ryots into debt and often into the hands of moneylenders.
The Mahalwari System
The Mahalwari System was introduced by Holt Mackenzie in 1822 in the North-Western Provinces and parts of Central India. Under it, the unit of revenue was the mahal (a village or a group of villages), and the revenue was settled with the village community or the village headmen rather than with individual zamindars. It was revised in 1833 under Lord William Bentinck and later extended by James Thomason. Like the other systems, it placed a heavy burden on the peasants.
Commercialisation of Agriculture
British policies forced Indian farmers to grow cash crops such as indigo, opium, cotton, jute and tea instead of food crops. This was called the commercialisation of agriculture. It made India a supplier of raw materials to British industries and a market for British manufactured goods. The most notorious example was the indigo cultivation in Bengal, which led to the Indigo Revolt of 1859. Commercialisation increased the peasants’ dependence on the market and on moneylenders and contributed to famines.
De-industrialisation and Drain of Wealth
De-industrialisation means the decline of Indian handicraft industries, especially cotton and silk textiles, because of the heavy import of cheap British machine-made goods and the loss of court patronage. Millions of artisans lost their livelihood and were pushed back to agriculture. The drain of wealth means the transfer of Indian wealth to Britain through revenue, salaries, pensions, home charges and one-sided trade. Indian leaders such as Dadabhai Naoroji (in Poverty and Un-British Rule in India) and R. C. Dutt (in Economic History of India) exposed this drain as a major cause of India’s poverty.
Timeline of Land Revenue Policies
- 1765: Grant of Diwani; revenue collection begins.
- 1772–1777: Warren Hastings’ five-year settlement.
- 1793: Permanent Settlement introduced by Lord Cornwallis in Bengal.
- 1792–1820: Ryotwari System developed in Madras by Munro and Read.
- 1822: Mahalwari System introduced by Holt Mackenzie.
- 1833: Mahalwari System revised under Lord William Bentinck.
- 1859: Indigo Revolt in Bengal.
Main Facts about Land Revenue and Economic Policies (Quick Revision Bullets)
- Permanent Settlement: 1793, Lord Cornwallis, Bengal, Bihar and Orissa.
- Fixed revenue: 10/11th to the Company, 1/11th to the zamindar.
- Sunset Law: land auctioned if revenue not paid by sunset of the fixed day.
- Ryotwari System: Madras and Bombay; associated with Thomas Munro.
- Mahalwari System: 1822, Holt Mackenzie; village (mahal) as unit.
- Commercialisation of agriculture: forced cash-crop farming.
- De-industrialisation: decline of Indian handicrafts.
- Drain of wealth: transfer of Indian wealth to Britain.
- Estimate of drain: popularised by Dadabhai Naoroji.
Important Persons and Terms
- Lord Cornwallis: introduced the Permanent Settlement (1793).
- Thomas Munro: associated with the Ryotwari System.
- Alexander Read: pioneer of the Ryotwari idea in Madras.
- Holt Mackenzie: introduced the Mahalwari System.
- Warren Hastings: began early revenue experiments in Bengal.
- Zamindar: landlord recognised as owner under the Permanent Settlement.
- Ryot: individual cultivator under the Ryotwari System.
- Mahal: village or group of villages under the Mahalwari System.
- Drain of wealth: one-way flow of wealth from India to Britain.
Why This Topic Matters for Exams
Common questions: Who introduced the Permanent Settlement? (Lord Cornwallis.) In which year? (1793.) Who introduced the Ryotwari System? (Thomas Munro.) Who introduced the Mahalwari System? (Holt Mackenzie, 1822.) What was the Sunset Law? (The rule of auctioning land if revenue was not paid by sunset.) Who wrote Poverty and Un-British Rule in India? (Dadabhai Naoroji.) A common trap is to mix up the three settlements’ founders and regions.
How to Prepare This Topic
- Learn the three settlements. Permanent, Ryotwari and Mahalwari, with year and founder.
- Learn the regions. Bengal (Permanent), Madras/Bombay (Ryotwari), North-West (Mahalwari).
- Learn the terms. Zamindar, ryot, mahal, Sunset Law.
- Learn the economic effects. Commercialisation, de-industrialisation and drain of wealth.
- Connect with movements. The Indigo Revolt of 1859 followed indigo commercialisation.
Common Exam Traps
- Permanent Settlement (1793) was in Bengal; the Ryotwari was in Madras and Bombay.
- Cornwallis is linked to the Permanent Settlement, not to Ryotwari.
- The Sunset Law belonged to the Permanent Settlement.
- Mahal means a village unit, not a landlord.
- The drain of wealth theory was popularised by Dadabhai Naoroji, not by an Englishman.
Frequently Asked Questions
Who introduced the Permanent Settlement and when?
The Permanent Settlement was introduced by Lord Cornwallis in 1793 in Bengal, Bihar and Orissa. Under it, zamindars were recognised as landowners and had to pay a fixed annual revenue to the Company, which could never be increased.
What is the difference between the Permanent, Ryotwari and Mahalwari systems?
In the Permanent Settlement the revenue was fixed with the zamindars; in the Ryotwari System it was settled directly with the individual cultivator (ryot); and in the Mahalwari System it was settled with the village or mahal community. They were introduced in Bengal (1793), Madras and Bombay, and the North-Western Provinces (1822) respectively.
What was the Sunset Law?
Under the Permanent Settlement, the Sunset Law said that if a zamindar did not deposit the fixed revenue by sunset of the appointed day, his land would be auctioned. It made revenue collection strict but ruined many zamindars.
What was the commercialisation of agriculture?
Commercialisation of agriculture means the shift from growing food crops to cash crops such as indigo, opium, cotton, jute and tea for sale in the market. The British encouraged it so that India would supply raw materials to British industries, but it increased peasant debt and contributed to famines.
What is meant by de-industrialisation and drain of wealth?
De-industrialisation means the decline of Indian handicraft industries, especially textiles, due to the import of cheap British goods. Drain of wealth means the one-way transfer of Indian wealth to Britain through revenue, salaries, pensions and trade. Both were exposed by leaders like Dadabhai Naoroji and R. C. Dutt.
Which system was introduced by Holt Mackenzie and where?
Holt Mackenzie introduced the Mahalwari System in 1822 in the North-Western Provinces and parts of Central India. In this system the unit of revenue was the mahal (village or group of villages), and the revenue was settled with the village community. It was revised in 1833 under Lord William Bentinck.