Economic Impact Of The British Raj

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The British who came here to India for trade, in the end, grew to become the political grasp of India. From the Battle of Plassey to the annexation of Punjab in 1849, the whole Indian sub-continent had been brought under British control.

Apart from outright wars they employed methods like Subsidiary Alliance and Doctrine of Lapse to extend and consolidate their empire in India.

In this article, we are going to see the economic impact of British Raj under the following sub headings:

  • Drain of Wealth
  • Zamindari, Ryotwari, and Mahalwari
  • Deindustrialization
  • Development of Railways
  • Deterioration of Agriculture
  • Growth of Landless Labour

Economic Impact of the British Raj

Drain of Wealth

  • The transfer of sources and wealth from India to England without presenting ‘any equivalent return’ which commenced in the second half of the eighteenth century had been christened by Indian ‘non-practicing’ economists like Dadabhai Naoroji, M. G. Ranade, R. C. Dutt as the “economic drain”.
  • It was in 1867 that for the first time Dadabhai Naoroji in his paper ‘England’s Debt to India’ put forward the idea that Britain was once extracting wealth from India as a fee of her rule in India, that out of the revenues raised in India, almost one-fourth went clean out of the country and used to be added to the assets of England’, and that India was once subsequently ‘being bled’.Dadabhai Naoroji devoted his life to the proliferation of the channeling hypothesis and to propelling a thundering effort in opposition to the drain which was viewed through him to be the integral evil of British rule in India.


These factors were given by Dadabhai Naoroji describing the cause for the external drain.

  • External rule and administration in India.
  • Funds and labor needed for economic development were brought in by immigrants but India did not draw immigrants.
  • All the civil administration and army expenses of Britain were paid by India.
  • India was bearing the burden of territory building both inside and outside India.
  • India was further exploited by opening the country to free trade.
  • Major earners in India during British rule were foreigners. The money they earned was never invested in India to buy anything. Moreover, they left India with that money.
  • Not only this but through different services such as railways, India was given a huge amount to Britain. On the other hand, trade as well as Indian labor was deeply undervalued. Along with this, The East India Company was buying products from India with Indian money and exporting it to Britain.


  • A huge drain of sources from India into England had resulted in disastrous effects on the Indian economy and its people. A huge amount of these resources which may want to be invested in India had been snatched and siphoned off to England.
  • Huge public debt undertaken by means of the Government and its charge of activity necessitated a growing tax burden on the people of India, which were relatively regressive in nature. As per Dadabhai Naoroji’s estimates, the tax burden in India at some stage in 1886 used to be 14.3 percent of its whole profits which was very high as in contrast to 6.93 percent in England.
  • Moreover, these tax proceeds had been usually used for making repayments to British creditors and no longer for the social services and welfare activities of Indians. This type of drain of tax proceeds from India impoverished the agriculture, enterprise, and trading activities in India and was largely accountable for the stagnant stage of its economic system at some point of the 18th and nineteenth centuries.
  • Although the British undertook accountability of maintaining regulation and order, centralized political and judicial administration, roads, railways, academic set up, etc. however the extent of draining out of sources was too immoderate main to stagnation of the financial system and bad and miserable condition of Indian masses.
  • The drain idea had a far-reaching impact on the increase of financial nationalism in India. Banking on this idea the early nationalists attributed the all-encompassing poverty now not as a visitation from God or nature. It was considered as man-made, and therefore capable of being defined and removed.
  • In direction of their search for the motives of India’s poverty, the nationalists underlined elements and forces which had been introduced into play through colonial rulers and the colonial structure. The trouble of poverty used to be seen as the hassle of growing the productive ability and strength of the people. This approach made poverty a wide countrywide trouble and helped to unite, alternatively, divide special areas and sections of Indian society.

Zamindari, Ryotwari and Mahalwari

Zamindari System

  • Lord Cornwallis who used to be governor-general of India from 1786-1793, had brought the Zamindari System under his Permanent Settlement Act.
  • It was introduced in provinces of Bengal, Bihar, Orissa, and Varanasi.
    With the introduction of the land revenue structures in the course of the British Rule, there was a start of intermediaries like Zamindars, Mahalwars, Ryotwars, etc. These agencies of people have been hampering the cultivators and hence, the initiative to abolish the Zamindari System was once taken.
  • The settlement was once made between the British Officials and the Zamindars.
  • Zamindars have been made the proprietors of the land and have been given the right to accumulate the rents from the peasants.
  • The rent or the complete amount accumulated via the Zamindar used to be divided into 11 components where 10/11 of the share belonged to the East India Company and only 1/11 share was to be saved by the Zamindar.
  • The Zamindari System underneath the Mughals did not make Zamindars the owner of the land.
  • Also, in contrast to the Zamindari System beneath the Permanent Settlement system; lands have not been detracted from the laborers except if and until they are paying the rents.
  • In the Zamindari System of Mughal Rule, the hereditary rule was a legal rule.

Ryotwari System

  • This device of land revenue used to be instituted in the late 18th century through Sir Thomas Munro, Governor of Madras in 1820.
  • This was once practiced in the Madras and Bombay areas, as well as Assam and Coorg provinces.
  • In this system, the peasants or cultivators had been regarded as the owners of the land. They had possession rights, could sell, personal loan, or gift the land.
  • The taxes were at once accumulated via the authorities from the peasants.
  • The prices had been 50% in dryland and 60% in the wetland.
  • The costs were excessive and not like in the Permanent System, they were open to being increased.
  • If they failed to pay the taxes, they had been evicted by means of the government.
  • Ryot capability peasant cultivators.
  • Here there were no middlemen like the Zamindari system. But, considering high taxes had to be paid only in cash (no option of paying in sort as earlier than the British) the problem of moneylenders came into the show. They in addition stressed the peasants with heavy interests.

Mahalwari System

  • The government of Lord William Bentinck, Governor-General of India (1828 to 1835) added the Mahalwari device of land revenue in 1833.
  • This system was delivered in the North-West Frontier, Agra, Central Province, Gangetic Valley, Punjab, etc.
  • This had elements of both the Zamindari and the Ryotwari systems.
  • This gadget divided the land into Mahals. Sometimes, a Mahal was constituted by way of one or extra villages.
  • The tax used to be assessed on the Mahal.
  • Each person farmer gave his share.
  • Here likewise, proprietorship rights were with the laborers.
  • Income was amassed through the town headman or town pioneers (Lambardar).
  • It presented the idea of normal rents for interesting soil classes.
  • The national share of the income used to be 66% of the rental value. The contract was agreed upon for 30 years.
  • This system used to be referred to as the Modified Zamindari system because the village headman grew to become in reality a Zamindar.

Consequences of British land revenue system

  • The land turned into an item.
  • Prior there was no private responsibility for Indeed, even lords and cultivators didn’t consider land as his ‘private property’.
  • Because of the extremely high charges, ranchers turned to develop money crops rather than food crops. This prompted food weakness and even starvation.
  • Duties on farming produce were moderate during pre-British occasions. The British made it high.
  • Emphasis on money installment of income prompted more obligation among ranchers. Moneylenders became landowners at the appropriate time.
  • Reinforced work emerged in light of the fact that advances were given to ranchers/workers who couldn’t repay it.
  • At the point when India accomplished the opportunity from provincial guidelines, 7% of the locals (Zamindars/landowners) claimed 75% of the agrarian land.


The process of de-industrialization of India started out with the gradual disappearance of cotton manufactures from the list of India’s exports and the high-quality boom of cotton manufactures in the listing of her imports mainly from Britain.


  • The disappearance of the court way of life of late Moghul days and historic aristocracy,
  • The foundation of an outsider principle with the flood of numerous unfamiliar impacts that such an exchange the idea of government implied, and The opposition from machine-made goods.
  • The tariff policy pursued by way of the British Government used to be additionally one of the main reasons closer to the decay of handicrafts.
  • A few people contend that the shortcomings in the modern structure itself should likewise be accused of this decay of craftsmanship enterprises.
  • Guild corporations in India were without a doubt very vulnerable and India didn’t possess a classification of Industrial entrepreneurs.

Causes of De-Industrialisation

  1. Mughal crumbling: The fundamental wellspring of interest for the results of painstaking work was from the imperial courts of Mughals. With the annulment of the regal court, interest for the results of these specialties diminished. Continuous expansion of the British guideline and the decrease in regal force all over India prompted deindustrialization because of diminished interest.
  2. Change in Habits: The utilization propensities for the recently instructed bunches managed a hit to these businesses. These recently made Indian ‘bourgeoisie’ not just despised the results of the indigenous businesses yet in addition attempted to duplicate everything European which was viewed as the trademark.
  3. Inconsistent Competition: The upheaval in innovation which picked up energy all through the nineteenth century in the wake of the modern insurgency expanded the procedure of the decrease of conventional handiworks. The development of intensity looms in Europe finished the decrease of this significant industry. In spite of the fact that machine-made merchandise couldn’t contend in quality with the neighborhood items, lower cost, and change in taste prompted deindustrialization.
  4. Duties: The single direction international commerce strategy which lectured that what was useful for England was viewed as useful for India prompted the decrease of industry. Britain sought after the approach of security through the burden of import obligations and facilitated send out obligations for British products.
  5. Loss of forces: British guideline foundation additionally brought about the loss of forces of the experts association and different bodies that used to manage and control the exchange, which brings about the tumbledown of crude materials just as the talented workers which further outcomes in the decrease of the market estimation of the items.


  • By isolating the Indian handloom and demolishing the turning wheel, the British completed the “blending of cultivating and crafted works”. The internal equality of the town economy was once vexed.
  • Present issues of area and crack of land assets, over-advancement or improvement of below average and inadequate land, etc., are the prompt effects of the British guideline.
  • Indian economy tended to be extra and more agricultural with the disintegration of common industries and impoverishment of rural people. This accounted for the famines and growing poverty in the 19th and quarter of the 20th century. India purely grew to become an exporter of raw cloth for industrial Britain.


  • Inadequate capital accumulation.
  • Mobilization of unproductive investment.
  • The undue desire for quick-return yielding commerce and trading activities of the Indian capitalist classes.
  • The concentration of entrepreneurship in the hands of a few small sections of Indians

Development of Railways

  • It connected people from hitherto unknown lands and they blended with one any other irrespective of caste and race.
  • The movement of people was facilitated. Women and Dalits had been benefited majorly as they could tour without any constraints.
  • It helped in the development of a new labor category who had been instrumental in times like the Non-cooperation movement.
  • It only took a journey through train to remind the hostile therapy of Indians through the British as 2nd or 3rd classification residents in their own countries. This introduced a feeling of fraternity among Indians.
  • It helped in the mobilization of national leaders. With this, they had been able to change their thoughts and discussed the problems and fashioned famous public opinion towards the overseas rule.
    e.g. Dadabhai Naoroji pinpointed the misuse of railways to justify his monetary drain theory through the British.
  • It was used with the aid of Indian national congress to connect Indian intelligentsia from extraordinary parts of India.
  • Gandhiji used railways to travel all over India and familiarize Indians with the ideas of swaraj and satyagraha.
  • Helped Vernacular press: which with the assistance of Indian railways could penetrate the interiors of the subcontinent. Now, their ideas and critique of the British ought to be examined by way of frequent human beings as the circulation of newspapers and journals increases.
  • Railways united the whole Indian financial system as one section of India depending on the movement of goods and services of different parts.
  • It helped in the movement of Indian goods and supplied a market for Indian producers. Also integrated the markets and elevated the trade.
  • It facilitated the investment in one of a kind industries as now the movement of completed items grew to become easy. Jute, Cotton, Iron, and steel industries were established in times to come.
  • It supplied employment and helped numerous sub-sectors like mining, construction, and so on.

Deterioration of Agriculture

  • The commercialization of agriculture should have extended productivity but in truth, it did not now happen as a result of poor agrarian association, out of date innovation, and absence of sources among most workers. Rich ranchers profited and this quickened the disparities of income in the country society.
  • The industrial non-food vegetation substituted the meals grains. This had a devastating effect on the rural economy and showed its impact on famines.
  • Following had been the predominant reasons for stagnation and deterioration of agriculture −
  1. Overcrowding of agriculture;
  2. Excessive land income demand;
  3. Growth of landlordism;
  4. Increasing indebtedness; and
  5. The growing impoverishment of the cultivators.
  • Indigo manufacture used to be delivered in India at the end of the 18th century and flourished in Bengal and Bihar.
  • Indigo planters gained notoriety for their oppression over the peasants who had been compelled by using them to cultivate indigo. This oppression used to be vividly portrayed by using the famous Bengali writer Dinbandhu Mitra in his play “Neel Darpan” in 1860.
  • The invention of a synthetic dye gave a huge blow to the indigo industry and it step by step declined.
  • The poverty of the people located its culmination in a series of famines that ravaged all components of India in the second half of the 19th century.
  • The first of these famines came about in Western U.P. in 1860-61 and cost over 2 lakh lives.
  • In 1865-66, a famine engulfed Orissa, Bengal, Bihar, and Madras and took a toll of nearly 20 lakh lives; Orissa on my own misplaced 10 lakh people.Perhaps the worst famine in Indian records until then occurred in 1876-78 in Madras,
  • Mysore, Hyderabad, Maharashtra, Western U. P., and Punjab.
  • Madras lost nearly 35 lakhs.
  • Maharashtra lost eight lakh, people,
  • Mysore misplaced almost 20 percent of its population, and
    U. P. misplaced over 12 lakhs.
  • The famine of 1896-97 affected over 9.5 crore people of whom nearly 45 lakhs died. The famine of 1899-1900 accompanied rapidly and precipitated widespread distress.
  • In spite of respectable efforts to keep lives via the provision of famine relief, over 25 lakh people died.
  • Apart from these main famines, many other neighborhood famines and scarcities occurred. William Digby, a British writer, has calculated that, in all, over 28,825,000 humans died throughout famines from 1854 to 1901.
  • Another famine in 1943 carried away almost three million people in Bengal.
  • These famines and the high losses of lifestyles in them point out the extent to which poverty and hunger had taken root in India.

Growth of Landless Labour

  • In ancient India, there had been no wage earners in agriculture. The scenario in the British Era used to be reversed with an ever excessive populace of the landless laborers. Landless agricultural laborers had been as high as 20 percent of the agricultural populace in Dinajpur in 1808. Those who both owned land or had normal rights to domesticate it had not been homogeneous in the early a long time of the nineteenth century.
  • Further, their impact on the commercialization of agriculture on the peasant classes was once complex. It from time to time strengthened small peasants by means of presenting a higher income, however often the growing fluctuation in fees led them to crumble into a crew of more extravagant workers, who profited by the variance, and other people who came underneath the hold of moneylenders and vendors. As a rule, it added to the development of landed property by the method of the non-agrarian populace, however, the degree of such exchange varied by the method of area.


On the surface, it may seem that the British rule in India that converted its society for the better. But upon nearer examination, these benefits were in basic terms coincidental, if no longer self-serving.

Economic upgrades had been enacted in order to plunder the Indian economy. Even societal modifications would have come out on their personal barring the need for British intervention. In the end, the poor effects of British Imperialism far outweigh the benefits.

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