The rural community remained neglected under both the permanent settlement and the Ryotwadi system. Further attempts were made to determine the location of this rural community in the Mahalwadi system. In determining the Mahalwadi system, the impact of ideology and attitude was seen. This is believed to have an effect on Ricardo’s Lagaan theory.
However, on conducting a microscopic examination, it is known that the influential factor in determining the Mahalwadi system remained the physical motivation and the ideology did not have much effect. In fact, now the company realized its mistake.
The permanent settlement system was faulty, this became evident only in the early decades of the 19th century. Defects of the permanent settlement were also beginning to emerge. The result of these defects was that the company was deprived of its future profits in Bengal.
Secondly, during this period the company was constantly involved in war and conflict. In such a situation, he did not have time to develop any new method and test it scientifically, and could implement it in the land revenue system. On the other hand, large amounts of money were also needed to invest in the Industrial Revolution in Britain, given the company’s growing spending. The above factors proved to be effective in the formulation of the Mahalwadi system.
This was the next land revenue system to be implemented in British India after the Permanent Settlement and Raiyatwadi system, which was applicable to 30% of the whole of India in districts of Deccan, Central Province Punjab and Uttar Pradesh (United Provinces) Agra, Awadh.
Under this system, the land revenue was determined on the basis of the production of the entire village and the land revenue of all the cultivators of the Mahal was determined jointly. In this, the people of the village used to take the responsibility of paying the revenue within a specified time by their head or representatives.
Under this method, the determination of rent was based on estimates and by taking advantage of its discrepancies, the officers of the company engaged in their own self-realization and the company had to spend more than revenue on the revenue collection. As a result, this system failed miserably.
Drain of Wealth
It cannot be denied that the commercialistic nature of the company was at the core of all the above-mentioned arrangements. The concept of withdrawal of funds developed in the order of commercialist thinking. In other words, the withdrawal of money under the commercialist system is called the situation when precious metals like gold, silver go out of a country due to an adverse trade balance.
It is believed that up to 50 years before the Battle of Plassey, the British company brought a precious metal of two crore rupees for the purchase of Indian goods. This move of the company was criticized by the British Government but after the Karnataka Wars and the Plassey and Buxar Wars, the situation changed dramatically.
The company solved the problem of its investment with the acquisition of the Bengal-based British company. Now a part of the sum of the money received from internal trade, the money received from the Bengal plunder, and the money from the Bengal addict began to be invested for the purchase of Indian goods. In such a situation, the problem of withdrawal of funds was bound to arise. In other words, India did not receive any economic, physical, or financial benefits in exchange for what India exported to Britain. Thus, a part of the revenue derived from the Diwali of Bengal was transferred from India to Britain in the form of goods.
This can be called a transfer of funds from India in favor of Britain. This process continued till 1813 AD, but under the charter of 1813 AD, the revenue account of the company and the business account of the company were separated. Based on this change it can be estimated that at the end of the 18th century, about 4 million pounds sterling money was transferred from India to Britain. Thus, in the context of India, it can be said that until 1813 AD, the policy of the company was mainly driven by the commercialist purpose, which emphasized that the colonies are important in terms of the interest of the motherland.
The export surplus in India was retained to meet its amount due to higher household expenditure. A special method was adopted to pay the amount of household expenditure. For example, the Secretary of India used to issue a council bill in London and the purchasers of this council bill were traders who were also future buyers of Indian goods. In exchange for this purchase, the Secretary of India would receive pound sterling, from which he used to arrange for the amount of household expenditure.
After this, British traders used to come to India with this council bill, and instead, they would take money out of Indian accounts and use it for purchasing Indian goods. After this, British officials working in India would buy this council bill. Not only British officers, but also private British businessmen doing business in India, they used to buy council bills in order to send their profits to Britain, in London they used to get pound sterling in exchange for these council bills.
Dadabhai Naoroji and R.K. Nationalist thinkers like C. Dutt severely criticized the withdrawal of funds and considered it a reason for India’s impoverishment. On the other hand, British advocates such as Morinson reject the status of schism. He tried to prove that the amount of household expenditure was not very much and then this amount was necessary for the development of India.
He also tried to prove that the British gave the good government in India and developed the traffic and communication system and industries here and then Britain provided a large amount of money from the international money market to India at a very low interest.
Outflow of Wealth: Nationalist Ideology
Economic withdrawal under the ‘Withdrawal Principle’ takes place when gold and silver are lost due to adverse trade balance of a country. The principle of ‘Withdrawal of Money’ was first raised by ‘Dada Bhai Naoroji’ at a meeting of ‘East India Association’ held in London in 1867 AD. He raised this issue in his essay England Debt to India. He said- “Britain is taking away the support of this country as the price of its rule in India. About a quarter of the total revenue recovered in India goes outside the country and gets added to England’s resources.” “In 1896 AD, the Indian National Congress formally approved it at the Calcutta Session, saying that for years the continuous withdrawal of property from the country is responsible for the famines in the country and for the poverty of the countrymen.”
The gradual loss or disintegration of the industries of any country is called industrialization. The decline of handicraft industries under British rule in India occurred, resulting in increasing the burden of the population on agriculture. Under British rule, the following components are believed to have inspired industrialization:
After the Battle of Plassey and Buxar, the British Company established control over the Bengal handicraftsmen through the Gumashtas, that is, their interference in the production process.
Through the Charter X of 1813, the way of India was opened to British goods.
Excessive restrictions were imposed on Indian goods in Britain, that is, Britain’s door was being closed for Indian goods.
Remote areas in India were penetrated through railways. In other words, on the one hand, while British factory products were also transported to distant areas, on the other hand, raw materials were brought to ports.
The Indian states had been great patrons of Indian handicraft industries, but these kings had disappeared due to the British imperialist proliferation, with the Indian handicraft industries losing their domestic market.
British social and educational policy is also blamed for the endangered handicraft industries. This gave birth to a class whose trends and outlook were British rather than Indian. Therefore, these English-educated Indians gave protection to British goods only.
There were two types of handicraft industries in India in the 18th century – rural industries and urban handicrafts. The rural handicraft industry in India was organized under the Yajamani System.
Urban handicraft industries were relatively highly developed. Not only this, there was a good demand for these products in western countries. British economic policy influenced both types of handicraft industries. The cotton textile industry was highly developed among the urban handicraft industries. After agriculture, this area was the place, but the competition of British goods and discriminatory British policy led to the decline of the cotton textile industry.
Before the arrival of the British, the weaving of jute cloth was also done in Bengal. But after 1835 AD, the product of the British mechanized industry of jute handicrafts in Bengal was also hit. Before the establishment of British power, the paper industry was also prevalent in India, but in the second half of the 19th century, the declaration of Chillers Wood changed the situation dramatically. Under this declaration, a clear order was issued that the purchase of paper for all types of government work in India would be from Britain.
In such a situation, it was only natural to push the paper industry in India. Since ancient times, India was famous for the production of better quality iron and steel, but due to the import of iron equipment from Britain, this industry could not remain unaffected.
Commercialization of Agriculture
According to Adam Smith, commercialization promotes the production and consequently brings prosperity to society, but while commercialization brought under colonial rule made Britain prosperous, poverty increased in India. ‘Business relations and monetary economy relations in the field of agriculture and monetization of agriculture was not a new phenomenon because these factors were prevalent in the agricultural economy even during the Mughal period. The emphasis on cash recovery in lieu of grains by both the state and the jagirdars is seen as the reason for this. This thing is different, the process got a further boost in British rule. The development of railways and the Indian economy connecting the world economy to the world economy also proved to be an important factor in this direction.
The reasons which prompted the commercialization of agriculture under British rule were the following:
The maximum amount of land revenue in India was determined. It was not possible for the farmers to repay this amount of land revenue based on the production of traditional crops. In such a situation, his orientation towards the production of cash crops was natural.
The Industrial Revolution had begun in Britain and British industries required large quantities of raw materials. It is well known that industrialization requires a strong agricultural base. In the absence of this base in Britain, the Indian agricultural economy was extensively exploited for industrialization in Britain.
Along with industrialization, the process of urbanization in Britain was also encouraged. Export of large quantities of food grains to meet the needs of the urban population is also seen as one of the reasons.
The motivation of farmers to get profit is also considered to be a factor that drives commercial farming.
In this context, it is noteworthy that the colonial government encouraged the production of the same crops in India which were in line with their colonial demand. For example, to reduce the dependence of indigo imports on Caribbean countries, they encouraged indigo production in India.
This production continued to be promoted until the demand for indigo declined. The decrease in demand for indigo came from the development of synthetic dyes. Similarly, the emphasis was placed on the production of opium in India for export to China. Similarly, the production of mulberry silk was encouraged in Bengal to reduce its dependence on Italian silk. Cotton was produced in India with short fiber whereas in the UK and Europe there was a demand for cotton with high fiber.
To meet this demand, the production of large fiber cotton was encouraged in Maharashtra. In the same way, in view of the need for industrialization and urbanization in Britain, the emphasis was placed on the production of many types of crops. For example, tea and coffee plantations were developed.
The emphasis on the production of wheat in Punjab, jute in Bengal, and oilseeds in South India is seen in this sequence. Taking a look at the impact of commercialization of agriculture, it becomes clear that even though limited in nature, it has also seen a positive impact on the Indian economy. This weakened the self-sufficient rural economy but resulted in the development of the all-India economy. Farmers also benefited from this commercialization in certain areas, for example in the cotton production area of the Deccan and in the Krishna, Godavari, and Cauvery delta regions.