OCR Specification focus:
‘Economic and political developments under Company rule in India, c.1730–1773.’
The mid-eighteenth century marked profound changes in India as the East India Company expanded its authority. Economic structures and political arrangements were reshaped, altering both Indian society and British imperial ambitions.
Economic Developments under Company Rule
Expansion of Trade and Commerce
The East India Company’s economic strength was rooted in its monopoly privileges and its ability to dominate India’s rich trading networks.
The Company controlled exports of cotton textiles, indigo, saltpetre, silk, and opium, commodities vital for European markets.
By establishing favourable treaties with Indian rulers, it secured low duties and customs exemptions, increasing profitability.
British manufactured goods began to displace some Indian crafts, particularly in textile production, leading to shifts in local economies.
Monopoly: The exclusive possession or control of trade or supply of a commodity or service, limiting competition.
Revenue Collection and Land Settlement
After military victories, notably the Battle of Plassey (1757) and Battle of Buxar (1764), the Company gained political rights to collect revenue.
In 1765, the Diwani of Bengal, Bihar and Orissa was secured, granting taxation powers.
This allowed the Company to fund military campaigns and trading ventures directly from Indian revenues.
The Company employed local revenue farmers (zamindars), but these were often corrupt, leading to widespread exploitation of peasants.
The consequences included:
Economic drain of wealth from India to Britain.
Agricultural distress due to high revenue demands.
Famines, most notably the Great Bengal Famine of 1770, exacerbated by exploitative collection practices and Company mismanagement.
Financial Institutions and Speculation
Company rule also facilitated the growth of financial networks.
British and Indian bankers (banias) financed Company trade and military activities.
Speculation in Company stock on the London market tied metropolitan investors to Indian fortunes.
This link between finance capitalism and empire reflected Britain’s growing global economic integration.
Ports, Bases and Infrastructure
The expansion of Company power reinforced the importance of ports.
Calcutta, Madras and Bombay became commercial and military hubs.
View of Fort William, Calcutta in 1735. Fortified ports such as this were vital bases for the East India Company, combining warehousing, customs control, and military garrisons to secure trade. Source
Warehouses, docks and fortified settlements allowed the Company to secure shipping routes and protect commerce.
Control of ports strengthened the Company’s capacity to impose terms on both Indian rulers and European rivals.
Political Developments under Company Rule
From Trade to Political Authority
The East India Company shifted from a primarily commercial body to a political power.
Before 1757, the Company acted largely as a trader under Mughal oversight.
After Plassey, the Company began to interfere in succession disputes and to install rulers who supported its interests.
This transformation laid the foundation for Britain’s later colonial state in India.
Diwani: The right to collect revenue and administer civil justice in a territory, granted to the East India Company in Bengal in 1765.
The Role of Robert Clive and Company Officials
Company officials played central roles in shaping political authority.
Robert Clive emerged as a key figure, using alliances, military victories, and financial inducements to enhance Company influence.
Company servants exploited their positions to amass personal fortunes through private trade and corruption.
This raised concern in Britain about the governance of the Company and its accountability.
Relationship with Indian Rulers
Indian princes and nawabs were increasingly subordinated.
Treaties often forced rulers to accept Company garrisons or subsidies for British troops.
Authority of the Mughal Emperor declined rapidly, symbolised by the Company’s receipt of revenue rights from him in 1765.
Local rulers became dependent clients, diminishing traditional political autonomy.
British Parliamentary Oversight
The Company’s growing power and wealth attracted scrutiny in Britain.
Reports of corruption, maladministration, and exploitation in Bengal fuelled debates in Parliament.
The Regulating Act of 1773 was the first major step in asserting state control over the Company, creating the office of Governor-General of Bengal and tightening financial accountability.
This marked the beginning of the transition from Company rule to formal imperial governance.
Military Power and Security
The political developments of this period were underpinned by military strength.
The Company maintained a large army of sepoys (Indian soldiers) trained and commanded by British officers.
Fortified settlements such as Fort William in Calcutta symbolised Company dominance.
Military victories allowed the Company to impose treaties and revenue arrangements that reshaped Indian politics.
Broader Consequences of Developments
For India
Traditional ruling elites lost power and influence.
Agrarian society suffered due to heavy taxation and economic disruption.
Indian manufacturing, particularly in textiles, was undermined by British imports.
Famines and hardship increased, exposing the destructive aspects of Company administration.
For Britain
Enormous wealth flowed back to Britain, fuelling its commercial and financial revolution.
Political debates in Britain increasingly focused on imperial responsibility and the dangers of corruption.
The Company became a test case for questions of private versus state power in empire.
The Transformation of the East India Company
By 1773, the East India Company was no longer merely a trading corporation but a territorial power exercising governance over millions.
Map of Company rule in India c.1765, showing British territorial gains, presidencies, and nearby European possessions. It illustrates the political geography of Company authority and its expansion after Plassey and Buxar. Source
Economic and political developments had combined to expand its authority.
Its activities raised enduring questions about empire, morality, and the limits of commercial enterprise.
FAQ
Under the Mughals, revenue was collected through established landholding elites (zamindars) with relatively stable assessments. The Company, however, prioritised maximising revenue to fund trade and military campaigns.
This led to harsher collection, frequent changes in tax farming contracts, and reduced concern for peasant welfare. The Mughal system allowed some flexibility during poor harvests, while the Company often insisted on fixed, high demands regardless of conditions.
The famine killed millions, exposing the consequences of revenue extraction and neglect of relief.
For many in Britain, it became evidence of the Company’s inability to govern responsibly. Parliamentary critics used the crisis to argue for tighter oversight, paving the way for the Regulating Act of 1773.
Despite economic hardship for peasants, some Indian financiers profited.
They provided loans to the Company to fund armies and trade.
Many acted as intermediaries in revenue collection.
Partnerships with British officials allowed some families to amass significant wealth and influence, even as rural society suffered.
The Diwani gave the Company more than just revenue rights; it gave legitimacy.
It was conferred by the Mughal Emperor, still a symbol of imperial authority.
This meant the Company could claim lawful governance, not just military dominance.
It represented a formal shift from merchant to ruler, blurring the line between commerce and sovereignty.
The Act introduced structural reforms:
Creation of the Governor-General of Bengal, centralising authority over Company territories.
A council to oversee decisions, limiting unchecked power of officials.
New requirements for Company directors to report to Parliament.
It reflected fears of corruption and maladministration while recognising that the Company had become a de facto governing power.
Practice Questions
Question 1 (2 marks)
In which year did the East India Company obtain the Diwani of Bengal, Bihar and Orissa, giving it the right to collect revenues?
Mark scheme:
1 mark for correct year: 1765.
No marks for incorrect answers or vague references such as “mid-eighteenth century.”
Full 2 marks awarded only if the year is given precisely.
Question 2 (6 marks)
Explain two ways in which the East India Company’s control of revenue collection in Bengal affected economic or political developments between 1765 and 1773.
Mark scheme:
Up to 3 marks for each explained way (maximum 6 marks total).
1 mark: Identifies a valid development (e.g. increased Company wealth, famine, political authority, Mughal decline, etc.).
2 marks: Provides brief explanation of the development.
3 marks: Fully explains with clear links to both the Company’s control of revenue collection and the broader consequences (economic or political).
Examples:
Economic: The Company’s heavy revenue demands led to widespread agricultural distress and contributed to the Great Bengal Famine of 1770 (3 marks if clearly explained).
Political: By securing the Diwani, the Company gained quasi-sovereign authority, undermining Mughal power and allowing the British Parliament to begin regulating Company governance (3 marks if clearly explained).
