The Problem
Introduction
The East India Company was appointed as the Diwan of Bengal in 1765, becoming the chief financial administrator of the region. This change marked the Company's shift from a trading entity to a governing power with significant responsibilities for managing local resources, particularly in ensuring adequate revenue while maintaining control over local powers.
Revenue Issues
Initially, the Company preferred to focus on increasing revenue without establishing a regular assessment and collection system. The goods purchased by the Company in Bengal doubled within five years, yet that came at a cost to local artisans and peasants, who suffered from forced low prices and tax demands. The Bengal economy faced a crisis, culminating in a catastrophic famine in 1770 that decimated the population.
The Need for Agricultural Improvement
In light of these crises, Company officials recognized the need to encourage agricultural investment and improvement. The introduction of the Permanent Settlement in 1793 aimed to stabilize revenue flow and incentivize zamindars to invest in land. However, this system did not function as intended. Many zamindars failed to invest in land improvement or found themselves unable to pay the fixed revenue due to its high demands.
Consequences of Permanent Settlement
The Permanent Settlement exacerbated problems for ryots (peasants), who faced oppressive rents, insecurity regarding land rights, and the frequent need to take loans from moneylenders to pay their dues, leading to further debts and displacement. As a result, a new system was warranted, leading to the introduction of the mahalwari and ryotwari systems in the early 19th century, which sought to decentralize tax collection.
Shift to Indigo Cultivation
Recognizing the potential for higher profits, the Company encouraged the growth of crops like indigo for export. The exploitation of ryots under oppressive contracts led to unrest, culminating in the indigo rebellion of 1859 when peasants refused to cultivate indigo, showing the chronic discontent with the Company's policies.
Conclusion
While the Company initially sought to stabilize revenue through various systems, they failed to consider the rights and conditions of peasants, ultimately leading to widespread discontent and economic instability in Bengal.