Credit control methods by the Reserve Bank of India

Quantitative Credit Control Methods

In this method the central bank controls the quantity of credit given by commercial banks by using the following weapons.

Bank Rate

It is the rate at which bills are discounted and rediscounted by the banks with the central bank. During inflation, the bank rate is increased and during deflation, bank rate is decreased.

Open Market Operation

Direct buying and selling of government securities by the central bank in the open market is called as open market operations. During inflation the securities are sold in the market by the Central Bank. During the deflation period, the central bank buys the bills from the market and pays cash to commercial banks.

Variable reserve ratio

Every commercial bank has to keep a minimum cash reserve with the Reserve Bank of India depending on the deposits of the commercial bank. During inflation this ratio is increased and during deflation the ratio is decreased.

Qualitative Credit Control Methods

This is also called as selective credit control methods. The following weapons are used under this method:

Fixation of Margin

Banker lends money against price of securities. The amount of loan depends upon the margin requirements of the banker. The word margin here it means the difference between the loan value and market value of securities.

The central bank has the power to change the margins, which limits the amount of loan to be sanctioned by the commercial banks. During inflation higher margin would be fixed and during deflation lower margin would be fixed.

Regulation of consumer credit

Customer gets this type of foreign exchange reserves and exchange value of the rupee in relation to other country’s currencies. Currencies should be exchanged only with RBI or its authorized banks.

Direct action

To regulate the volume of bank loans the central bank may issue directives to the commercial banks from time to time. The directives may be in the form of oral or written statements or appeals or warnings. By means of these directives the RBI may decrease or increase the volume of credit.

Rationing of credit

It is a method of regulating and controlling purpose for which credit is guaranteed by the commercial bank. It may be of two types.

Variable portfolio ceilings

In this method the central bank fixes a maximum amount of loans and advances for every commercial bank.

Variable capital assets ratio

In this method the central bank fixes a ratio, which the capital of the commercial bank must bear to the total assets of the bank. By changing these ratio the credit can be regulated.

Moral Suasion

This is a gracious method followed by RBI. In this method the RBI gives advices and suggestions to the bankers to follow the instructions given by it, by sending letters and conducting meeting of the Board of Directors.

Know about the Bank Rate or Discount Rate Policy

Bank Rate Policy or the Discount Rate Policy has been the earliest instrument of quantitative credit control. It was the Bank of England which experimented with the bank rate policy for the first time as a technique of monetary management. Now every central bank has been endowed with this instrument of credit control.


Bank rate refers to the official minimum lending rate of interest of the central bank. It is the rate at which the central bank advances loans to the commercial banks by rediscounting the approved first class bills of exchange of the banks. Hence, bank rate is also called as the discount rate.

Theory of Bank Rate

The theory underlying the operation of bank rate is that by manipulating the bank rate, the central bank is in a position to exercise influence upon the supply of credit in the economy.

According to the theory of bank rate an increase or a decrease in the bank rate leads to a reduction or an increase in the supply of credit in the economy. This is possible because changes in the bank rate bring about changes in the other rates of interest in the economy.

Working of Bank Rate

As mentioned above, by manipulating the bank rate it is possible to effect changes in the supply of credit in the economy. During a period of inflation, to arrest the rise in the price level, the central bank raises the bank rate. When the bank rate is raised, all other interest rates in the economy also go up.

As a result, the commercial bank also raise their lending rates. The consequence is an increase in the cost of credit. This discourages borrowing and hence investment activity is curbed in the economy. This will bring about a reduction in the supply of credit and money in the economy and therefore in the level of prices.

On the other hand, during a period of deflation, the central bank will lower the bank rate n order to encourage business activity in the economy. When the bank rate is lowered, all other interest rates in the economy also come down. The banks increase the supply of credit by reducing their lending rates. A reduction in the bank rate stimulates investment and the fall in the price level is arrested.

The Process of Bank Rate Influence

Regarding the process through which changes in the bank rate influence the supply of credit, the level of business activity and the price level, we can distinguish two approaches. One put forth by R.G. Hawtrey and the other one associated with J.M. Keynes.

In the opinion of Hawtrey, changes in the bank rate operate through changes in the short term rates of interest. These changes in the short term interest rates, in their turn, influence the cost of borrowing by businessmen and industrialists.

But, according to Lord Keynes, changes in bank rate become effective through changes in the long term interest rates as reflected by changes in the capital value of long term securities.

But, it should be noted that there is not much difference between the two approaches and hence they are complementary to each other.

Bank Rate Under the Gold Standard

Under the gold standard, bank rate was used primarily to set right the disequilibrium in the balance of payments of the country. When there was a deficit in the balance of payments and hence an outflow of gold, bank rate was raised to check the outflow of gold. This was done by attracting the inflow of short term capital into the country.

Conditions for the Success of the Bank Rate Policy

The efficacy of bank rate as an instrument of monetary management calls for the fulfillment of the following conditions:

(a) Close relationship between bank rate and other interest rates

It is necessary that the relationship between bank rate and the other interest in the economy should be close and direct. Changes in the rate should bring about similar and appropriate changes in the other interest rates in the economy. Otherwise the efficacy of bank rate will be limited. There is, therefore, the need for the existence of an integrated interest rate structure.

(b) Existence of an elastic economic system

The success of bank rate requires the existence of an elastic economic structure. That is, the entire economic system should be perfectly flexible to accommodate itself to changes in the bank rate. Changes in the bank rate should bring about similar and desirable changes in prices, costs, wages, output, profits, etc. The existence of a rigid economic structure will reduce the efficacy of bank rate.

(c) Existence of short term funds market

Another condition required for the success of bank rate policy is the existence of market for short term funds in the country. This will help to handle foreign as well as domestic funds that come up on account of changes in the interest rates, following changes in the bank rate.

Before the First World War, bank rate policy was very effective as an instrument of quantitative credit control because, the conditions necessary for the success of bank rate were there. But, after the war, the significance of bank rate began to wane because the post-war atmosphere was not conducive for the smooth and effective operation of the bank rate policy.


The Bank Rate Policy suffers from the following limitations:

(a) It has been argued that bank rate proves ineffective to combat boom and depression. During a period of boom, investment is interest inelastic.

Even if the bank rate is raised to any extent, investment activity will not be curbed, because during a period of boom, the marginal efficiency of capital will be very high and the entire business community will be caught in a sweep of optimism.

During depression, bank rate becomes ineffective following the general psychology of diffidence and pessimism among the business circles.

(b) The growth of non-banking financial intermediaries has proved an effective threat to the effectiveness of bank rate policy. It has been adequately established by the study of the Redcliffe Report and Gurley-Shaw, that the mushroom growth of non-banking financial intermediaries has belittled the significance of bank rate.

This is because changes in the bank rate immediately affect the rates of interest of the commercial banks only and the non-banking financial institutions are not subject to the direct control of the central bank. Hence, it is said that “the good boy is punished for
the actions of a bad boy.”

(c) The decline in the use of bills of exchange as credit instruments also has been responsible for the decline in the importance of bank rate.

(d) Further, of late, businessmen have found out alternative methods of business financing, self-financing, ploughing back the profits, public deposits, etc. Indeed, the role of commercial banks as suppliers of loanable funds has been decreasing in importance.

(e) Moreover, the economic structure has not been adequately responding itself to changes in the bank rate. After the war, all kinds of rigidities have crept into the economic system.

(f) The invention of alternative instruments of credit control also has accounted for the decline in the popularity of bank rate.

(g) Further, the dependence of the commercial bank on the central bank for loans also has decreased leading to the decline in getting the bills of exchange rediscounted by the central bank. In addition, there has been an increased liquidity in the assets of banks.

(h) Finally, the increase in the importance of fiscal policy following the Great Depression of 1930’s has also reduced the importance of bank take policy as a technique of credit control.

However, in spite of the above limitations that the bank rate policy is subject to, it would be wrong to undermine the significance of bank rate as a tool monetary management. Though, by itself, it may not yield the desirable results, but
will certainly prove effective when used with other instruments of credit control.

The scope for the use of bank rate by the central bank, therefore, cannot be completely ruled out. The bank rate has undergone a significant revival. Its significance in controlling inflation cannot be undermined.

Educational and Social Reforms of the British in India

The Language and Education Policy

Initially, the East India Company did not evince any particular interest in matters of education. Although the British had captured Bengal in 1757, yet the responsibility of imparting education remained only in Indian hands. The study of ancient texts written in Arabic, Persian and Sanskrit still continued. In 1781, Warren Hastings established a Madrasa in Calcutta to encourage the study of Muslim laws along with Arabic and Persian languages.

A decade later in 1791 due to the sincere efforts of the British resident, Jonathan Duncan, a Sanskrit College was established to promote the study of Hindu laws and philosophy in Banaras. Therefore, it must be contended that during the first three decades of the 19th century, the development of education took place only through the traditional institutions.

It is apparent from the government and Church records that the state of oriental learning at the time of the establishment of the Company’s rule in Bengal, there were about 80,000 traditional institutions of learning in Bengal alone, which means that there was at least one institution for every four hundred people in that province. Different educational surveys of Madras, Bombay and Punjab also demonstrate similar facts. There was at least one school in every village of India at that time.

The East India Company began to adopt a dual policy in the sphere of education. It discouraged the prevalent system of oriental education and gave importance to western education and English language. The Charter Act of 1813 adopted a provision to spend one lakh rupees per annum for the spread of education in India. Although there was a prolonged debate pertaining to education during the course of a general discussion on the Act of 1813 in the British Parliament, yet the matter continued to generate debate for the next 20 years. Consequently, not even a single penny out of the allocated funds could be spent on education.

The contemporary British scholars were divided into two groups on the issue of development of education in India. One group, called the Orientalists, advocated the promotion of oriental subjects through Indian languages. The other group, called the Anglicists, argued the cause of western sciences and literature in the medium of English language.

In 1829, after assuming the office of the Governor-General of India, Lord William Bentinck, emphasized on the medium of English language in Indian education. In the beginning of 1835, the 10 members of the General Committee of Public Instruction were clearly divided into two equal groups. Five members including the Chairman of the committee Lord Macaulay were in favour of adopting English as medium of public instruction whereas the other five were in favour of oriental languages.

The stalemate continued till 2 February 1835 when the Chairman of the committee, Lord Macaulay announced his famous Minute advocating the Anglicist point of view. Consequently, despite fierce opposition from all quarters, Bentinck got the resolution passed on 7 March 1835 which declared that henceforth, government funds would be utilized for the promotion of western literature and science through the medium of English language.

In 1854, Sir Charles Wood sent a comprehensive dispatch as a grand plan on education. The establishment of departments of public instructions in five provinces and introduction of the pattern of grants in aid to encourage private participation in the field of education were recommended. Besides, the dispatch also laid emphasis on the establishment of schools for technical education, teacher and women education. Over and above all these, the dispatch recommended the establishment of one University each in Calcutta, Bombay and Madras, on the model of the London University. Consequently, within the next few years, the Indian education became rapidly westernized.

Social Policies and Legislation

In the beginning, the British interest was limited to trade and earning profits from economic exploitation. Therefore, they did not evince any interest in taking the issue of social or religious reforms. They were apprehensive of interfering with the social and religious customs and institutions of the Indians because of the fear that they might lose trade advantage. Thus, they adopted the policy of extreme precaution and indifference towards social issues in India. The one reason why they indulged in criticizing the customs and traditions of India was to generate a feeling of inferiority complex among the Indians.

However, in the mid-19th century the social and religious movements, launched in India, attracted the attention of the Company’s administration towards the country’s social evils. The propaganda carried out by the Christian missionaries also stirred the minds of the educated Indians. Western thought and education and views expressed in different newspapers and magazines had their own impact. Some of the British administrators like Lord William Bentinck had evinced personal interest in the matter. There were primarily two areas in which laws were enacted, laws pertaining to
women emancipation and the caste system.

Social Laws Concerning Women

The condition of women, by the time the British established their rule, was not encouraging. Several evil practices such as the practice of Sati, the Purdah system, child marriage, female infanticide, bride price and polygamy had made their life quite miserable. The place of women had come to be confined to the four walls of her home. The doors of education had been shut for them. From economic point of view also her status was miserable. There was no social and economic equality between a man and woman. A Hindu woman was not entitled to inherit any property. Thus, by and large, she was completely dependent on men.

During the 19th and 20th centuries some laws were enacted with the sincere efforts of social reformers, humanists and some British administrators to improve the condition of women in Indian society. The first effort in this direction was the enactment of law against the practice of Sati during the administration of Lord William Bentinck.

Female Infanticide

Female infanticide was another inhuman practice afflicting the 19th century Indian society. It was particularly in vogue in Rajputana, Punjab and the North Western Provinces. Colonel Todd, Johnson Duncan, Malcolm and other British administrators have discussed about this evil custom in detail. Factors such as family pride, the fear of not finding a suitable match for the girl child and the hesitation to bend before the prospective in-laws were some of the major reasons responsible for this practice.

Therefore, immediately after birth, the female infants were being killed either by feeding them with opium or by strangulating or by purposely neglecting them. Some laws were enacted against this practice in 1795, 1802 and 1804 and then in 1870. However, the practice could not be completely eradicated only through legal measures. Gradually, this evil practice came to be done away through education and public opinion.

Widow Remarriage

There are many historical evidences to suggest that widow remarriage enjoyed social sanction during ancient period in India. In course of time the practice ceased to prevail increasing the number of widows to lakhs during the 19th century. Therefore, it became incumbent on the part of the social reformers to make sincere efforts to popularize widow remarriage by writing in newspapers and contemporary journals.

Prominent among these reformers were Raja Rammohan Roy and Iswar Chandra Vidyasagar. They carried out large scale campaigns in this regard mainly through books, pamphlets and petitions with scores of signatures. In July 1856, J.P. Grant, a member of the Governor-General’s Council finally tabled a bill in support of the widow remarriage, which was passed on 13 July 1856 and came to be called the Widow Remarriage Act, 1856.

Child Marriage

The practice of child marriage was another social stigma for the women. In November 1870, the Indian Reforms Association was started with the efforts of Keshav Chandra Sen. A journal called Mahapap Bal Vivah (Child marriage: The Cardinal Sin) was also launched with the efforts of B.M. Malabari to fight against child marriage. In 1846, the minimum marriageable age for a girl was only 10 years.

In 1891, through the enactment of the Age of Consent Act, this was raised to 12 years. In 1930, through the Sharda Act, the minimum age was raised to 14 years. After independence, the limit was raised to 18 years in 1978.

Purdah System

Similarly, voices were raised against the practice of Purdah during the 19th and 20th century. The condition of women among the peasantry was relatively better in this respect. Purdah was not so much prevalent in Southern India.

Through the large scale participation of women in the national freedom movement, the system disappeared without any specific legislative measure taken against it. Struggle against the Caste System and the related Legislation Next to the issue of women emancipation, the caste system became the second most important issue of social reforms. In fact,the system of caste had become the bane of Indian society.

The caste system was primarily based on the fourfold division of society viz. Brahmins, Kshatriya, Vaishyas and Shudras. On account of their degradation in their social status, the Shudras were subjected to all kinds of social discrimination. In the beginning of the 19th century the castes of India had been split into innumerable subcastes
on the basis of birth.

In the meantime, a new social consciousness also dawned among the Indians. Abolition of’ untouchability became a major issue of the 19th century social and religious reform movements in the country. Mahatma Gandhi made the removal of untouchability a part of his constructive programme. He brought out a paper, The Harijan, and also organised the Harijan Sevak Sangh. Dr. Bhimrao Ambedkar dedicated his entire life for the welfare of the downtrodden.

In Bombay, he formed a Bahiskrit Hitkarini Sabha in July 1924 for this purpose. Later, he also organised the Akhil Bharatiya Dalit Varg Sabha to fight against caste oppression. Jyotirao Phule in Western India and Shri Narayana Guru in Kerala respectively established the Satya Sadhak Samaj and the Shri Narayana Dharma Partipalana Yogam to include self-esteem among the downtrodden. In the Madras Presidency also the beginning of 20th century witnessed the rise of Self-respect Movement of Periyar E.V.R. In order to eradicate this evil practice many other individual and institutional efforts were also made. These movements were directed mainly in removing the disabilities suffered by Harijans in regard to drawing of water from public wells, getting entry into temples and admission into schools.

Revenue Administration and Economic Policy of the British

British Agrarian Policy

It is a well-known fact that India is primarily an agricultural country. The overwhelming majority of its people depend on agriculture for sustenance. If the crop is good, prosperity prevails otherwise it leads to famine and starvation. Till the 18th century, there was a strong relation between agriculture and cottage industries in India. India was not only ahead in the field of agriculture than most other countries but it also held a prominent place in the world in the field of handicraft production.

The British destroyed handicraft industry in the country while unleashing far-reaching changes in the country’s agrarian structure by introducing new systems of land tenures and policies of revenue administration.

India’s national income, foreign trade, industrial expansion and almost every other dominion of economic activity, depended on the country’s agriculture. The British policies revolved around getting maximum income from land without caring much about Indian interests of the cultivators.

They abandoned the age -old system of revenue administration and adopted in their place a ruthless policy of revenue collection.

After their advent, the British principally adopted three types of land tenures. Roughly 19 per cent of the total area under the British rule, i.e., Bengal, Bihar, Banaras, division of the Northern Western Provinces and northern Karnatak, were brought under the Zamindari System or the Permanent Settlement.

The second revenue system, called the Mahalwari Settlement, was introduced in about 30 per cent of the total area under British rule i.e., in major parts of the North Western Provinces, Central Provinces and the Punjab with some variations. The Ryotwari System covered about 51 per cent of the area under British rule comprising part of the Bombay and Madras Presidencies, Assam and certain other parts of British India.

The Permanent Settlement

Lord Cornwallis’ most conspicuous administrative measure was the Permanent Land Revenue Settlement of Bengal, which was extended to the provinces of Bihar and Orissa. It is appropriate to recall that Warren Hastings introduced the annual lease system of auctioning the land to the highest bidder. It created chaos in the revenue administration.

Cornwallis at the time of his appointment was instructed by the Directors to find a satisfactory and permanent solution to the problems of the land revenue system in order to protect the interests of both the Company and the cultivators. It obliged the Governor- General to make a thorough enquiry into the usages, tenures and rents prevalent in Bengal.

The whole problem occupied Lord Cornwallis for over three years and after a prolonged discussion with his colleagues like Sir John Shore and James Grant he decided to abolish the annual lease system and introduce a decennial (Ten years)settlement which was subsequently declared to be continuous.

The main features of the Permanent Settlement were as follows:

(i) The zamindars of Bengal were recognised as the owners of land as long as they paid the revenue to the East India Company regularly.

(ii) The amount of revenue that the zamindars had to pay to the Company was firmly fixed and would not be raised under any circumstances. In other words the Government of the East India Company got 89% leaving the rest to the zamindars.

(iii) The ryots became tenants since they were considered the tillers of the soil.

(iv) This settlement took away the administrative and judicial functions of the zamindars.

The Permanent Settlement of Cornwallis was bitterly criticised on the point that it was adopted with ‘undue haste’. The flagrant defect of this arrangement was that no attempt was made ever either to survey the lands or to assess their value. The assessment was made roughly on the basis of accounts of previous collections and it was done in an irregular manner.

The effects of this system both on the zamindars and ryots were disastrous. As the revenue fixed by the system was too high, many zamindars defaulted on payments. Their property was seized and distress sales were conducted leading to their ruin. The rich zamindars who led luxurious lives left their villages and migrated into towns. They entrusted their rent collection to agents who exacted all kinds of illegal taxes besides the legal ones from the ryots.

This had resulted in a great deal of misery amongst the peasants and farmers. Therefore Lord Cornwallis’ idea of building a system of benevolent land-lordism failed. Baden Powell remarks, “The zamindars as a class did nothing for the tenants”. Though initially the Company gained financially, in the long run the Company suffered financial loss because land productivity was high, income from it was meagre since it was a fixed sum. It should be noted that in pre- British period a share on the crop was fixed as land tax.

Nevertheless, this system proved to be a great boon to the zamindars and to the government of Bengal. It formed a regular income and stabilised the government of the Company. The zamindars prospered at the cost of the welfare of the tenants.

Ryotwari Settlement

The Ryotwari settlement was introduced mainly in Madras, Berar, Bombay and Assam. Sir Thomas Munro introduced this system in the Madras Presidency. Under this settlement, the peasant was recognised as the proprietor of land. There was no intermediary like a Zamindar between the peasant and the government. So long as he paid the revenue in time, the peasant was not evicted from the land. Besides, the land revenue was fixed for a period from 20 to 40 years at a time.

Every peasant was held personally responsible for direct payment of land revenue to the government. However, in the end, this system also failed. Under this settlement it was certainly not possible to collect revenue in a systematic manner. The revenue officials indulged in harsh mesuares for non payment or delayed payment.

Mahalwari Settlement

In 1833, the Mahalwari settlement was introduced in the Punjab, the Central Provinces and parts of North Western Provinces. Under this system the basic unit of revenue settlement was the village or the Mahal. As the village lands belonged jointly to the village community, the responsibility of paying the revenue rested with the entire Mahal or the village community. So the entire land of the village was measured at the time of fixing the revenue. Though the Mahalwari system eliminated middlemen between the government and the village community and brought about improvement in irrigation facility, yet its benefit was largely enjoyed by the government.

British Policy towards Indian Handicrafts

The European companies began arriving on the Indian soil from 16th century. During this period, they were constantly engaged in fierce competition to establish their supremacy and monopoly over Indian trade. Not surprisingly, therefore, initial objective of the English East India Company was to have flourishing trade with India. Later, this objective was enlarged to acquire a monopoly over this trade and obtain its entire profit. Although the trade monopoly thus acquired by the Company in India was ended by the Charter Act of 1833, yet the British Policy of exploiting the resources of India continued unabated. In this respect, the nature of the British rule was different from the earlier rulers.

As far as the traditional handicraft industry and the production of objects of art were concerned, India was already far ahead of other countries in the world. The textiles were the most important among the Indian industries. Its cotton, silk and woolen products were sought after all over the world. Particularly, the muslin of Dacca, carpets of Lahore, shawls of Kashmir, and the embroidery works of Banaras were very famous. Ivory goods, wood works and jewellery were other widely sou

ght after Indian commodities.

Apart from Dacca, which was highly famous for its muslins, the other important centres of textile production were Krishnanagar, Chanderi,

Arni and Banaras. Dhotis and dupattas of Ahmedabad, Chikan of Lucknow, and silk borders of Nagpur had earned a worldwide fame. For their silk products some small towns of Bengal besides, Malda and Murshidabad were very famous. Similarly, Kashmir, Punjab and western Rajasthan were famous for their woolen garments.

Besides textiles, India was also known widely for its shipping, leather and metal industries. Indian fame as an industrial economy rested on cutting and polishing of marble and other precious stones and carving of ivory and sandalwood. Moradabad and Banaras were famous for brass, copper, bronze utensils. Nasik, Poona, Hyderabad and Tanjore were famous for other metal works. Kutch, Sind and Punjab were known for manufacturing arms. Kolhapur, Satara, Gorakhpur, Agra, Chittor and Palaghat had likewise earned a reputation for their glass industries. Making of gold, silver and diamond jewellery was another important industrial activity in which many places in India specialized. These entire handicrafts industry indicated a vibrant economy in India.

Despite enjoying such fame in the world, the Indian handicraft industry had begun to decline by the beginning of the 18th century. There were many reasons for it. First, the policies followed by the English East India Company proved to be highly detrimental to the Indian handicrafts industry. The Indian market was flooded with the cheap finished goods from Britain. It resulted in a steep decline in the sale of Indian products both within and outside of the country. In 1769, the Company encouraged the cultivation of raw silk in Bengal while imposing service restrictions on the sale of its finished products.

In 1813 strategies were devised by the Company to enhance the consumption of finished goods from Britain. In this respect the tariff and octroi policies were suitably modified to suit the British commercial interests. To cite an example, in 1835 only a minimal import of British duty of 2.5 per cent was imposed on the import of British manufactured cotton cloth whereas a very high 15 per cent export duty was charged on Indian cotton textiles as per the new maritime regulations.

Moreover, goods from England could only be brought by the English cargo ships. As a result of all these policies, the Indian textiles could not enter the British market, whereas the Indian market was flooded with British goods.

Thus, with the rise of British paramountcy in India, the process of decline in the power and status of Indian rulers had set in. Thus, the demands for the domestic luxury goods like royal attires, armory and objects of art by the Indian royalty also reduced drastically.

So, with the disappearance of the traditional dynasties, their nobility also passed into oblivion. This led to a sharp decline in the demand for traditional luxury goods. Besides, the Industrial revolution led to the invention of new machinery in Europe. Power looms replaced handlooms. In India also the advent of machines led to the decline of handicraft as now the machine-made products were available at cheaper rate and more goods could be produced in much lesser time. Finally, the new communication and transport facilities brought about a revolution in public life. Earlier, goods used to be transported either by bullock carts or by ships. Thus, during the rainy season, it was not always convenient to carry on with the normal transportation. But now conditions were changed with the introduction of railways and steamer services. Concrete roads were laid to connect the country’s agricultural hinterland. The import of goods from England also increased with the simultaneous increase in exports of raw materials from India, leading to massive loss of jobs among Indian artisans and craftsman who lost their only means to livelihood.

India under the British – Lord Dalhousie

Lord DalhousieLord Dalhousie was the youngest Governor-General of India when he assumed charge at the age of 36 in 1848. His early career was remarkable. He studied in Christ Church, Oxford. He became Member of Parliament and enjoyed the confidence of Sir Robert Peel, the Prime Minister of England. He did much for the progress of railway construction in England as the president of the Board of Trade. In 1847, he was offered the Governor-Generalship of India which he accepted and arrived at Calcutta in January 1848.

Policy of Annexation

The most important aspect of Dalhousie’s administration is related to “the great drama of annexation”. His aims for expanding the Company’s territories were administrative, imperial, commercial and financial. Although he used different reasons for annexation, his main objective was to end misrule in the annexed states, as in the case of the annexation of Oudh. He aimed at providing the beneficent administration to the people of the annexed states. At the same time he had in his mind the advantages of annexation to the British such as imperial defence, commercial and financial benefits. Though Dalhousie did not come to India to follow a policy of annexation, but he was able to consolidate British rule in India by his policy of annexation. His great annexations include the Punjab, Lower Burma, most of the Central Provinces and Oudh.

Annexation of Punjab

At the end of the second Anglo-Sikh War in 1849, Punjab was annexed by Dalhousie. He organized the administration of Punjab very efficiently. The province was divided into small districts under the control of District Officers who were called Deputy Commissioners. These commissioners with the help of their assistants came into close contact with people. Revenue and judicial departments were combined to secure concentration of power and responsibility. The laws and procedure were simplified in accordance with the custom of the people. The overall administration of Punjab was entrusted to the Chief Commissioner. In fact, the Governor-General was the virtual ruler of Punjab. The services of Lawrence brothers in the administration of Punjab were notable. Within three years perfect order was restored in the province. It was efficiently defended from internal and external enemies. In 1859, Sir John Lawrence became the Lieutenant Governor of Punjab.

Second Burmese War and the Annexation of Lower Burma

In 1852, commercial disputes in Rangoon prompted new hostilities between the British and the Burmese. After the end of the second Burmese War (1852), Dalhousie annexed Lower Burma with its capital at Pegu. Major Arthur Phayre was appointed the Commissioner of the new province. His administration also proved to be efficient. The annexation of Lower Burma proved beneficial to Britain. Rangoon, Britain’s most valuable acquisition from the war became one of the biggest ports in Asia.

Doctrine of Lapse

Dalhousie also took advantage of every opportunity to acquire territory by peaceful means. The East India Company was rapidly becoming the predominant power in India. It had concluded alliances with Indian rulers. It promised to support them and their heirs in return for various concessions. Although this type of agreement favoured the British, Dalhousie sought to acquire even more power. According to the Hindu Law, one can adopt a son in case of no male heir to inherit the property. The question arose whether a Hindu ruler, holding his state subordinate to the paramount power, could adopt a son to succeed his kingdom. It was customary for a ruler without a natural heir to ask the British Government whether he could adopt a son to succeed him. According to Dalhousie, if such permission was refused by the British, the state would “lapse” and thereby become part of the British India. Dalhousie maintained that there was a difference in principle between the right to inherit private property and the right to govern. This principle was called the Doctrine of Lapse.

The Doctrine of Lapse was applied by Dalhousie to Satara and it was annexed in 1848. Jhansi and Nagpur were annexed in 1854. As a result of these annexations, a large part of the Central Provinces came under the British rule. The new province was governed by a Chief Commissioner from 1861. Although the Doctrine of Lapse cannot be regarded as illegal, its application by Dalhousie was disliked by Indian princes. The advantages of the annexations of Satara, Jhansi and Nagpur were substantial to the British. Dalhousie was blamed for using the Doctrine of Lapse as an instrument in pursuing his policy of annexation. After the Mutiny of 1857, the doctrine of lapse was withdrawn.

Later during the Mutiny of 1857, Rani Lakshmi Bai of Jhansi played an important role in fighting against the British.

Annexation of Oudh

The British relations with the state of Oudh go back to the Treaty of Allahabad in 1765. Right from Warren Hastings, many Governor-Generals advised the Nawab of Oudh to improve the administration. But, misrule continued there and the Nawab was under the assumption that the British would not annex Oudh because of his loyalty to them. In 1851, William Sleeman, Resident at Lucknow, reported on the “spectacle of human misery and careless misrule”.

But Sleeman was against the policy of annexing Oudh. After surveying the situation in Oudh, Dalhousie annexed it in 1856. Nawab Wajid Ali was granted a pension of 12 lakhs of rupees per year. The annexed territory came under the control of a Chief Commissioner. Dalhousie’s annexation of Oudh, the last one among his annexations, created great political danger. The annexation offended the Muslim elite. More dangerous was the effect on the British army’s Indian troops, many of whom came from Oudh, They had occupied a privileged position before its annexation. Under the British Government they were treated as equals with the rest of the population. This is a loss of prestige for them. In these various ways, the annexation of Oudh contributed to the Mutiny of 1857.

Domestic Reforms of Dalhousie

Dalhousie’s territorial acquisition transformed the map of India. He was not only a conqueror but also a great administrator. The appointment of a Lieutenant-Governor to Bengal enabled Dalhousie concentrate on administration. His greatest achievement was the molding of the new provinces into a modern centralized state. For the newly acquired territories, he introduced the centralized control called “Non-Regulation System”. Under this system a Commissioner was appointed for a newly acquired territory. Under military reforms Dalhousie shifted the headquarters of Bengal Artillery from Calcutta to Meerut. Simla was made the permanent headquarters of the army.


The introduction railways in India inaugurated a new economic era. There were three major reasons for the British to take interest in its quick development. The first reason was commercial. The second main reason was administrative. The third reason was defense.

At the time of revolt and disturbance, movement of the forces was much easier through railways. Lord Dalhousie’s contribution in the development of railways is worth commending. In 1853, he penned his Railway Minute formulating the future policy of railways in India. He started the ]] >

India under the British – Lord William Bentinck

Lord William BentinckLord William Bentinck assumed the office of the Governor-General in 1828. Born in 1774 he commenced his career as a soldier and later at the young age of twenty two he became a Member of Parliament. He was appointed the Governor of Madras in 1803. He supported Sir Thomas Munroe on revenue administration. The Vellore Mutiny of 1806 had resulted in Bentinck’s recall. However, his appointment again to the higher office as Governor-General shows his real greatness. As Governor-General, Bentinck had initiated an era of progress and reforms. He was undoubtedly the first Governor- General of British India who acted on the dictum that “the welfare of the subject peoples was a main, perhaps the primary, duty of the British in India”.

Policy Towards Indian States

William Bentinck adopted a policy of non-intervention and non-aggression with Indian states. If at all he interfered in the affairs of the Indian states, it was only to end any form of misgovernment and never to annex any territory.


In Mysore, Hindu rule under Krishnaraja III was restored by Wellesley. In the beginning, the young Raja functioned well along with his able minister Puranaiya. Later, when the young raja assumed full control of the government he proved incompetent. The peasantry of the state suffered from many grievances. There was no redressal. Consequently, a revolt of the peasants broke out in 1830 and it was suppressed with the help of an army from Madras. Nonetheless, the British authorities took over the administration of Mysore State and placed it under the control of a commissioner. The Raja was given a pension.

Sir Mark Cubbon was commissioner from 1834 to 1861 and his administration was beneficial to the people of Mysore. Even today, the famous Cubbon Park in Bangalore city has been named after him to remind his services to Mysore.

Cachar and Jaintia

The principality of Cachar lying in the North East Frontier came under the protection of the British in accordance with the Treaty of Yandaboo concluded at the end of the first Burmese War. The Raja of this small state was assassinated in 1832 but there was no heir to succeed him. Bentinck annexed this state at the wish of the people.

Jaintia was one of the territories brought under the custody of the British after the first Anglo-Burmese War. The ruler of the small country behaved in an unruly way by abducting a few subjects of British India with the evil intention of sacrificing them to the goddess Kali. Therefore, the Governor-General acted promptly to avert any recurrence of such cruel abhorrent act and annexed this country.


Vira Raja was a ruthless ruler of Coorg who treated his people with savage barbarity and killed all his male relatives. Lord William Bentinck decided to deal with him effectively and sent Colonel Lindsay to capture Mercara, the capital of the Coorg state. The Raja was deposed in 1834 and the state was annexed.

Relations with Ranjit Singh

Lord William Bentinck was the first Governor-General to visualise a Russian threat to India. Hence, he was eager to negotiate friendly relations both with the ruler of Punjab, Maharajah Ranjit Singh and also with the Amirs of Sind. His earnest desire was that Afghanistan should be made a buffer state between India and any possible invader. As an initial measure, an exchange of gifts took place between Lahore, the capital of Punjab and Calcutta, the seat of Governor-General. It was then followed by the meeting of Bentinck and Ranjit Singh on 25 October, 1831 at Rupar on the bank of the river Sutlej amidst show and splendor. The Governor-General was successful in winning the friendship of Ranjit Singh and the Indus Navigation Treaty was concluded between them. This treaty opened up the Sutlej for navigation. In addition, a commercial treaty was negotiated with Ranjit Singh. A similar treaty was also concluded with the Amirs of Sind.

Charter Act of 1833

The Regulating Act of 1773 made it compulsory to renew the Company’s Charter after twenty years. Hence, the Charter Act of 1793 was passed by the Parliament. It extended the life of Company for another twenty years and introduced minor changes in the existing set up. The Charter Act of 1813 provided one lakh of rupees annually for the promotion of Indian education. It also extended the Company’s charter for another twenty years.

The Charter Act of 1833 was a significant constitutional instrument defining the scope and authority of the East India Company. The liberal and utilitarian philosophy of Bentham was made popular by the provisions of this Act. Following were the important provisions:

(i) The English East India Company ceased to be a commercial agency in India. In other words, it would function hereafter as the political agent for the Crown.

(ii) The Governor-General of Fort William was hereafter called ‘the Governor- General of India’. Thus, Bentinck was the first Governor-General of India’.

(iii) A Law Member was appointed to the Governor-General’s Council. T. B. Macaulay was the first Law Member of the Governor- General-in-Council.

(iv) The Act categorically stated ‘that no native of India, nor any natural born subject of His Majesty, should be disabled from holding any place, office, or employment, by reason of his religion, place of birth, descent or colour”. It was this enactment which laid the foundation for the Indianisation of public services.

After twenty years, the Charter Act of 1853 was passed and it was the last in the series of Charter Acts.

Reforms of Lord William Bentinck

The advent of Lord William Bentinck ushered in a new era in the annals of India in many ways. Although his tenure of office covered only a short span of seven years, it saw a period of enduring reforms. They may be classified as financial, administrative, social and educational.

Financial Reforms

When Bentinck assumed the Governor-Generalship in 1828, the financial position of the Company was poor. The exchequer was very weak. The state budget showed a deficit of one million rupees. It became necessary on the part of the Governor-General to take effective steps to improve the financial condition. To achieve this he adopted the following measures:

He reduced the salaries and allowances of all officers and additional staff were removed. In the military department, he abolished the system of double batta. (Batta was an allowance to troops on active service.) By these financial reforms at the time of his departure, he left the treasury with a surplus of Rs.1.5 millions.

Administrative Reforms

Bentinck’s administrative reforms speak of his political maturity and wisdom. In the judicial department he abolished the provincial courts of appeal established by Cornwallis. They were largely responsible for the huge arrears of cases. This step was readily accepted by the Directors since it cut down their expenditure. Another good measure of Bentinck was the introduction of local languages in the lower courts and English in the higher courts in the place of Persian. Even in matters of revenue Bentinck left his ma

rk. He launched the revenue settlements of the North West Province under the control of R.M. Bird. This settlement was for a period of 30 years and it was made either with the tillers of the soil, or with the landowners.

Social Reforms

The social reforms of William Bentinck made his name immortal in the history of British India. These include the abolition of Sati, the suppression of Thugs and the prevention of female infanticide.

Abolition of Sati

The practice of sati, the age old custom of burning of widows alive on the funeral pyre of their husbands was prevalent in India from ancient times. This inhuman social custom was very common in northern India more particularly in Bengal. Bentinck was greatly distressed when he received a report of 800 cases of sati in a single year and that from Bengal. He determined to abolish this practice which he considered an offence against natural justice. Therefore, he became a crusader against it and promulgated his Regulation XVII on 4 December 1829 prohibiting the practice of sati. Those who practiced sati were made liable for punishment by law courts as accessories to the crime. The Regulation was extended to the Madras and Bombay Presidencies in 1830.

Suppression of Thugs

The most commendable measure which Bentinck undertook and which contributed to the material welfare of the people was the suppression of the ‘thugs’. They were hereditary robbers. They went about in small groups of fifty to hundred posing as commercial gangs or pilgrims ‘strangling and robbing peaceful travellers’. They increased in number in central and northern India during the 18th century when anarchy reigned after the disintegration of the Mughal Empire. A campaign was systematically organised by Colonel Sleeman from 1830 against the thugs. During the course of five years nearly 2000 of them were captured. A greater number of them were exterminated and the rest were transported to the Andaman and Nicobar Islands. For his role in the suppression of thugs, Sir William Sleeman was known as “Thugee Sleeman”.

Female Infanticide

Female infanticide was one of the horrible and heartless deeds committed even by civilized people. This practice killing female infants was very much prevalent in places like Rajputana, Punjab, Malwa and Cutch. Bentinck took effective steps to prevent the ritual of child sacrifice at Saugar Island in Bengal. He not only prohibited female infanticide but declared them as punishable crime.

Introduction of English Education

The introduction of English Education was a significant event of Lord William Bentinck’s administration. He appointed a committee headed by Lord Macaulay to make recommendations for the promotion of education. In his report, Macaulay emphasized the promotion of European literature and science through English medium to the people of India. This recommendation was wholeheartedly accepted by William Bentinck. The Government Resolution in 1835 made English the official and literary language of India. In the same year, William Bentinck laid foundation of the Calcutta Medical College.

Estimate of William Bentinck

Bentinck was a “straightforward, honest, upright, benevolent, sensible man”. His social reforms such as abolition of sati and prevention of child sacrifice eradicated age old evils from Hindu society. It is gratifying to note that “Bentinck acted where others had talked”. To enforce the regulations regarding the prohibition of sati, he was prepared to risk his own position. Such courage and straightforwardness were seldom found among the administrators of those days. His educational reforms heralded a new age in India.

After William Bentinck, Lord Auckland (1836-42) became Governor-General. The First Afghan War (1836-42) was fought during his administration. Due to his failure in Afghanistan he was recalled in 1842. Lord Ellenborough succeeded him and ended the Afghan War. He also annexed the Sindh. His successor, Lord Hardinge (1844-48) fought the first Anglo-Sikh War (1845-46) and concluded the Treaty of Lahore.

India under the British – Lord Hastings

Lord Hastings became Governor-General in 1813. He adopted a vigorous forward policy and waged wars extensively. His aggressive and imperialist polices paved the way for the general of expansion of the British Empire. He further expanded the British power in India.

LORD HASTINGSThe conditions in India when he assumed power posed a serious threat to the British administration. There was anarchy in central India. The Pindaris plundered the whole region and the Marathas could not control them. Also, there was infighting among the Maratha chiefs. Yet, they were aiming at the expulsion of the British from India. The Peshwa was secretly plotting against the British. Hastings was also troubled by the expansion of the Gurkha power. Therefore, Hastings determined to restore order by suppressing the Pindaris and to eliminate threats to the British power by waging wars with the Marathas and the Gurkhas.

War against the Gurkhas (1814-16)

Nepal emerged as a powerful Gurkha state in 1768. This country is situated to the north of India with its boundary touching China in the north and Bengal and Oudh in the east and south, respectively. In 1801, the British acquired the districts of Gorakhpur and Basti from the Nawab of Oudh. This move brought the boundary of Nepal to touch the British frontier. The aggressions of the Gurkhas into the British territories culminated in a war. In May 1814, the Gurkhas attacked the British police post and killed 18 policemen and their officer. Hastings declared war on Nepal. In 1814 several battles were fought between the British and the Gurkhas. Amar Singh Thapa, the able General of Nepal Army was forced to surrender.

In March 1816, the Treaty of Sagauli was concluded. The Gurkhas gave up their claim over the Tarai region and ceded the areas of Kumaon and Garhwal to the British. The British now secured the area around Simla and their north-western borders touched the Himalayas. The Gurkhas had to withdraw from Sikkim and they also agreed to keep a British Resident at Katmandu. It was also agreed that the kingdom of Nepal would not employ any other foreigner in its services other than the English. The British had also obtained the sites of hill stations like Simla, Mussoori, Nainital, Ranikhet and developed them as tourist and health resorts. After this victory in the Gurkha War Hastings was honoured with English peerage and he became Marquis of Hastings.

Suppression of the Pindaris

The origin of Pindaris is lost in obscurity. The first reference about them is during the Mughal invasion of Maharashtra. They did not belong to any particular caste or creed. They used to serve the army without any payment but instead were allowed to plunder. During the time of Baji Rao I, they were irregular horsemen attached to the Maratha army. It is worth mentioning here that they never helped the British. They were mostly active in the areas of Rajputana and the Central Provinces and subsisted on plunder. Their leaders belonged to both the Hindu as well as the Muslim communities. Chief amongst them were Wasil Muhammad, Chitu and Karim Khan. They had thousands of followers.

In 1812, the Pindaris plundered the districts of Mirzapur and Shahabad and in 1815 they raided the Nizam’s dominions. In 1816, they plundered the Northern Circars. Lord Hastings determined to suppress the Pindaris. For this he gathered a large army of 1,13,000 men and 300 guns and attacked the Pindaris from four sides. He himself took command of the force from the north while Sir Thomas Hislop commanded the force from the south. By 1818, the Pindaris were completely suppressed and all their bands disintegrated. Karim Khan was given a small estate in the Gorakhpur district of the United Provinces. Wasil Muhammad took refuge in the Scindia’s camp but the latter handed him over to the British. Wasil committed suicide in captivity and Chitu escaped to the forest, where a tiger killed him. Thus, by 1824, the menace of the Pindaris came to an end.

Downfall of the Maratha Confederacy

The third major achievement of Lord Hastings was against the Marathas. In reality, the Maratha power had weakened considerably after the Third Battle of Panipat (1761) and the two subsequent wars against the British. But the Marathas had not finally crushed out. The Maratha chiefs fought amongst themselves and their successors were invariably weak and incapable. The relationships of powerful Maratha chiefs like the Bhonsle, Gaekwar, Scindia, Holkar and the Peshwa were ridden with mutual jealousies.

Peshwa Baji Rao II wanted to become the head of the Maratha Confederacy and at the same time wanted freedom from the British control. His Chief Minister Tirimbakji encouraged him. On the advice of the Company, the Gaekwar sent his Prime Minister Gangadhar Shastri to negotiate with the Peshwa. On his way back, Gangadhar Shastri, was murdered at Nasik in July 1815, at the instance of Triambakji.

This caused a lot of anger not only among the Marathas but also among the British. The latter asked the Peshwa to handover Triambakji to them. Peshwa handed over his Minister to the British, who lodged him in Thana jail from where he escaped. Consequently, on 13 June 1817, the British Resident Elphinstone forced the Peshwa to sign the Treaty of Poona. Baji Rao gave up his desire to become the supreme head of the Marathas.

Third Maratha War (1817-1819)

But soon the Peshwa undid this treaty with the British and on 5 November 1817 attacked the British Residency. He was defeated at a place called Kirkee. Similarly, the Bhonsle chief, Appa Sahib also refused to abide by the Treaty of Nagpur, which he had signed with the British on 17 May 1816. According to this treaty, Nagpur came under the control of the Company. He fought with the British in the Battle of Sitabaldi in November 1817, but was defeated. The Peshwa now turned to Holkar for help, but Holkar too was defeated by the British on 21 December 1817 at Baroda. Therefore, by December 1817 the dream of a Mighty Maratha Confederacy was finally shattered.

In 1818, Scindia was also forced to sign a new treaty with the British on the basis of which Ajmer was given to the Nawab of Bhopal, who also accepted the British suzerainty. The Gaekwar of Baroda, while accepting the Subsidiary Alliance, agreed to hand over certain areas of Ahmedabad to the British. The Rajput states which were under the Pindaris were freed after the latter’s suppression. The year 1818 was a significant year on account of major political achievements for the British. The Maratha dream of establishing themselves as the paramount power in India was completely destroyed. Thus, the last hurdle in the way of British paramountcy was removed.

Causes of the Defeat of the Marathas

There were several reasons for the defeat of the Marathas in the Anglo-Maratha Wars. The main reasons were:

  1. Lack of capable leadership
  2. Military weakness of the Marathas.
  3. The major drawback of the Maratha power was mutual bitterness and lack of cooperation amongst themselves.
  4. The Marathas hardly left any positive impact on the conquered territories.
  5. The Marat

    has did not have cordial relations with other princes and Nawabs of India.

  6. The Marathas failed to estimate correctly the political and diplomatic strength of the British.

Reforms of Hastings

The Governor-Generalship of Lord Hastings witnessed not only territorial expansion but also the progress of administration. He approved the Ryotwari system of land revenue introduced in the Madras Presidency by Sir Thomas Munroe. In the sphere of judiciary, the Cornwallis Code was improved. The Police system of Bengal was extended to other regions. The importance of Indian Munsiffs had increased during his administration. The separation of judicial and revenue departments was not rigidly followed. Instead, the District Collector acted as Magistrate.

Hastings had also encouraged the foundation of vernacular schools by missionaries and others. In 1817, the Hindu College was established at Calcutta by the public for the teaching of English and western science. Hastings was the Patron of this college. He encouraged the freedom of the Press and abolished the censorship introduced in 1799. The Bengali Weekly, Samachar Darpan was started in 1818 by Marshman, a Serampore missionary.

Estimate of Hastings

Lord Hastings was an able soldier and a brilliant administrator. His liberal views on education and Press are commendable. He suppressed the Pindaris, defeated the Marathas and curbed the power of the Gurkhas. His territorial gains strengthened the British power in India. He was considered the maker of the Bombay Presidency. In short, he completed and consolidated the work of Wellesley.

India under the British – The Marquis of Wellesley

The appointment of Richard Colley Wellesley as Governor- General marks an epoch in the history of British India. He was a great imperialist and called himself ‘a Bengal tiger’. Wellesley came to India with a determination to launch a forward policy in order to make ‘the British Empire in India’ into ‘the British Empire of India’. The system that he adopted to achieve his object is known as the ‘Subsidiary Alliance’.

Political Condition of India at the time of Wellesley’s Arrival

LORD WELLESLEYIn the north-western India, the danger of Zaman Shah’s aggression posed a serious threat to the British power in India. In the north and central India, the Marathas remained a formidable political power. The Nizam of Hyderabad employed the Frenchmen to train his army. The political unrest in the Karnatak region continued and Tipu Sultan had remained the uncompromising enemy of the British. Moreover, the policy of neutrality adopted by Sir John Shore, the successor of Cornwallis, created a kind of political unrest in India and greatly affected the prestige of the English. His non-intervention policy contributed much to the growth of anti-British feelings. Further, Napoleon’s move for an Eastern invasion created a fear among English statesmen. It was in this light that Wellesley moulded his policy. Preservation of British prestige and removal of French danger from India were Wellesley’s twin aims.

He was also thoroughly convinced that only a strong British power in India could reduce and control the existing tyranny and corruption in Indian states. Therefore, he reversed the non-intervention policy of his predecessor and formulated his master plan namely the ‘Subsidiary Alliance’.

The Subsidiary System

The predecessors of Wellesley concluded alliances with Indian princes like the Nawab of Oudh and the Nizam of Hyderabad. They received subsidies from the Indian rulers for the maintenance of British troops, which were used for the protection of respective Indian states. Wellesley enlarged and consolidated the already existing system. However, his originality was revealed in its application.

Main Features of Subsidiary Alliance

1. Any Indian ruler who entered into the subsidiary alliance with the British had to maintain a contingent of British troops in his territory. It was commanded by a British officer. The Indian state was called ‘the protected state’ and the British hereinafter were referred to as ‘the paramount power’. It was the duty of the British to safeguard that state from external aggression and to help its ruler maintain internal peace. The protected state should give some money or give part of its territory to the British to support the subsidiary force.

2. The protected state should cut off its connection with European powers other than the English and with the French in particular. The state was also forbidden to have any political contact even with other Indian powers without the permission of the British.

3. The ruler of the protected state should keep a British Resident at his court and disband his own army. He should not employ Europeans in his service without the sanction of the paramount power.

4. The paramount power should not interfere in the internal affairs of the protected state.

Benefits to the British

Wellesley’s Subsidiary System is regarded as one of the masterstrokes of British imperialism. It increased the military strength of the Company in India at the expense of the protected states. The territories of the Company were free from the ravages of war thereby establishing the stability of the British power in India. The position of the British was strengthened against its Indian and non-Indian enemies. Under the system, expansion of British power became easy. Thus Wellesley’s diplomacy made the British the paramount power in India.

Defects of the Subsidiary System

The immediate effect of the establishment of subsidiary forces was the introduction of anarchy because of the unemployment of thousands of soldiers sent away by the Indian princes. The freebooting activities of disbanded soldiers were felt much in central India where the menace of Pindaris affected the people.

Further, the subsidiary system had a demoralizing effect on the princes of the protected states. Safeguarded against external danger and internal revolt, they neglected their administrative responsibilities. They preferred to lead easy-going and pleasureseeking lives. As a result misgovernment followed. In course of time, the anarchy and misrule in several states had resulted in their annexation by the British. Thus, the subsidiary system proved to be a preparation for annexation. Furthermore, the British collected very heavy subsidies from the protected princes and this had adversely affected their economy.

Enforcement of the Subsidiary System


Hyderabad was the first state which was brought under Wellesley’s Subsidiary System in 1798. The treaty concluded in 1798 was an ad hoc measure. It fixed the amount to be paid annually at Rs.24 lakhs for the subsidiary force. In accordance with the treaty, all the French troops in Hyderabad were disbanded and replaced by a subsidiary British force. A new treaty was concluded in 1800 by which the Nizam ceded large territories to the Company and this constitutes the famous Ceded Districts.


The threat of invasion by Zaman Shah of Afghanistan was the pretext for Wellesley to force the Nawab of Oudh to enter into a subsidiary treaty. Accordingly, the Nawab gave the British the rich lands of Rohilkhand, the lower Doab and Gorakhpur for the maintenance of an increased army which the British stationed in the capital of Oudh. The strength of Nawab’s own army was reduced.

For the maintenance of law and order the British were authorised to frame rules and regulations. By this, the British acquired the right to interfere in the internal matters of Oudh. Although the Company obtained a fertile and populous territory, which increased its resources, the highhanded action of Wellesley was severely criticized.

Tanjore, Surat and the Karnatak

Wellesley assumed the administration of Tanjore, Surat and the Karnatak by concluding treaties with the respective rulers of these states. The Maratha state of Tanjore witnessed a succession dispute. In 1799, Wellesley concluded a treaty with Serfoji. In accordance with this treaty the British took over the administration of the state and allowed Serfoji to retain the title of Raja with a pension of 4 lakhs of rupees.

Raja Sarbhoji was a man of culture and attractive manners.He was the disciple of Schwarts. He built the Saraswathi Mahal Library in Tanjore which contains valuable books and manuscripts. He patronized art and culture.



The principality of Surat came under British protection as early as 1759. The Nawab of this historic city died in 1799 and his brother succeeded him. The ch

ange of succession provided Wellesley an opportunity to take over the administration of Surat. The Nawab was allowed to retain the title and given a pension of one lakh of rupees.

The people of Karnatak had been suffering for a long time by the double government. The Nawab, Umadat-ul-Umara was an incompetent ruler noted for his extravagance and misrule. He died in the middle of 1801 and his son, Ali Hussain became the Nawab. Wellesley asked him to retire with a liberal pension leaving the administration to the English. Since he refused, Wellesley signed a treaty with Azim-ud daulah, the nephew of the deceased Nawab in 1801. Accordingly the entire military and civil administration of the Karnatak came under the British.

The Fourth Anglo-Mysore War (1799)

The circumstances which led to the Fourth Mysore War can be summarized as follows: Tipu Sultan wanted to avenge his humiliating defeat and the terms imposed on him by the British. He also aimed at making Mysore a strong state. Tipu worked continuously to secure help to fight British imperialism. He took efforts to seek the help of the France, Arabia, Kabul and Turkey. He corresponded with the Revolutionary French Government in July 1798. At Srirangapattinam, a Jacobian Club was started and the flag of the French Republic was hoisted. The tree of Liberty was also planted.

Later, when Napoleon came to power, Tipu received a friendly letter from Napoleon (who was in Egypt at that time). It was at this juncture that Wellesley reached Calcutta with a mind already filled with fear of Napoleon. Therefore, he prepared for a war against Mysore. As a part of his strategy, Wellesley tried to revive the Triple Alliance of 1790 with the Marathas. Though his proposal was not accepted by the Marathas, they promised to remain neutral. However, a Subsidiary Alliance with the Nizam was concluded by the British and as a consequence, the French force at Hyderabad was disbanded.

Wellesley set out to persuade Tipu to accept a pact of subsidiary alliance and wrote letters requesting the Tipu to dismiss the French, to receive an English envoy, and to make terms with the Company and its allies. Tipu paid scant attention to Wellesley’s letters and thus the Fourth Anglo-Mysore war started. The war was short and decisive. As planned, the Bombay army under General Stuart invaded Mysore from the west. The Madras army, which was led by the Governor-General’s brother, Arthur Wellesley, forced Tipu to retreat to his capital Srirangapattinam. Although severely wounded, he fought till his capital Srirangapattinam was captured and he himself was shot dead.

Mysore After the War

With the fall of Tipu Sultan the kingdom of Mysore fell at the feet of Wellesley. He restored Hindu rule at the central part of the kingdom. A five year old boy, Krishnaraja III, a descendant of the dethroned Hindu Raja, was enthroned at Mysore, which became the capital almost after two hundred years. Purnaiya, the previous minister, became Diwan. The remaining parts of the kingdom were divided between the British and the Nizam. The whole of Kanara, Wynad, Coimbatore, Dharmapuri and Srirangapattinam were retained by the British whereas the Nizam was given the areas around Gooty and a part of Chittoor and Chitaldurg districts. A British Resident was stationed at Mysore. Tipu’s family was sent to the fort of Vellore.

Wellesley and the Marathas

The only power that remained outside the purview of the subsidiary system was the Marathas. Nana Fadnavis provided the leadership to the Marathas. He was responsible for the preservation of independence of his country from the onslaught of the British. By extending a helping hand to Cornwallis against Tipu he was able to acquire a large slice of territory as the share of the Marathas from the kingdom of Mysore. His death in 1800 removed the last great Maratha leader. Peshwa Baji Rao II, despite his stately appearance and immense learning, lacked political wisdom. The infighting among the Maratha leaders proved to be self-destructive. Jaswant Rao Holkar and Daulat Rao Scindia were fighting against each other. The Peshwa supported Scindia against Holkar. Holkar marched against the Peshwa. The combined forces of Scindia and the Peshwa were utterly defeated. The city of Poona fell at the feet of the victor who did not hesitate to commit all sorts of atrocities, including the torturing of rich inhabitants. With rich booty Holkar returned to his capital.

India under Wellesley

Peshwa Baji Rao II was in great danger, so he fled to Bassein where he signed the Treaty of Bassein with the British in 1802. It was a subsidiary treaty and the Peshwa was recognized as the head of the Maratha kingdom. Although it was nominal, the treaty was considered the crowning triumph of Wellesley’s Subsidiary System. In accordance with this document, the foreign policy of the Marathas came under British control and therefore any action of the Maratha chiefs against the British was successfully prevented. That is the reason why the Marathas considered the treaty as a document of surrendering their independence.

As an immediate response to the Treaty of Bassein, the British troops marched under the command of Arthur Wellesley towards Poona and restored the Peshwa to his position. The forces of Holkar vanished from the Maratha capital.

The Second Maratha War (1803-1805)

Daulat Rao Scindia and Raghoji Bhonsle took the Treaty of Bassein as an insult to the national honour of the Marathas. Soon the forces of both the chieftains were united and they crossed the river Narmada. Wellesley seized this opportunity and declared war in August 1803.

Arthur Wellesley captured Ahmadnagar in August 1803 and defeated the combined forces of Scindia and Bhonsle at Assaye near Aurangabad. Subsequently, Arthur Wellesley carried the war into Bhonsle’s territory and completely defeated the Maratha forces on the plains of Argaon. As a result, the Treaty of Deogaon was signed between Bhonsle and Wellesley. The former signed the subsidiary treaty which forced him to give up the province of Cuttack in Orissa. The campaign of British commander Lord Lake against the forces of Scindia was rather dramatic. Lake triumphantly entered the historic city of Delhi and took Shah Alam, the Mughal Emperor under British protection. Lake was quick in consolidating his conquests. By negotiating with the Raja of Bharatpur, he occupied Agra. Sadly this military engagement proved to be a battle of great slaughter in which thousands of Maratha soldiers perished. Scindia signed a subsidiary treaty with the British. It is known as the Treaty of Surji –Arjungaon.

During the war against Bhonsle and Scindia, Holkar remained aloof because he was Scindia’s enemy. However, when Wellesley offered an alliance, Holkar made extreme demands. This made Wellesley to declare war against Holkar. The campaign against Holkar was well-organised but the English generals for the first time committed blunders. Holkar remained unsubdued.

Estimate of Wellesley

An unscrupulous annexationist and an advocate of forward policy, Wellesley was one of the greatest empire-builders that England had ever produced. Wellesley converted the British Empire in India to the British Empire of India. The establishment of British paramountcy in India was his supreme task. He located the weak spots of
the Indian powers and applied his political technique (namely Subsidiary Alliance). By the annexation of Karnatak and Tanjore he paved the way for the formation of the Madras Presidency. He rightly deserves to be called the maker of the erstwhile Madras Presidency and the creator of the Province of Agra. In this manner a great part of the Indian subcontinent was brought under Company protection. “He turned the East India Company from a trading corporation into an imperial power”.

Sir George Barlow was the next Governor-General for two years (1805-07). The Vellore Mutiny of 1806 took place during his administration. He was succeeded by Lord Minto (1807-13) who concluded the Treaty of Amritsar with Ranjit Singh of Punjab in 1809. The Charter Act of 1813 was passed during this period.

India under the British – Lord Cornwallis

Lord Cornwallis

Lord Cornwallis, a warrior-statesman, succeeded Warren Hastings as Governor-General in 1786. He belonged to an influential and aristocratic family which had wider political connections. He was also a close friend of Prime Minister Pitt and of Dundas, the most influential member of the Board of Control. He distinguished himself as a remarkable soldier in the American War of Independence. Although he surrendered at York Town in 1781 before the American troops, his reputation was not spoiled. He still enjoyed the confidence of the authorities at Home. After his return from America he was offered the Governor- Generalship in India.

Cornwallis was prompted by a strong sense of public duty and enjoyed the respect as well as the confidence of his fellow countrymen. The Parliament was prepared to give him extraordinary legal powers to carry out radical reforms in the administration of Bengal. It amended Pitt’s India Act in 1786 so as enable him to overrule the decision of the majority of his council, if necessary. The appointment of Cornwallis was significant in one respect. A new tradition of choosing a person from an aristocratic family for the post of Governor-General was initiated. It was his good fortune that he had an excellent team of subordinates comprising John Shore, James Grant, and Sir William Jones. Although Cornwallis commenced his work under beneficial circumstances, he had to carry out his policy with caution.

Tipu Sultan and the Third Mysore War (1790-92)

Tipu Sultan The Treaty of Mangalore (1784) exhibited the military strength of Mysore, exposed English weaknesses and increased Tipu’s strength. Like his father he wanted to eliminate the English from India. His other designs were to wreak vengeance on the Nizam and on the Marathas as they had betrayed his father during the hour of need.

The chief causes for the Third Mysore War were:

1. Tipu Sultan strengthened his position by undertaking various internal reforms. This created worries to the British, the Nizam of Hyderabad and the Marathas.

2. Moreover, Tipu made attempts to seek the help of France and Turkey by sending envoys to those countries.

3. He also expanded his territories at the cost of his neighbours, particularly the Raja of Travancore, who was an ally of the British.

4. In 1789, the British concluded a tripartite alliance with the Nizam and the Marathas against Tipu.

War broke out in May 1790 between the English and Tipu. It was fought in three phases. The first phase commenced when Medows, the Governor of Madras, initially directed the campaign to invade Mysore but Tipu’s rapid movements halted the progress of the English troops and inflicted heavy losses on them. In the meantime, Cornwallis himself assumed command in December 1790. This was the beginning of the second phase of the war. Marching from Vellore, he captured Bangalore in March 1791, but Tipu’s brilliant strategies prolonged the war and Cornwallis was forced to retreat to Mangalore due to lack of provisions. The third phase of the war began when timely aid from the Marathas with plenty of provisions helped him to resume his campaign and marched against Srirangapattinam again. This time ipu was at a disadvantage. Swiftly the English forces occupied the hill forts near Srirangapattinam and seized it in February 1792. Tipu Sultan concluded the Treaty of Srirangapattinam with the British.

The terms of the treaty were as follows:

(i) Tipu had to give up half his dominions.

(ii) He had to pay a war indemnity of three crore rupees and surrender two of his sons as hostages to the English.

(iii) Both sides agreed to release the prisoners of war.

The Treaty of Srirangapattinam is a significant event in the history of South India. The British secured a large territory on the Malabar Coast. In addition they obtained the Baramahal district and Dindugal. After this war, although the strength of Mysore had been reduced, it was not extinguished. Tipu had been defeated but not destroyed.

Reforms of Cornwallis

The internal reforms of Cornwallis can be studied under three main heads.

(i) Administrative reforms

(ii) Revenue reforms or Permanent Settlement (given in Lesson -7)

(iii) Judicial and other reforms

Administrative Reforms

The greatest work of Cornwallis was the purification of the civil service by the employment of capable and honest public servants. He aimed at economy, simplification and purity. He found that the servants of the Company were underpaid. But they received very high commissions on revenues. In addition to that they conducted forbidden and profitable private trade in the names of relatives and friends. Cornwallis, who aimed at cleansing the administration, bolished the vicious system of paying small salaries and allowing enormous perquisites. He persuaded the Directors of the Company to pay handsome salaries to the Company servants in order that they might free themselves from commercial and corrupting activities.

Further, Cornwallis inaugurated the policy of making appointments mainly on the basis of merit thereby laying the foundation of the Indian Civil Service. To cut down on extravagances, he abolished a number of surplus posts. Another major reform that Cornwallis introduced was the separation of the three branches of service, namely commercial, judicial and revenue. The collectors, the king-pins of the administrative system were deprived of their judicial powers and their work became merely the collection of revenue.

Judicial Reforms

In the work of judicial reorganization, Cornwallis secured the services of Sir William Jones, who was a judge and a great scholar. Civil and criminal courts were completely reorganized.

1. At the top of the judicial system, the highest civil and criminal courts of appeal, namely Sadar Diwani Adalat and Sadar Nizamat Adalat were functioning at Calcutta. Both of them were presided over by the Governor-General and his Council.

2. There were four provincial courts of appeal at Calcutta, Dacca, Murshidabad and Patna, each under three European judges assisted by Indian advisers.

3. District and City courts functioned each under a European judge. Every district was provided with a court. As already
stated, Cornwallis had taken away from the collectors of their judicial powers and made them solely responsible for the
collection of revenue. As a result, District Judges were appointed.

4. Indian judges or Munsiffs were appointed to all the courts at the botto

m of the judicial system.

In criminal cases, Muslim law was improved and followed. In civil cases, Hindu and Muslim laws were followed according to the religion of the litigants. In suits between Hindus and Muslims, the judge was the deciding authority. Cornwallis was merciful by temperament. He hated barbarous punishments and abolished those like mutilation and trial by ordeal.

Cornwallis was better known as a law giver than as an administrator. With the help of his colleague, George Barlow, Cornwallis prepared a comprehensive code, covering the whole field of administration’, judicial, police, commercial and fiscal. This Code was based upon the principle of Montesquieu, “the Separation of Powers”, which was popular in the West in 18th century. In order to curb undue exercise of authority Cornwallis made all officials answerable to the courts.

Police Reforms

The effective implementation of judicial reforms required the reorganisation of police administration. The District Judge controlled the police. Each district was divided into thanas or police circles each of which was about 20 square miles. It was placed under an Indian officer called the daroga who was ably assisted by many constables. However, the police organization was not effective. In the words of Marshman, ‘the daroga enjoyed almost unlimited power of extortion and became the scourge of the country”.

Other Reforms

Cornwallis reformed the Board of Trade which managed the commercial investments of the Company. With the aid of Charles Grant, he eradicated numerous abuses and corrupt practices. Fair treatment was given to weavers and Indian workers. He increased the remuneration for honest service.

Estimate of Cornwallis

Cornwallis, a blue-blooded aristocrat, was an ardent patriot. He discharged his duties fearlessly, and his life was an embodiment of ‘duty and sacrifice’. He perceived the danger of Tipu’s growing power and curtailed it by boldly discarding the policy of nonintervention. As an administrator, he consolidated the Company’s position in India and started the tradition of efficient and pure administration. Although there were defects in his Permanent Settlement of Land Revenue, his administrative and judicial reforms were solid achievements. He may be regarded the parent of the Indian Administrative Service and founder of an efficient and clean system of administration.

Sir John Shore (1793-98) succeeded Cornwallis as Governor General and his administration was uneventful.

India under the British – Warren Hastings

The English East India Company

Sir Thomas Roe The English East India Company was established on 31 December 1600 as per the Royal Charter issued by the Queen of England, Elizabeth I. The Company had sent Captain Hawkins to the court of the Mughal Emperor, Jahangir in 1608 to secure permission to establish a “factory” (store house of goods) at Surat. It was turned down initially. However, in 1613, Jahangir issued the firman permitting the East India Company to establish its first trading post at Surat. Subsequently, Sir Thomas Roe obtained more trading rights and privileges for the East India Company. Accordingly, the English set up business centres at Agra, Ahmedabad and Broach. Slowly the English East India Company succeeded in expanding its area of trade.

Warren HastingsIn 1639, Francis Day established the city of Madras and constructed the Fort St. George. On the west coast, the Company obtained Bombay on lease from their King, Charles II for a rent of 10 pounds per annum in 1668. By the year 1690, Job Charnock, the agent of the East India Company purchased three villages namely, Sutanuti, Govindpur and Kalikatta, which, in course of time, grew into the city of Calcutta. It was fortified by Job Charnock, who named it Fort William after the English King, William III. The factories and trading centres which the English established all along the sea-coast of India were grouped under three presidencies namely Bombay, Madras and Calcutta. After the Battle of Plassey in 1757 and the Battle of Buxar in 1764, the Company became a political power. India was under the East India Company’s rule till 1858 when it came under the direct administration of the British Crown. Robert Clive was the first Governor of Fort William under the Company’s rule. He was succeeded by Verelst and Cartier. In 1772, the Company appointed Warren Hastings as the Governor of Fort William.

Reforms of Warren Hastings

When Warren Hastings assumed the administration of Bengal in 1772, he found it in utter chaos. The financial position of the Company became worse and the difficulties were intensified by famine. Therefore, Warren Hastings realized the immediate need for introducing reforms.

Abolition of the Dual System

The East India Company decided to act as Diwan and to undertake the collection of revenue by its own agents. Hence, the Dual System introduced by Robert Clive was abolished. As a measure to improve the finances of the Company, Warren Hastings reduced the Nawab’s allowance of 32 lakhs of rupees to half that amount. He also stopped the annual payment of 26 lakhs given to the Mughal Emperor.

Revenue Reforms

After the abolition of the Dual System, the responsibility of collecting the revenue fell on the shoulders of the Company. For that purpose, a Board of Revenue was established at Calcutta to supervise the collection of revenue. English Collectors were appointed in each district. The treasury was removed from Murshidabad to Calcutta and an Accountant General was appointed. Calcutta thus became the capital of Bengal in 1772 and shortly after of British India.

The Board of Revenue farmed out the lands by auction for a period of five years instead of one year in order to find out their real value. The zamindars were given priority in the auction. However, certain good measures were taken to safeguard the interests of the peasants. Arbitrary cesses and unreasonable fines were abolished. Besides, restrictions were imposed on the enhancement of rent. Yet, the system was a failure. Many zamindars defaulted and the arrears of revenue accumulated.

Reorganisation of the Judicial System

The judicial system at the time of Warren Hastings’ ascendancy was a store-house of abuses. The Nawab who was hitherto the chief administrator of justice, misused his powers. Often, his judgments were careless. The zamindars who acted as judges at lower levels within their own areas were highly corrupt and prejudiced. On the whole, the judicial institution suffered from extreme corruption. Warren Hastings felt the necessity of reorganising the judicial system. Each district was provided with a civil court under the Collector and a criminal court under an Indian Judge. To hear appeals from the district courts two appellate courts, one for civil cases and another for criminal cases, were established at Calcutta. The highest civil court of appeal was called Sadar Diwani Adalat, which was to be presided over by the Governor and two judges recruited from among the members of his council. Similarly, the highest appellate
criminal court was known as Sadar Nizamat Adalat which was to function under an Indian judge appointed by the Governor-in-Council.

Experts in Hindu and Muslim laws were provided to assist the judges. A digest of Hindu law was prepared in Sanskrit by learned Pandits and it was translated into Persian. An English translation of it – Code of Hindu Laws – was prepared by Halhed.

Trade Regulations and other Reforms

Warren Hastings abolished the system of dastaks, or free passes and regulated the internal trade. He reduced the number of custom houses and enforced a uniform tariff of 2.5 percent for Indian and non-Indian goods. Private trade by the Company’s servants continued but within enforceable limits. Weavers were given better treatment and facilities were made to improve their condition. He also introduced a uniform system of pre-paid postage system. A bank was started in Calcutta. He improved the police in Calcutta and the dacoits were severely dealt with.

The Regulating Act of 1773

The Regulating Act of 1773 opened a new chapter in the constitutional history of the Company. Previously, the Home government in England consisted of the Court of Directors and the Court of Proprietors. The Court of Directors were elected annually and practically managed the affairs of the Company. In India, each of the three presidencies was independent and responsible only to the Home Government. The government of the presidency was conducted by a Governor and a Council.

The following conditions invited the Parliamentary intervention in the Company’s affairs. The English East India Company became a territorial power when it acquired a wide dominion in India and also the Diwani rights. Its early administration was not only corrupt but notorious. When the Company was in financial trouble, its servants were affluent. The disastrous famine which broke out in Bengal in 1770 affected the agriculturists. As a result, the revenue collection was poor. In short, the Company was on the brink of bankruptcy. In 1773, the Company approached the British government for an immediate loan. It was under these circumstances that the Parliament of England resolved to regulate the affairs of the Company. Lord North, the Prime Minister of
England, appointed a select committee to inquire into the affairs of the Company. The report submitted by the Committee paved the way for the enactment of the Regulating Act.

Provisions of the Regulating Act of 1773

The Regulating Act reformed the Company’s Government at Home and in India. The important provisions of the Act were:

(i) The term of office of the members of the Court of Directors was extended from one year to four years. One-fourth of them were to retire every year and the retiring Directors were not eligible for re-election.

(ii) The Governor of Bengal was styled the Governor-General of Fort William whose tenure of office was for a period of five years.

(iii) A council of four members was appointed to assist the Governor-General. The government was to be conducted in accordance with the decision of the majority. The Governor General had a casting vote in case of a tie.

(iv) The Governor-General in Council was made supreme over the other Presidencies in matters of war and peace.

(v) Provision was made in the Act for the establishment of a Supreme Court at Calcutta consisting of a Chief Justice and three junior judges. It was to be independent of the Governor- General in Council. In 1774, the Supreme Court was established by a Royal Charter.

(vi) This Act prevented the servants of the Company including the Governor-General, members of his council and the judges of the Supreme Court from receiving directly or indirectly any gifts in kind or cash.

Merits and Demerits of the Act

The significance of the Regulating Act is that it brought the affairs of the Company under the control of the Parliament. Besides, it proved that the Parliament of England was concerned about the welfare of Indians. The greatest merit of this Act is that it put an end to the arbitrary rule of the Company and provided a framework for all future enactments relating to the governing of India. The main defect of the Act was that the Governor-General was made powerless because the council which was given supreme power often created deadlocks by over-ruling his decision. However, many of these defects were rectified by the Pitt’s India Act of 1784.

Expansionist Policy of Warren Hastings

Warren Hastings was known for his expansionist policy. His administration witnessed the Rohilla War, the First Anglo-Maratha War and the Second Anglo-Mysore War.

The Rohilla War (1774)

Rohilkand was a small kingdom situated in between Oudh and the Marathas. Its ruler was Hafiz Rahmat Khan. He concluded a defensive treaty in 1772 with the Nawab of Oudh fearing an attack by the Marathas. But no such attack took place. But, the Nawab demanded money. When Rahmat Khan evaded, the Nawab with the help of the British invaded Rohilkand. Warren Hastings, who sent the British troops against Rohilkand was severely crticised for his policy on Rohilla affair.

First Anglo-Maratha War (1775-82)

The Marathas were largely remained disunited since the Third Battle of Panipet (1761). The internal conflict among the Marathas was best utilized by the British in their expansionist policy. In 1775, there was a dispute for the post of Peshwa between Madhav Rao and his uncle Ragunatha Rao. The British authorities in Bombay concluded the Treaty of Surat with Raghunatha Rao in March 1775. Rahunatha Rao promised to cede Bassein and Salsette to the British but later when he was unwilling to fulfill his promise, the British captured them. This action of the Bombay Government was not approved by Warren Hastings. In 1776, Warren Hastings sent Colonel Upton to settle the issue. He cancelled the Treaty of Surat and concluded the Treaty of Purander with Nana Fadnavis, another Maratha leader. According to this treaty Madhava Rao II was accepted as the new Peshwa and the British retained Salsette along with a heavy war indemnity. However, the Home authorities rejected the Treaty of Purander. Warren Hastings also considered the Treaty of Purandar as a ‘scrap of paper’ and sanctioned operations against the Marathas. In the meantime, the British force sent by the Bombay Government was defeated by the Marathas.

In 1781, Warren Hastings dispatched British troops under the command of Captain Popham. He defeated the Maratha chief, Mahadaji Scindia, in a number of small battles and captured Gwalior. Later in May 1782, the Treaty of Salbai was signed between Warren Hastings and Mahadaji Scindia. Accordingly, Salsette and Bassein were given to the British. Raghunath Rao was pensioned off and Madhav Rao II was accepted as the Peshwa.

The Treaty of Salbai established the British influence in Indian politics. It provided the British twenty years of peace with the Marathas. The Treaty also enabled the British to exert pressure on Mysore with the help of the Marathas in recovering their territories from Haider Ali. Thus, the British, on the one hand, saved themselves from the combined opposition of Indian powers and on the other, succeeded in dividing the Indian powers.

The Second Anglo-Mysore War (1780-84)

Haider AliThe first Anglo-Mysore War took place in 1767-69. Haider Ali emerged victorious against the British and at the end of the War a defensive treaty was concluded between Haider Ali and the British. After eleven years, the Second Mysore War broke out and the main causes for the second Anglo-Mysore War were:

1. The British failed to fulfill the terms of the defensive treaty with Haider when he was attacked by the Marathas in 1771.

2. There was an outbreak of hostilities between the English and the French (an ally of Haider) during the American War of Independence.

3. The British captured Mahe, a French settlement within Haider’s territories.

4. Haider Ali formed a grand alliance with the Nizam of Hyderabad and the Marathas against the British in 1779. The War began when the British led their forces through

Haider’s territory without his permission to capture Guntur in the Northern Sarkars. Haider Ali defeated Colonel Baillie and captured Arcot in 1780. In the next year, Warren Hastings, by a clever stroke of diplomacy, divided the Confederacy. He made peace with the Nizam, won the friendship of Bhonsle and came to an understanding with the Scindia (both Marathas). Consequently, Haider was isolated without any alliance. He was defeated by Sir Eyre Coote at Porto Novo in March 1781. In December 1782, Haider died of cancer at the age of sixty and his death was kept secret till his son Tipu Sultan assumed power.

The Second Mysore War came to an end by the Treaty of Mangalore in 1783. Accordingly, all conquests were mutually
restored and the prisoners on both sides were liberated.

Pitt’s India Act, 1784

The Regulating Act proved to be an unsatisfactory document as it failed in its objective. In January 1784, Pitt the Younger (who became Prime Minister of England after the General Elections) introduced the India Bill in the British Parliament. Despite bitter debate in both the Houses, the bill was passed after seven months and it received royal assent in August 1784. This was the famous Pitt’s India Act of 1784.

Main Provisions of
the Pitt’s India Act, 1784

(i) A Board of Control consisting of six members was created. They were appointed by the Crown.

(ii) The Court of Directors was retained without any alteration in its composition.

(iii) The Act also introduced significant changes in the Indian administration. It reduced the number of the members of the Governor-General’s Council from four to three including the Commander-in-Chief.

Pitt’s India Act constitutes a significant landmark with regard to the foreign policy of the Company. A critical review of the Act reveals that it had introduced a kind of contradiction in the functions of the Company. The Court of Directors controlled its commercial functions, whereas the Board of Control maintained its political affairs. In fact, the Board represented the King, and the Directors symbolised the Company.

The Impeachment of Warren Hastings

The Pitt’s India Act of 1784 was a rude shock and bitter disappointment for Warren Hastings. The Prime Minister’s speech censuring the policy of the Government of Bengal was considered by Warren Hastings as a reflection on his personal character. His image and reputation were tarnished in England. Therefore, he resigned and left India in June 1785. In 1787, Warren Hastings was impeached in the Parliament by Edmund Burke and the Whigs for his administrative excess. Burke brought forward 22 charges against him. The most important of them were related to the Rohilla War, the Case of Nanda Kumar, the treatment of Raja Chait Singh of Benares and the pressures on the Begums of Oudh. After a long trail which lasted till 1795, Warren Hastings was completely acquitted. He received pension from the Company and lived till 1818.

Nanda Kumar was an influential official in Bengal. He was hanged to death by the verdict of the Supreme Court at Calcutta for a petty offence of forgery. The English law was applied in this judgement. It was contended that Warren Hastings and Sir Elija Impey, the judge of the Supreme Court conspired against Nanda Kumar. Warren Hastings imposed heavy penalty on the Raja Chait Singh of Benares for his delay in payment of tribute and deposed him in an unjust manner.

The Begums of Oudh were mother and grand mother of the Nawab of Oudh. Warren Hastings helped the Nawab by sending his troops to the help of Nawab who squeeze money from the Begums. This was a highhanded policy.

Estimate of Warren Hastings

He was a gifted personality endowed with ‘strong will, great energy and resourcefulness’. His long stay in Bengal ‘in the shadow of the Mughal cultural tradition’ gave him, enough opportunity to learn oriental languages such as Bengali (the local language) and Persian (the diplomatic language) and to develop ‘oriental tastes’. Since he considered Indian culture as a basis for sound Indian administration, he patronised the learning of Indian languages and arts. His task was a challenging one since he was surrounded by hostile forces. “He faced his external enemies with unflinching courage and unfailing resource, and his internal opponents with extraordinary patience and firmness.” It was on the foundation which Warren Hastings laid down, that others erected a ‘stately edifice’.