Feudalism appears in a predominantly agrarian economy which is characterised by a class of land lords and a class of servile peasantry. In this system, the landlords extract surplus through social, religious or political methods which are called extra-economic.
The origin and growth of feudalism is to be sought in the land grants made to “Brahmanas” from the first century A.D. onwards.
The number of land granites increased in the gupta period and goes on increasing afterwards. The monastery of Nalanda owned 200 villages in the reign of Harshavardhana.
Brahmanas and temples were clearly granted land revenues not in lieu of services but for spiritual services.
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They were allowed the fiscal rights, and maintenance of law and order. Huein- Tsang suggests that high officers of the state were paid by land grants in lieu of cash remuneration
but such grants are defecting because of the perishable nature of the material on which those were recorded.
The Land was commonly granted assigned by the rulers with rights of varying degrees to Brahmanas and religious institutions, to vassals for military services, to members of the clan or family and even to officers.
Thus, there developed a great variety of interests and rights over land, claimed by the various grades of intermediaries. The process of creating a class of landlords spread unevenly over the country. The practice first appeared in Maharashtra around the beginning of the Christian era.
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In the fourth and fifth century A.D., it seems that major part of Madhya Pradesh was covered by the land grants. During the fifth to seventh century A.D. they became prominent in Bengal, Orissa and Assam, eighth century in Tamilnadu and in the 9th and 10th century A.D. in Kerala.
In order to find new avenues of wealth for Brahmanas and to bring virgin land under cultivation, the process of land grants started in backward and tribal areas first.
When it was found useful by the ruling class; gradually, it was extended to Central India of Madhyadesa which v was the civilised part of the country, and pivot of the Brahmanical culture and society.
The distinct characteristic of early Indian feudalism was the provision for fiscal units for ten or twelve of Sixteen villages and their multiples.
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The ancient law-book of Manu, a work of the first and second century A.D. lays down that collectors in charge of ten villages or their multiples should be paid by the grantee or beneficiary. These units persisted in the Rashtrakuta and to some extent in the Pala dominions.
The practice of land grants gave birth to a land-lord class between the peasants and the kings. The socio-economic aspects of feudalism in India was closely connected with the transfomiation of “Sudras”, who were treated as the common servants and slaves of the three higher “Varnas” and peasants from the Gupta Period onward.
In the old settled areas “Sudras ” or laborers seem to have been provided with land. In the tribal, undeveloped and uncultivated areas a large number of tribal peasantry was annexed to the Brahmanical system through the land grants and they were called “Sudras”. Therefore, Huein-Tsang describes the “Sudras” as agriculturists, a fact corroborated by Al-Beruni about four century later.