The Grant of Diwani empowered the East India Company to collect revenue from the occupied territories of Bengal, Bihar and Orissa. For a trading organization like the Company, extraction of maximum revenue was considered as the higher profit. While fixing the land revenue, interest of the peasants was never taken into consideration.

On the other hand, for an agricultural country like India, economic development depended upon the improvement of agriculture and prosperity of agrarian class. But from the very beginning the burden of taxation fell heavily on the peasants.

They had to pay for trade and profits of the company, for wars of expansion and for the cost of administration. Land revenue was viable source to maximize revenue collection and to make every Indian a tax payer. Early land revenue policy of the company had disastrous effects on the peasants and the experiments of Clive and Warren Hastings compounded their woes. Even the peasants deserted the villages and gave up cultivation of land due to tax burden. The land revenue policy made the Company administration stable and its economy healthy. But it left the peasants in deplorable condition and ultimately broke the economic backbone.

Heavy Assessment:


The land settlements, whether the Permanent Settlement or the Ryatwari Settlement or the Mahalwari Settlement, neglected the peasants and made no provision for development of agriculture.

All these settlements were primarily concerned about smooth collection of revenue. The Permanent Settlement in Bengal left the peasants at the mercy of the intermediaries or Zamindars. As such the land rent was fixed at an excessive high rate and very often arbitrarily. Though the land revenue was fixed in perpetuity, the Zamindars enhanced the rent at their will to unbearable limit. Apart from that the peasants were compelled to pay illegal taxes and cusses. For the Zamindars, enhanced collection of land rent meant additional income beyond their approved share in fixed land rent.

Those Zamindars played the role of true tax-collectors but not that of true proprietors of the land. The condition of peasantry in the Ryotwari and Mahalwari settled areas were no way better. Here the Government claimed up to one-half of the produce from land as the share of state. The peasants were left with no surplus produce to reinvest for land development. As they had to part a major share of the produce, the rest was not enough for subsistence. As a result, agriculture deteriorated and poverty perpetuated.

The Permanent Settlement created a class of intermediaries who were responsible for collection of land revenue. In most cases the land settlement was made with the rich merchants and money lenders who could afford for timely payment of land revenue to the Government.


The merchants and money-lenders found the opportunity for investment of the capital and were solely concerned about the return in terms of collection of maximum revenue. However, those Zamindars were non-cultivating landowners residing in towns away from land and cultivators.

They never intended for agricultural development and extension of cultivation. In the Ryotwari and Mahalwari areas the Government also remained unconcerned about the miseries of the peasants and did nothing to increase agricultural production. Heavy assessment of land revenue and rack-renting left the peasants in such a position where they could not afford for development and extension of agriculture.

On the other hand, due to closure of cottage and handicraft Industries, thousands of artisans and craftsmen lost employment. Hence they were forced to change their occupation and switched over the agriculture. In addition, population of the country grew rapidly and growing population also concentrated on land for livelihood. Thus, pressure of land increased and income from land fell far, short of the basic necessities of the peasants. Their economic condition deteriorated day by day.

Unable to meet the family, the poor peasants very often failed to pay land revenue in time. In addition, failure of crops due to natural calamities such as flood, drought, famine etc. worsened their condition.


There was no provision for remission of land revenue in the years of crop failure. Irrespective of harvest, the peasants had to pay land revenue on the fixed dates. In cases of their failure to pay, the Government put the land on sale. So the peasants themselves sold or mortgaged a part of their land to pay land-tax on due dates. However, in both cases, the peasants lost their land and worked either as agricultural labourers or as tenants.

The worst effect was the growth of rural indebtedness that submerged the entire rural population in debt. Whenever the peasants needed money either to pay revenue or to meet expenses of social customs like marriage, they ran for debt at higher rates of interest from the money-lenders.

More often they mortgaged their land to get the loan with the hope to get back the same. But it never happened as the peasants found it impossible to come out of the money-lenders’ net. On the other hand, the money-lenders charged excessively high rates of interested within a short time the amount of interest grew more than the principal. Usually the cunning and thrifty money-lenders used spurious methods to cheat the peasants.

They managed to get the thumb impressions of the illiterate peasants on the blank agreement papers or loan deeds and later entered larger amounts than the borrowed one. Even the signature of the debtor was forged by the creditor and sometimes the debtors, having no choice, knowingly signed agreement for a larger amount. In the process the loan swelled and went beyond the paying capacity of the peasants. The result was the compulsion for the peasant to sell his land.


The British revenue system also helped the money-lenders. As the ownership of land was made transferable, the money-lenders found it convenient to transfer the land of the peasants. The poor and illiterate peasants could not have money and courage to fight a legal battle against the money-lenders. The shrewd money-lenders took advantages of the ignorance and poverty of the peasants and interpreted law in their favor. Thus, the peasants were left in hopeless condition from which they never woke up.

For centuries Indian peasants produced mainly food crops and such other non-food crops required for domestic consumption. But the British Government exported agricultural products to be used as raw material in the English Industries. So commercialization of agriculture was encouraged. The peasants also needed money to pay land revenue in cash. So the peasants changed agricultural pattern and produced non-food crops or commercial crops like cotton, jute, sugarcane etc. Here again the poor peasants were exploited by the money-lender-cum merchant. There was no provision for price control and procurement of the agricultural produces. Local markets and price were controlled by the merchants.

They fixed the price of those produces at their profit. On the other hand, the peasants were hard pressed for cash payment of Government dues, repayment of the loans of the money-lenders, and for expenses of marriage and other social ceremonies.

They were bound to sell those agricultural produces including food grains, immediately after harvest. The needy peasants bowed before the merchants who controlled the markets as well as price. The merchants took away a large share of benefit of the trade in agriculture and the peasants were thoroughly exploited.


The peasants lost their land. The craftsmen and the artisans abandoned traditional crafts and indigenous industries were ruined. There was no initiative, both from the Government and private, for development of modern machine industry. In other words, India was reindustrialized. Non-agricultural sectors of employment were closed.

The peasants, the craftsmen and the artisans-all depended on land and pressure on land accumulated. They competed among themselves for a price of land and the landlords exploited them further by enhancing rent. Ultimately there was scarcity of land and was fragmented into small plots.

Income from those small plots fell far short of the need of the cultivators. They worked either as the tenants of the money-lenders and Zamindars by paying rack-rent or toiled hard as agricultural labourers. The Government, the landlords and money-lenders sucked the blood of the peasants and hardly left anything for him. The peasantry was left in starvation and impoverishment and died in millions whenever crops failed. The natural calamities like famines only multiplied the death toll.