British Land Revenue Systems and Their Economic Impact
Exam notes on the Permanent Settlement, Ryotwari and Mahalwari systems, commercialisation of agriculture, the drain of wealth, deindustrialisation and the famines.
By GK24 Editorial Team· Published · 6 min read

Land revenue was the largest single source of income for the English East India Company and later for the British Crown in India, so the way it was assessed and collected shaped the life of the Indian village for a century and a half. After the Company obtained the Diwani, that is the right to collect revenue in Bengal, Bihar and Odisha in 1765, it experimented with farming out collections before settling on three great systems: the Permanent Settlement, the Ryotwari settlement and the Mahalwari settlement. Each fixed a different person as the party responsible for paying the state, and from that single difference flowed different consequences for the peasant. This chapter is a favourite of examiners because the three systems can be set against each other in a matching question.
The Permanent Settlement of 1793
Introduced by Lord Cornwallis in 1793, on the advice of John Shore, the Permanent Settlement covered Bengal, Bihar, Odisha, the Benaras division of the present Uttar Pradesh and the northern districts of the Madras Presidency, roughly a fifth of British India. The zamindars were recognised as the proprietors of the soil on the condition that they paid a revenue demand fixed in perpetuity. The demand was never to be revised, however much prices or production rose; the zamindar kept one-eleventh of the rental he collected and paid ten-elevenths to the state. The Sunset Law required the instalment to be deposited before sunset of the appointed day, failing which the estate was sold at auction, and in the first decades a great many old zamindari families were ruined and replaced by city merchants. Because the zamindar had no duty to improve the land and the tenant had no security, sub-infeudation multiplied and the actual cultivator sank into the position of a tenant-at-will.
The Ryotwari settlement
Worked out by Captain Alexander Read and Thomas Munro at the end of the eighteenth century and extended when Munro became Governor of Madras in 1820, the Ryotwari system made the settlement directly with the ryot, that is the individual cultivator, who was recognised as the owner of his field so long as he paid the revenue. It covered the Madras and Bombay Presidencies and parts of Assam and Coorg, about half of British India. The assessment was based on the quality and extent of the holding, took a very high share of the produce, and was revised every twenty to thirty years. There was no intermediary, but the state itself became the great landlord, and in bad years the demand was pressed with the same rigour, which drove the ryot to the village moneylender.
The Mahalwari settlement
Devised by Holt Mackenzie in Regulation VII of 1822 for the North Western Provinces and reformed in 1833 under Lord William Bentinck by Robert Mertins Bird, the Mahalwari system took the mahal, that is the village or the estate, as the unit of assessment. The revenue was fixed for the whole village and the village headman, the lambardar, collected it from the co-sharers on behalf of the community, which was jointly responsible for the whole sum. It was applied in the North Western Provinces, later Uttar Pradesh, in the Central Provinces, in Punjab and in parts of Awadh, about thirty per cent of British India, and the settlement was revised periodically.
| Basis | Permanent Settlement | Ryotwari | Mahalwari |
|---|---|---|---|
| Year and author | 1793, Lord Cornwallis | From 1792 onward, Read and Thomas Munro | 1822, Holt Mackenzie; reformed 1833 |
| Revenue paid by | Zamindar | Individual cultivator, the ryot | Village or mahal, through the lambardar |
| Main regions | Bengal, Bihar, Odisha, Benaras, northern Madras | Madras, Bombay, Assam, Coorg | North Western Provinces, Central Provinces, Punjab |
| Nature of demand | Fixed for ever | Revised every 20 to 30 years | Revised periodically |
| Share of area | About 19 per cent | About 51 per cent | About 30 per cent |
Commercialisation of agriculture
Revenue had to be paid in cash, and the needs of British industry pulled Indian fields towards commercial crops: indigo in Bengal and Bihar, cotton in the Deccan, jute in eastern Bengal, opium for the China trade, oilseeds, sugarcane and, on plantations, tea and coffee. The peasant who grew a crop for the market was exposed to distant price movements he could not foresee, and land that had grown food now grew raw material for export. The Indigo Revolt of 1859 and 1860 in Bengal, which forced the appointment of the Indigo Commission in 1860, and the Deccan Riots of 1875 against moneylenders in Poona and Ahmednagar, which led to the Deccan Agriculturists' Relief Act of 1879, were the peasant's answer to this pressure.
Decline of handicrafts and the drain of wealth
British rule also reversed India's position in trade. Indian textiles had been exported for centuries, but a one-sided free trade, heavy duties on Indian goods in Britain, the loss of courtly patronage and the competition of machine-made yarn turned India into an exporter of raw cotton and an importer of cloth. The weavers of Dacca and Murshidabad lost their livelihood, and because no modern industry grew fast enough to absorb them, they fell back upon agriculture, a process the nationalists called deindustrialisation. Dadabhai Naoroji, in Poverty and Un-British Rule in India, set out the theory of the drain of wealth: a part of India's national income was taken out every year without any return, as home charges, the salaries and pensions of British officials, the interest on sterling debt and the profits of British capital. Romesh Chandra Dutt made the same case in The Economic History of India. Railways, begun with the Bombay to Thane line of 1853 under Lord Dalhousie, were built with a guaranteed return to British investors and served the ports rather than the inland market.
Famines and the condition of the peasant
Stagnant agriculture, a rigid revenue demand and dependence on the market made famine frequent in the second half of the nineteenth century. The Bengal famine of 1770, the Great Famine of 1876 to 1878 and the famine of 1896 and 1897 each killed millions. The Famine Commission under Richard Strachey in 1880 recommended famine codes and relief works, and later commissions under Lyall in 1897 and MacDonnell in 1900 continued the enquiry. The Great Depression after 1929 struck Indian agriculture hard, because the prices of farm produce fell much further and for much longer than the prices of the manufactured goods the peasant had to buy, while his revenue and his debt stayed where they were.
What to remember
Fix the pairs in memory: 1793 with Cornwallis and the zamindar, Munro with the ryot of Madras, Holt Mackenzie and 1822 with the mahal of the North Western Provinces. Add the Sunset Law to the Permanent Settlement, the one-eleventh share of the zamindar, the Indigo Revolt of 1859, the Deccan Riots of 1875 and the Deccan Agriculturists' Relief Act of 1879, and the two classics of economic nationalism with their authors.
Exam Point of View
The commonest question is a matching one: which system goes with which officer, which region and which unit of assessment. Learn 1793 with Cornwallis and the zamindar, Munro with the ryot, and Holt Mackenzie with the mahal. The Sunset Law, the one-eleventh share of the zamindar and the periodic revision under Ryotwari and Mahalwari are asked directly. Examiners also set the area covered by each system, where Ryotwari is the largest at about half of British India. From the economic impact they ask the authors of the two nationalist classics, the meaning of home charges, the date of the first railway line, and the peasant revolts with their enquiry commissions and relief Acts. A frequent trap is to attribute the Permanent Settlement to John Shore, who advised on it, instead of Cornwallis, who introduced it.
Important Facts
| Permanent Settlement | 1793, Lord Cornwallis, on the advice of John Shore |
|---|---|
| Zamindar's share | One-eleventh of the rental collected; ten-elevenths paid to the state |
| Sunset Law | Revenue to be paid before sunset of the fixed day, else the estate was auctioned |
| Ryotwari system | Captain Alexander Read and Thomas Munro; settlement with the individual cultivator |
| Munro as Governor of Madras | 1820 |
| Mahalwari system | Holt Mackenzie, Regulation VII of 1822; reformed in 1833 by Robert Mertins Bird |
| Unit of Mahalwari assessment | The mahal, that is the village or estate; collected by the lambardar |
| Diwani rights of Bengal | Obtained by the East India Company in 1765 |
| Indigo Revolt | 1859 to 1860 in Bengal; Indigo Commission appointed in 1860 |
| Deccan Riots | 1875 in Poona and Ahmednagar; Deccan Agriculturists' Relief Act, 1879 |
| Drain of wealth | Dadabhai Naoroji, in Poverty and Un-British Rule in India |
| The Economic History of India | Romesh Chandra Dutt |
| First railway line | Bombay to Thane, 1853, under Lord Dalhousie |
| First Famine Commission | 1880, under Richard Strachey |
Practice MCQs on this topic
Who is the author of the book 'Poverty and Un-British Rule'?
- A.A. O. Hume
- B.Dadabhai Naoroji
- C.W. C. Banerjee
- D.S. Subramanya Iyer
Show answer
Explanation
The correct answer is B, Dadabhai Naoroji. In Poverty and Un-British Rule in India Naoroji gathered his estimates of India's national income and set out the theory of the drain of wealth, showing that a part of the country's wealth was carried to Britain every year without any return, through home charges, the salaries and pensions of British officials and the profits of British capital. He was called the Grand Old Man of India and was the first Indian to be elected to the British House of Commons. A is wrong because A. O. Hume, a retired civil servant, helped to found the Indian National Congress in 1885 but wrote no such work on Indian poverty. C is wrong because W. C. Bonnerjee presided over the first session of the Congress and was a lawyer, not an economic writer. D is wrong because S. Subramania Iyer was a Madras judge and public figure associated with the early Congress.
In the year 1929, the agricultural sector and the community were badly affected, because the decline in agricultural prices was more and longer than the values of ______.
- A.Industrial goods
- B.Opium
- C.Raw Materials for Agriculture
- D.indigo
Show answer
Explanation
The correct answer is A, industrial goods. The Great Depression that began in 1929 pulled down the prices of primary produce such as wheat, cotton and jute far more sharply, and for far longer, than the prices of the manufactured goods the peasant had to buy. Because his revenue demand and his old debt were fixed in money terms, the Indian cultivator had to sell much more grain to pay the same sum, and rural indebtedness rose. B is wrong because opium was a government monopoly crop of the China trade and not the general standard against which farm prices are compared. C is wrong because agricultural inputs of that time, mainly seed, bullocks and manure, came from within the village and were themselves farm produce, so they fell with other agricultural prices. D is wrong because indigo had already lost its market to synthetic dyes well before 1929.
The Permanent Settlement of Bengal was introduced in 1793 by
- A.Warren Hastings
- B.Lord Cornwallis
- C.Lord Wellesley
- D.Lord William Bentinck
Show answer
Explanation
The correct answer is B, Lord Cornwallis. Cornwallis, Governor-General from 1786 to 1793, made the settlement permanent in 1793 on the advice of John Shore, recognising the zamindars as proprietors of the soil against a revenue demand fixed for ever. A is wrong because Warren Hastings experimented earlier with the farming system, auctioning the revenue of districts for five years, which the Permanent Settlement replaced. C is wrong because Lord Wellesley is remembered for the Subsidiary Alliance system and the expansion of British territory, not for revenue settlement. D is wrong because Lord William Bentinck came much later, from 1828 to 1835, and is associated with the reform of the Mahalwari settlement in 1833 and with social legislation such as the abolition of sati. A common trap is to mark John Shore, who advised on the scheme but did not introduce it.
The Ryotwari system of land revenue is associated with which of the following officials?
- A.Holt Mackenzie
- B.Thomas Munro
- C.John Shore
- D.Robert Mertins Bird
Show answer
Explanation
The correct answer is B, Thomas Munro. Munro, with Captain Alexander Read, worked out the Ryotwari settlement in the Baramahal and Madras region, and extended it widely after he became Governor of Madras in 1820; the state dealt directly with the ryot, the individual cultivator, who held the land so long as he paid the assessment. A is wrong because Holt Mackenzie framed the Mahalwari settlement for the North Western Provinces in Regulation VII of 1822. C is wrong because John Shore advised Cornwallis on the Permanent Settlement and later became Governor-General himself. D is wrong because Robert Mertins Bird carried out the revised Mahalwari settlement of the North Western Provinces under Lord William Bentinck in 1833. Pair each name with its system, since matching questions on these four officers are set almost every year.
Under the Permanent Settlement, what share of the rental collected was the zamindar allowed to keep?
- A.One-fourth
- B.One-eleventh
- C.One-half
- D.One-third
Show answer
Explanation
The correct answer is B, one-eleventh. The settlement required the zamindar to pay ten-elevenths of the rental he collected from the peasants to the state and to retain one-eleventh for himself, which is why the demand pressed so heavily and so many estates changed hands in the early years. A is wrong because a quarter share has no basis in the Bengal settlement. C is wrong because a half share is closer to the proportion of the gross produce the state claimed under the Ryotwari assessment on dry land, a figure candidates often confuse with this one. D is wrong because a third share belongs to older Indian practice, such as the Mughal demand on produce, and not to the Permanent Settlement. Remember the ratio along with the Sunset Law, since the two together explain the ruin of the old zamindari families.
The Sunset Law was a feature of which land revenue system?
- A.The Ryotwari system
- B.The Mahalwari system
- C.The Permanent Settlement
- D.The Farming system of Warren Hastings
Show answer
Explanation
The correct answer is C, the Permanent Settlement. Under its rules the revenue instalment had to reach the treasury before sunset on the appointed day; if it did not, the estate was liable to be sold at public auction, and many old families lost their zamindaris to Calcutta merchants in the first two decades. A is wrong because the Ryotwari settlement dealt with the individual cultivator and its hardship came from the high assessment and its rigid collection, not from any sunset rule. B is wrong because the Mahalwari settlement made the village jointly responsible and the lambardar collected the sum, with no such auction rule attached. D is wrong because the farming system auctioned the right to collect revenue in advance for a term of years, which is a different arrangement that the Permanent Settlement was designed to replace.
In the Mahalwari system, the unit of revenue assessment was
- A.the individual field of each cultivator
- B.the estate of the zamindar
- C.the village or mahal
- D.the district
Show answer
Explanation
The correct answer is C, the village or mahal. The word mahal means an estate or a village, and in this settlement the demand was fixed for the whole mahal; the village headman, called the lambardar, collected the shares from the co-sharers, and the village as a body was jointly responsible for the full amount. A is wrong because assessment field by field on the individual cultivator is the mark of the Ryotwari system of Munro. B is wrong because a settlement made with the zamindar as proprietor of an estate describes the Permanent Settlement of 1793, although Mahalwari villages too sometimes had a dominant co-sharer. D is wrong because no revenue system in British India assessed a whole district as one unit; the district was only the administrative area under a Collector who supervised the settlement.
Which land revenue system covered the largest area of British India?
- A.The Permanent Settlement
- B.The Ryotwari system
- C.The Mahalwari system
- D.The Taluqdari system
Show answer
Explanation
The correct answer is B, the Ryotwari system. It was applied in the Madras and Bombay Presidencies and in parts of Assam and Coorg, which together made up about half of British India, the largest share of the three settlements. A is wrong because the Permanent Settlement, though the earliest and the most famous, covered only about a fifth of British India, chiefly Bengal, Bihar, Odisha, the Benaras division and the northern districts of Madras. C is wrong because the Mahalwari settlement covered roughly thirty per cent, in the North Western Provinces, the Central Provinces and Punjab. D is wrong because the taluqdari arrangement of Awadh and parts of Gujarat was a local variant of landlord settlement and never a system of all-India extent. The order to remember is Ryotwari, then Mahalwari, then the Permanent Settlement.
The Deccan Riots of 1875 in Poona and Ahmednagar were directed mainly against
- A.indigo planters
- B.moneylenders
- C.tea planters of Assam
- D.the zamindars of Bengal
Show answer
Explanation
The correct answer is B, moneylenders. The cotton boom of the American Civil War years ended, prices fell, the revenue demand was raised, and the Deccan ryot who had borrowed heavily turned on the Marwari and Gujarati sahukars, burning their bonds and account books in 1875. The government appointed the Deccan Riots Commission and passed the Deccan Agriculturists' Relief Act in 1879 to limit the transfer of land for debt. A is wrong because the revolt against indigo planters was the Indigo Revolt of 1859 and 1860 in Bengal. C is wrong because the grievances of Assam tea garden labour produced a different kind of protest over recruitment and penal contracts. D is wrong because agitation against Bengal zamindars took the form of tenancy movements such as the Pabna agrarian unrest of 1873.
The book 'The Economic History of India' was written by
- A.Mahadev Govind Ranade
- B.Romesh Chandra Dutt
- C.Gopal Krishna Gokhale
- D.Surendranath Banerjee
Show answer
Explanation
The correct answer is B, Romesh Chandra Dutt. A member of the Indian Civil Service who later presided over the Congress, Dutt documented in The Economic History of India how revenue policy, the decline of handicrafts and the pattern of trade impoverished the countryside, and his work stands beside Naoroji's as a classic of economic nationalism. A is wrong because Ranade, though a pioneer of Indian economic thought and the author of Essays on Indian Economics, did not write this book. C is wrong because Gokhale is remembered for his budget speeches in the Imperial Legislative Council and for founding the Servants of India Society in 1905. D is wrong because Surendranath Banerjee was an organiser and journalist, the founder of the Indian Association in 1876, and his writing was political rather than economic.
India's first railway line, opened in 1853, ran between
- A.Howrah and Hooghly
- B.Bombay and Thane
- C.Madras and Arcot
- D.Delhi and Meerut
Show answer
Explanation
The correct answer is B, Bombay and Thane. The line of about thirty-four kilometres was opened in 1853 during the governor-generalship of Lord Dalhousie, who had set out the policy of railway construction in his famous minute. The railways were built by private companies under a system of guaranteed interest, so the risk lay with the Indian taxpayer, and the routes ran from the interior to the ports to carry raw material out and manufactured goods in. A is wrong because the Howrah to Hooghly line came in 1854, as the first in eastern India. C is wrong because the first line in the Madras Presidency, from Royapuram to Arcot, was opened in 1856. D is wrong because the line in the Delhi region came later still. The 1853 date with Dalhousie and the Bombay to Thane route is the fact examiners want.
The East India Company obtained the Diwani rights, that is the right to collect revenue, of Bengal, Bihar and Odisha in
- A.1757
- B.1765
- C.1772
- D.1793
Show answer
Explanation
The correct answer is B, 1765. After the Battle of Buxar in 1764 and the Treaty of Allahabad, the Mughal emperor Shah Alam II granted the Company the Diwani of Bengal, Bihar and Odisha in 1765, which made it the revenue authority of the richest provinces of India and began the system of Dual Government. A is wrong because 1757 is the year of the Battle of Plassey, which gave the Company political mastery of Bengal but not the formal right to collect revenue. C is wrong because 1772 is the year Warren Hastings ended the Dual Government and began direct collection through English Collectors. D is wrong because 1793 is the year of the Permanent Settlement, which fixed the demand for ever on the zamindars of these same provinces.
Frequently Asked Questions
Who introduced the Permanent Settlement and in which year?
Lord Cornwallis introduced it in 1793, acting on the advice of John Shore. It applied to Bengal, Bihar, Odisha, the Benaras division of the present Uttar Pradesh and the northern districts of the Madras Presidency, and it recognised the zamindars as proprietors of the land.
What was the difference between the Ryotwari and the Mahalwari systems?
In the Ryotwari system the state settled the revenue directly with the individual cultivator, who was treated as the owner of his field. In the Mahalwari system the village or mahal was the unit, the demand was fixed for the whole village, and the lambardar collected it from the co-sharers who were jointly responsible.
What was the Sunset Law?
It was the rule under the Permanent Settlement that the revenue instalment had to reach the treasury before sunset on the appointed day. If it did not, the estate could be put up for auction, and in the early years many old zamindari families lost their estates in this way.
What is meant by the drain of wealth?
It is the theory, set out by Dadabhai Naoroji in Poverty and Un-British Rule in India, that a part of India's national income was transferred to Britain every year without any equivalent return, through home charges, the salaries and pensions of British officials, interest on sterling debt and the profits of British capital.
Which land revenue system covered the largest part of British India?
The Ryotwari system, which covered about half of British India, including the Madras and Bombay Presidencies and parts of Assam and Coorg. Mahalwari covered about thirty per cent and the Permanent Settlement about nineteen per cent.
Why did the commercialisation of agriculture hurt the Indian peasant?
Revenue had to be paid in cash, so peasants shifted from food crops to cotton, indigo, jute and oilseeds for the export market. Their income then depended on distant price movements, and when prices fell, as in the Great Depression after 1929, the fixed revenue demand and old debts remained, pushing them deeper into the hands of moneylenders.
Sources
- Themes in Indian History Part III (Class XII), Chapter on Colonialism and the Countryside — NCERT
- India and the Contemporary World II (Class X), Chapter on Work, Life and Leisure and the colonial economy — NCERT
- Report of the Indian Famine Commission, 1880 — Government of India





