Statement I : The economy of India in the 19th century came to a state

Statement I :
The economy of India in the 19th century came to a state of ruin under the English East India Company.
Statement II :
The English East India Company’s acquisition of Diwani right led to the miseries of the peasants and those associated with the traditional handicrafts industry of India.

Both the statements are individually true and Statement II is the correct explanation of Statement I

Both the statements are individually true but Statement II is not the correct explanation of Statement I

Statement I is true but Statement II is false

Statement I is false but Statement II is true

This question was previously asked in

UPSC CAPF – 2012

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Both Statement I and Statement II are individually true, and Statement II is the correct explanation of Statement I. Statement I is true because the economic policies of the English East India Company, particularly in the 19th century, systematically exploited India’s resources and labour for the benefit of Britain, leading to de-industrialization, drain of wealth, and widespread poverty, thus ruining the Indian economy. Statement II provides a key mechanism through which this ruin occurred. The acquisition of Diwani rights in Bengal (1765) gave the EIC control over revenue collection. This led to excessive revenue demands on peasants, impoverishing them. Simultaneously, the EIC’s trade policies, designed to promote British manufactured goods and suppress Indian textiles and handicrafts, devastated traditional Indian industries, leading to unemployment and misery for artisans. Thus, the miseries caused by the Diwani right directly contributed to the overall ruin of the Indian economy described in Statement I.

The English East India Company’s policies, especially after gaining Diwani rights, led to the exploitation of India’s resources and traditional industries, contributing significantly to the decline of the Indian economy in the 19th century.

The period following the acquisition of Diwani is often referred to as the ‘Plassey Plunder’ period, highlighting the intense economic exploitation. The ‘Drain of Wealth’ theory, later popularized by Dadabhai Naoroji, articulated how India’s resources and wealth were systematically transferred to Britain under colonial rule, a process heavily influenced by the EIC’s control over revenue and trade.

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