The Deccan: revenue, debt and cotton

The Permanent Settlement was not extended to the new territories the British conquered in the nineteenth century. Two reasons: after 1810, agricultural prices rose, and a fixed revenue meant the government could not share in the rising income; and officials were influenced by the economist David Ricardo, who argued that the state should claim a share of the 'average rent'.

In the Bombay Deccan, the British introduced the ryotwari system: the revenue was settled directly with the ryot (cultivator), not with a zamindar. The land was resurveyed every 30 years, and the revenue raised.

In the 1820s, the revenue demand was too high: many peasants fled their villages. After 1832, prices fell, and a famine struck in 1832-34. By the 1840s, debt was everywhere: peasants had to borrow from moneylenders to pay revenue and survive.

Then came a cotton boom. When the American Civil War broke out in 1861, cotton imports to Britain from America fell to less than 3 per cent of their earlier level. British cotton merchants turned to India: in the Deccan, ryots got advances of up to ₹100 an acre to grow cotton. Cotton acreage doubled between 1860 and 1864.

After the war ended in 1865, American cotton came back. Indian cotton demand fell, and credit dried up: moneylenders refused loans. At the same time, the government raised the revenue by 50 to 100 per cent. Credit came with the boom and left with it.