Ryotwari in the Bombay Deccan: Ricardo in the countryside

Detail

Why the Permanent Settlement was not copied

• The Permanent Settlement (Bengal, 1793) was rarely extended beyond Bengal. The Company learnt from it and did not repeat it.
• The reason was money. After 1810 farm prices in India rose. Higher prices meant zamindars earned much more from their lands.
• But the Company's demand was fixed in perpetuity (fixed forever). So when incomes grew, the state could claim no share of the extra income.
• The lesson officials drew: never fix the demand forever again.
• So all territories taken over in the 19th century got temporary revenue settlements — the demand could be revised after a set number of years.

Ricardo in the countryside — the theory behind the policy

• Officials sent to India in these years were trained in the ideas of David Ricardo, the British economist whose name was celebrated in 1820s England.
• Ricardo's main book was On the Principles of Political Economy and Taxation, published in 1817; it was written partly as a critical comment on Adam Smith's Wealth of Nations [4].
• Ricardo studied how the wealth a country produces gets split among three classes — landlords, workers, and owners of capital [4]. British officials in India used this three-way split to decide who deserved what.
• Ricardo's warning: as population grows, rent paid to landlords keeps rising, because people are pushed to farm poorer, costlier land to feed the extra mouths [4]. Landlords would take a bigger and bigger slice of national income while capitalists got less — ending in stagnation (growth grinding to a halt) [4].
• What officials took from this:
• A landowner deserves only the 'average rent' — the normal return from land of that quality.
• Anything the land earned above the average rent was a surplus.
• That surplus should be taxed away by the state. It was not the landowner's by right.
• If the state let him keep the surplus, he would stop working and become an idle rentier (a person who lives off rent alone and invests nothing).
• Bengal's zamindars seemed to prove the point — fixed demand, rising prices, and no investment in improving the land.

Note: Ricardo said rent goes to the landlord; the classical theory itself does not tell the state to take it. That step was the officials' own. Britannica describes the distribution theory only [4].

The ryotwari settlement — how it actually worked

• Settled directly with the ryot — the cultivator himself. No zamindar or landlord sat in between.
• Method, step by step:
• Survey the land and sort it by soil type.
• Estimate the average income each type of soil could give.
• Work out the ryot's paying capacity — how much he could hand over and still survive.

• Fix the state's share of that amount as the revenue demand.

• Lands were resurveyed every 30 years, and rates were revised — almost always upward. The demand was not permanent.

• The system was devised by Captain Alexander Read and Thomas Munro at the end of the 18th century, and introduced by Munro when he was Governor of Madras (1820–27) [2][3].
• Under it each field was separately measured and assessed, with the tax falling on land actually cultivated, not merely occupied [3].
• In the Bombay Deccan the revenue was collected through local officials from the village headmen [3].
• Claimed advantage at the time: it removed the middlemen who squeezed villagers [3]. The Deccan experience showed the state itself could squeeze just as hard.

Consequences — the first settlement and the crash

• First settlement: from 1818, running through the 1820s. The demand fixed was so high that peasants deserted their villages and moved away.
• Collectors used force to get the money in:
• crops were seized;

• whole villages were fined together.

• After 1832 prices fell sharply and stayed low for over a decade and a half. The ryot's cash income collapsed while the fixed demand stayed.

• The famine of 1832–34 struck the same countryside. The chapter records:
• one-third of Deccan cattle died — cattle are the plough, so this destroyed the ability to farm;

• half the human population perished.

• Revenue arrears (unpaid dues) piled up.

• Loans from moneylenders became the only way to pay the revenue. The ryot borrowed not to invest, but simply to hand cash to the government.
• By the 1840s officials were writing reports about alarming rural indebtedness.

The credit trap after 1845

• From the mid-1840s the state moderated the demand and prices recovered.
• Cultivation expanded after 1845 — but this expansion was credit-financed. Seed, cattle and land clearance were all paid for with borrowed money.
• So even the good years deepened dependence on the moneylender. Recovery did not free the ryot; it tied him tighter.
• This debt structure plus:
• the Limitation Law of 1859 (meant to stop old debt bonds being used forever) — and the way moneylenders subverted it by making the ryot sign fresh bonds; and
• the cotton boom-bust (boom during the American Civil War, crash after),
• together formed the fuse for the Deccan Riots of 1875. (Full treatment in the peasant-tribal-revolts note.)

Comparison table

	Permanent Settlement	Ryotwari
Region	Bengal	Bombay Deccan (also Madras)
Year	1793 (Cornwallis)	first settlement 1818/1820s
Settled with	zamindars (rajas/taluqdars reclassified)	directly with the ryot
Demand	fixed in perpetuity	revised at 30-year resurveys
Theory	property security → investment → loyal yeomen	Ricardian 'average rent', tax the surplus
Failure mode	high fixed demand + Sunset Law → auctions, fictitious sales	over-assessment → debt spiral → moneylender dependence

Prelims Hooks

• Permanent Settlement was rarely extended beyond Bengal; 19th-century annexations got temporary settlements.
• After 1810 agricultural prices rose, but the fixed Bengal demand gave the state no share of the rise.
• The economist behind the ryotwari logic was David Ricardo, celebrated in 1820s England; his book On the Principles of Political Economy and Taxation appeared in 1817 [4].
• Ricardian rule applied in India: the landowner gets only the 'average rent'; the surplus above it is taxed by the state, to stop him becoming an idle rentier.
• Ryotwari was devised by Alexander Read and Thomas Munro; Munro introduced it as Governor of Madras, 1820–27 [2][3].
• Under ryotwari, revenue was settled directly with the ryot, each field separately measured and annually assessed [3].
• Ryotwari lands were resurveyed every 30 years with rates revised upward — the demand was not permanent.
• The first Bombay Deccan settlement began in 1818; the demand was so high that peasants deserted villages.
• Prices fell sharply after 1832, for over fifteen years.
• The famine of 1832–34: one-third of Deccan cattle died; half the human population perished.
• By the 1840s, official reports flagged alarming rural indebtedness; cultivation expansion after 1845 was credit-financed.
• Key follow-on dates: Limitation Law 1859, Deccan Riots 1875.

Mains Points

• Ideology shaped revenue policy, and the theory was bent in transit. Ricardo's Principles (1817) described how national income splits between landlords, workers and capitalists, and predicted landlord rent would keep rising [4]. Indian officials converted this description into a licence: tax the surplus above 'average rent'. The Deccan shows what happens when an English theory of rent is imposed on a rain-dependent, price-volatile peasant economy with no cushion for bad years.
• Both settlements failed, but in opposite directions. The Permanent Settlement gave away future revenue and created non-investing zamindars; ryotwari kept the revenue lever but over-assessed the cultivator until he broke. The shared root cause was the same: the demand was fixed by state need, not by what the land actually yielded that year.
• Debt was created by the revenue system, not by peasant extravagance. The cash demand had to be met in a bad-price decade, so the moneylender became the only source of cash. The post-1845 recovery also ran on credit. This links revenue policy directly to the Deccan Riots of 1875 and to the wider commercialisation-without-capitalisation argument — the peasant produced for the market but never accumulated.
• Ryotwari's claimed merit — removing middlemen [3] — did not mean lighter burden. Cutting out the zamindar brought the ryot face to face with a stronger extractor, the colonial state, whose collectors seized crops and fined whole villages. Useful counter to the exam claim that ryotwari was "more humane" than zamindari.