The economic condition of India before the consolidation of British as colonial power during the 18th century was almost similar to those prevalent in other countries.
Indian society of mid-eighteenth century was marked by several peculiar characteristics. Most of the people worked as cultivators.
As many as 90% of the population lived in villages. For this reason one can also regard the Indian economy as a village economy. Besides, India had a fairly well-developed system of handicrafts.
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It also had trade relations with the outside world and the balance of trade was in its favour. To finance trade, indigenous banking was sufficiently developed.
The English east india company established on 31st December, 1600 in Britain with objective to trade with India remained a commercial body for one and a half centuries. However, the mid-18th century saw the transformation of the English East India Company from a trading enterprise to a political power.
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The decline of Mughal authority obviously provided a great opportunity for expansion of influence.
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The beginning of the empire is usually traced to 175 7 when the British defeated the Bengal Nawab at Plassey.
The Company’s need for more revenue from taxation inclined it towards establishing an empire.
The Company needed money to maintain its trade and pay its troops therefore, acquisition of territory seemed the best method of meeting this requirement.
The Company’s interest in conquering Bengal was two-fold:
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1. Protection of its trade
2. Control over Bengal’s revenue.
The intention was to remit the surplus revenue of Bengal as tribute through the channel of investment in Bengal goods.
It need not be over stressed that the bulk of the revenue in India came from land and therefore, dissolution of the existing land systems and introduction of changes in the land revenue settlement and administration was an inevitable result of the foundation of the British administration.