In the early 1790s, a Company official in Calcutta is drafting a note on the new revenue system for Bengal. He points out that once the demand on each estate is fixed for all time, the Company will gain nothing in future when prices rise and cultivation expands. He wants the settlement to protect the Company against this expected loss. The note must be approved by the head of the government in Bengal, a senior officer who had earlier commanded British forces in a war across the Atlantic.
What step did the Company take to reduce the expected loss the official describes?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → It pegged the demand high, expecting the burden to fall as output rose.
Option (1) It set the demand low, expecting zamindars to invest more in their land. — Incorrect. A low demand would have made the loss worse. The Company feared losing future income, so it did the opposite.
Option (2) It took the demand in grain, expecting grain prices to rise later. — Incorrect. The demand was fixed as a sum of revenue to be paid to the Company. Taking it in grain was not the Company's answer to this problem.
Option (3) It pegged the demand high, expecting the burden to fall as output rose. — Correct. To minimise the anticipated loss, the Company pegged the revenue demand high. It argued the burden on zamindars would decline as production expanded and prices rose. This high initial demand was the first reason zamindars defaulted.
Option (4) It levied a separate tax on trade, expecting commerce to grow. — Incorrect. A trade tax was not the step taken here. The Company dealt with the loss through the land revenue demand itself.
NCERT (2026-27): “1.3 Why zamindars defaulted on payments … |