This is a study of the Carnatic Debts, of how they were created and inflated, and how their burden was thrown on the peasantry of Tamil Nadu in the eighteenth century. The Carnatic Debts, also known as the Arcot Debts, were a class of debts created by private servants of the East India Company who enriched themselves by lending money to the ruler of the Carnatic, Nawab Muhammad Ali Khan Wallajah (1717–1795). The Arcot Debts contributed substantially to what early Indian nationalist writers called the “Drain” or “Tribute” from India, particularly from southern India. Their impact on agrarian relations in the region known as the Carnatic in the eighteenth century was deep and transformatory. Thus, in a broader sense, this study deals with the transformation, as a result of the impact of early colonial rule, of the agrarian economy of what was to become the Madras Presidency and modern Tamil Nadu.

In British colonial commentary of the eighteenth century relating to East India Company affairs in the Carnatic, the Arcot Debts find prominent mention, and became a catchphrase denoting skullduggery, cheating, and outright theft.

In 1790, the Whig parliamentarian and consummate apologist of empire, Edmund Burke, made a speech in the British Parliament that was a masterly indictment of the unscrupulous servants of the East India Company, who were responsible for generating the Arcot Debts, servicing them at extortionate rates of interest, and finally returning to Britain as immensely wealthy individuals.¹ Burke’s speech in fact represented the interests of the British industrial bourgeoisie, which wanted to wrest direct control over the British colonies from the East India Company. In the nineteenth century, Karl Marx also wrote about the Debts, and the conduct of the “English swindler usurers” under whom the “entire Carnatic was ruined . . . .”² Several nationalist writers wrote in the nineteenth century of the Drain from India, and some of them wrote of the Carnatic Debts. Romesh Chander Dutt was among those who provided much detail on the economic impact of the Debts.³

By issuing personal loans at extortionate rates of interest to the Nawab, for which he rendered large and fertile tracts of his domains as collateral, the growing army of English creditors bled the countryside while themselves amassing astronomical wealth and resources. The web of interests linking the Nawab to his creditors could never fully be unravelled, and the Debts could only partially be quantified in the voluminous reports and enquiries of the time.

An important study of the Debts is an unpublished doctoral thesis by J. D. Gurney, titled The Debts of the Nawab of Arcot, 1763–76 and available in manuscript form at the British library in London. Gurney’s thesis, submitted to the University of Oxford in 1968, is an exhaustive study of the Debts. In it he examines the trajectory and expansion of the Debts, and illuminates the role of key actors in this sordid drama – the private creditors to the Nawab, the Company’s Board of Governors in London, the Madras Government at Fort St. George, the Nawab and his administration, and other intermediaries. The thesis however does not address the impact of the Debts on the Carnatic economy. This gap is a general shortcoming of historical scholarship on the Carnatic.

The impress of colonial policy on a predominantly agrarian society can be established in some detail from the historical record in respect of the eighteenth century Carnatic. The known sources on the Debts are vast, and there are doubtless many sources of information in private collections that lie unstudied. After all, apart from private Company servants, every European traveller who visited and recorded his impressions of the Carnatic in the eighteenth century would soon have learned of this easy pathway to enrichment. Of British sources, a large collection of reports and correspondence pertaining to the issue lies in the British Library, the National Archives of India, and the Madras Archives. The Debts find mention in British historical accounts of the period. The historian Robert Orme, to whom we owe much of our knowledge of the political and military developments of eighteenth-century India, was himself a lender. British and European travellers to the region, many of whom had their hands in the till, wrote about the Debts. Finally, there is a vast and largely unexcavated collection of papers in Persian belonging to the descendants of the Nawabs of Arcot housed in Chennai. Gurney, who used some of these for his study, said that he had but skimmed the surface of the collection.

The questions this article seeks to answer concern the origins of the Debts, the methods by which they were contracted and interest upon them calculated, the collateral offered by the Nawab, and the expansion and total value of the Debts. The article is also concerned with the disastrous consequences for the peasantry and the rural economy of the Nawab’s practice of mortgaging fertile tracts of land to service these Debts.

The Geographical and Political Context

The Carnatic, a territorial nomenclature that went into disuse in the nineteenth century was first given by the Mughals to denote the most far-flung of their southern territories. These were deep in the south of the peninsula, territories over which their control was at best tenuous. The Carnatic included the districts and principalities of the south-eastern coast of India, and corresponds roughly to Tamil Nadu, though excluding the west interior regions of Salem, Erode, and Dharmapuri, and the districts further west.⁴

Starting as a relatively inconsequential trading company that competed with other European trading outfits operating along the coast and hinterland of the Coromandel in the seventeenth century, the British East India Company, a mere century later, had established full territorial control over most of peninsular India. Many of the traditional features of the agrarian economy were transformed under the relentless pressure on the revenues of the region by the Company and its servants.⁵

Geographically, the Carnatic comprised the districts and principalities along the Coromandel coast, from Nellore in the north and extending south through Chittoor, the principality of Arcot, Fort St George (Madras, or today’s Chennai), the Jaghire (Chinglepet and other parts of the hinterland of Madras), Fort St. David (present day Puducherry), Tanjore (Thanjavur) principality, and the smaller principalities of Ramnad (Ramanathapuram), Tinnevelly (Tirunelveli), and Madura (Madurai). These latter principalities were under the control of tribute-paying chiefs known variously as Palayakkar, Nayaka, Setupati, and so on.⁶ In the seventeenth century, the Carnatic fell under the Mughal Suba of Haidarabad, which in turn fell under the jurisdiction of the Subadar of the Deccan. With the fragmentation of the Mughal empire – a process that began with the death of Aurangzeb in 1707 – the two claimants to this rich and well-resourced breakaway principality were Saadat Ali Khan (1651–1732) and Anwaruddin Khan (c. 1674–1749). Their claims, and those of their successors, became tied to the interests of the French and the English, who were in conflict over trade and territorial acquisitions in the region. The Treaty of Paris in 1763 established the claims of the British and recognised Muhammad Ali of the Wallajah dynasty and descendant of Anwaruddin Khan as the Nawab of the Carnatic. The Nawab died in October 1795 and was succeeded by his son Umdat-ul Umra, who died in July 1801. In the same year, the whole of the possessions of the Nawab, with the exception of a small portion reserved for the needs of himself and his family, were transferred by treaty to the British government.⁷

Politically, the eighteenth century saw the territorial fragmentation of the peninsula, with regional entities such as the Marathas, the Hyderabad Nizams, the Arcot dynasties, and the Mysore rulers in conflict over control of territory and revenues. Their military requirements drove them into the camps of the British or French, who, as we have seen, were themselves in competition for commercial and political supremacy in South India.⁸ Mysore under Haidar Ali (c. 1720–1782), and after his death under his son Tipu Sultan (November 1750–1799), stands out as the solitary exception to the general economic and political anarchy. Tipu Sultan was even able to regenerate Mysore’s economy for a time; but in the absence of political unity amongst regional powers, and the pressure to finance constant wars against the British and its allies, he too finally succumbed to British arms in 1799.⁹

Revenue Assignments to the Company

Among the earliest territorial acquisitions of the East India Company was the territory around Madras, known as the “Jaghire.” This was originally granted by the Nawab of the Carnatic as a jagir (or a revenue assignment) to the English in 1765. The revenue assigned from the Jaghire was intended as a contribution towards the expenses of wars undertaken by the Company in “aid” of the Nawab. At first, the direct administration of the Jaghire was not in the hands of the Company, the revenues being collected by the Nawab himself. In 1780, however, the Company took over direct administration of the Jaghire, and let it out in 14 large farms on leases of nine years at increasing rents. The Company kept pressing the lessees for advances that they were unable to fulfil. By 1788, the renters had repeatedly failed to pay their rents, and their “estates” were sequestered. This happened in all other districts of the Carnatic as well. Because of the inability of the Nawab to fulfil the Company’s demands, the 14 large farms were brought under direct Company management.¹⁰

In 1781, the Nawab of Arcot handed over the management and control of the whole of the revenues of the district of Tirunelveli to the Company, on condition that he be allowed one-sixth of the revenues for his personal use.¹¹ Local opposition to the collection of revenues by the Company forced it to return the assignment to the Nawab in 1785. In 1790 the revenue administration was once again taken over by the Company, which established a Board of Assigned Revenue for the purpose of its management.¹² The Company’s administration in Tirunelveli was so oppressive that it brought the palayakkar (or the local hereditary military chieftains) into open confrontation with them.¹³

The Carnatic and Bengal: Contrasts in Administration

If the Nawab’s administration was oppressive, the Company’s administration was even more so. The changes that the Company tried to bring about in the Carnatic should be seen in the background of the growth of tax-farming and the Nawab’s debts.

In Bengal the Company acquired the Diwani, or rights to collect the revenue of the province, from its rulers in 1765. The Company formally annexed the Carnatic region in 1801. Prior to that they did not need to acquire the Diwani as the pliant Nawab had already made over much of his lands to the Company. Writing on the colonial impact on eighteenth-century India, R. C. Dutt contrasts the responses by Muhammad Ali, the Nawab of the Carnatic, and Mir Kasim, the Nawab of Bengal to the demands of a rapacious colonial power.

Mir Kasim was a determined man and a strong ruler; Mahomed Ali, was a feeble man and a luxurious prince. Mir Kasim removed his seat of government to Monghyr in order to organize his own administration away from British influence; Mahomed Ali left his own capital, Arcot, to live amidst the luxury of the British town of Madras. Mir Kasim was a stern economist, and paid off all his pecuniary obligations to the British in two years after he had ascended the throne; Mahomed Ali never could liquidate the claims of the Company, and drifted more and more into debt. Mir Kasim fought with the British in order to keep the inland trade of Bengal in the hands of his own subjects; Mahomed Ali made assignments of his land revenues to his British moneylenders, until virtually the whole of his territories passed into the hands of his creditors. Mir Kasim was driven out of his dominions and died an exile; Mahomed Ali lived in glorious dependence, luxury, and debt, and died in ripe old age. A strong ruler had no place in the scheme of British dominion in the East; a weak ruler was permitted to live and to borrow, and to pay the interest out of the revenues of his kingdom.¹⁴

Notwithstanding the differences in their characters, both rulers presided – Mir Kasim in helpless anger, Muhammad Ali in self-serving acquiescence – over the plunder of enormous wealth from their respective provinces.¹⁵

The Beginnings of the Nawab’s Debts

As part of the terms of the agreement between the Arcot Nawab and the East India Company, a certain sum of money was set aside from the Nawab’s revenues for the payment of the Company’s troops stationed at Madras for his “protection.” As the financial demands of the Company grew, the Nawab began to borrow from private servants of the Company in order to meet the Company’s demands, becoming in the process entangled in a debt that soon assumed staggering proportions.¹⁶ As security for these debts, the Nawab mortgaged portions of his territories and allowed the assignees to collect the revenues from them until principal and interest were redeemed. The creditors well knew that the money they advanced would never directly be repaid by the Nawab, but calculated that if securities worth many times the principal were pledged, they would be able to make an enormous profit nevertheless. The Nawab first issued bonds that formed a medium of speculation, and which, according to one contemporary authority, “were freely bought and sold throughout south India, in direct proportion to the Nawab’s prospective ability to reclaim them.”¹⁷ After the war with Haidar Ali in 1767–69, and in the acute depression that followed, many English merchants found themselves loaded with bonds that they could not sell other than at a heavy discount. Moreover, many of the bonds were not even genuine. When the East India Company took over the Carnatic in 1801, it was found that 90 per cent of the bonds in circulation were spurious.¹⁸

The practice of the Nawab borrowing from the Company’s servants in order to meet Company demands began around 1760. The practice was initiated on a small scale, the money being raised for the Nawab only when ready money was available at Madras and stocks were easily replaced from Bengal. But the needs of the Nawab soon grew and he was willing to promise to pay almost any rate of interest on the money he borrowed.¹⁹

What were the amounts involved in the debts and what methods did the creditors use to keep the Nawab in a state of perpetual bondage?

The sums involved were so large and the transactions themselves so dubious that when the Court of Directors in London were made aware of the enormity of the loans in 1769, they dissolved the Madras Council, which they believed responsible for the state of affairs, and set up a select committee to investigate several issues, including the Debts. In a letter to the Madras Council, the Board reprimanded the Council for its concealment of the company servants’ private transactions with the Nawab.²⁰ The “first obligation” of the Nawab was to repay the Company his dues, the Court stated. England had just suffered a humiliating defeat at the hands of Haidar Ali, the ruler of Mysore, and the Court’s fury knew no bounds when they learnt that the Nawab’s creditors may have instigated the Nawab to support hostilities against Mysore. This was because a victory over Mysore would have opened up new and resource-rich territories for revenue farming.

In its letter, the Court said,

We are alarmed that the debt to Individuals should have been the real Motive for the Aggrandisement of Mahomed Ally and that We are plunged into a War to put him in possession of the Mysore Revenues for the discharge of the debt.²¹

As late as 1784, by which time the total debt had snowballed further, one of the explicit instructions of the Pitt’s India Act, which tightened the control of the British Parliament over the Company, was an enquiry into the nature and origin of these Debts.

What was the total amount of money extracted from the Carnatic during this period? According to Burke’s estimate, between 1760 and 1780, the direct drain of wealth from the Carnatic amounted to nearly 20 million pounds.²² The Debts themselves were officially computed at £4,440,000, which, according to Burke’s calculations was “a good deal more than double the whole annual dividend of the East India Company, the nominal masters of the proprietary in these funds.”²³

In a speech in the British Parliament in 1785, Burke railed against the corruption of those who had enriched themselves in India. He asked:

By what means could a small number of slight individuals, of no consequence or situation, possessed of no lucrative offices, without the command of armies, or the known administration of revenues, without possession of any kind, without any sort of trade sufficient to employ a pedlar, could have, in a few years (as to some even in a few months), amassed treasures equal to the revenues of a respectable kingdom? When all England, Scotland, and Ireland, had for years been witness to the immense sums laid out by the servants of the Company in flocks of all denominations, in the purchase of lands, in the buying and building of houses, in the securing quiet seats in parliament, or in the tumultuous riots of contested elections . . . that after all India was four millions still in debt to them? India in debt to them? For what? Every debt for which an equivalent of some kind or other is not given, is on the face of it a fraud . . . What are the articles of commerce, or the branches of manufacture, which those gentlemen have carried hence to enrich India? What are the sciences they beamed out to enlighten it? What are the arts they introduced to cheer and to adorn? . . . [A] debt still paying, still to owe, which must be bound on the present generation in India, and entailed on their mortgaged posterity forever? A debt of millions, in favour of a set of men, whose names, with few exceptions, are either buried in the obscurity of their origin and talents, or dragged into light by the enormity of their crimes?²⁴

The sudden amassing of wealth by individuals with no trade in India was the burden of the Arcot Nawab’s complaint in several plaintive letters to the Court of Directors of the Company during this period. Later, as the influence of his creditors grew within the Company, the Nawab would side with them against the company when the Court in London tried reducing the rates of interest.²⁵

“If all these things were against the real interests of the company,” the Nawab argued in one such letter,

they are ten thousand times more against mine, and against the prosperity of my country, and the happiness of my people; for your interests and mine are the same. What were they owing to then? to the private views of a few individuals, who have enriched themselves at the expense of your influence, and of my country; for your servants HAVE NO TRADE IN THIS COUNTRY; neither do you pay them high wages, yet in a few years they return to England with many lacs of pagodas. How can you or I account for such immense fortunes, acquired in so short a time, without any visible means of getting them? ²⁶

Three Tranches of Debt

In an enquiry into the Debts mandated by the terms of Pitt’s East India Act, 1784, the Court of Directors classified the Debts into three categories:

1. The loan that was consolidated in 1767;
2. The “Cavalry” Loan; and
3. The loan consolidated in 1777.

The Consolidated Loan of 1767

The consolidated loan of 1767 (in Burke’s commentary this was “the fairest of the whole . . . I can convict it of nothing worse than the most enormous usury”)²⁷ amounted to £880,000, the greatest part of which was claimed by Company servants residing in Madras.²⁸ From a list of 110 creditors and the money due to them by the Nawab, his total debt stood in December 1766 at Star Pagodas 2,229,650.²⁹ This capital was settled finally by order at ten per cent interest per annum, amounting to interest payments alone of £88,000 annually.³⁰ In 1769, the Court of Directors was horrified to hear of the existence of this loan. The information was out when the trustees of the Nawab’s private creditors John Pybus, John Call, and James Bourchier proved a deed of assignment on the Nawab and his son of fifteen districts³¹ of the Nawab’s country, yielding a revenue of 800,000 pagodas (£320,000 annually) and another deed of assignment of the yearly tribute paid to the Nawab from the Raja of Thanjavur amounting to Rs 400,000 (£40,000).³² The creditors had gained substantial influence in the Governor’s Council at Fort St. George by then. The Court of Directors’ order for an enquiry into the transaction was annulled by the new Council of Proprietors owing to pressure from the creditors. Their claims were thus admitted and settled by the Court of Directors, whose orders to their servants forbidding them to enter into any further financial dealings with the Nawab fell on deaf ears.³³ Our evidence does not provide a complete list of the creditors on this loan, but there were at least 52 creditors who signed a letter to the Nawab’s son in November 1769 declining his plea for leniency in the payment of interest.³⁴ Using records of the Company and the Nawab’s government, Gurney provides a list of 140 creditors and the amounts they loaned the Nawab in 1769.³⁵

Even the rate of interest at which the debt was actually contracted was not clearly set: was it 10 per cent per year (as was maintained by those who defended the loan in Parliament) or was it much more? At first loans were contracted at 36 per cent per year, the rate being then reduced to 25 and then to 20 per cent per year.³⁶ It is a measure of how inextricably tied the Nawab was to a thick tangle of debt that he viewed any measure, however feeble, that the Company took to rein in his creditors with great alarm. Thus, when the Company ordered that interest rates were to be reduced to 10 per cent per year, the Nawab was seized with fear lest his creditors abandon him. He thus quickly formed the principal and arrears into a new fund previous to the order of 1766, on which he added an interest of 20 per cent per year, and it was on that accumulated fund that 10 per cent interest per year was settled, not on the sum originally lent.³⁷ One General Smith, who was a proprietor for the Company, was an agent for this debt. For this debt of £880,000, it was unlikely that the Nawab had obtained even £100,000 in ready money and all his later appeals for leniency in paying the Company his stipulated tribute went unheard.³⁸ During the war with Haidar Ali, the creditors – who by now were the revenue collectors for large areas of the Carnatic – lent money to the Company for war expenses. They charged them interest at 8 per cent per annum but told the Court of Directors that the interest at which they lent money to the Nawab would remain at the old rates.³⁹

The Cavalry Loan

The Cavalry Loan, taken by the Nawab in 1777, illustrates yet again the fraudulent methods the creditors used in their lending deals with the Nawab. In order to discharge the arrears of pay to his mutinous cavalry detachment before he disbanded it, the Nawab contracted a debt for the sum of £160,000 from three servants of the Company – Taylor, Majendie, and John Call. When the time came for actual payment by the creditors, the Nawab was told that as there was no ready money available, the creditors would make the payment in four months’ time; the Nawab managed somehow to pacify his soldiers with this promise. However, two years later, in 1779, the amount had still not been handed over to the Nawab although the interest on the “loan” went on mounting. The rate of interest was fixed at 12 per cent per annum, but, according to Burke, was in reality computed at 20 to 24 per cent per annum. Now, on the promise of payment the Nawab delivered up the revenues of a few districts. Since the creditors did not have to begin payment until after four months and did not actually do so until after two years, it is clear, first, that their payments to the Nawab were made from the revenue they received by assignment from the Nawab himself, and, secondly, that the revenues drawn must have been considerably greater than the amount originally “lent.” The Nawab received complaints from the amildar of the assigned districts that the creditors had collected all the revenue and that another section of troops – those whose salaries were to be disbursed from the revenues of that particular province – were mutinying as they had not received their pay for seven or eight months.⁴⁰

Instead of cancelling the debt accumulated as a result of this deception, or at least ordering an enquiry into it, the Ministerial Board added the arrears of 12 per cent per year interest accumulated between 1777 and 1784 to make a new capital amount of £294,000 (from the old of £160,000) upon which they charged a new interest of 12 per cent per year – and all of this in respect of a transaction in which not a single rupee had in reality been advanced.⁴¹ In Burke’s graphic description of this debt,

Bond is paid by Bond; arrear is returned into new arrear; usury engenders new usury; mutiny, suspended in one place, starts up in another; until all revenues and all establishment are entangled into one inextricable knot of confusion from which they are only disengaged by being entirely destroyed.⁴²

In his testimony, Burke unveils the “profession of soucaring” (money-lending) whereby propertyless Englishmen take whole provinces in mortgage, “to make princes their debtors, and to become creditors for millions.” He quotes from a letter written by an eyewitness stationed in Madras to the whole fraudulent scheme. The Nawab “is generally in arrears to the Company,” writes the eyewitness.

Here the Governor, being cash-keeper, is generally on good terms with the banker, who manages matters thus. The Governor presses the Nabob for the balance due from him; the Nabob flies to his banker for relief; the banker engages to pay the money and grants his notes accordingly, which he puts in the cash-book as ready money; the Nabob pays him an interest for it at two and three per cent per mensem, till the tunkaws [an assignment on the revenue on land in favour of an individual] he grants on the particular districts for it are paid. Matters in the meantime are so managed that there is no call for this money for the Company’s service till the tunkaws become due. By this means not a cash is advanced by the banker though he receives a heavy interest from the Nabob, which is divided as lawful spoil.⁴³

The Company ultimately paid £294,000 out of the public revenues to “settle” the scandalous Cavalry debt.⁴⁴

These massive loans were moreover made in a period of acute depression and shortage. First, the province was destroyed by the war with Haidar Ali in 1767–69. The resulting depression was heightened by the Nawab’s inability to honour his promises, resulting in an increase in revenue assignments. The smaller merchant creditors had large amounts locked up in bonds for which they could neither raise money nor sell, except at a heavy discount. On top of all this the Second Mysore War broke out in 1780. It lasted four years. David Young, a merchant in Madras wrote in September, 1781,

It is astonishing how dear every article for the table is, or rather how we get anything at all to eat; drink is as dear and no money to be had; nor is there any appearance or hopes of better times.

In early 1782 he wrote,

You will perhaps not believe me but there is not a merchant to buy rice or any one kind of grain, and, if it was sold at ever so low a price, ready money could not be got . . . .⁴⁵

The Consolidated Loan of 1777

The Consolidated Loan of 1777 was similar to the previous consolidated loan in that neither could the actual amount involved be computed accurately (the versions differed from each other by as much as £1 million pounds), nor was there a full list of the creditors who were involved.⁴⁶ The Consolidated Debt of 1777, however, had the distinction of being the largest and most elusive of the Arcot Debts. This loan was contracted against the express orders of the Court of Directors. The loan amount was later roughly calculated at £2,400,000 principal, at 12 per cent interest per year.⁴⁷

So outrageous were the terms of the loan that in 1781 the creditors themselves (or their agents) agreed that 25 per cent could be struck off from the principal of the debt, along with the interest. But here again they were treated with a leniency that showed the extent to which their influence in the Court of Directors had grown. The Court of Directors responded to this proposal with a magnanimity that surprised the creditors themselves. Four years’ interest (i.e., from 1777–81) at 12 per cent per year was added to the original principal and then over and above that, an annuity of 6 per cent was fixed on the sum effective from 1781 until the debt was repaid.⁴⁸

The Ministerial Board, i.e., the British Government, treated the Carnatic creditors with similar generosity in the matter of repayment of the Debts. When it became obvious that the Nawab simply could not repay the loans he had contracted, a sum of £480,000 was set aside from the public revenues of the Carnatic as an annual fund for the repayment of the debt. This was based on a gross overestimation of the total revenues of the Carnatic, which was calculated for the purpose at £1,200,000, and the revenues of Thanjavur at £4,50,000.⁴⁹ But this was the revenue in good times, and not of a region that was recovering from the ravages of the Second Mysore War and the depredations of the creditors. Indeed, the sum of £480,000 set aside as an annual payment to the creditors amounted to more than half the total revenues of the Carnatic, calculated subsequently by the Directors at £800,000.⁵⁰

The cycle of debt did not stop. The sum set aside from the public revenues to repay creditors had to be paid by none other than the hard-pressed Nawab, who in turn had nobody to turn to but his English moneylenders. The notorious Madras shark Paul Benfield lent the Nawab the requisite sum at the rate of 24 per cent per year.⁵¹ In order to meet his obligations, the Nawab had once again to mortgage his territories. The interest on this sum came to another £118,000 a year!

The story of how the principality of Thanjavur was drawn into the trap of the Carnatic Debts is yet another illustration of early colonial policy in south India. With the resources of the Carnatic getting exhausted, it was not surprising that the Nawab and his creditors cast covetous eyes on the fertile principality of Thanjavur, which was ruled by Raja Pratap Singh, a ruler of Maratha descent. The Raja, an ally of the British under the treaty signed between Haidar Ali and the British in 1769, was let down by his friends, who, in collusion with the Nawab, besieged Thanjavur first in 1771 and then in 1773. While the Raja bought his freedom by the payment of £400,000 on the first occasion, in the 1773 siege he and his family were captured and imprisoned. His kingdom was handed over to the Nawab, who in turn assigned the province to his creditors, led by Paul Benfield. In ten years the once prosperous kingdom was ruined and its people made to suffer great privation because of the harsh demands made on them by the Nawab’s creditors. From being “one of the most flourishing, best cultivated, populous districts in Hindustan” of “great foreign and inland trade” in 1782, its “government, trade, manufactures, and agriculture were neglected, and many thousands of inhabitants went in quest of a more secure abode.”⁵²

All creditors profited from the Thanjavur plunder, but Paul Benfield most of all. Benfield, called the “Banker of the Carnatic,” rose from very humble beginnings; his career is an interesting example of how the Company “Nabob” was made. In 1773, he laid claims on assignments upon the revenues of Thanjavur amounting to £234,000 totally. In 1782, Benfield’s share of the Carnatic Debts amounted to £400,000, which with 12 per cent per year interest became £592,000. Although Benfield was on the top of the list of creditors in 1783, he cleverly ensured that his name would not appear in later lists, and was always represented by his agent. When the terms of the 1777 loan came under rigorous enquiry, he tried to wriggle out of his predicament by instituting a suit against his own agents in the Mayor’s Court, stating that the bond they issued was spurious. Later, although Benfield was forced to give up his claim on the bond, he was permitted his original demand of £592,000. Benfield, with his Carnatic wealth, was able to build parliamentary influence in England and according to Burke, financed the elections of eight members to Parliament, including himself in 1780.⁵³

After the East India Company annexed the Carnatic in 1801, it kept aside a sum of £12,000 annually to redeem the amount. Commissioners were set up – two in Madras and two in London – to weed out the fake bonds.⁵⁴ They found the debt to be monstrous, around £30,000,000, and most of the debt to be based on bonds that were forged and fictitious.⁵⁵

The Ruin of Agriculture

With the passing of large tracts of territory into the hands of private moneylenders, new forms of land revenue collection were introduced that were both more harsh and less flexible than before. While the Nawab’s demands, though severe, were at least suited to the yearly produce of the soil, the new revenue collectors showed no such consideration. There is much justification in the observation of R. C. Dutt that

The whole of the Carnatic resembled an egg-shell with its contents taken out. The fields and villages of Southern India were converted into a vast farm, and the tillers tilled and the labourers toiled in order that all the produce might be annually exported to Europe.⁵⁶

In a Minute submitted to the Madras Council in 1795, Lord Hobart, Governor of Madras, brought to light, in an unusually candid way, the impact of the mortgaging system on the lives and resources of a section of the population at the bottom of the ladder – the peasantry.⁵⁷

In practice, the mortgaging of territory was carried out mainly in the southern districts – in Tirunelveli in particular, being most distant from Madras – although similar practices existed also in Vellore, Arcot, Tiruchirapalli, and later, after its annexation in 1783, in Thanjavur. In North Arcot district, the Nawab adopted a system of renting that “can never fail of ruining a country, namely, that of renting the whole territory from year to year to the highest bidder,” with the result that when the district was transferred to the British in 1801,

. . . the population had dwindled away, and the cultivators that remained were in a state of extreme wretchedness, while the condition of the tanks and water courses was ruinous. What cultivation still existed was effected by compulsion, the peasant’s share amounting to no more than he could make away with and conceal.⁵⁸

Not very different was the situation in South Arcot district. The same source notes that there was much uncultivated land of excellent quality in the village in 1806. Villages were deserted, some partially and others wholly, owing “partly from the lands being over-assessed, and partly from the rapacious exactions of the native officers, who collected the revenue during the Nabob’s administration.”⁵⁹

The whole transaction would begin at Madras where the Nawab paid his yearly instalments of land revenue (kist). A deal would be struck between him and one of the principal houses of business, or a private individual. The creditors, not satisfied with a single security (i.e., the mere handing over of a district) would in addition insist that a man of their choice be appointed to the posts of Manager or amildar of the district and Military Commander (tehsildar), in order that their claims be rigorously enforced.⁶⁰ The link between the three parties was established before the agreement for a loan was made, and the mortgaged territory then passed under the sole governing power of the creditors and their agents. All efforts were then made to realise as much revenue in as short a time as possible.

The actual interest on the loan varied but was fixed at an average of 4 per cent a month, a rate much higher than was admitted by the creditors and their supporters in Parliament when the Carnatic Debts came up for debate. Besides this, the Nawab also gave an undertaking to meet the pay requirements of all the subordinate servants employed by the creditors. This latter amount was substantially above the actual expenses incurred by the tehsildar, the difference being regarded as part of the legitimate claims of the revenue collectors.

The amildar arrived in the district, assembled his under-managers and renters, and then began the second part of this oppressive transaction. In order to satisfy the urgent and persistent demands of the tehsildar quickly, the amildar had to turn to subordinate moneylenders, both native and foreign, who would advance him money. The securities they received were either the bonds of the inhabitants or grain. Soon, three-fourths of the sum lent were secured to the moneylender by grain made over to him; for the remaining one-fourth, bonds from the inhabitants were secured by him for that part of the revenue that the cultivators usually paid to the government in cash (i.e., usually for dry grain). Thus, the cultivators were forced to anticipate the crops and pay interest upon money before it was due from them. The moneylender then sent his own servants into the countryside with an order from the Nawab’s amildar to seize grain and secure his bonds. If the cultivator delayed his payment, he was confined without food and beaten. Thus an inhabitant who granted a bond for 100 chukrum (40 pagodas) was compelled finally to part with 110-115 chukrum; and if his credit was exhausted, he had to part with his stock of cattle and food grain. As a last resort, the inhabitants fled to nearby territories.⁶¹

The grain now completely in his control, the moneylender sought to reap as big a profit as he could on its sale. The poor cultivator had to dispose of the grain as soon as it came into his hands. The moneylender, who now had a monopoly on the grain, would hoard it, thus pushing up its price. If any of the stock remained in his hands at the end of the season, the whole quantity would be divided up among the inhabitants and forced on them as gaddayum (an ancient custom that compelled the producer to buy grain at a value considerably above the market price).⁶² The moneylender’s authority was so complete that no one could part with money or grain but by his orders.

In this way, the district of Tirunelveli was annually mortgaged to the amount of 300,000 pagodas, according to Hobart. The interest at 4 per cent per month came to 72,000 pagodas. The charges paid for the servants and peons of the creditors amounted to another 3,000 pagodas, making the total amount of revenue collected as 375,000 pagodas (£50,000).

Apart from the dealings of the principal moneylenders with the head manager, there were also similar practices at play at lower levels and for smaller amounts, in all amounting from 50,000 to 100,000 pagodas, on which, again, interest accrued before the kist was due.

Collections made in this manner, Hobart noted, tended to take the peasant to complete ruin. With the decrease in cultivation, the price of grain shot up,

. . . and it is a notorious maxim of eastern finances, that a year of scarcity is more productive than a year of plenty . . . because as a given number of months can only consume a proportionable quantity of grain, the immediate advantage or disadvantage . . . arises from the price at which that given quantity is sold. In years of plenty the superfluous grain is in a great measure useless owing to the partial and difficult means of exportation: in years of scarcity . . . as the demand is greater than the supply, an increase of the price is produced by the usual effects of a competition in the market.⁶³

The oppression endured by the peasantry in the Jaghire administered by the Company in the late eighteenth century is well illustrated by the contents of a petition submitted by landholders in Poonamallee in 1778 to Sir Thomas Rumbold Bart, President and Governor of Fort St. George and Council.⁶⁴ The letter begins with a history of landholding in the region by the petitioners; of how more than 4000 years ago, the ruler of the coast of “Choromandel” gave the ancestors of the petitioners permission to clear the jungles and cultivate the land in return for certain rights in the land, specifically “to selling and mortgaging their property of land,” and for which they had to surrender one-sixth of the produce to the ruler.⁶⁵ The region then passed into the hands of the “Tullukkers or Moremen” (Muslim rulers) one hundred and fifty years ago, and this regime then forced them to give six parts of ten of the produce as revenue. When the same region passed under the control of the Company “we imagined that now we would do well and suffer not injustice,” the petitioners write. However,

the people of the Company do, contrary to our expectation, oppress us more than the Nabob did. Because they force us to give them bullock, sheep, fowles and other things for a trifling price. We cannot for that reason keep herds upon fields for getting by their dung the fields manured, thus a field which thirty years ago produced one hundred marcal [marakkal, a volumetric measure, here equivalent to 13.04 kg] does now scarcely produce twenty.

The contractor for “burning chunam” and the contractor for building fortifications, “which are in your petitioners’ wages as your petitioners’ servants,” the petitioners wrote, “forcibly enlist” workers from the village. The petitioners complained that their servants come back with “stripes, blows or wounds received,” and that after their servants had been forced to work in this fashion, the petitioners had “not one cash profit out of them.” The wages given by them to their servants, the petitioners say, for eight days at the rate of three fanam for one day and night was 24 fanam. They complain that the “contractor for burning chunam give a man half a fanam a day, this being not enough for him, we are obliged to supply the rest of the butta (living expenses) besides giving his wages.”

The demands by the Company’s contractors resulted in a shortage of labour for their own cultivation:

For want of rain we ought to have your petitioners’ servants to water the field, but there being no proper hands for it, the few people which we can employ for it not being sufficient, very little corn grows, and the straw of it is not enough for your petitioners’ bullocks, which obliges us to buy from the neighbouring country seven bundles of straw for them for a pagoda when meanwhile we carry thirty bundles of straw for one pagoda to the garrison storekeeper to town, and the garrison storekeeper sell year by year the straw at nine bundle for a pagoda.

The garrison commander, they complained, takes away even their calving cows that he keeps until the cows stop giving milk, and he makes them cut firewood for him. “They let no cattle, no sheep remain, but drive them away to him [the garrison commander] for a trifling price” the petitioners complained. The fishermen sent by the commanding officer to catch fish for the garrison spoiled the water tanks of the village, the petitioners alleged, and when they tried to stop these persons from fishing, they were beaten by sepoys of the garrison commander:

. . . which gave blows to the inhabitants, carryed off two of their headmen, and brought them before the commanding officer of Poondamaley Fort who ordered twelve strokes to be inflicted to each of them. Such like injustice has before this time not been seen . . . .

They further wrote: “It is not agreeable to your justice to let us be treated in an arbitrary manner by such as think we are black people and not better than animals.” They finally ask for justice from these oppressions, failing which “we can’t water nor cultivate the fields, nor pay some money to the amildar but must look ways and means to go and leave anywhere else.”

This is more than a cry against one particular garrison commander, but rather against the oppressive system of revenue farming in the late eighteenth century. Poonamallee district was within the Company’s Jaghire, which had been farmed out to one of the creditors of the Nawab. Thomas Rumbold, who received the petition, was himself a creditor of the Nawab.

Conclusions

Historians agree that the political and economic convulsions of the eighteenth century created the conditions for the establishment and consolidation of full-blown colonial rule from the early nineteenth century. There are however sharp differences amongst scholars on the nature and significance of historical change in the eighteenth century, in particular over the characterisation of colonialism as constituting a distinct and external system of political and economic subjugation and control. Some historians see colonialism as no different from other social forces seeking to establish their dominance in the areas of land revenue collection, commerce and trade. They argue that the eighteenth century was a period of economic growth powered by a predominantly urban indigenous trading and business stratum that had thrived under the official radar during the Mughal period, and continued to flourish and compete during the phase of early colonial expansion in the second half of the eighteenth century. Others have contested this view, arguing that it fails to recognise the single most important economic process at work during this period, namely, that of the tribute extracted from India to England and the drain of wealth that it engendered. In the second half of the eighteenth century, the “private drain,” that is, the remittances to England in the form mainly of goods, plus the “official” and “unofficial” tribute (the Arcot Debts falling under the latter category) not merely depleted the resources of India but also firmly blocked avenues of potential economic growth.⁶⁶

There are many pieces missing in the puzzle of the Arcot Debts. We still do not have a comprehensive and comparable estimate of their value. There were several computations of the debt, as our survey shows, but many of these were in different local currencies, and the exchange value of the many Indian currencies in circulation in the Carnatic in terms of pound sterling cannot be readily estimated from the sources at hand. Secondly, the enormity of the debt as forming a part of the direct drain of wealth to England has been valued here in absolute terms. However, for a real measure and meaning of the outflow of wealth that occurred through the Debts, an estimation of comparable outflows from other regions of India would help illuminate what part of the total drain of wealth from India the Arcot Debts accounted for. But these are studies for the future. The conclusions from this article are more limited, namely that early colonial policy in the Carnatic sought to extract revenues through methods that were both new and more oppressive than the practice of previous regimes and that the resources thus raised were not reinvested locally but rather transferred to England, forestalling any productive outcomes for the region. The reasons for the growing leniency of the Court of Directors of the Company in England towards the manifestly illegal methods employed by the loan sharks in raising and servicing loans lies in the spreading hold of Arcot lenders over the governing bodies of the Company.

The relentless pressure on the Carnatic continued in spite of a widespread famine in Madras in 1783. A contemporary account noted that, as early as 1805, “famines and scarcities are much more frequent in the Carnatic and south of India generally than in the Bengal provinces.” With the land settlements of the early nineteenth century, however, the

condition of the cultivators has been improved; because though the assessment was originally fixed at one-half of the produce, in the course of time, by improvement, the half is reduced to a third, one-fourth, and even one-fifth of the actual produce.⁶⁷

In practice, however, the land settlements of the nineteenth century created a system of revenue extraction in the Carnatic that was even more exploitative than before in respect of the long-term extraction of surplus. The burden of this exploitation was, as previously, borne by the peasantry.