Question

How did the adoption of Diwani benefit the East India Company?

Answer 1

Hint: Through the early eighteenth century, East India Company has set up its factory in Bengal. There were tensions between Nawabs and companies which led to battles. In order to meet the demands of trade and other expenses, the company wanted more money which led them to the Diwani system.

Complete answer:
After the battle of Buxar in 1764 when the company defeated Mir Qasim, they installed Mir Jafri as the nawab of Bengal. Even after doing that the company’s expenses could not be managed. They wanted to come up with such ideas where they get all the revenue and could finance their wars, stoops, trading etc. Finally, in 1765, the company became the Nawab of Bengal with the sanction and appointment of Mughal emperor. The Diwani system benefited them, they could now use the vast resources and revenues of Bengal directly. This solved a major problem the company was facing earlier, as Nawabs held or refused to pay revenues.

After this system, the trade expanded rapidly between India and Britain. Earlier Britain had no goods to sell in India and had to buy things in either gold and silver. Soon after the Diwani system the outflow of gold from Britain slowed down and finally stopped, as now companies could buy products from the revenue collected. The company used the revenues to purchase cotton and silk textiles in India, for maintaining the cost of building the company fort and offices at Calcutta and company troops.

Note: However not all company officials who came to India were corrupted and dishonest like Robert Clive. They came to earn money and returned back to Britain where they were called, ‘nabobs’.