The administrative policy of the Company underwent frequent changes during the long period between 1751 and 1857. However, it never lost sight of its main objects which were −
To increase the Company's profits;
To enhance the profitability of its Indian possessions to Britain; and
To maintain and strengthen the British hold over India.
The administrative machinery of the Government of India was designed and developed to serve these ends. The main emphasis in this respect was placed on the maintenance of law and order so that trade with India and exploitation of its resources could be carried out without disturbance.
From 1765 to 1772, in the period of the Dual Government, Indian officials were allowed to function as before but under the over-all control of the British Governor and British officials.
The Indian officials had responsibility but no power while the Company's officials had power but no responsibility. Both sets of officials were venal and corrupt men.
In 1772, the Company ended the Dual Government and undertook to administer Bengal directly through its own servants. But the evils inherent in the administration of a country by a purely commercial company soon came to the surface.
The East India Company was at this time a commercial body designed to trade with the East. Moreover, its higher authority was situated in England, many thousands of miles away from India.
The parliamentary politics of Britain during the latter half of the 18th century were corrupt in the extreme.
The Company, as well as its retired officials bought seats in the House of Commons for their agents.
Many English statesmen were worried that the Company and its officials, backed by Indian plunder, might gain a preponderant influence in the Government of Britain. The Company and its vast empire in India had to be controlled or the Company as master of India would soon come to control British administration and be in a position to destroy the liberties of the British people.
The exclusive privileges of the Company were also attacked by the rising school of economists representing free-trade manufacturing capitalism. In his celebrated work, “The Wealth of Nations.”
Adam Smith, the founder of Classical economics, condemned the exclusive companies; “Such exclusive companies, therefore, are nuisances in many respect; always more or less inconvenient to the countries in which they are established and destructive to those which have the misfortune to fall under their government.”
The first important parliamentary act regarding the Company's affairs was the Regulating Act of 1773.
Act of 1773 made changes in the constitution of the Court of Directors of the Company and subjected their actions to the supervision of the British Government.
The Directors were to lay before the Ministry all correspondence dealing with the civil and military affairs and the revenues of India.
In India, the Government of Bengal was to be carried on by a Governor-General and his Council who were given the power to superintend and control the Bombay and Madras Presidencies in matters of war and peace.
The Act also provided for the establishment of a Supreme Court of Justice at Calcutta to administer justice to Europeans, their employees, and the citizens of Calcutta.
The Regulating Act soon broke down in practice. It had not given the British Government effective and decisive control over the Company.
In India, the Act had paced the Governor-General at the mercy of his Council. Three of the Councilors could combine and outvote the Governor-General on any matter.
In practice, Warren Hastings, the first Governor-General under the Act, and three of his Councilors quarreled incessantly, often creating deadlocks in the administration.
The Act perceptively had failed to resolve the conflict between the Company and its opponents in England who were daily growing stronger and more vocal. Moreover, the Company remained extremely vulnerable to the attacks of its enemies as the administration of its Indian possessions continued to be corrupt, oppressive, and economically disastrous.
The defects of the Regulating Act and the exigencies of British politics necessitated the passing in 1784 of another important act known as Pitt's India Act.
Pitt’s Act gave the British Government supreme control over the Company's affairs and its administration in India. It established six Commissioners for the affairs of India, popularly known as the Board of Control, including two Cabinet Ministers.
The Board of Control was to guide and control the work of the Court of Directors and the Government of India. In important and urgent matters it had the power to send direct orders to India through a secret committee of Directors.
The Pitt’s Act placed the Government of India in the hands of the Governor-General and a Council of three, so that if the Governor-General could get the support of even one member, he could have his way.
The Act clearly subordinated the Bombay and Madras Presidencies to Bengal in all questions of war, diplomacy, and revenues.
With the Pitt’s Act, a new phase of the British conquest began in India. While the East India Company became the instrument of British national policy, India was to be made to serve the interests of all sections of the ruling classes of Britain.
The Company having saved its monopoly of the Indian and Chinese trade was satisfied. Its Directors retained the profitable right of appointing and dismissing its British officials in India. Moreover, the Government of India was to be carried out through their agency.
While Pitt's India Act laid down the general framework in which the Government of India was to be carried on till 1857, later enactments brought about several important changes which gradually diminished the powers and privileges of the Company.
In 1786, the Governor-General was given the authority to overrule his Council in matters of importance affecting safety, peace, or the interests of the Empire in India.
By the Charter Act of 1813, the trade monopoly of the Company in India was ended and trade with India was thrown open to all British subjects. But the trade of tea and trade with China were still exclusive to the Company.
According to the Charter Act, the Government and the revenues of India continued to be in the hands of the Company. The Company also continued to appoint its officials in India.
The Charter Act of 1833 brought the Company's monopoly of tea trade and trade with China to an end. At the same time, the debts of the Company were taken over by the Government of India, which was also to pay its shareholders a 10.5 per cent dividend on their capital.
The Government of India continued to be run by the Company under the strict control of the Board of Control.
Supreme authority in India was, therefore, delegated to the Governor-General in Council. The Governor-General, having the authority to overrule his Council in important questions, became in fact the real, effective ruler of India, functioning under the superintendence, control, and direction of the British Government.
As per the Act of 1833, Indians were allowed ‘no share’ in their own administration.
The three seats of authority, as far as India was concerned, were −
The Court of Directors of the Company;
The Board of Control representing the British Government; and
With none of these three seats, any Indian was associated even remotely or in any capacity.
The British created a new system of administration in India to serve their purposes.
The chief aim of the British was to enable them to exploit India economically to the maximum advantage of various British interests, ranging from the Company to the Lancashire manufacturers.
At the same time, India was to be made to bear the full cost of its own conquest as well as of the foreign rule. An examination of the economic policies of the British in India is, therefore, of prime importance.