Type 1: EVIDENCE INFERENCE

In the context of the changing economy under early British rule, evaluate the following evidence and subsequent inferences:

Evidence: In 1765, the Mughal emperor formally appointed the East India Company as the Diwan of the provinces of Bengal.

Inference 1: The East India Company no longer needed to bring gold and silver from Britain to buy Indian textiles.

Inference 2: The East India Company completely shut down its trading business to focus only on ruling the new lands.

Click an option to test yourself

Detailed Solution & Context

The correct answer is A.

Core Idea

  • The Diwani Rights gave the British access to Bengal taxes.
  • This stopped the need to bring gold from Britain.
  • The British did not stop buying Indian goods.

Detailed Solution:

The Mughal emperor gave the Diwani Rights to the East India Company in 1765. This gave the British direct access to the rich taxes of Bengal. They used this local money to buy goods, so they did not need British gold anymore.

Distractor & Trap:

Inference 2 is completely incorrect about the company stopping trade. The British did not stop buying Indian textiles after the Battle of Buxar. Instead, they used the new tax money from Bengal to buy silk and cotton for export.
Type 2: ASSERTION REASON

Regarding the financial changes during the mid-eighteenth century, analyze the following assertions related to the East India Company:

Statement-I: During the second half of the eighteenth century, the inflow of gold and silver from Britain into India declined a lot.

Statement-II: The East India Company gained the Diwani Rights of Bengal shortly after winning the Battle of Buxar.

Statement-III: After winning the war, the company stopped buying Indian goods and used the tax money only to build forts.

Click an option to test yourself

Detailed Solution & Context

The correct answer is B.

Core Idea

  • The inflow of gold from Britain dropped after 1765.
  • The company got the Diwani Rights after the Battle of Buxar.
  • The company still bought Indian goods using the new tax money.

Detailed Solution:

Statement-II correctly states a major historical fact. The East India Company won the Battle of Buxar and secured the Diwani Rights. This new power allowed them to collect taxes, which directly caused the drop in British gold mentioned in Statement-I.

Distractor & Trap:

Statement-III tries to trick you by saying the trading business ended. This is fully incorrect because the company continued buying silk and cotton. They used the tax money for both military expenses and buying goods to sell in Europe.
Type 3: SCENARIO

Assume you are a chief accountant for the East India Company in Calcutta in 1766. Based on the new powers from the Diwani Rights, how many of the following Directives would you approve to save company money?

Directive 1: Ask London to send more gold and silver on the next ship to pay for the expensive silk cloth.

Directive 2: Take a portion of the tax money collected from Bengal farmers to pay the wages of the British soldiers.

Directive 3: Use the local taxes to buy raw cotton from Indian weavers to send back to markets in Britain.

Click an option to test yourself

Detailed Solution & Context

The correct answer is B.

Core Idea

  • The company did not need more gold from London.
  • Tax money was used to pay soldiers and build forts.
  • Tax money was used to buy cotton and silk for trade.

Detailed Solution:

Directives 2 and 3 show exactly what the British did with their new power. The Diwani Rights gave them control over the local money. They used this free cash to pay their soldiers and to buy Indian cotton for export.

Distractor & Trap:

Directive 1 is completely wrong for a smart company official. Asking London for more gold defeats the whole purpose of getting the tax rights. The inflow of British silver had almost entirely stopped by this specific time.
Type 4: HOW MANY

Consider the following statements regarding the financial actions of the East India Company. How many of the above statements are correct?

Statement 1: Before the Battle of Plassey, the company always bought Indian goods using gold and silver brought from Britain.

Statement 2: The assumption of the Diwani Rights permanently stopped the company from buying any kind of goods from India.

Statement 3: The company drastically reduced the amount of gold imported from Britain after taking control of Bengal's taxes.

Click an option to test yourself

Detailed Solution & Context

The correct answer is B.

Core Idea

  • Before Plassey, the company bought goods with British gold.
  • The company continued to buy goods after getting Diwani Rights.
  • The import of British gold slowed down and almost stopped.

Detailed Solution:

Statements 1 and 3 correctly describe the flow of money. In the early days, Britain had no goods to sell, so they had to pay with silver. Later, the Diwani Rights gave them local tax money, which stopped the silver imports.

Distractor & Trap:

Statement 2 uses an absolute trap word to create a false fact. The company never stopped buying goods from India after becoming rulers. They simply used the new Bengal taxes to pay for the silk and cotton they wanted.

🚨 The Examiner's Trap (Concept Mix-up)

The Bait: Thinking that becoming a ruler meant the Company stopped acting as a trader.

The Reality: The Company remained a trader but used its new tax money to fund its purchases.

⚡ Deck Revision (1/3)

Concept Flow Mapping

Mughal emperor
authored
Diwani Rights
Battle of Buxar
caused
Diwani Rights
East India Company
established
fort at Calcutta

Logic Quest

"Why did British silver imports to India stop after 1765?"

The British used the newly acquired tax revenues from Bengal to pay for Indian goods.

Topic Clusters

Battle of BuxarDiwani Rights

Not practicing core concepts like Economic Exploitation under Colonial Rule using the latest UPSC exam pattern is a serious miss-out that can drastically reduce your chances of clearing Prelims. This interactive engine is specifically designed to help you master highly probable General Studies questions across all emerging analytical formats: Type 1 (Evidence-Inference), Type 2 (Assertion-Reason), Type 3 (Scenario-Based), and the dreaded Type 4 (Multi-Statement "How Many").