Plassey, Buxar, and the Diwani: the Company becomes a ruler

The East India Company's transformation into a territorial power began in Bengal. In 1757, at the Battle of Plassey, Robert Clive's forces defeated Siraj-ud-Daulah, the Nawab of Bengal, after the Company's conspiracy with the Nawab's commander Mir Jafar and leading bankers. Plassey was a small battle in military terms, but it gave the Company control of Bengal's politics, and Mir Jafar was installed as a ruler dependent on the Company.

The Company's power was confirmed at Buxar in 1764, when a combined army of the Mughal emperor Shah Alam II, the Nawab of Awadh, and the deposed Nawab of Bengal, Mir Qasim, was defeated by the Company's forces under Hector Munro. Buxar mattered more than Plassey, because it defeated not just one Nawab but a coalition that included the Mughal emperor himself. The following year, by the Treaty of Allahabad in 1765, Shah Alam II granted the Company the Diwani, the right to collect revenue, of Bengal, Bihar, and Orissa.

The Diwani changed everything. The Company, a trading body, now collected the land revenue of India's richest provinces, and it used that revenue to buy Indian goods for export and to pay its armies. The result was the dual system in Bengal, under which the Company held the revenue while the Nawab kept the appearance of administration, a system that produced confusion, corruption, and, in the famine of 1770, a failure to provide relief that killed a large but uncounted number of people. Modern historians do not accept a single reliable death toll for the 1770 famine, and figures circulating in popular accounts should be treated with caution.

Plassey, Buxar, and the Diwani together explain why the British conquest of India was also a financial revolution. Revenue, not trade alone, now funded expansion, and each new province paid for the next campaign. The Company's servants, who had come as traders, became revenue collectors, judges, and soldiers, and the distinction between company and state disappeared.