Rethinking the Bengal connection: opium monopoly and fiscal capacity in British India, 1862-1908

It is well known that variations in state capacity between different colonial regimes have had persistent effects in many formerly colonised regions. In particular, the existing literature identifies the presence of taxable trade, pre-colonial fiscal centralisation, population density, and administrative manpower as major determinants of the resources available to colonial states. However, within this framework the British Empire in India presents a puzzle since it possessed many of these preconditions for fiscal capacity formation, but state revenue remained very small relative to the size of the population and the economy. This thesis, using the case of the Government of India's Bengal Opium Monopoly, argues that in practice during a long period of colonial rule, the British Indian state avoided the introduction of broad, informationally-intensive taxes, relying instead on charges for government services and commodity revenues, in order to minimise demand for greater popular involvement in government. This trade-off had significant impacts on the quality of government, especially with regard to revenue collection, limiting the development of the colonial state relative to other colonies in Asia. This thesis is divided into three papers. The first paper examines the Government of India's attempts to control the international market for the drug. While these efforts resulted in greater stability to prices, analytical and informational constraints prevented effective revenue maximisation. The second paper focuses on the government's procurement of the drug; in this setting the difficulty of collecting and processing information about local agrarian conditions forced the use of decentralised decision-making, thereby limiting oversight, preventing effective control of costs, and encouraging corruption. Finally, the third paper uses the Government of India's reaction to growing ideological pressure around opium to argue that the difficulty of adapting reforms to local political sensitivities in individual regions heavily curtailed substantive changes to the revenue framework.