After the Indian Rebellion of 1857, the British Government took over the administration to establish the British Raj. The British Raj was the period of British rule on the Indian subcontinent between 1858 and 1947, for around 89 years of British occupation. The system of governance was instituted in 1858 when the rule of the East India Company was transferred to the Crown in the person of Queen Victoria.
The British Raj lasted until 1947, when the British provinces of India were partitioned into two sovereign dominion states: the Dominion of India and the Dominion of Pakistan, leaving the princely states to choose between them. Most of the princely states decided to join either Dominion of India or Dominion of Pakistan, except the state of Jammu and Kashmir. It was only at the last moment that Jammu and Kashmir agreed to sign the "Instrument of Accession" with India. The two new dominions later became the Republic of India and the Islamic Republic of Pakistan (the eastern half of which, still later, became the People's Republic of Bangladesh). The province of Burma in the eastern region of the Indian Empire had been made a separate colony in 1937 and became independent in 1948.
The East India Company was an English and later British joint-stock company. It was formed to trade in the Indian Ocean region, initially with Mughal India and the East Indies, and later with Qing China. The company ended up seizing control of large parts of the Indian subcontinent, colonised parts of Southeast Asia, and colonised Hong Kong after a war with Qing China.
Prelude
Effects on the economy
In the later half of the 19th century, both the direct administration of India by the British Crown and the technological change ushered in by the industrial revolution, had the effect of closely intertwining the economies of India and Great Britain. In fact, many of the major changes in transport and communications (that are typically associated with Crown Rule of India) had already begun before the Mutiny. Since Dalhousie had embraced the technological change then rampant in Great Britain, India too saw rapid development of all those technologies. Railways, roads, canals, and bridges were rapidly built in India and telegraph links equally rapidly established in order that raw materials, such as cotton, from India's hinterland could be transported more efficiently to ports, such as Bombay, for subsequent export to England. Likewise, finished goods from England were transported back just as efficiently, for sale in the rising (burgeoning) Indian markets. However, unlike Britain itself, where the market risks for the infrastructure development were borne by private investors, in India, it was the taxpayers—primarily farmers and farm-labourers—who endured the risks, which, in the end, amounted to £50 million. In spite of these costs, very little skilled employment was created for Indians. By 1920, with a history of 60 years of its construction, only ten per cent of the "superior posts" in the railways were held by Indians.
The rush of technology was also changing the agricultural economy in India: by the last decade of the 19th century, a large fraction of some raw materials—not only cotton, but also some food-grains—were being exported to faraway markets. Consequently, many small farmers, dependent on the whims of those markets, lost land, animals, and equipment to money-lenders. More tellingly, the latter half of the 19th century also saw an increase in the number of large-scale famines in India. Although famines were not new to the subcontinent, these were particularly severe, with tens of millions dying, and with many critics, both British and Indian, laying the blame at the doorsteps of the lumbering colonial administrations.