UPSC 2013 CDS 2 GK Paper

Both the statements are individually true and statements II is the correct explanation of statement I. Shah Alam II, based on the Treaty of Allahabad signed in August 16, 1765, granted Diwani rights or right to administer the territory and collect taxes to the British East India Company. Once they got the diwani rights, the Company stopped receiving money from England to buy merchandise in India. The revenue received from Bengal was used for this purpose,and the money earned by selling these goods went back to England.All these deteriorated the condition of peasants and handicraft industry as the latter lost patronage – as the rulers had all responsibilities but no financial rights.