The lessening of The East India Company profits that resulted from corruption, as well as a need to recoup debts generated by military efforts, produced a need for higher revenues. Peasant landowners, required to pay their taxes in cash, increasingly had to turn to moneylenders who seized much of this land for nonpayment of loans. This, coupled with land speculation, resulted in large-scale land ownership and a significant decrease in small holdings.

Increased dislocation along with a collapsing of the subsistence economy produced a period of social unrest. Beginning in the early 19^th century, rebellions occurred in various areas of the subcontinent, culminating in the 1857 Sepoy Mutiny. "no single event more powerfully affected the mind of that generation than the 'Indian Mutiny' in 1857." How best to reduce if not entirely eliminate the chances of its recurrence became the dominant official concern. 1857 was not an empty threat. From Lord Lytton in the 1870s through General Dyer in 1918 to Tottenham in 1942 the spectre of the Revolt of 1857 haunted the administrators whenever they were called upon to deal with a mass upsurge. The causes of the revolt are numerous. Hindu troops objected to the addition of Gurkha, Sikh, and lower-caste soldiers to their ranks. In addition, the economic policy of the Raj had a debilitating effect on the families at homes causing further unrest among the Sepoy troops. But, the final catalyst for the revolt centered around the use of animal grease on the cartridges utilized by the newly issued Enfield rifles. In order to load the new rifles, soldiers had to bite off the end of the cartridges. For both Islamic and Hindu soldiers, this practice violated religious ritual taboo.

What Happened in 1857

The earliest signs of disquiet among the sepoys were evident in Dum Dum in January. Dum Dum had earlier been the headquarters of Bengal Artillery. When this headquarters was shifted to Meerut, Dum Dum had to be satisfied with a School of Musketry designed to impart training of the Enfield Rifle. In January, the cantonment at Dum Dum was agog with all sorts of rumours about the nefarious designs of the government. From Dum Dum, rumours reached Barrackpore, the headquarters of the Presidency division of the army. In late January Major General John Hearsay, who was in charge of the Division, noticed a growing "ill-feeling" in the minds of the sepoys of the regiments at Barrackpore. There were reports of animated discussion among the sepoys, generally held at night. In February 1857 General Hearsay felt that the English at Barrackpore had been "dwelling upon a mine ready for explosion."

What was still a suspicion at Barrackpore, turned into a belief at Berhampore. The first rumble of the Mutiny occured on 26^th February 1857, when the 19^th Native Infantry at Berhampore, whose suspicions had been allayed by the explanation of their commandant, took alarm on hearing from detachments of the 34^th, which had been foolishly allowed to march thither from Barrackpore, that the sepoy had told the truth, and refused to receive their percussion caps for the next day's parade. Colonel Mitchell, who was in charge of Berhampore, instead of explaining the unreasonableness of their fears, threatened them with condign punishment, but, having no means of enforcing his threat, was obliged to forgo the parade. The men continued to perform their ordinary duties; but their disobedience could not be ignored, and, as it was impossible to punish it without British troops, the governor-general sent for the 84^th Regiment from Rangoon. Early in 1857, three regiments were disbanded because they refused to participate in this practice. After eighty-five Sepoys, stationed at Meerut, were imprisoned for disobeying orders to load their rifles, the remainder of the regiments mutinied on May 10, 1857. This contingent, then, marched to Delhi and announced the last Mughal emperor, Bahadur Shah Zafar, as the ruler of India.

By June, nearly 90,000, or 70 percent of the Bengal Army's Sepoy force had joined the mutiny. During the early stages of the revolt, the British were unable to respond effectively to the widespread uprising, and suffered heavy casualties. After major losses at the Kanpur garrison and Lucknow, the British Army, along with loyal Sikh and Gurkha forces, were able to regroup and put down the rebellion. Despite the extent of the rebellion, Indian forces were unable to generate a coordinated nationalist effort which significantly contributed to the failure of the rebellion.