Warren Hastings abolished the system of dastaks, or free passes and regulated the internal trade. He reduced the number of custom houses and enforced a uniform tariff of 2.5 percent for Indian and non-Indian goods. Private trade by the Company's servants continued but within enforceable limits. Weavers were given better treatment and facilities were made to improve their condition. He also introduced a uniform system of pre-paid postage system. A bank was started in Calcutta. He improved the police in Calcutta and the dacoits were severely dealt with.
The Regulating Act of 1773 opened a new chapter in the constitutional history of the Company. Previously, the Home government in England consisted of the Court of Directors and the Court of Proprietors. The Court of Directors were elected annually and practically managed the affairs of the Company. In India, each of the three presidencies was independent and responsible only to the Home Government. The government of the presidency was conducted by a Governor and a Council.
The following conditions invited the Parliamentary intervention in the Company's affairs. The English East India Company became a territorial power when it acquired a wide dominion in India and also the Diwani rights. Its early administration was not only corrupt but notorious. When the Company was in financial trouble, its servants were affluent. The disastrous famine which broke out in Bengal in 1770 affected the agriculturists. As a result, the revenue collection was poor. In short, the Company was on the brink of bankruptcy. In 1773, the Company approached the British government for an immediate loan. It was under these circumstances that the Parliament of England resolved to regulate the affairs of the Company. Lord North, the Prime Minister of England, appointed a select committee to inquire into the affairs of the Company. The report submitted by the Committee paved the way for the enactment of the Regulating Act.
The Regulating Act reformed the Company's Government at Home and in India. The important provisions of the Act were:
The term of office of the members of the Court of Directors was extended from one year to four years. One-fourth of them were to retire every year and the retiring Directors were not eligible for re-election.
The Governor of Bengal was styled the Governor-General of Fort William whose tenure of office was for a period of five years.
A council of four members was appointed to assist the Governor-General. The government was to be conducted in accordance with the decision of the majority. The Governor-General had a casting vote in case of a tie.
The Governor-General in Council was made supreme over the other Presidencies in matters of war and peace.
Provision was made in the Act for the establishment of a Supreme Court at Calcutta consisting of a Chief Justice and three junior judges. It was to be independent of the Governor-General in Council. In 1774, the Supreme Court was established by a Royal Charter.
This Act prevented the servants of the Company including the Governor-General, members of his council and the judges of the Supreme Court from receiving directly or indirectly any gifts in kind or cash.
The significance of the Regulating Act is that it brought the affairs of the Company under the control of the Parliament. Besides, it proved that the Parliament of England was concerned about the welfare of Indians. The greatest merit of this Act is that it put an end to the arbitrary rule of the Company and provided a framework for all future enactments relating to the governing of India.
The main defect of the Act was that the Governor-General was made powerless because the council which was given supreme power often created deadlocks by over-ruling his decision. However, many of these defects were rectified by the Pitt's India Act of 1784.
Warren Hastings was known for his expansionist policy. His administration witnessed the Rohilla War, the First Anglo-Maratha War and the Second Anglo-Mysore War.