Economic Drain during British India

Read this article to learn about the Economic Drain during British Rule in India!

Drain theory was the core of nationalist critique of colonialism and the acknowledge high-priest of this critique was Dadabhai Naoroji who, as early as 1867, put forward the idea that Britain was draining and bleeding India and that, too, for nothing.

R.C. Dutt made this theme the subject of his Economic History of India.

Drain, they declared, was the basic cause of India’s poverty. Naoroji observed in 1880,

“It is not the pitiless operations of economic laws, but it is thoughtless and pitiless action of the British policy; it is pitiless eating of India’s substance in India and further pitiless drain to England, in short it is pitiless perversion of Economic Laws by the sad bleeding to which India is subjected, that is destroying India.

John Sullivan, President of the Board of Revenue, Madras, added—Oursystem acts very much like a sponge, drawing up all the good things from the banks of the Ganges, and squeezing them down on the banks of the Thames.

(i) The ‘Drain of wealth’ from India to England started after 1757, when the Company acquired political power and the servants of the Company a ‘privileged status’ and, therefore, acquired wealth through dastak, dastur, nazarana and private trade. For company, becoming a political power meant its ownership of revenues as used in financing ‘investments’ and ‘expenditure’ of ‘colonial budget’.

(ii) The Company servants, after 1757, extorted immense wealth from Indian rulers, zamindars, mer­chants and common-people, amounting to not less than 6 million between 1758 and 1765; four times more than the total land revenue collection of Bengal in 1765.

(iii) After 1737 and especially after 1765 (year of receiving diwani rights of Bengal) financial structure of the Company had a qualitative change.

(a) Earlier, the Company had to import ‘treasure’ fell (bullion in form of gold and silver) to buy Indian goods for sale in Europe.

(b) After Plassey, however, the import of ‘treasure’ fell sharply in size and yet the export of the Company to England and Europe continued.

(c) This became possible due to appropriation of Indian revenue which was used as the invest­ment of the Company and this investment financed the cost of commodities which the Com­pany had to export from India.

In other words, the company was getting Indian goods for sale outside India for nothing. Investment was thus nothing but a ‘political’ tribute.

This is how there began the ‘Drain of Wealth ‘which was nothing but a unilateral transfer of fund; the Early nationalist leaders made this point central to their economic criticism of the British colonialism.