Q. The British rule has been often been described as the reason for drain of Indian wealth to Britain. In this light discuss constituent of economic drain and consequences of the same.

Structure of the answer:

  • Introduction (drain of wealth)
  • Estimate of drain of wealth
  • Constituent of economic drain
  • Consequences
  • Final analysis

Model Answer

The constant flow of wealth from India to England for which India did not get an adequate economic, commercial or material return has been described as drain of wealth from India. Dadabhai Naoroji gave ‘drain of wealth theory’ in his book ‘Poverty and Un-British Rule in India’. Scholarly, estimate drain of wealth to be around 9% of India’s GDP in 18th century and 6% of GDP in 19th century.

The various constituents of drain of wealth are as follows:

  • Territorial Expansion enabled the Company to generate greater commercial revenues to access Indian goods for export purposes.
  • The drain also included the movement of private funds to EnglandFor ex.- earnings of Englishmen from plunders during wars, bribes obtained from the native states According to G.A. Princep, over Rs. 1 crore was sent away from India every year between 1813 and 1820 as private wealth.
  • Another form of movement of wealth away from India was the money paid to banks, insurance companies, shipping companies in England for the services they render in India.
  • The Company’s remittances to England (Home Charges) also formed a major part of the drain. This included, salaries/ pensions paid to the Company’s employees in England

The consequence of Drain of wealth were as follows:

  • It impoverished all the section of Indian society particularly the peasants, who bore the brunt of the taxes raised by the Britishers.
  • It drained India of its precious capital, which could have otherwise been invested in industrialization/ modernization of India.
  • The drain of Indian wealth was used for financing the Industrial Revolution in England and is also the reason why industrial revolution did not take place in India.
  • The economic criticism of British rule had helped in shattering the myth of benevolence of British administration in India.
  • It was instrumental in laying the foundations for the demand for Swaraj and ensuing freedom struggle.

Thus, British methods of exploitation though less painful but resembled the blood-sucking leeches.