Drain Of Wealth Theory

 

The steady movement of national wealth from India to England, for which India received insufficient economic, commercial, or material returns, has been referred to as the "drain of wealth theory." The phrase "economic drain" refers to a portion of India's gross domestic product that was not available for consumption by its citizens but was instead being exported to Britain for political reasons while India lacked sufficient economic resources. The first person to bring up the problem of resource flow from India to England was Dadabhai Naoroji in his book "Poverty and Un-British Rule in India," which was released in 1871. R.C. Dutt, Dadabhai Naoroji, and other economists have named the British syphoning method employed to drain India's resources and riches "The Economic Drain." 

 

•    The mercantilist hypothesis claims that when gold and silver leave the nation as a result of a negative trade balance, there is an economic drain.

 

•    The East India Company sent $20 million worth of silver into India in the 50 years before to the Battle of Plassey in order to balance its exports against Indian purchases.

 

•    After the Battle of Plassey, the situation was reversed, and as England progressively established monopolistic control over the Indian economy, wealth began to flow forth.

 

•    As a result, the 'drain of money' from India to England started after the Battle of Plassey in 1757, when the Company gained political clout and its employees had a 'privileged status' as a result of which they were able to amass income through dastak, dastur, nazarana, and private trade, and as a result, wealth.

 

•    To limit or forbid the entry of Indian textiles into the country, the British government passed a variety of laws.

 

•    In addition to other steps, the British government outlawed the usage and sale of Indian cotton and silks in England in 1720 and fined both the weaver and the retailer. 

 

•    One characteristic of the colonial era was the exploitation of Indian resources.

 

•    The main reason Britain invaded India was to control a reliable supply of cheap raw materials to support its own industrial base there.

 

•    Indians' income was used to import expensive finished items from Britain, which helped Britain get wealthier at India's expense.

 

•    In addition, the British administration expanded its colonial influence outside of India by using Indian manpower. Indian soldiers in the British army received lower pay than their British colleagues.

 

•    Revenue from India and the export surplus produced by India's overseas trade were used to fund the British Government's military and administrative costs to govern colonial control in India.

 

•    British rule as a result plundered Indian wealth for its own purposes.

 

•    The money taken in from India was used to pay the salaries and pensions of British civil and military employees there, the interest on government-issued loans, and the profits of British businesspeople there. One way that money was being taken out of India was through this.

 

•    The surplus of exports over imports, for which India received no financial or material advantage, was how the drain appeared.

 

•    The colonial form of administration included remittances made to England by European workers for the upkeep of their families and the education of their kids.

 

•    Because they wanted to invest at home, East India Company employees sent funds to the company.

 

•    Purchases of British goods in India as well as remittances for the purchase of British goods requested by British employees

 

•    The government bought British-made goods for its outlets.

 

•    Interest payments on British public debt (excluding interest on loans for railroads and other debts acquired for productive enterprises).

 

•    Private riches acquired by the Company's employees through illegitimate gifts and perquisites from Indian kings and other Bengal residents.

 

•    As a result of their involvement in the inland commerce, firm employees made a sizable profit.

 

•    In their quest for control against a competing claimant, the Indian Princes received military support from the East India Company. Many of these funds wound up in the hands of British residents.

 

•    Economic nationalists claimed that the primary objective of British policy in India was to turn the country into a significant export market for the home country and to make it a reliable source of affordable and secure raw materials for developing agrarian nations.

 

•    India is subject to foreign governance and administration.

 

•    Immigration brought the money and manpower required for economic progress, but India did not attract immigration.

 

•    India covered all of Britain's expenses for the civil government and military.

 

•    India was responsible for both internal and external territory expansion.

 

•    India was abused even more after it allowed free commerce.

 

•    Foreigners made up the majority of India's income during British rule. They never made investments in India with the money they made.

 

•    India provided Britain with numerous services, including roads, trains, and other infrastructure, for a significant sum.

 

•    With such cash, the East India Company imported goods from India and exported them to Britain.

 

•    These resources, which could have been used to invest in India, were mostly stolen and diverted to England.

 

•    India's citizens have to bear a heavier, extremely regressive tax burden as a result of the government's enormous public debt and interest payments.

 

•    The tax burden in India in 1886, according to Dadabhai Naoroji's calculations, was 14.3 percent of total revenue, which was much greater than the 6.93 percent in England.

 

•    Instead of going towards social services and welfare for Indians, the majority of these tax proceeds were utilized to settle British debt.

 

•    This kind of loss of tax revenue from India weakened the country's trade, industry, and agricultural sectors and was a major factor in the 18th and 19th centuries' economic stagnation.

 

•    Since most of the surplus was exported, the wealth drain hindered capital development in India, but the British economy grew more quickly with the same amount of wealth.

 

•    The British economy's surplus was funneled back into India as financial capital, severely depleting its resources. This had a significant impact on India's revenue and employment prospects.

 

•    India's productive capital was effectively reduced by the drain, creating a capital shortfall that slowed down industrial growth.

 

•    Although the British took on the duty of upholding law and order and centralizing political and judicial administration, as well as managing roads, trains, and other infrastructure, the level of resource depletion was excessive, which caused the economy to stagnate.

 

•    What was being sucked out, according to Dadabhai Naoroji, was "potential surplus" that, if invested in India, could lead to greater economic growth.

 

In order to examine the underlying reasons of poverty in India, Indian nationalist thinkers developed the Theory of Wealth Drain. According to nationalists, the drain was the flow of goods and wealth from India to England without any economic, commercial, or tangible benefits for the former. Indian phrases for the Drain therefore inexorably refer to an excess of export over import. It was popular to refer to The Drain of Wealth as "a phenomenon of colonial rule."