Drain of Wealth Theory

Drain of Wealth Theory

  • R C Dutta & Dadabhai Naoroji first cited the drain of wealth theory Naoroji brought ii to light in his book titled “Poverty And Un-British Rule In India” R C Dutt blamed the British policies for, Indian economic ills in his book ‘Economic History of India’ (1901-03)
  • Drain of wealth refers to a portion of national product of India, which was not available for consumption of its people
  • Drain of wealth began in 1757 after Battle e>t Plassey when the company’s servants began to extort fortunes from Indian rulers, zamindars, merchants and common people and send home
  • In 1765 the company acquired the Diwani of Bengal & began purchase the Indian goods out of the revenue of Bengal and exported them These purchases were known as Company’s investment
  • Duty free inland trade provided British merchants a competitive edge over their Indian counterparts

Constituents of the Drain

  • Home charges: Costs of the Secretary of State’s India Office, East India Company’s military adventures, cost of suppressing the Mutiny of 1X57 and the compensation to the company’s share holders, pensions lo the British Indian officials and army officers, costs of army training, transport, equipments and campaigns outside India and guaranteed interests on railways
  • Remittances: To England (a part of their salaries, incomes and savings) by English Civil servants, Military and railway employee’s lawyers, doctors etc
  • Foreign trade: The phase of finance imperialism entered India with the introduction of railways development of plantations, mines, banking and factories financed through British capital Much of
  • the burden of the expanding railway network was met by the Indian taxpayer through the guaranteed interest scheme.


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