The concept of the 'drain of wealth' refers to a part of India's national wealth being exported to England, for which India received no adequate economic or material returns. For many nationalist scholars, it was the root cause of poverty in India. This issue was first raised in the second half of the 19th century and brought nationalist leaders together on a single platform.
Dadabhai Naoroji, the "Grand Old Man of India," was the first to expose the true nature of British rule in India through his paper "English Debt to India," which he read at a meeting of the East India Association on May 2, 1867, in London. He wrote that "out of the revenues raised in India, nearly one-fourth goes clean out of the country and is added to the resources of England." He presented additional papers on the same subject, such as ‘The Wants and Means of India’ (1870) and ‘On the Commerce of India’ (1871) in London. However, the book that drew attention from both Indians and the world, especially the English, was ‘Poverty and Un-British Rule in India’. In it, he described British rule as plundering, unrighteous, despotic, destructive, and un-British. He argued that it was a myth that British rule brought any benefit to India; in reality, it caused India to bleed.
Dadabhai Naoroji was not the only Indian to raise the alarm. Justice Govind Ranade, a renowned nationalist and social reformer, delivered a lecture in Poona in 1872, observing that "of the national income of India, more than one-third was taken away by the British in some form or other." Another prominent nationalist leader, Ramesh Chandra Dutt, in his book *The Economic History of India*, claimed that half of the net revenue "flows annually out of India," painfully stating, "verily the moisture of India blesses and fertilizes other lands."
Other nationalist leaders who expressed their concerns through various papers on the drain of wealth included Gopal Krishna Gokhale, P.C. Ray, G.V. Joshi, M.M. Malaviya, D.E. Wacha, G. Subramaniya Iyer, Surendranath Banerji, and Bholanath Chandra. Many nationalist newspapers, notably the Amrita Bazar Patrika, also condemned the drain of wealth from India. Ironically, the Indian National Congress officially adopted the "drain theory" only in 1896 at its Calcutta session, where the president was none other than Dadabhai Naoroji.
One may wonder about the difference between invaders like Alexander, Mahmud of Ghazni, Shihabuddin Ghori, Timur, Nadir Shah, and Ahmad Shah Abdali, and the British, both during the Company phase and the Raj phase. While the earlier invaders plundered India's wealth in the form of cash, gold, silver, and precious items, their invasions affected only a few individuals—Nadir Shah being the exception. The British rule, on the other hand, affected the entire nation, plundering regularly and systematically.
Although many rulers in India came from outside, such as the Indo-Greeks, Sakas, Kushans, Arabs, Turks, Afghans, and Mughals, the British rule was different. These earlier rulers made India their permanent home and confined their activities, good or bad, within India's boundaries. The national wealth stayed within the country and was spent there, benefitting at least some sections of Indians. Moreover, these Indian-based rulers encouraged industries and crafts. However, when the British established their rule in India, Indian industries and crafts suffered heavily, benefitting only English industries. The nature of British rule was responsible for the continuous drain of wealth from India.
Nationalist leaders arrived at varying figures when calculating the amount of the drain, as they used different methods, and the gap between exports and imports grew continuously. In 1867, Dadabhai Naoroji computed the drain to be 8 million pounds. By 1870, this figure had increased to 12 million pounds. In 1905, he declared that Rs. 51.5 crore (34 million pounds sterling) worth of Indian produce was being drained out annually. G.V. Joshi claimed in 1888 that Rs. 25 crore was drained yearly, while D.E. Wacha estimated the figure to be between 30 and 40 crores per year.
Visible Forms of Drain
Until the 18th century, the drain took the form of visible tribute. After the Battle of Plassey, the drain began in the following ways:
1. Gifts or bribes taken from Mir Jafar, Mir Qasim, and Shuja-ud-Daula.
2. Profits earned through trade in Bengal by the misuse of Dastak (the free pass). Company employees bought cheap raw materials and earned huge profits in England, depriving Indians of potential gains.
Invisible Forms of Drain
There were also invisible forms of drain, which nationalist leaders highlighted:
1. Portions of the salaries, incomes, and savings of English employees in Indian government services (military, civil, railway, doctors, lawyers, etc.) paid by the Government of India.
2. Pensions and allowances to these officials after retirement.
3. Home Charges incurred in England by the Secretary of State on behalf of the Indian Government, including:
(a) Salaries and pensions for officials at the India Office in London.
(b) Costs of military stores supplied to India.
(c) Civil and military charges paid in England on account of India.
(d) Payment of interest on Indian public debt.
4. Profits from private foreign capital invested in Indian trade or industry.
Effects of the Drain
Economic Effect: Dadabhai Naoroji considered the drain of wealth the real cause of poverty in India, with all other causes secondary. Nationalist leaders emphasized that the drain not only resulted in a loss of wealth but also a loss of capital. They argued that if the wealth had been spent in India rather than England, it would have generated employment and income in India.
The drain slowed the growth of modern industry in India. While Indian capital was limited, the accumulated capital in England, aided by the drain, accelerated England’s industrialization, leading to the destruction of Indian industries. Thus, the drain of wealth contributed to de-industrialization in India.
The peasants were directly affected by the drain. The high rate of land revenue was due to it, and famines and food shortages were linked to it. Peasants were often forced to sell food grains, which were then exported, depriving agriculture of productive capital.
Political Effect: The nationalist leaders, through papers, books, and newspapers, highlighted the drain theory, uniting on a single platform. The drain theory brought to the forefront the political conflict between England and India. While economic remedies could resolve other issues, the drain required a political solution, which made nationalist leaders more active.
The theory also raised awareness among common people, as nationalist leaders explained it in simple terms. The peasants and general public could relate to it, particularly due to high taxes. When the Congress adopted the resolution for Swaraj in 1905 at Calcutta, presided over by Dadabhai Naoroji, the drain theory was certainly in mind.
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