Drain of Wealth During British Raj

The British Raj was the British rule in the Indian Subcontinent Between 1858 to 1947. In this time period the Indian administration directly administrated by the British crown or king of the Britain. Before this time Period the East India Company ruled on India from 1757 to 1857. East India Company and British Crown Plays a very strong role to drain of wealth from India. The east India Company come to India for the purpose of make money but the raj of British crown totally destroyed the Indian economy it affects the common peoples life. Indian raw material goes to the British factories for make the factory made good to totally destroy Indian hand made small scale industry. Here We try to understand the British policy to weak the Indian economy. The Theory of the Drain of Wealth Dadabhai Naoroji was the first man to say that internal factors were not the reasons of poverty in India but poverty was caused by the colonial rule that was draining the wealth and prosperity of India. In 1867, Dadabhai Naoroji put forward the drain of wealth theory in which he stated that the Britain was completely draining India. He mentioned this theory in his book Poverty and UnBritish Rule in India. Dadabhai Naoroji gave six factors that caused external drain. These are:

External rule and administration in India. Funds and labor needed for economic development was brought in by immigrants but India did not draw immigrants. All the civil administration and army expenses of Britain were paid by India. India was bearing the burden of territory building both inside and outside India. India was further exploited by opening the country to free trade.

Major earners in India during British rule were foreigners. The money they earned was never invested in India to buy anything. Moreover they left India with that money. Not only this, but through different services such as railways, was India giving a huge amount to Britain. Company was buying products from India with Indian money and exporting it to Britain.

The Amount drained from India In the view of William Digby (British author, journalist and humanitarian), the total drain amounted to 60080 million pounds up to the end of 19th century. In the view of English writer and politician Hyndman (He was the founder of the Social Democratic Federation and the National Socialist Party.), the total annual drain amounted to 30 million pounds. Mr. Maclean says "A sum of something like 30,000,000 pounds a year comes to England and for which India gets no return whatever". R.C.Dutt an ICS Officer wrote 'Economic History of India.' According to him, "His (Nadir Shah) Plunder was far better than British, Nadir Shah's plundering was temporary where as the same from British was permanent. Nadir Shah plundering was visible but British plundered in an unseen manner." Dadabhai Nauroji said " The loot of India is a very sad one. Her condition is that of a slave and a plunder nation in the hands of constant plunderers. The plundering raids occasionally made on India before English. The British invasion is continuous and goes on." Constituents of Economic Drain The imperial rulers used thousand and one methods to skin the Indian cat. The Indian administration was in British hands and was conducted in a manner to sub serve the interests of England. The drain mainly consisted of the following:Home Charges Home charges refer to the expenditure incurred in England by the Secretary of State on behalf of India. Before the Revolt of 1857 the Home charges varied from 10% to 13% of the average revenues of India. After the Revolt the proportion shot up to 24% in the period 1897-1901. In 1901-02, the Home charges amounted to 17.36 million. During 1921-22, the Home charges sharply increased to 40% of the total revenue of the Central Government. The main constituents of Home charges were:-

(i) Dividend to the shareholders of the East India Company: The Charter Act of 1833 provided for an annual dividend of 630,000 to be paid to the shareholders of the Company out of the Indian revenues till 1874. In 1874 the loan of 4.5 million was raised to redeem the stock at a premium of 100%. (ii) Interest on Public Debt rose abroad: The East Indian Company had piled up a public debt of 70 million to dislodge Indian rulers from their Principalities. By 1900 the public debt had risen to 224 million. Part of the debt was raised for productive purposes i.e., for construction of railways, irrigation facilities and public works. (iii) Civil and Military charges: These included payments towards pensions and furloughs of British officers in the civil and military departments in India, Expenses on India Office establishment in London, payments to the British war office etc. All these charges were solely due to India's subjection to foreign rule. (iv) Store purchases in England: The Secretary of State and the Government of India purchased stores for the Military, Civil and Marine Departments in the English market. The annual average expenditure on stores varied from 10% to 12% of the Home charges between 1861-1920 B. Interest on Foreign Capital Investments: Interest and profits on private foreign capital were another important leakage from the national income stream. Finance capital entered the Indian market in the 20th century. During the inter- war period the payments on this account roughly varied between Rs. 30 crores to Rs. 60 crores per annum. It must be pointed out that foreign capitalists were the least interested in industrial development of India. Rather they exploited Indian resources for their own benefit and Infact thwarted indigenous capitalist enterprise by fair and foul means.

C. Foreign Banking: Insurance and Shipping Companies: For banking, insurance and shipping services India had to make huge payments. Apart from constituting a drain on Indian resources, unrestricted activities of these foreign companies stunted the growth of Indian enterprise in these spheres. Hence we say this systematic drain was nothing short of loot albeit carried over 200 years and under the cover of colonial trade. It left the economy in shambles and reduces this great country from one of the powerhouses of the world economy to a laggard which was barely able to sustain itself.