The transfer of resources from India to England and other countries of Western Europe,

which began in the middle of the 18

th
century, has been described by many economists as
a drain on Indian resources. ttempts ha!e been made from time to time to measure the
e"tent and assess the effects of this drain. The most notable attempt was made by
#adabhai $aoro%i in 18&1 who, in his study entitled 'o!erty and (n)*ritish +ule in
India, not only tried to ,uantify the magnitude of the drain but also sought to pro!e that
the mass po!erty in India was a direct conse,uence of the drain. It was in this connection
that #adabhai wor-ed up the first estimate of Indias national product.
(nli-e those parts of the *ritish Empire, li-e ustralia or .anada, which had been settled
by emigrants from England, India did not recei!e any large influ" of foreign enterprise or
foreign capital. Thus India was forced to de!elop her own resources largely through her
own e"ports whole a substantial part of her accumulated capital found its way to *ritain
by way of tributes, plunder, profits from unauthori/ed trade, and, at a later period, as
interest on loans granted for the !ery purpose of e"tending *ritish dominions in India.
The ci!il ser!ants and military officials sent out from *ritain en%oyed a salary scale
which was too high in relation to a!erage Indian income and remitted most of their
sa!ings to the mother country. 0or all these reasons the inflow of bullion to India
dwindled after the middle of the 18
th
century and by 1&&1 India, with her fa!ourable
balance of trade o!er a succession of years, was gradually reduced to a chronically
indebted country.
s the East India .ompany came into the possession of Indias territorial re!enues, these
could be used for ma-ing purchases of e"portable items in India and elsewhere. Thus
profit)ma-ing through trade became integrated with administration which also became an
instrument of profit)ma-ing. The drain too- the form of an unre,uited e"port of goods,
not an e"port of bullion. The surplus of Indias production was ta-en away as a tribute to
the newly ac,uired political power of the East India .ompany.
fter 1&2& the inflow of bullion fell off. There were periods, for e"ample between 1&&&
and 1&8&, when there was a substantial outflow of bullion from India to finance the
.ompanys in!estments in .hina. 3utflow of bullion continued off and on until the
opening years of the 14
th
century. *etween 1811 and 1856 there was, according to
#adabhai $aoro%i, a net influ" of bullion into India amounting to 711 million pounds, but
this was relati!ely a small amount compared to Indias tremendous e"port surpluses
during this period. fter 1858 the inflow of bullion was accelerated by the large e"port
surpluses India en%oyed for some years owing to the merican .i!il War. t the same
time *ritish money was also flowing into India in the form of +ailway loans. 9owe!er
the import of bullion could not be regarded as a symptom of capital accumulation in
India. 3n the contrary, the drain went on unhindered impo!erishing the country and
enriching England at Indias e"pense.
s concei!ed by #adabhai $aoro%i, the economic drain from India arose out of the
following reasons:
9ea!y imports of *ritish capital into these colonies generated employment and income,
while Indias meager stoc- of capital was drained away in the form of unre,uited e"ports,
depri!ing Indian agriculture and industry of much)need imports of e,uipments.
The e"ternal drain had its counterpart an inter!al drain) the transfer of purchasing power
through ta"ation from the po!erty)stric-en rural masses to the richer urban centres. The
transferred amount, barring a certain lea-age by way of affluent consumption in the urban
areas, formed the unre,uited e"ports which made up the e"ternal drain.
The drain was not only in the form of commodities or capital. There was an
imperceptible drainage of human s-ill as well, since industries wee being -illed one after
another by unimpeded foreign competition and people were being forced to fall bac- on a
primiti!e system of agriculture. The *ritish connection had gi!en to India nothing but a
on)sided flow of resources from India to England.