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. Attempts have been made from time to time to measure the
extent and assess the effects of this drain. The most notable attempt was made by
Dadabhai Naoroji in 1871 who, in his study entitled Poverty and Un-British Rule in
India, not only tried to quantify the magnitude of the drain but also sought to prove that
the mass poverty in India was a direct consequence of the drain. It was in this connection
that Dadabhai worked up the first estimate of Indias national product.
Unlike those parts of the British Empire, like Australia or Canada, which had been settled
by emigrants from England, India did not receive any large influx of foreign enterprise or
foreign capital. Thus India was forced to develop her own resources largely through her
own exports whole a substantial part of her accumulated capital found its way to Britain
by way of tributes, plunder, profits from unauthorized trade, and, at a later period, as
interest on loans granted for the very purpose of extending British dominions in India.
The civil servants and military officials sent out from Britain enjoyed a salary scale
which was too high in relation to average Indian income and remitted most of their
savings to the mother country. For all these reasons the inflow of bullion to India
dwindled after the middle of the 18 th century and by 1770 India, with her favourable
balance of trade over a succession of years, was gradually reduced to a chronically
indebted country.
As the East India Company came into the possession of Indias territorial revenues, these
could be used for making purchases of exportable items in India and elsewhere. Thus
profit-making through trade became integrated with administration which also became an
instrument of profit-making. The drain took the form of an unrequited export of goods,
not an export of bullion. The surplus of Indias production was taken away as a tribute to
the newly acquired political power of the East India Company.
After 1757 the inflow of bullion fell off. There were periods, for example between 1777
and 1787, when there was a substantial outflow of bullion from India to finance the
Companys investments in China. Outflow of bullion continued off and on until the
opening years of the 19th century. Between 1801 and 1863 there was, according to
Dadabhai Naoroji, a net influx of bullion into India amounting to 200 million pounds, but
this was relatively a small amount compared to Indias tremendous export surpluses
during this period. After 1864 the inflow of bullion was accelerated by the large export
surpluses India enjoyed for some years owing to the American Civil War. At the same
time British money was also flowing into India in the form of Railway loans. However
the import of bullion could not be regarded as a symptom of capital accumulation in
India. On the contrary, the drain went on unhindered impoverishing the country and
enriching England at Indias expense.
As conceived by Dadabhai Naoroji, the economic drain from India arose out of the
following reasons:

Heavy imports of British capital into these colonies generated employment and income,
while Indias meager stock of capital was drained away in the form of unrequited exports,
depriving Indian agriculture and industry of much-need imports of equipments.
The external drain had its counterpart an interval drain- the transfer of purchasing power
through taxation from the poverty-stricken rural masses to the richer urban centres. The
transferred amount, barring a certain leakage by way of affluent consumption in the urban
areas, formed the unrequited exports which made up the external drain.
The drain was not only in the form of commodities or capital. There was an
imperceptible drainage of human skill as well, since industries wee being killed one after
another by unimpeded foreign competition and people were being forced to fall back on a
primitive system of agriculture. The British connection had given to India nothing but a
on-sided flow of resources from India to England.