Drain of Wealth and De-industrialisation
The Drain of Wealth theory of Dadabhai Naoroji says that India's wealth was taken to Britain without return, and de-industrialisation ruined India's handicrafts and made it a market for British goods.
The Drain of Wealth
- What it means: A part of India's resources was sent to Britain each year without any matching economic return.
- Components: "Home Charges" (interest on the public debt, pensions and salaries of British officials, military costs, dividends to Company shareholders, costs of the India Office, interest on guaranteed railway loans) and the profits of British businesses and the Company's servants.
- Who developed it: Dadabhai Naoroji ("Grand Old Man of India") in England's Debt to India (1867), Poverty of India (1876) and Poverty and Un-British Rule in India (1901). R.C. Dutt (Economic History of India, 1901 to 1903), M.G. Ranade (Essays on Indian Economics), G. Subramania Iyer, G.K. Gokhale, Tilak and William Digby ("Prosperous" British India, 1901) also wrote on it.
Three phases of exploitation (Marxist/Bipan Chandra view)
| Phase | Period | Nature |
|---|---|---|
| Mercantilist | 1757 to 1813 | Monopoly trade, plunder of Bengal, purchases paid from Indian revenue ("Company's investment"). |
| Industrial capitalism | 1813 to 1858 | Free trade for British goods; India as a market and raw-material supplier. |
| Finance imperialism | 1858 onwards | British capital investments in railways, plantations, mines and banks, with guaranteed profits. |
De-industrialisation
- Decline of handicrafts: Indian cotton and silk (Dhaka muslin, Murshidabad silk, Surat) lost markets. Britain put heavy duties on Indian goods while British goods entered India at low duty after the Charter Act of 1813 ended the monopoly.
- Governor-General William Bentinck is often quoted (1834) as saying the bones of cotton weavers were "bleaching the plains of India".
- Ruin of artisans and the fall of towns such as Dhaka, Murshidabad and Surat. Workers moved back to agriculture (increase of pressure on land).
- India turned from an exporter of manufactures into an exporter of raw materials.
Growth of modern industry
- Cotton mills: the first at Bombay (1854), by Cowasji Nanabhoy Davar; Ahmedabad followed (1861).
- Jute mill: Rishra near Calcutta (1855), by George Acland.
- Coal at Raniganj; Tata Iron and Steel Company at Jamshedpur (1907), an idea of Jamsetji Tata that was started under Dorabji Tata (steel was produced in 1912).
- Under pressure from the Indian capitalists the Fiscal Commission (1921) and discriminating protection (1923 Tariff Board) were adopted.
- FICCI was founded in 1927; the Bombay Plan (1944) was drafted by leading industrialists.
Keep practising
Notes are only half the work. Test yourself with questions and discuss doubts with other aspirants.
Prepared for exam revision from standard sources such as NCERT, Bipan Chandra, Spectrum and official records. Historians differ on some dates, figures and interpretations, so check your exam syllabus and a standard textbook. Found a mistake? Tell us.