Economic Exploitation and Drain of Wealth during British Rule

Economic Exploitation of India

1. Drain of Wealth → A continuous transfer of India’s resources and capital to Britain.
2. Colonial Trade Pattern:
   1. India was forced to export raw materials (cotton, jute, indigo, tea).
   2. The colonial system turned India into a buyer of overpriced British goods.
3. Impact → Indian commerce and industries were severely damaged (e.g., collapse of handloom industry).

Main Methods of Drain of Wealth

1. Home Charges → Regular payments made from Indian revenues to Britain.
2. Components:
   1. Administrative Expenses: Expenditure of the India Office in London.
   2. British Officers’ Salaries: A large part of their income remitted to England.
   3. Civil & Military Pensions: Retired British officials settled in Britain but drew pensions from Indian revenues.
   4. Interest on Loans: Loans raised in Britain on India’s behalf (for wars, railways, etc.) had to be repaid by India.
3. Effect:
   1. Indian money financed Britain’s expenses.
   2. Little was left for India’s own development.
4. Export–Import Imbalance
   1. Cheap Export of Raw Materials: Cotton, jute, indigo, and tea were exported at very low prices.
   2. Costly Import of Manufactured Goods: British machine-made goods were imported into India at high prices.
5. Military Expenditure
   1. Expenses of maintaining the British Indian Army were borne by India.
   2. Indian money was also used for Britain’s imperial wars in Afghanistan, Burma, and Africa.
6. Civil & Military Pensions
   1. Retired British officials, both civil and military, drew their pensions from Indian revenues.
   2. These pensions were mostly remitted to England.
7. Profits & Dividends Transfer
   1. Profits of the East India Company (earlier) and British investors (later) were sent to Britain.
   2. This included dividends, interest, and commercial gains.
8. Free Services
   1. Indian soldiers, labour, and raw materials were exploited at very low cost.
   2. Britain gained maximum benefit without fair payment.

Collapse of Indian Handloom Industry

1. Pressure of British Imports
   1. After the Industrial Revolution, Britain produced machine-made cloth at cheap rates.
   2. This cloth flooded Indian markets and was sold at very low prices.
2. Decline of Indian Handloom
   1. Indian handwoven textiles, once famous worldwide, could not compete with machine-made cloth.
   2. Weavers and artisans lost their livelihood.
   3. This is known as the Handloom Industry Collapse.
3. Trade Restrictions
   1. Britain levied high tariffs on the entry of Indian textiles.
   2. But British cloth entered India duty-free or with very low tariffs.
   3. Result → Indian textiles lost both European and domestic markets.
4. Impact of Drain of Wealth
   1. Resources that could have been invested in Indian industries were sent abroad.
   2. Industrial growth and employment generation came to a standstill.

Overall Results of Drain of Wealth

1. India’s capital was exhausted, leaving no funds for investment or industrialisation.
2. Traditional industries like textiles and handicrafts collapsed.
3. Widespread poverty and unemployment among artisans and peasants.
4. India was reduced to a raw material supplier for Britain and a market for British goods.
5. Dadabhai Naoroji described this exploitation as the “Drain Theory.”

Simple Line to Remember:
Low-cost British machine-made cloth flooded Indian markets, ruined the handloom sector, and siphoned India’s wealth to Britain.