Drain of Wealth – British Colonialism and Economic Impact

Meaning of Drain of Wealth

  • The drain of wealth was typically “a phenomenon of colonial rule.” The person to draw pointed attention to this drain of resources from India to England was Dadabhai Naoroji in his book Poverty and Un-British Rule in India (1871).
  • Dadabhai tried to prove that mass poverty in India was a direct consequence, among other reasons, of drain of wealth (resources) from India to England.

Forms of Drain of Wealth

  • Remittances to England by Company employees:
  • For support of families and education of children.
  • Of saving from earnings.
  • For purchase of British goods for consumption in India.
  • Government purchase of stores manufactured in Britain.
  • Interest charges on public debt held in Britain (excluding interest payments on railway loans and debts incurred for productive works).

Read Also: The Drain Theory

‘Home Charges’ included:

  • India Office expenses including pensions to retired officials.
  • Interest on public debt raised in England at comparatively higher rates;
  • Annuities on account of railway and irrigation works;
  • Payments in connection with civil departments where Englishmen were employed;

Estimate of Drain of Wealth

  • Within just five years after Battle of Plassey, goods, and bullion worth 4.94 million pounds. During 1757-80 amount of drain on Bengal’s resources alone was 38 million pounds.
  • One-fourth of all revenues in India came to be annually remitted to England as Home Charges alone.

British Colonialism and Economic Impact

British colonialism passed through three stages, each stage representing a different pattern of subordination of colony and consequently different colonial policies, ideologies, impact and colonial people’s response. Change from one stage to another was due partly to changes in metropolis itself and partly to changes in colonies. Three stages are not strictly bound. But each stage has some main features, though features of earlier one may continue into later one. Again some stags are atrophied in some colonies, e.g. the third stage in India.

First Stage of Mercantilism (1757-1813)

  • Monopoly of trade and the direct appropriation of revenue.
  • A very strong element of plunder and direct seizure of power.
  • The absence of large-scale import of British goods.
  • No basic changes in colony’s administration, judiciary, culture, economy, etc.

Must Read: Colonial Exploitation of Indian Economy

Second Stage of Laissez Faire (1813-60)

  • Determination of administrative policies and economic structure of colony by interests of an industrial bourgeoisie of metropolis.
  • Making colony a subordinate trading partner which would export raw materials and import manufactured goods.
  • Transformation of colony’s economy, polity, administration, society, culture and ideology under the guise of development and modernization in order to exploit it in a new and more sophisticated way.

 Third Stage of Finance Imperialism (1860-1947)

  • Intense struggle for new, secure and exclusive markets and for sources of raw materials among industrialized countries.
  • Export of capital by these countries to colonies.
  • Replacement of liberal imperialist policies by reactionary ones in the administration of colonies.

Don’t Miss:

Impact of Colonial Rule over India

Phases of British Rule in India

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