Economic drain has visualised as a portion of the national product of India was not available for capital formation or consumption by its own people rather drained away to Britain for political reasons. This drain was without getting an adequate economic, commercial and material return. Thus it is unilateral transfer of wealth from India to Britain. Further we can see the drain in to two major aspects- internal and external. Former in terms revenue collection, agricultural production, the issue of economic drain theory first highlighted by Alexandor Dow, a military personnel of the East India Company, who spent twenty years in Bengal and wrote an economic conditions of Bengal.
According to his estimation, the annual drain from Bengal to Great Britain was about 1,477,500 Pounds including company’s revenue and exports from India. Later on Edmund Burke (1783) developed this theory and explained the mechanism of economic drain in Indian situation and increasing poverty. In 1776, Philip Francis analysed the drain economy and divided it into four major streams- first was the East India Company’s Investment, secondly remittance to other presidencies, thirdly the transfer of private income, fourthly the transfer of income from private trade or investment.
There are many other British intellectuals and their documents providing the evidences for drain theory. Later nineteenth century, Indian intellectual also realised the impact of British rule as exploitative process and transfer of Indian economy towards Britain. Before this period, particularly the elite sections of Indian society had positive perception and assumed British rule as development actor in India.
This perception has changed different British commercial policy and interventions towards destruction cottage industries, agricultural policy and land tenure resettlements. Review of British policy has started by Indian intellectuals and the idea of economic drain has been evolved to show how rigorous the British policy draining India and reducing it to poverty.
In this process, many nationalists who advocated the ‘economic drain theory’ like Dada Bhai Naoroji, M. G. Ranade, G.. V. Joshi, Romesh Chandra Dutt, Bholanath Chandra, G. K. Gokhle, Gadgil Bhaskar Tarkhadkar and others. First three have played instrumental role and analysed economic transition in depth, while the issue has raised first by Bhaskar
Tarkhadkar (a journalist) along with his Maharastrian group in 1841.
Dada Bhai Naoroji (1825- 1917), Mahadev Govind Ranade (1842-1901), Romesh Chandra Dutt (1848-1909) worked extensively and spread message through speeches, research papers and other publications in favour of their argument.
Naoroji attributed the India’s abysmal poverty to sustained drain of wealth towards Britain long before Indian National Congress placed its agenda for change. M G Ranade, a well known Indian economist after Kautilya, analyzed trade pattern and consider the export of raw materials and import of manufactured product as major cause of drain and causes of backwardness. R. C. Dutt elaborated mechanism of transfer of wealth in his book- the economic history of India. He writes “If manufactures were crippled, agriculture overtaxed, and a third of the revenue remitted out of the country, any nation on earth would suffer from permanent poverty and recurring famines”.
The following are major causes of economic drain during colonial India.
a) Colonial Rule and their interest
b) Decline of Indian Export
c) Introduction of new patterns of products
d) Competition with machine made goods
e) Western education
f) Role of intermediaries
g) Government’s policy
British interests were of several kinds. At first the main purpose was to achieve a monopolistic trading position. Later, it was felt that a regime of free trade would make India a major market for British goods and a source of raw materials, but British capitalists who invested in India, or who sold banking or shipping service there, continued effectively to enjoy monopolistic privileges.
India also provided interesting and lucrative employment for a sizeable portion of the British upper middle class, and the remittances they sent home made an appreciable contribution to Britain’s balance of payments and capacity to save. Finally, control of India
was a key element in the world power structure, in terms of geography, logistics and military manpower. The British were not averse to Indian economic development if it increased their markets but refused to help in areas where they felt there was conflict with their own economic interests or political security.
Hence, they refused to give protection to the Indian textile industry until its main competitor became Japan rather than Manchester, and they did almost nothing to further technical education. They introduced some British concepts of property, but did not push them too far when they met vested interests.
As we discussed the company’s commercial policy was based on the principle that to purchase Indian goods in exchange for bullion. There was little demand for European consumer goods in India market whereas Indian silk, drugs, spices were high demand in the European market at a much higher price and the East India Company earned a considerable profit from European market. Historian writes that between 1601 AD and 1612 AD cargo worth 200,540 pound were carried in 9 East India voyages of which 69 per cent consisted of bullion.
In the first two decades was 292,286 pound of which 65 per cent was in bullion. The danger of a drain of treasure from the West became a nightmare and India became the ‘sink of precious metals’ . In 1772, Lord Clive also mentioned this in his speech at House of Commons that “silver of the West and the gold of the East have for many years been pouring into that country and goods only have been sent out in return.”