📌 Topic 01 of 6 · Chapter 13 · Economic Impact & Social Reforms
Economic Impact of British Rule — Drain of Wealth
Drain of wealth theory (Dadabhai Naoroji), deindustrialisation, destruction of handicrafts, commercialisation of agriculture.
💰 Drain of Wealth Theory
The Drain of Wealth theory was propounded by Dadabhai Naoroji in his book “Poverty and Un-British Rule in India” (1901). He argued that India’s wealth was being systematically drained to Britain.
Channels of Drain:
- Trade surplus: India exported more than it imported — but the surplus went to Britain, not India
- Home charges: Salaries and pensions of British officials paid from Indian revenues; cost of wars fought for British interests; interest on loans
- Profits of British companies: Profits of EIC and British businesses repatriated to Britain
- Estimated drain: Dadabhai Naoroji estimated £200 million per year
⭐ Dadabhai Naoroji: Called the “Grand Old Man of India.” He was the first Indian to be elected to the British Parliament (1892, as Liberal MP from Finsbury Central). His Drain of Wealth theory became the foundation of Indian nationalist economics. He also coined the term “Swaraj” (self-rule) in 1906. He was a mentor to Mahatma Gandhi.
🏭 Deindustrialisation
British policies destroyed India’s traditional industries — especially textiles:
- British machine-made goods flooded India at lower prices — Indian handloom weavers lost livelihood
- Dacca muslin — once world-famous — virtually disappeared
- India became a supplier of raw materials (cotton, jute, indigo) and market for British goods
- Artisans and craftsmen became agricultural labourers — increased pressure on land
- India’s share of world manufacturing fell from ~25% (1750) to ~2% (1900)
🌾 Commercialisation of Agriculture
- Peasants forced to grow cash crops (indigo, cotton, jute, opium) instead of food crops
- Led to famines — Bengal Famine (1943), Deccan Famine (1876–78), Great Famine (1876–79)
- Peasants became indebted to moneylenders
- Indigo revolt (1859–60): Bengal peasants revolted against forced indigo cultivation
- Land revenue demands were high and inflexible — even during droughts
🏛️ Land Revenue Systems
| System | Introduced By | Area | Features |
|---|---|---|---|
| Permanent Settlement (Zamindari) | Lord Cornwallis (1793) | Bengal, Bihar, Orissa | Fixed revenue permanently; zamindars as landowners; exploited peasants |
| Ryotwari | Thomas Munro (Madras) | Madras, Bombay | Direct settlement with ryot (peasant); no zamindars; flexible revenue |
| Mahalwari | Holt Mackenzie (1822) | UP, Punjab, MP | Settlement with village community (mahal); joint responsibility |
📝 Exam Tip:
• Drain of Wealth = Dadabhai Naoroji = “Poverty and Un-British Rule in India” (1901)
• Deindustrialisation = British goods destroyed Indian textiles = Dacca muslin declined
• Permanent Settlement = 1793 = Lord Cornwallis = Bengal = zamindars
• Ryotwari = Thomas Munro = Madras = direct with peasants
• Indigo revolt = 1859–60 = Bengal = forced indigo cultivation
• Drain of Wealth = Dadabhai Naoroji = “Poverty and Un-British Rule in India” (1901)
• Deindustrialisation = British goods destroyed Indian textiles = Dacca muslin declined
• Permanent Settlement = 1793 = Lord Cornwallis = Bengal = zamindars
• Ryotwari = Thomas Munro = Madras = direct with peasants
• Indigo revolt = 1859–60 = Bengal = forced indigo cultivation