💰 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

🏭 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