From the great ancient Roman historian of the 1st century BCE, Strabo to almost every foreign traveler who visited India till the eighteenth century acknowledged the sheer wealth accumulated in the country. This monumental wealth was the prime reason that attracted an array of foreign rulers from Alexander to the Mughals to India. Almost all of them settled in this wonderland and made it home. The same India, which “has been celebrated even in the earliest times for her riches” was thrown into absolute poverty, recurring famines, and a crumbling economy by the late 18th and early 19th centuries onwards because of British colonialism. Jabez Sunderland, the famous human rights and anti-imperialism activist from America remarked “When the British first appeared on the scene, India was one of the richest countries of the world; indeed, it was her great riches that attracted the British to her shoes”. The political ambitions of the East India Company in India (and later that of the British crown), were primarily and fundamentally driven by monetary benefits. They looted the country in every possible way and accumulated colossal wealth in their nation. The economic exploitation of the British was one the major driving forces of Indian nationalism in its formative stages and the most deserving credit for popularizing the anti-Indian economic policies of the imperialists undoubtedly goes to the ‘Grand Old Man of India’, Dadabhai Naoroji and his path-breaking theory of Drain of Wealth.
Poverty and Un-British Rule in India by Dadabhai Naoroji
Dadabhai Naoroji was born in Navsari district in Gujarat on 4th September 1825. After serving as the Dewan of Sayajirao Gaekwad II, the Maharaja of Baroda, he was appointed as a professor in the Elphinstone College Bombay in 1855 and thereby became the first Indian to hold a similar academic position. The East India Association founded in London in 1867, which was one of the predecessors of the Indian National Congress was a brainchild of Naoroji. After serving as the Prime Minister of Baroda and a member of the Bombay Legislature, he moved to Finsbury, from where he was elected as the MP to the British parliament. He set forth the Indian demands in the British parliament and thus he was called the ‘unofficial ambassador of India’. Naoroji was thrice elected as the president of the Indian National Congress in 1886, 1893 and 1906. His monumental treatise on the economic and political exploitation of the British in India Poverty and Un-British Rule in India, published in 1901 remains a gospel of Indian economic nationalism.
Dadabhai Naoroji
The Indian intelligentsia started identifying and acknowledging the ill effects of British rule in terms of the economy in the 1840s. It was Raja Ram Mohun Roy, who for the first time criticized the Indian ‘tributes’ to England. Three seniors of Naoroji at the Elphinstone Institute Bombay, Bhaskar Tarakadkar, Bhau Mahajan, and Rama Krishna Viswanath, deserve the credit for projecting economic nationalism against the British rule for the first time which was acknowledged by Naoroji himself in his speech at the East India Association meeting in London in 1867. Through the letters to Bombay Gazette written under the pen name ‘A Hindoo’, Tarakadkar addressed the British as “ungrateful wretches” and called their rule “the most bitter curse India has ever been visited with. He called out the British for draining Indian wealth and pushing India to poverty. Through his writings in his own newspaper Prabhakar, Mahajan constantly hammered the British economic exploitation of India. He even wrote that the sheer extravaganza the world witnessed at the naming ceremony of Queen Victoria’s son (1842) was possible because of the regular economic extraction from India. Viswanath, in his Thoughts of Indian Past, Its Present Condition and Their Impact on the Future, attacked the British rule of India which caused severe impoverishment of the Indian economy despite her abundant natural resources. Though these three eminent men sowed the early seeds of economic nationalism, their ideas could only be circulated among the Marathis. Dadabhai Naoroji undoubtedly, inspired by their ideas brought his drain theory and made it a tool of anti-imperialistic sentiments in the whole of India.
The first expression of the concept of the drain by Dadabhai Naoroji was through his paper titled ‘England’s Debt to India’ which he presented at the gathering of the East India Association in London (1867). He argues that India was being continuously bled and compelled to pay an indirect tribute to England. He urged Britain to ensure equitable financial relations and suggested the use of foreign capital to enhance the Indian economy. With time, Naoroji’s ideas turned more intensive and he dedicated the rest of his life to advocating the theory to create awareness among the people. Other nationalists like M G Ranade, Bholonath Chandra, and R C Dutt also criticized the imperialists for the drain of wealth from India. The concept of ‘drain’ was soon taken up by the national media, which eventually culminated in the adoption of the theory by the Indian National Congress in 1896 which attributed the famines and poverty in India to it. According to Dadabhai, though the rulers of India prior to the British plundered the country, the wealth essentially remained within the nation. However, the British took away every possible monetary benefit to their country thereby pushing the Indian economy into absolute chaos.
Dadabhai Naoroji pointed out that, the economic drain is the main cause of the impoverishment of India. According to him, it had a direct loss of wealth and physical transfer of national produce. It also led to the loss of employment and income that would have been generated within India. In a country, the taxes raised are spent within the country which stimulates agriculture, industries, and trade and thereby reaches back to the people. But under British rule, the taxes collected from India were remitted to Britain instead of which India got no return. It resulted in the loss of Indian capital, retardation of capital accumulation in India and thus hampering the production capabilities of India. Naoroji argued that the drain prevented India from acquiring her own capital and hindered her prosperity. He emphasized the relationship between the drain capital formation and income generation. He stated that if India was allowed to keep its own resources, it could raise taxes and use them for the betterment of the country.
Cover Page of the Proposed Issue of an Authorities Announcement on the Subject of the Theory of the Drain, 1912
Driven by the national cause, the Indian intelligentsia and national leaders took up the issue of economic impoverishment and called for the retention of resources within India to stimulate economic growth and living conditions. They considered the ‘drain’ as evil which should be eliminated in order to save India from ruin. Some of the leaders even reduced the drain as the most essential condition of removing poverty and famine from India. Naoroji, in this regard, advocated for the Indianization of civil and military services to prevent the drain. He also proposed reducing home charges between England and India.
Earlier, British officials acknowledged the massive drain of wealth. For example, John Sullivan, the President of the Board of Revenue, Madras, once remarked;
“Our system acts very much like a sponge, drawing up all the good things from the banks of Ganges and squeezing them down in the banks of the Thames”
Lord Ellenborough, Chairman of the Select Committee of the House of Lords, H H Wilson, and Labouchere, the British chancellor of the exchequer, have admitted the extraction of wealth as a source of British revenue. In addition, in the Governor General’s report of 1834-35, it is noted that;
“The misery hardly finds a parallel in the history of commerce. The bones of the cotton weavers are bleaching the plains of India.”
However, alarmed by the rising national consciousness of the economic drain, British administrators and scholars began to deny its existence. They argued that India received economic equivalents for its excess exports. Further, according to them, the interest in the borrowed capital contributed to the economic development of India. They highlighted the foreign investments in railways, irrigation and major industries generated profits, wages and rent which remained in the country itself. The English went to the extent of projecting how India benefitted from British rule.
Dadabhai Naoroji and other nationalists effectively countered the criticism by calculating the drain by taking into account even the transactions in gold and silver. They recognized that capital transactions distorted the real balance of trade, resulting in excess exports than what appeared on the surface. Naoroji and his comrades understood the distinction between visible and invisible imports and between the balance of trade and the balance of payments. They argued that the drain on the account of useful and essential services acquired through expenditure abroad was acceptable, but the drain on account of useless and domestically available services was objectionable. The nationalists ruled out the claim that foreign capital brought economic development to India, stating that it replaced rather than augmented indigenous capital. They emphasized that foreign capital, particularly in the form of railways often resulted in complex profit extraction from India instead of being beneficial as they claimed. They rightly pointed out that it suppressed indigenous capital and hindered its useful employment, leading to the exploitation of and impoverishment of the country. They identified the expenditure on salaries of European employees of the Government of India as an ‘uncompensated drain’. It was in this regard; Dadabhai Naoroji taunted the British by asking if they would accept foreigners occupying lucrative positions in England.
The drain theory propounded by Dadabhai Naoroji was a landmark in the mainstream Indian independence movement. It was one of the major factors that was crucial in forming public opinion against imperial rule in the latter half of the 19th century and the early 20th century. The theory epitomized the economic exploitation under British rule, as highlighted by Indian nationalist newspapers. Prominent economists and thinkers like Adam Smith and Karl Marx also criticized the drain and described British rulers as plunderers. The ‘drain’, whether narrow or wide in interpretation, represented significant amounts compared to India's low national income and generated debate about economic development and capital imports.
Source: Indian Culture Portal