4.11 Drain of Wealth

Drain of Wealth

2020-04-27 15:04:38


  "Our system acts very much like a sponge, drawing up all the good things from the banks of the Ganges and squeezing them down on the banks of the Thames." - **Lawrence Sullivan, Deputy Chairman, Court of Directors**.
  • Drain Theory was the focal point of critique of Indian Nationalists.
  • Dadabhai Naoroji put the theory forward in May 1867.
  • Other proponents were RC Dutt and MG Ranade who said that drain had caused innumerable famines, draught which were more fatal that any known before
  • amounted to 1/2 of gov revenues, 1/3 of total savings of the country
  • was a high watermark for Indian nationalists since the theory was easily graspable by the common public
  • As per Naoroji's calculation 12mil pound per yr, per capita at Rs 20.
  • 30 mil per William Digby calc per capita inc to Rs 18.
  • Led to overburdening of agri, further impoverishment.

How Indian Wealth Was Drained

  1. in the form of salaries and pensions of British officers
  2. interest on loans taken by Indian Gov
  3. profits of British capitalists
  4. Home Charges/ expenses of Indian gov in Britain
  5. Excess exports over imports.
  6. Transfer of money took place through sale of Council Bills that was sold in London
  7. Free trade and foreign capital investment were used as garb for resource extraction

PYQs

  1. Trace the course and explain the consequences of the drain of wealth from Bengal in the eighteenth century. [1982, 60m]
  1. "Our system acts very much like a sponge, drawing up all the good things from the banks of the Ganges, and squeezing them down on the banks of the Thames." Comment. [1985, 20m]
  1. Write a critique on the impact of the Drain Theory of Dadabhai Nauroji in the growth of economic nationalism. [2008, 60m]
  1. "The need for a unilateral transfer of funds to Britain was constant factor and, in fact, progressively increased over time." Critically evaluate. [2011, 20m]