HOW INDIA BECAME POOR AND THE COLONIAL BRITAIN BECAME RICH?-India’s drain of wealth helped finance England’s Industrial Revolution

As late as the 1750s, India had an export surplus; its favourable trade balance was matched by bullion import, as the world had nothing else to offer India in return for its fine textiles. British colonialism reversed this process, first by monopolising trade and then — in the early 19th century — by demolishing Indian industry. During the period when British trade established supremacy, goods were exported by India but the bullion never reached the country. British merchants purchased goods in rupee receipts in India, and exchanged them abroad for bullion. Much before Dadabhai Naoroji and the so-called ‘modern nationalist’ school came up with a figure for India’s drain of wealth, Mughal chroniclers had put it at more than 100,000 million pound sterling per annum.

Dadabhai proved that the average annual income of an Indian was barely Rs 20. Examining the import and export figures for 37 years, he proved that India's exports exceeded its imports by Rs 50 crores (approximately $135 million) annually.

In fact, bullion owed to India helped finance England’s Industrial Revolution. Then, in order to flood Indian markets with European goods, India was de-industrialised. From being a supplier of luxury goods, it was turned into an exporter of raw material. Between 1820 and 1840, de-industrialisation closed down more than 12,000 markets, controlled and operated by peasants and small entrepreneurs in northern India

The ideological moorings of imperialism have been many. From liberaltradition of orientalism to that of not so good utilitarianism. Allthese affected the political as well as the economic fabric. Theimperial powers started as trading organisations and later developedinto full fledged political powers. This transformation was to a largeextent based on the control over resources. In India's context, this hadmeant things like:# Use of territorial revenue by British trading company as 'investment',whereby during the eighteenth century, it would use the territorialrevenue of Bengal to buy goods from Bengal and export that to Europe,and would show that this money was their 'investment' in India!#Trade imbalance that had gradually transformed India from an exportingcountry in goods like Cotton to that of an importing country of cotton.#Transfer of wealth in form of invisibles eg. transfer of profit,pensions, cost of maintenance of Office of Secy etc all these comingfrom Indian revenue.

Destruction of handicraft industries (during the later eighteenthcentury), when the industrial revolution had only just started~ andperhaps the societies were poised in a balanced way. This is alsorelated to an important phenomena of "proto-industrialisation" and"deindustrialisation".
# Destruction of technological industries like shipping in the earlynineteenth century. Here it is interesting to note that shipping ofIndia was not outdone by any Western technology, but by thenon-technological political policies made in Britain. Scholars likeGunder Frank also puts the western superiority in areas like shippingonly by 1840s. All these meant technological impoverishment in the longrun
# The nature of this drain underwent a shift when the age of financecapitalism emerged. The most glaring example is that of railways. In thecase, of railways the whole cost was put on India as guaranteed project.This meant that whether the project earned money or losses, it would bepaid a guaranteed system by the Govt that protected the privateinvestment. Consequently, this meant that the money for investment inprojects like railways was basically extracted from India. If theinvestment in railways is neglected, then there was very little foreigninvestment during the whole period of imperialism
# Moreover, all this was not just a matter of drain, but also worked toserve the imperial political interests. Railways & Telegraph was usedfor suppression of revolts. Railways particularly was useful both forthings like troop movement as well as penetration into areas andprovinces of princely rulers, who were theoretically free. (at the timeof independence, there were some 562 such independent states, thatbecame part of the successor states) It was also useful for penetrationof foreign goods, particularly textile into the hinterlands and also fortransfer of raw materials from hinterland to the seaports for export toBritain.
# The drain also happened in terms of expenses on military. The costs ofmilitary expedition in far off lands- Middle East, Africa (like theAbyssinian & Sudan expeditons), Europe etc, which were basically Britishimperial wars, and had no relation to India were charged on Indianexchequer.
These areas were identified by the early Indian nationalists andmuch literature was written on it. It in some ways became an ideologicalissue, that received support from all spectrum of politics in India.This "Drain of Wealth Theory" gave a firm foundation to theanti-imperial struggle. In some ways, it meant that the struggle was notjust political or even an issue of power, but of safeguarding of thebasic interests of the country from an exploitative imperial power.
The people, among others, who actually theorised this were- Dada Bhai
Naoroji in his various monographs and particularly in "Poverty andUnbritish Rule in India", and RC Dutt in his "The Economic History ofIndia", in two vol. Such a thing also received support of someBritishers like Digby.
In 1906, at the age of 80, Dadabhai was invited for a third time to be president of the Indian National Congress in Calcutta, and he helped to patch up a conflict between the moderates and the extremists. In his keynote speech he demanded "Swaraj" or Self-Rule from the British, which delighted the Congress attendees and the Indian public. He said "Be united, persevere, and achieve self-Government, so that the millions now perishing by poverty, famine, and plague may be saved, and India may once more occupy her proud position of yore among the greatest and civilized nations of the world".