Drain of wealth

The debate on the drain of wealth commenced as early as 1867 focusing on the process by which Indian resources were drained
off by the mechanism of British rule. The drain started when the revenue surplus of Bengal was transferred to England in the
form of either treasure or investment.

By the late 19th century India was the largest purchaser of British exports, and exports exceeded imports. Dadabhai Naoroji
called them unrequited exports since India did not get any share of the profit.

He claimed that the surplus was appropriated by the European exchange banks and insurance companies. Naoroji computed the
drain between 1870 and 1872 at 27.4 million annually. Another major component of the drain was the Home Charges.

According to A.K. Banerji, political leverage enjoyed by British in India was an important factor. R.C. Dutt claimed that the drain
depleted the countrys resources leading to widespread poverty and famines, and India getting converted into an agricultural
colony.

The Nationalists argues that the drain led to impoverishment of the country. It hindered accumulation of capital within India and
delayed industrial development. India was a significant recipient of British capital, but was used unproductively.

Colonial scholars Morison and Anstey defended the British by arguing that most of the payments were made in return for services
or capital which had actually increased the wealth of the local economy. The tribute was thus a small proportion of the overall
benefits of colonial rule and modernization.

In their revisionist critique, K.N. Chaudhuri and Tomlinson claimed that the notion of unrequited exports was unjustified.
Tomlinson also dispute the prevalence of mass poverty and famines as evidence of the drain.

Modern Nationalist historians argue that capital did increase in India but it got accumulated in the hands of parasitic landlords.
Although there was some growth, it developed at a slow pace owing to domestic factors. Revisionist scholars like Tirthankar Roy
faulted the early nationalists by arguing that there is no empirical evidence for net decline in the colonial period.

To conclude, there is little doubt that the British gained enormously both economically and politically from their occupation of
India. However this is only tangentially related to the drain of wealth hypothesis. It must also be remembered its real importance
of the theory lay in its political implications.