Chapter 4 The Economic Drain of India – Indian Economy


The Economic Drain of India


It is indeed a very painful task to assess the ‘economic consequences’ of an alien regime; it is more so with the assessment of the ‘enlightened rulers’ we had in this country for 200 years and who reigned through the length and breadth of this great subcontinent. Even though Britain’s contribution to India’s economic growth is something unquestionable, there is also more than a ‘grain of truth’ in the contention of native economists like Romesh Dutta and C. N. Vakil that Britishers tried to strangle the goose that laid the golden eggs. As a recipient nation, India is grateful to England for whatever she has contributed to our progress, be it in the political area or in the economic sphere or in the field of administration. But this need not, and in a sense, should not deter us from fairly estimating the other side of the picture since we did not get these benefits for a mere asking. We had to pay a price for it and a heavy price at that; unfortunately, the price we had to pay was so heavy that it left us a people of ‘poverty amidst plenty.’ Such was a siphoning system the Britishers adopted to take away India’s wealth and capital that fair-minded British-born historians and economists themselves labelled it appositely the ‘Economic Drain.’

Many a Westerner has defended the right of British rulers to take away a portion of the incomes of their colonies to defray their expenditures at home and elsewhere. But this point of their right to a portion of such derived incomes has never been a bone of contention; the point in question, is how far could be the quantum of such ‘drain’ and at what cost to the country in discussion. The drain of wealth and capital from India which started after the ‘Plassey Plunder’ in 1757 and which continued upto the departure of the British in 1947 was so much that it completely dislocated and threw out of balance India’s economy and converted her into a ‘Country of hewers of wood and drawers of water.’ When the East India Company stormed the Kingdom of Bengal, it demanded and received from the native rulers several million pounds worth of gifts, exactions, booties and tributes. The amount of the drain during the ‘Indian Plunder’ as Montgomery Martin, Brooks Adams and Digby would call it, cannot be possibly determined with exactness and accuracy for lack of full and definite statistical information. But, Verelst estimates that within a period of five years, goods and bullion worth to the tune of 4,941,611 million sterling went out of the country. Dr K. Datta quotes Dow who wrote in 1790, ‘that with a peculiar want of foresight, they (i.e., the East India Company) began to drain the reservoir without turning it into a stream to prevent it from being exhausted,’ and observed that on account of such a ruthless policy, Bengal lost yearly to Europe 1,44,500 pounds sterling. J. C. Simha ascertains that during the period 1757 to 1780, the amount of drain on Bengal’s resources alone was something like 38 million pounds sterling in the important items only, to the exclusion of others.

Apart from this drainage of capital by the East India Company, the servants of that organization, from the highest to the lowest, made their own fortunes. It is on the record that a single individual, by name William Bolts amassed wealth to the extent of an incredible figure of 90,000 pounds within six years. Instances are not wanting where the Englishmen built up castles of fortunes raised on the life-blood of Indian capital. To add insult to the injury, the much-coveted bullion was exported out of Bengal to England. Lord Clive followed a shameless financial policy of looting Bengal’s resources with the concomitant result that the province in the absence of badly needed resources, was subjected to the most catastrophic famines.

Moreover, many wars of the company against the native rulers in India and abroad were fought with Indian wealth. In the period 1781–’82, alone Bengal had to send about Rs 1.5 crores to Madras to defray the expenses of the wars of Imperialism with the ignoble object of conquest and subjugation. For the financing of these wars, sometimes the government of India raised loans in Britain which meant India had to swallow not only the insult of a defeat, but also pay the expenses of the adversary in inflicting the injury! This public debt, administered by the India Office, was to the extent of 224 million pounds. Probably, this was the first time in history when the victor raised loans to finance the war against and to be paid by the vanquished! India, without any justification, had to shoulder and pay them not only a huge sum, but also the heavy rate of interest attached to it. Even Vera Anstey who takes an uncompromising stand and holds the opinion that Britishers took away only their rightful share, has yielded her argument in favour of the Indian contention in this context. Says she: ‘It is reasonable to argue that payment on account of the military expenses of conquering India and interest payments on the debentures of the East India Company taken over by the Crown after Mutiny, ought never to have been charged to the Indian revenues.’ As if these were too little to be borne by India, the cost of the various expeditions to Persia, Africa and other far-off countries had to be borne by this impecunious, nay, impoverished country. At the expense, of India, a good part of British Army and Navy was armed and made fit to fight in the foreign shores on the pretext it would be ultimately in the interest of India! The entire cost of the laying of telegraph lines from England to India had to be met by the Indian taxpayer. Many a trade expedition was undertaken thanks to the sources of ‘drain’ from the ‘brightest jewel of the British Empire.’

‘If the direct export of bullion from Bengal to England was not of considerable quantity, the Company’s China investment denuded Bengal of it, from 1757 onwards. While fully financing this China trade, Bengal did not receive any gain in return and so it was a drain to England via China’ (K. Datta). Such huge investments abroad without any quid pro quo exhausted the country’s bullion with disastrous economic consequences. The gravity of the evil was repeatedly pointed out to the company by Verelst. The Select Committee in Calcutta stated in its letter to the Court of Directors in 1767: ‘We have frequently expressed to you our apprehension lest the annual exportation of treasure to China should produce a scarcity of money in the country. This subject becomes every day more serious as we already feel, in a very sensible manner, the effects of the considerable drain made from the silver currency.’

Besides, the government of India had commitments, not only in India, but also in England owing to our political, administrative and commercial connections we had established with that country. These commitments were called the ‘Home Charges’. These payments included the interest in the management of Public Debt and annuities of account of railways and irrigation works, payments in connection with civil departments in India, India Office expenses including pensions for the retired officials, army and marine charges with pensions and gratuities for the personnel, payment for stores purchased in India and furlough allowance. Vera Anstey moderately estimates the amount of Home Charges at 35 million pounds per annum. Most of these expenses had no direct bearing on India’s economic growth and were beneficial to England and yet ‘the richest country on earth stoops to levy this annual contribution from the poorest.’ ‘It is not fair that all the expenses incurred in England, down to the maintenance of the India Office and the wages of the charwoman employed to clean the rooms at Whitehall, should be charged to India,’ observes Romesh Dutt and continues, ‘If Great Britain and India are both gainers by the building up British Indian Empire, it is not fair or equitable that India alone should pay all the cost of the maintenance of that superb edifice.’

With the available statistical information on the subject, it can be calculated that one-fourth of all the revenues derived in India was annually remitted to England as Home Charges, let alone other items. Even the richest of nations on the earth would have been impoverished when such inhuman treatment was meted to it. For, when taxes are raised and spent in a country, the money circulates among the people, fructifies trades, industries and agriculture, and in one shape or other reaches the mass of the people. But when the taxes raised in a country remitted out of it, the money is lost to the country for ever; it does not stimulate her trades or industries, or reach the people in any form. Thus, the Britishers siphoned off the lifeblood of India in a ceaseless and continuous flow to imburse their own coffers, wrangling the infant economy of India and impoverishing her trade and commerce. And India offered a ground where the statement of that inimitable genius, John Stuart Mill, has infallible truth, for he had said: ‘The government of a people by itself has a meaning and a reality but such a thing as government of one people by another does not and cannot exist. One people may keep another for its own use, a place to make money in human, cattle farm for the profits of its own inhabitants.’

Discussion Question

4.1. What do you understand by the term ‘Economic Drain’? To what extent were the Britishers justified in draining India her wealth and resources. Why were not the Indians able to stop this loot?