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Drain of wealth
BA (Hons.) History
University of Delhi
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On Coming of the British to India - Brief Introduction
The English came to India after the Portuguese and the Dutch soon after the discovery of the sea route to India in the year 1497 by the Portuguese navigator/explorer Vasco-da-Gama. The English came to India with the sole motivation of trade with the Indies. On 22nd September, 1599, certain prominent merchants of London held a meeting and formed an Association for the purpose of trade with India and submitted a petition to the Queen to incorporate them into a Company for the said purpose. On the 31st of December, 1960, the Queen of England, Queen Elizabeth, issued the Royal Charter where the East India Company known as “The Governor and Company of Merchants of London Trading into East Indies” was formed and authorised to trade and traffic freely onto and from the East Indies.
During the initial period the Company was primarily a trading organisation, but it progressively became a territorial organisation when the Company’s trade interests developed into political interests.
After the establishment of British rule in India there was an enormous drain of wealth from India to Britain. This adversely affected the economy of India and the country became poorer and poorer day by day. This drain began in the decades following the battle of Plassey in 1757.
Drain of Wealth - Signs
On June 23, 1757, Robert Clive, commanding a small force of East India Company professional troops, defeated and killed Siraju-ud-Daula, the ruling Nawab (Muslim nobleman) of Bengal, on the battlefield of Plassey. The battle marked a significant turning point in world history, for it permitted the English East India Company control over the rich resources of the Mughal successor state in north- eastern Bengal and Bihar. This was the starting point for a century-long process of British conquest and dominion over the entire Indian subcontinent and beyond.
From 1600 to 1757, the East India Company was playing the role of a trading corporation. They brought goods or precious metals to India and exchanged them for Indian goods like textile and spices. It earned its profits by selling Indian goods abroad. But as they were not happy with the popularity Indian textiles had in Britain, the British manufacturers put pressure on their government to restrict and prohibit the sale of Indian goods in England. Even after laws were passed by 1720 forbidding the wear or use of printed or dyed cotton cloth, Indian silk and cotton textiles still held their position in foreign markets until the middle of the eighteenth century when the English textile industry began to develop on the basis of new and advanced technology.
After the Battle of Plassey in 1757, as the East India Company took over political control in Bengal, it used its influence over trade and production. It used the revenues of Bengal to finance its export of Indian goods. The Company now forced the weavers of Bengal to sell their products at a cheaper price, even at a loss. Many of them were compelled to work for the Company at low wages and were forbidden to work for Indian merchants. The servants of the Company monopolized the sale of raw cotton and forced the Bengal weavers to pay a very high price for it. At the same time Indian textiles had to pay heavy duties on entering England. The real blow to Indian handicrafts fell after 1813, when they not only lost their foreign market, but also their market in India.
The Economic Drain:
The drain of wealth from Bengal subsequently began in 1757 when the Company’s servants began to carry with them a huge amount of wealth extracted from Indian rulers, zamindars (a land owner, one who leases his land to tenant farmers), merchants and the common people. In 1756, the Company acquired the ‘Diwani’ (revenue office) and Nizamat (civil administration) of Bengal and thus gained control over its revenues. The Company used the revenue of Bengal to purchase Indian goods and then exported them. These purchases were called ‘Investments’. Thus, through these ‘Investments’, the revenue of Bengal was sent to England. By the end of the eighteenth century the drain constituted nearly nine percent of India’s national income. The actual drain was even more; It was in the form of salaries and other incomes of English officials and the trading profits made by the English merchants.
The Industrial Revolution in Britain completely transformed Britain’s economy giving rise to a powerful class of manufacturers in Britain who had an important impact on Indian administration, economic relations and its politics. As this class grew in number and strength and political influence, it began to attack the trade monopoly of the Company. Since the profits of this class came from manufacturing and not from trading, it wanted to encourage not imports of manufactures, but exports of its own products to India as well as imports of raw materials like raw cotton from India. In 1813, they succeeded in abolishing the Company’s monopoly of Indian trade.
As a result, British goods started flooding the Indian market. The Indian handicraft industry suffered a lot as it could not face the competition from the machine made products coming from England. The British Government in India also did not take any effective step to protect these industries. Moreover the free trade imposed on India was one-sided. While foreign goods could easily enter India, the Indian products had to pay a heavy duty on entering Britain. As a result, Indian export to foreign countries fell rapidly as India was now forced to export raw materials like raw cotton and silk to meet the need of the British industry. The British also promoted the sale of Indian opium in China in spite of China’s ban on it. By the end of the nineteenth century, Indian exports consisted primarily of raw cotton, jute and silk, oil-seeds, wheat, hides and skins, indigo and tea.
Thus, the commercial policy of the East India Company after 1813 was guided by the needs of the British industry. Its main aim was to transform India into a consumer of British manufactures and a supplier of raw material. The British exported to Britain part of India’s wealth and resources for which India got no adequate economic or material return. This “Economic Drain” was a unique feature of British rule. The British government spent a large part of the taxes and income they drained from the Indian people not in India but in Britain.
India also had to meet administrative expenses in London, first of the East India Company, and then of the Indian Office, as well as other minor but extraneous charges such as the cost of British staff being raised by long home leave in the UK, early retirement and lavish amenities in the form of subsidized housing, utilities, rest houses, etc.
The interests on public debts incurred due to war waged by the British in India constituted yet another drain on India’s revenues.
The drain only went on increasing after 1858. The wealth drained out of India played an
In this phase, the British consolidated their position in India and made India a market for manufacturers and a supplier of foodstuffs and raw materials. The British made heavy investment in India like the Introduction of Railways (1853), Post and Telegraph (1853), Banking System (Avadh Commercial Bank-1881) and this increased the burden of public debt. Heavy British Industries also came into existence like the Tata Iron and Steel in 1907.
Conclusion:
During the period from 1757 to 1857, the main motive of the British East India Company was to protect its economic interest and to promote trade and commerce. The Company also wanted to establish its suzerainty over India, earn profits and to establish a strong British hold over India.
The restrictive policies of commodity production, trade and tariff pursued by the colonial government adversely affected the structure, composition and volume of India’s foreign trade. Consequently India became an exporter of primary products at very low rates and an importer of finished consumer goods and capital goods at huge cost to the country’s economy. Furthermore, this export surplus did not result in any flow of gold or silver into India. Rather, this was used to make payments for the expenses incurred by an office set up by the colonial government in Britain, expenses on war, again fought by the British government, and the import of invisible items, all of which led to the drain of Indian wealth.
This systematic drain was nothing short of a loot which carried on over 200 years and under the cover of colonial trade. It left the economy in shambles and reduced this great country from one of the powerhouses of the world economy to a laggard which was barely able to sustain itself.
References:
Naoroji, Dadabhai, “Poverty and UN-British Rule in India”, Cornell University Library, New York, 2010 Raychoudhary, S., “History of India”, Surjeet Publications, New Delhi, 2010 Roy, Tirthankar, “The Economic History of India 1857-1947)”, Oxford University Press, New Delhi, 2003 Tomlinson, B., “Oxford History of the British Empire”, Oxford University Press, New Delhi, 2001 Tomlinson, B., “The Economy of Modern India, 1860-1970), Cambridge University Press, 2001
Drain of wealth
Course: BA (Hons.) History
University: University of Delhi
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