The Drain Theory and Its Impact in India

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Among all the national movements in colonial countries, the Indian national movement had the strongest foundation in comprehending the nature and character of colonial domination and economic exploitation. This exploitation began with the Company’s arrival in 1757 and was acknowledged by 1860, albeit belatedly. From 1875 to 1905, an era of intellectual unrest and burgeoning national consciousness emerged. The primary cause attributed to India’s impoverishment was the drain of wealth to England.

The nationalists made a strong effort to eliminate this problem, using various methods such as speeches, letters to British newspapers, articles in journals, correspondence with officials, testimony before official commissions and committees, and private correspondence. They wanted to reach a larger audience to convey this message. Thanks to their efforts, we became aware of the “financial, political, and intellectual drain” we were experiencing.

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The nationalists believed that the British should give India back its wealth in order to develop its resources. They argued that the drain not only resulted in the loss of wealth, but also a loss of capital. This drain not only reduced current national savings, but also diminished the existing stock of inherited national capital. The nationalists also believed that the drain hindered industrial development, which they saw as India’s path to economic success. They focused on identifying the sources of this drain, which they found to be the excessive employment of Europeans in Indian administration, army, and railways, as well as the expenses incurred by the Indian government in Britain.

These are the payments made for the interests on Indian public debt, guaranteed railways, expenses for military and other supplies sent to India, and the civil and military charges paid in England on behalf of India. This also includes the costs of the Secretary of State’s establishment at the Indian Office and the pensions and allowances provided to European officials of the Indian government. Additionally, it includes foreign capital invested in trade or industry in India and the negative balance of trade.

To address this drain, nationalists proposed several solutions such as the Indianisation of services and reducing home charges. They suggested reducing the burden of public debt by raising it in India instead of England, decreasing the speed of railway construction to alleviate railway debt, buying government stores within India, and fairly distributing charges between India and England. Furthermore, they recommended reducing the import of foreign capital and promoting Indian industry to minimize dependence on imports.

The Britishers contested the notion that the excessive employment of Englishmen was draining India’s resources, arguing that it was a narrow perspective that undermined the drain theory. They believed that our nationalists lacked economic knowledge, as they failed to acknowledge that British rule in India would not exist without the home charges. They pointed out the absence of evidence supporting the transfer of surplus revenue from India to Britain. Additionally, they emphasized India’s economic growth through the rapid expansion of foreign trade and construction of railways. They sought to highlight the advantages of British rule, which included invisible imports, such as shipping services, and insurance charges on imports and exports.

3. The expenditure of Indian students and travelers abroad is being discussed, as well as the heavy imports of gold and silver.
4. Some advantages of foreign capital are listed, such as the construction of railways and the development of irrigation systems, as well as the establishment and growth of plantation and other industrial businesses.
India’s political connection to England allowed it to borrow from the world’s most affordable market.
There were also dedicated British officials who implemented non-economic reforms, which included maintaining peace and order, implementing modern administration, and ensuring security against external aggression.

The nationalists of India believed that their country had a government that supported economic progress at a cost cheaper than they could provide for themselves. They were dissatisfied with the British arguments and fought against them to prove the existence of a constant and never-ending financial drain. They disagreed with the idea of hidden imports being used to manipulate the situation. The Indian leaders did not object to the use of foreign technicians and qualified teachers in their factories and universities, and instead, actively worked towards increasing the expenditure on education for Indian students.

They were in agreement that this valuable drain is crucial. While military and civil services were beneficial for British interests, they were not advantageous for India. They believed that the accumulation of foreign capital suppressed indigenous capital, which could have otherwise supported the Indian industry more effectively. The rapid construction of railways was considered unnecessary and resulted in an undesired drain. They argued that this drain not only caused direct losses but also negatively impacted trade relations with other foreign countries.

India’s lack of protection in terms of law and order allowed the British to freely exploit it, leading to significant drain on the country’s resources. The non-economic reforms, from an economic perspective, resulted in the loss of skilled labor and a decline in knowledge and wisdom, further contributing to India’s economic backwardness. Nationalists believed that the drain was even greater than initially expected, attributing the responsibility to the East India Company for the creation of public debt.

During the rule of the Company, the public debt was created to cover the expenses of the wars that led to the British conquest of India and to ensure that India could pay the dividends of the Company. The common man bore the burden of various costs, including compensation for shareholders during the transfer of power from the Company to the Crown, costs associated with suppressing the 1857 revolt, and expenses related to wars. At the same time, nationalists sought equal treatment for India as other British colonies, like the USA. Unlike India, the USA waived interests on borrowed capital and kept profits for itself.

India’s current payment of excess export surplus for past loans suggests that it previously had an import surplus. However, historically, India did not have an import surplus. It is peculiar and alarming that India is paying the British without any valid reason, highlighting the exploitation it faces. The nationalists fought tirelessly to eradicate this oppressive practice, with Dadabhai Naoroji being the most renowned advocate. Naoroji, also known as the Grand Oldman of India, dedicated his life to analyzing the detrimental drain caused by foreign rule, considering it as an inevitable economic consequence.

Millions and millions of people bear the burden year after year, drained by the British rule in India. The author argues that while the British expect compensation for their services, they must also provide Indians with the means to pay for it. The author opposes any political association between India and England. Instead, he emphasizes the detrimental impact of British rule on both the material and moral aspects of India. He criticizes the idea that India can only be revitalized by British influence if it pays a high price. According to him, the reality of British rule is the suffering it causes, contrasting with the perceived benevolence.

Gandhi believed that British rule in India was heading towards a wrong and destructive path. He criticized the replacement of indigenous capital with foreign capital, which he saw as leading to exploitation, impoverishment, and despoliation. These views were considered disloyal and extremist by the British authorities. However, Gandhi earned immense respect from the people who saw him as the Father of Indian Nationalism. He urged his fellow compatriots, especially those supporting the anti-drain theory, to stay focused on this idea and not get distracted by other economic matters.

He desired drain theory to become the core principle of nationalist propaganda and activism. It was this individual who reached an inescapable deduction that India must obtain political freedom in order to halt this intentional looting and devastation. He popularized the rallying cry of ‘Swaraj (or) Self-government’. His substantial shift from believing in the enduring nature of British rule over India to advocating for independence caused shockwaves within nationalist circles. This transformation altered the political perspective of the entire nation and ultimately paved the way for our independence.

During my analysis, I have gained knowledge about India’s battle for freedom and the crucial impact of drain theory in guiding us towards this extraordinary event. While the British were capable of suggesting solutions for other theories, they faced difficulty in doing so for drain theory. What sets drain theory apart is its simplicity and its capacity to be effectively conveyed by nationalists to individuals from all walks of life. The notion that our money is flowing out of our country is a concept that can be easily understood by anyone, and it was this realization that prompted our nation to unite behind the slogan ‘No Drain’ and fueled our determination in the struggle for independence.


Several books discuss the rise and growth of economic nationalism in India. One such book is “The Rise and Growth of Economic Nationalism in India” by Bipan Chandra, published by People’s Publishing House in New Delhi in 1966. Another relevant book is “The Economic History of India in the Victorian Age, Vol-2: From the Accession of Queen Victoria in 1837 to the Commencement of the Twentieth Century” by Romesh Chandra Dutt, published by Kegan Paul, Trench and Trubner in Great Britain in 1904. Additionally, there is “India’s Struggle for Independence (1857-1947)” by Bipan Chandra, published by Penguin Books, which also covers this topic.

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The Drain Theory and Its Impact in India. (2016, Nov 22). Retrieved from

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