The Drain Theory and its impact in India

During the last quarter of the 19th century, a great controversy arose over the question of ‘The Drain’ between the nationalist leaders of India and the Protagonists of Britain. Indian nationalist thinkers developed the theory of Drain mainly for analysing main cause of poverty in India.

The ‘Drain Theory’ was first developed by Dadabhai Naoroji in a series of speeches and writings subsequently published in 1901 in a volume entitled Poverty and un-British Rule in India. Marginal contributions to the theory were also made by R.C. Dutt, G. S. Iyer, G.K. Gokhale and P.C. Ray.

During the late 19th and early 20th century, ‘the drain theory’ came to be seen as the symbol of Indian economic nationalism. Its message was that financial mechanisms by which British rule in India was maintained led to a transfer of wealth and income from India to Britain, imposing a ‘bleeding drain’ on the Indian economy.

The essence of the drain theory is that the unilateral transfers that India was compelled to make to Britain systematically stripped the country of resources and thus perpetuated poverty. Naoroji observed that ‘the chief cause of India’s poverty, misery, and all other material evils is the exhaustion of its wealth, which continuously and increasingly exhausting and weakening its production, by the excessive expenditure on the European portion of all its sources, and the burden of a large amount each year to be paid to foreign countries for interest on the public debt, which is chiefly caused by the British rule’.

Naoroji emphasised three types of drain. First, the most important item was the remittance to England of a proportion of salaries, incomes, and saving by civil, military employees of the British origin, as well as by professionals such as lawyers and doctors. These, together with the payment in sterling by the government of India of the pensions and allowances of British officials, constituted a heavy burden on the resources of India.

The second item was military expenditure. Just as in the case of civil servants, the remittances of a proportion of salaries, incomes and savings by British military personnel and the payment in sterling by the government of India of pensions and other allowances to the army officers, constituted an item of drain.

It was observed that a poor country like India was made to subsidise the imperial defence. The third item was the remittances made in sterling of interest on loans for construction and maintenance of public works such as railways, irrigation works, etc. The drain theory served as a basis for wide protests, and nationalist mobilisation against the British rule.