Drain of wealth

• The constant flow of national wealth from India to England for which India did not get an adequate economic, commercial or material return has been described by Indian national leaders and economists as ‘drain’ of wealth from India. This was the drain of wealth theory.
  • A prominent theme in nationalist economic thinking was this was one of the most important causes of India’s poverty. selfstudyhistory.com
• Economic drain was an integral feature of the East India Company’s administrative and economic policies.
• The colonial government was utilizing Indian resources- revenues, agriculture, and industry not for developing India but for its utilization in Britain.
• If  these resources been utilised within India then they could have been invested and the income of the people would have increased.
• The drain of wealth was interpreted as an indirect tribute extracted by imperial Britain from India year after year.

Background:

• In the mercantilist concept an economic drain takes place if gold and silver flow out of the country as a consequence of an adverse balance of trade.
• In the 50 years before the battle of Plassey, the East India Company had imported bullion worth £ 20 million into India to balance the exports over imports from India.
• British government adopted a series of measures to restrict or prohibit the imports of Indian textiles into England.
• Apart from other measures, in 1720 the British government forbade the wear or use of Indian silks and calicoes in England on pain of a penalty on the weaver and the seller.

Early Drain of wealth:

• After the Battle of Plassey the situation was reversed and the drain of wealth took an outward as England gradually acquired monopolistic control over the Indian economy.
• So, the ‘Drain of wealth’ from India to England started after 1757 (Battle of Plassey), when the Company acquired political power and the servants of the Company a ‘privileged status’ and, therefore, acquired wealth through dastak, dastur, nazarana and private trade.
• After the East India Company extended its territorial aggression in India and began to administer territories and acquired control over the surplus revenues of India, the Company had a recurring surplus which accrued from:
  • profits from oppressive land revenue policy,
  • profits from its trade resulting from monopolistic control over Indian markets,
    • The Company’s servants earned large incomes through their participation in inland trade.
    • British Free Merchants made fortune through their private trade.
  • exactions made by the Company’s officials.
    • During the years 1757-1766 individual Englishmen received from the princes and other persons in Bengal no less than 50 millions of current rupees in the form of illegal presents and perquisites.
      • The practice continued even after the prohibition imposed by the Court of Directors in 1766.
      • Among the persons against whom charges covering the post 1766 period have been made on this ground are Warren Hastings and his supporter in the Council, Barwell.
• Private fortunes obtained by the Company’s servants and other Europeans in India were remitted to Europe through various means.
  • One of these was sending of diamonds to Europe– a method followed by the British Free merchants as well.
  • The other was to issue bills of exchange on the East India Company or any of the other European Companies.
• Responsibility of East India Company:
  • For the most serious drain on Bengals’ capital, the East India Company itself was directly responsible.
  • First, the Company purchased its investments from Bengal out of the surplus territorial revenues of this province after the acquisition of Dewani (1765).
    • It became the supreme ruler of a rich and fertile kingdom and used its revenues partly for purposes with which its people had no concern.
  • Secondly, the Company’s Government in Bengal frequently provided financial assistance to the Governments at Madras and Bombay for their ordinary civil purposes as also for their wars-the First and Second Anglo-Mysore Wars and the First Anglo-Maratha War for instance.
  • Thirdly, the Company’s China trade was fully financed from Bengal, although this province gained nothing in return.
    • This drain took the form of export of bullion.
    • One pernicious effect of this export was scarcity of silver in Bengal which was largely responsible for the currency muddle in the province in the second half of the 18th century.
• This entire ‘surplus’ was used by Company as an “investment” i.e. for making purchases of exportable items in India and elsewhere.
  • Against the exports of goods made out of this ‘investment’, India did not get anything in return.
• This is how there began the ‘Drain of Wealth’ which was nothing but a unilateral transfer of fund; the Early nationalist leaders made this point central to their economic criticism of the British colonialism.
• It affected Bengal much more than Madras and Bombay because the incomes of these two Presidencies were less than their actual needs.
• Amount of drain
  • There are different estimates of the total amount of the economic drain, primarily because it is not possible to extract full and accurate statistics from incomplete and conflicting contemporary records.
  • According the Verelst, Governor of Bengal, during the five years following the grant of Dewani (1765) goods and bullion of the total value of 4,941,611 million pounds went out of the the country.
  • The historian Dow wrote about 1770 that Bengal lost yearly to Europe on account of the drain about 1477500 pounds sterling.
  • According ta a modern historians, during period 1757-1780 the amount of drain on Bengal’s resources was about 38 million pounds sterling in the important items only,excluding other items.

Dadabhai Naoroji’s theory of the Drain of Wealth

• Dadabhai Naoroji was the first man to say that internal factors were not the reasons of poverty in India but poverty was caused by the colonial rule that was draining the wealth and prosperity of India.
  • The drain of wealth was the portion of India’s wealth and economy that was not available to Indians.
• The Drain of Wealth theory was systemically initiated by Dadabhai Naoroji in 1867 and further analysed and developed by R.P. Dutt, M.G Ranade etc
• In 1867, Dadabhai Naoroji put forward the ‘drain of wealth’ theory in which he stated that the Britain was completely draining India. He mentioned this theory in his book Poverty and Un-British Rule in India.
  • He put forward the idea that Britain was draining and bleeding India and that, too, for nothing.
  • He slated that out of the revenues raised in India nearly one-fourth goes out of the country and is added to the resources of England.
  • He argued that this amount if not drained away would have been invested in India and increased the people’s income.
  • He considered it as a major evil of British in India.
  • To quote Dadabhai Naoroji, “materially” British rule caused only “impoverishment”; it was like “the knife of sugar. That is to say there is no oppression, it is all smooth and sweet, but it is the knife, notwithstanding.”
• Naoroji observed in 1880, “It is not the pitiless operations of economic laws, but it is thoughtless and pitiless action of the British policy; it is pitiless eating of India’s substance in India and further pitiless drain to England, in short it is pitiless perversion of Economic Laws by the sad bleeding to which India is subjected, that is destroying India.”
• On the footsteps of Dadabhai Naoroji, R. C. Dutt also promoted the same theory by keeping it as a major theme of his book Economic History in India in 1901.
  • He protested that taxation raised by a king is like the moisture sucked up by the sun, to be returned to earth as fertilizing rain, but the moisture raised from the Indian soil now descends as fertilizing rain largely on other lands, not on India.
• M.G Ranade published book Essay on Indian Economics in 1899)
  • He also talked about drain of wealth and saw the need for heavy industry for economic progress and believed in Western education as a vital element to the foundation of an Indian nation.
• Other economic critique of colonialism were GV Joshi, G Subramaniam Iyer, GK Gokhle, PC Ray etc.
• John Sullivan, President of the Board of Revenue, Madras, had wrote—”Our system acts very much like a sponge, drawing up all the good things from the banks of the Ganges, and squeezing them down on the banks of the Thames.”
• Dadabhai Naoroji and other economic nationalists gave several factors that caused external drain. These are:
  • “Home charges” or paying for the secretary of state and his establishment at the India Office in London, as well as pay, pension and training costs for the civilian and military personnel— or “the men who ruled India”.
  • Annuities on account of railway and irrigation works;
    • guaranteed interest on foreign investments in railways, irrigation, road transport and various other infrastructural facilities,
  • Indian office expences including pensions to retired officials who had worked in India or England, pensions to army and navals etc.
  • Remittances to England by Europeans to their families.
  • Remittances for purchase of British Goods for consumption of British employees in India.
    • the government purchase policy of importing all its stationery from England
  • interest on foreign debt incurred by the East India Company,
  • military expenditure,
  • Also, trade as well as Indian labour was deeply undervalued.

Amount of drain

• The Indian leaders estimates of the drain differed from person to person and from year to year. The general basis of calculation was the difference between exports and imports, but there were other factors as well.
• R.C. Dutt observed that one-half of the net revenues of India flows annually out of India.
  • R.C Dutt’s estimate was about £20 millions a year in the early years of the present 20th century.
• Ranade declared that of the national income of India more than one- third was taken away by the British in one form or other.
• In Naoroji’s calculation this huge drainage amounted to about £12 million per year, while
• William Digby calculated annual drainage to be £30 million.
  • In average, this amounted to at least half of the total revenue income of the British Indian government.
• Dadabhai Naroji slated that out of the revenues raised in India nearly one-fourth goes out of the country and is added to the resources of England (about £12 million per year).
• A modem historian would put the amount of drainage at £17 million per annum in the late nineteenth and early twentieth centuries, and point out that this “represented less than 2 per cent of the value of India’s exports of commodities in that period”.

Impact on economy:

• The drain theory was not limited to the narrow concept of export of money or good, but was based on wider economic reasoning and consideration.
• The drain affected the country’s prospects of employment and income.
• As R.C. Dutt pointed out when taxes paid by the people are spent in the country the money circulates among the people, fructifies trades, industries and agriculture and in one shape or another reaches the mass of the people but when the money is sent out of the country it does not stimulate her trades industries or reach the people in any form.
• The drain really denuded India of its productive capital and created that shortage of capital which hindered industrial development.
  • This directly impoverished India and stultified the process of capital formation.
• In R.C. Dutt’s view tho drain flowed mainly out of land-revenue and thus caused impoverishment of the peasantry.
• Dadabhai Naoroji argued, what was being drained out was “potential surplus” that could generate more economic development if invested in India
• Some of the recent historical writings point out that the fact still remains that India was not transformed into a full-fledged capitalist economy.
  • As in the case of agrarian economy, so also in other sectors, British policies failed to foster growth.
  • And this was due to the colonial nature of those policies, i.e., the policy of gearing up the colonial economy to the needs of the economy of the mother country.
• A revisionist view claims that on the whole “colonial India experienced positive economic growth“.
  • But this growth, it is admitted, varied widely in both time and space.
    • In other words, there were periods of growth (for example, 1860-1920) and regions of prosperity (such as Punjab, coastal Madras and western Uttar Pradesh), and a generalised view of colonial policies cannot explain these regional and periodic variations.
  • But where stagnation prevailed, it was to a large extent because the government did not do as much as it should have by investing in resource generation, such as irrigation, education and healthcare.
  • The revisionist view acknowledges that it was the presence or absence of these critical resources, which determined regional development or lack of it.

Constituents of drain of wealth:

• Home Charges:
  • “Home charges” or paying for the secretary of state and his establishment at the India Office in London, as well as pay, pension and training costs for the civilian and military personnel— or “the men who ruled India”.
  • Amount of Home charges:
    • Before the Revolt of 1857 the Home charges varied from 10% to 13% of the average revenues of India.
    • After the Revolt the proportion shot up to 24% in the period 1897-1901.
    • In 1901-02, the Home charges amounted to £ 17.36 million.
    • During 1921-22, the Home charges sharply increased to 40% of the total revenue of the Central Government.
  • Other constituents of Home charges were:
    • Dividend to the shareholders of the East India Company
    • Interest on Public Debt rose abroad:
      • The East Indian Company had piled up a public debt to dislodge Indian rulers from their Principalities.
      • By 1900 the public debt had risen to £ 224 million.
      • Only part of the debt was raised for productive purposes i.e., for construction of railways, irrigation facilities and public works.
    • Civil and Military charges:
      • These included:
        • payments towards pensions and furloughs of British officers in the civil and military departments in India,
        • expenses on India Office establishment in London,
        • payments to the British war office etc.
      • All these charges were solely due to India’s subjection to foreign rule.
    • Store purchases in England:
      • The Secretary of State and the Government of India purchased stores for the Military, Civil and Marine Departments in the English market.
      • The annual average expenditure on stores varied from 10% to 12% of the Home charges between 1861-1920.
• Council Bills:
  • The actual transfer of money took place through the sale of “Council Bills“, which were sold in London in sterling to purchasers of Indian goods who received Indian rupees in exchange. This caused drain of wealth.
  • Lets try to understand what is Council Bills (Even if you don’t understand, you can leave it).
    • Council Bills are best explained by quoting from Sir John Strachey’s lectures given in 1888. ‘The Secretary of State draws bills on the Government treasury in India, and it is mainly through these bills, which are paid in India out of the public revenues, that the merchant obtains the money that he requires in India and the Secretary of State the money that he requires in England.’
    • In other words:
      • Would be British purchasers of Indian exports bought Council Bills from the Secretary of State in return for sterling (which was used to meet the Home Charges).
      • The Council Bills were then exchanged for rupees from the Government of India’s revenues.
      • Next the rupees were used to buy Indian goods for export.
      • Conversely, British officials and businessmen in India bought Sterling Bills in return for their profits in rupees from British owned Exchange Banks; the London branches of these tanks paid in pounds for such bills with the money coming from Indian exports” purchased through-the rupees obtained through sale of Sterling Bills.
• Interest and profit on Foreign Capital Investments:
  • Interest and profits on private foreign capital were another important leakage from the national income stream.
  • Finance capital entered the Indian market in the last quarter of 19th century as a result of extension of railways, growth of internal and external trade and setting up of plantations, mines, cotton and jute mils, engineering works etc.
  • Foreign capitalists were the least interested in industrial development of India. Rather they exploited Indian resources for their own benefit and infact thwarted indigenous capitalist enterprise by fair and foul means.
• Foreign Banking:
  • For banking, insurance and shipping services India had to make huge payments.
  • Apart from constituting a drain on Indian resources, unrestricted activities of these foreign companies stunted the growth of Indian enterprise in these spheres.

British response

• The British reply to these arguments was that the drain really represented payments for services of capital and personnel.
• The imperial argument was that some of this expenditure was to encourage economic development in India in the way it had happened in the West.
  • India was brought into the larger capitalist world market and that was in itself a progress towards modernisation.
  • Much of the foreign loans and investments were for the development of infrastructure, for integrating internal markets and, therefore, for the modernisation of the Indian economy itself.
• Sir John Strachey said in 1888 : England receives nothing from India except return for English services rendered English capital expended. The export surplus was accounted for by invisible exports such as shipping services, insurance charges on exports and imports etc.
• In return for the interest paid to British capital, India got railways, irrigation works, plantation industries etc. In return for the Home Charges India got the services of efficient officers security against external aggression etc.
• The substance of the argument was that the drain really represented which benefited India in different ways and contributed to her modernization.
• Indian nationalist thought never reconciled itself to the very high price exacted by the British rulers for these benefits. The British capitalists sent to England not only the amount of legitimate interest on their capital invested in India but the entire amount of profits. The British pensioners spent their pensions in England.

Impact of the Drain Theory in the Growth of Economic Nationalism/ Economic Critique of Colonialism:

• Of all the national movements in colonial countries, the Indian national movement was the most deeply and firmly rooted in an understanding of the nature and character of colonial economic domination and exploitation.
• Moderates (early congress leaders), were the first in the 19th century to develop an economic critique of colonialism. This critique was, also, perhaps their most important contribution to the development of the national movement in India.
• The themes built around this critique were later popularized on a massive scale and formed the very pith and marrow of the nationalist agitation through popular lectures, pamphlets, newspapers, dramas, songs, and prabhat pheries.
• Disillusionment of Indian intellectuals:
  • Indian intellectuals of the first half of the 19th century had adopted a positive attitude towards British rule. They hoped that Britain, the most advanced nation of the time, would help modernize India.
  • It is not that the early Indian nationalists were unaware of the many political, psychological and economic disabilities of foreign domination, but they still supported colonial rule as they expected it to rebuild India as a spit image of the Western metropolis.
  • The process of disillusionment set in gradually after 1860 as the reality of social development in India failed to conform to their hopes. They began to notice that while progress in new directions was slow and halting; overall the country was regressing and underdeveloping.
  • Gradually, their image of British rule began to take on darker hues; and they began to probe deeper into the reality of British rule and its impact on India.
• Economic analysis of British rule:
  • Dadabhai Naoroji (the Grand Old Man of India)
  • Justice Mahadev Govind Ranade,
  • Romesh Chandra Dutt: published The Economic History of India at the beginning of the 20th century in which he examined in minute detail the entire economic record of colonial rule since 1757.
  • These three leaders along with G.V. Joshi, G. Subramaniya lyer, G.K. Gokhale, etc analysed every aspect of the economy and colonial economic policies to minute scrutiny.
  • After analysing they concluded that colonialism was the main obstacle to India’s economic development.
• They were able to see that colonialism no longer functioned through the crude tools of plunder and tribute and mercantilisin but operated through the more disguised and complex mechanism of free trade and foreign capital investment. The essence of 19th century colonialism, they said, lay in the transformation of India into a supplier of food stuffs and raw materials to the metropolis, a market for the metropolitan manufacturers, and a field for the investment of British capital.
• The early Indian national leaders were simultaneously learners and teachers. They organized powerful intellectual agitations against nearly all the important official economic policies. An important feature of this agitation was the use of bold, hard- hitting and colourful language.
• The nationalist economic agitation started with the assertion that Indians were poor and were growing poorer every day.
  • The early nationalists could see poverty as man-made and, therefore, capable of being explained and removed. As R.C. Dutt put it: ‘If India is poor today, it is through the operation of economic causes.’
  • The problem of poverty was, moreover, seen as the problem of national development. This approach made poverty a broad national issue and helped to unite, instead of divide, different regions and sections of Indian society.
• Industrialisation was the main focus of Moderates:
  • Economic development was seen above all as the rapid development of modern industry.
  • The early nationalists accepted that the complete economic transformation of the country on the basis of modem technology and capitalist enterprise was the primary goal of all their economic policies.
  • They believed Industrialism represents ‘a superior type and a higher stage of civilization;’
  • Ranade: factories could ‘far more effectively than Schools and Colleges give a new birth to the activities of the Nation.’
  • Modem industry was also seen as a major force which could help unite the diverse peoples of India into a single national entity having common interests.
  • Surendranath Banerjea’s newspaper the Bengalee: ‘The agitation for political rights may bind the various nationalities of India together for a time. The community of interests may cease when these rights are achieved. But the commercial union of the various Indian nationalities, once established, will never cease to exist. Commercial and industrial activity is, therefore, a bond of very strong union and is, therefore, a mighty factor in the formation of a great Indian union.’
  • Consequently, because of their whole-hearted devotion to the cause of industrialization, the early nationalists looked upon all other issues such as foreign trade, railways, tariffs, currency and exchange, finance, and labour legislation in relation to this paramount aspect.
• The early nationalists were also clear on one question: However great the need of India for industrialization, it had to be based on Indian capital and not foreign capital.
  • They saw foreign capital as an unmitigated evil which did not develop a country but exploited and impoverished it.
  • Or, as Dadabhai Naoroji popularly put it, foreign capital represented the ‘despoilation’ and ‘exploitation’ of Indian resources.
  • They further argued that instead of encouraging and augmenting Indian capital foreign capital replaced and suppressed it, led to the drain of capital from India and further strengthened the British hold over the Indian economy.
  • To try to develop a country through foreign capital, they said, was to barter the entire future for the petty gains of today.
  • In essence, the early nationalists asserted that genuine economic development was possible only if Indian capital itself initiated and developed the process of industrialization.
  • They were also aware about the political consequences of foreign capital investment.
  • Foreign capital investment created vested interests which demanded security for investors and, therefore, perpetuate foreign rule.
• Problems highlighted by Moderates:
  • A major problem the early nationalists highlighted was that of the progressive decline and ruin of India’s traditional handicrafts.
    • It was the result of the deliberate policy of stamping out Indian industries in the interests of British manufacturers.
  • Pattern of foreign trade and construction of railway: The British administrators pointed with pride to the rapid growth of India’s foreign trade and the rapid construction of railways as instruments of India’s development as well as proof of its growing prosperity.
    • However, the nationalists said that because of their negative impact on indigenous industries, foreign trade and railways represented not economic development but colonialization and Underdevelopment of the economy.
    • What mattered in the case of foreign trade was not its volume but its pattern or the nature of goods internationally exchanged and their impact on national industry and agriculture.
      • And this pattern had undergone drastic changes during the 19th Century, the bias being overwhelmingly towards the export of raw materials and the import of manufactured goods.
    • Similarly, the early nationalists pointed out that the railways had not been coordinated with India’s industrial needs. They had therefore, ushered in a commercial and not an industrial revolution which enabled imported foreign goods to undersell domestic industrial products.
    • Moreover, they said that the benefits of railway construction in terms of encouragement to the steel and machine industry and to capital investment — what today we would call backward and forward linkages — had been reaped by Britain and not India.
      • G.V. Joshi: expenditure on railways should be seen as Indian subsidy to British industries.
  • The policy free trade: According to the early nationalists, a major obstacle to rapid industrial development was the policy of free trade which was, on the one hand, ruining India’s handicraft industries and, on the other, forcing the infant and underdeveloped modem industries into a premature and unequal and, hence, unfair and disastrous competition with the highly organized and developed industries of the West.
    • The tariff policy of the Government convinced the nationalists that British economic policies in India were basically guided by the interests of the British capitalist class.
  • Pattern of finance: The early nationalists strongly criticized the colonial pattern of finance. Taxes were so raised as to overburden the poor while letting the rich, especially the foreign capitalists and bureaucrats, go scot-free.
    • They demanded the reduction of land revenue and abolition of the salt tax and  supported the imposition of income tax and import duties on products which the rich and the middle classes consumed.
  • Pattern of expenditure: They pointed out that the emphasis was on serving Britain’s imperial needs while the developmental and welfare departments were starved.
    • They condemned the high expenditure on the army which was used by the British to conquer and maintain imperialist control over large parts of Asia and Africa.
• The drain theory.
  • It was the focal point of the nationalist critique of colonialism.
  • The drain theory incorporated all the threads of the nationalist critique of Colonialism, for the drain denuded India of the productive capital its agriculture and industries so desperately needed.
  • The drain theory was the high watermark of the nationalist leaders’ comprehensive, interrelated and integrated economic analysis of the colonial situation. Through the drain theory, the exploitative character of British rule could be made Visible.
  • Moreover, the drain theory possessed the great political merit of being easily grasped by a nation of peasants.
    • No other idea could arouse people more than the thought that they were being taxed so that others in far off lands might live in comfort.
    • The foreign rulers do anything to appease the people on this question. Modem colonialism was inseparable from the drain.
    • The contradiction  between the Indian people and British imperialism was seen by people to be insoluble except by the overthrow of British rule. It was, therefore, inevitable that the drain theory became the main staple of nationalist political agitation during the Gandhian era.
• Effects of economic critiques:
  • This agitation on economic issues contributed to the undermining of the ideological hegemony of the alien rulers over Indian minds, that is, of the foundations of colonial rule in the minds of the people.
    • Any regime is politically secure only so long as the people have a basic faith in its moral purpose, in its benevolent character — that is, they believe that the rulers are basically motivated by the desire to work for their welfare. It is this belief which leads them to support the regime or to at least acquiesce in its continuation. It provides legitimacy to a regime, in this belief lie its moral foundations.
    • The secret of British power in India lay not only in physical force but also in moral force, that is; in the belief sedulously inculcated by the rulers for over a century that the British were the Mai-Baap of the common people of India
    • • The first lesson in primary school language textbooks was most often on ‘the benefits of British rule.’
    • The nationalist economic agitation gradually undermined these moral foundations. It corroded popular confidence in the benevolent character of British rule — in its good results as well as its good intentions.
  • The economic development of India was offered as the chief justification for British rule by the imperialist rulers and spokesmen.
    • The Indian nationalists controverted it forcefully and asserted that India was economically backward precisely because the British were ruling it in the interests of British trade, industry and capital, and that poverty and backwardness were the inevitable Consequences of colonial rule.
  • The corrosion of faith in British rule inevitably spread to the political field.
    • In the course of their economic agitation, the nationalist leaders linked nearly every important economic question with the politically subordinated status of the country.
    • Slowly they began to draw the conclusion pro-Indian and developmental policies would be followed only by a regime in which Indians had control over political power.
    • The result was that even though most of the early nationalist leaders were moderate in politics and political methods, and many of them still professed loyalty to British rule, they cut at the political roots of the empire and sowed in the land the seeds of disaffection and disloyalty and even sedition.
      • This was one of the major reasons why the period 1875 to 1905 became a period of intellectual unrest and of spreading national consciousness — the seed-time of the modem Indian national movement.
    • While until the end of the 19th century, Indian nationalists confined their political demands to a share in political power and control over the purse, by 1905 most of the prominent nationalists were putting forward the demand for some form of self-government.
      • Here again, Dadabhai Naoroji was the most advanced:
        • Speaking on the drain at the International Socialist Congress in 1904, he put forward the demand for ‘selfgovernment’ and treatment of India ‘like other British Colonies.”
        • In 1905, in the Benares session of the Indian National Congress, Dadabhai categorically asserted: ‘Selfgovernment is the only remedy for India’s woes and wrongs.’
        • As the President of the 1906 session of the Congress at Calcutta, he laid down the goal of the national movement as “selfgovernment or Swaraj,” like that of the United Kingdom or the Colonies.’
• Thus, the early nationalists rooted their nationalism in a brilliant scientific analysis of the complex economic mechanism of modern colonialism and of the chief contradiction between the interests of the Indian people and British rule.
• The nationalists of the 20th century relied heavily on the main themes of their economic critique of colonialism.
• Based on this firm foundation, the later nationalists went on to stage powerful mass agitations and mass movements. At the same time, because of this firm foundation, they would not, unlike in China, Egypt and many other colonial and semi-colonial countries, waver in their anti-imperialism.

Note:

• Naoroji calculated the per capita income of the Indians to be Rs. 20, while Digby’s calculation was Rs. 18 for 1899. The government did not accept this calculation: in 1882 Ripon’s finance secretary calculated it to be Rs. 27, while Lord Curzon in 1901 calculated it to be Rs. 30. The famines and epidemics of this period however told a different story.

Economic nationalism led to the various economic demands by moderates:

• To rectify the situation what the moderates wanted was a change in economic policies.
• Their recommendations included:
  • reduction of expenditure and taxes,
  • a reallocation of military charges,
  • protectionist policy to protect Indian industries,
  • reduction of land revenue assessment,
  • extension of Permanent Settlement to ryotwari and mahalwari areas, and
  • encouragement of cottage industries and handicrafts.
• But none of these demands were fulfilled.
  • Income tax, abolished in the 1870s, was reimposed in 1886;
  • the salt tax was raised from Rs. 2 to Rs. 2.5;
  • a customs duty was imposed, but it was matched by a countervailing excise duty on Indian cotton yarn in 1894, which was reduced to 3.5 per cent in 1896.
  • The Fowler Commission artificially fixed the exchange rate of rupee at a high rate of 1 shilling and 4 pence.
  • There was no fundamental change in the agricultural sector either, as colonial experts like Alfred Lyall believed that Indian agriculture had already passed through its stationary stage and had entered the modem stage of growth and hence there were more signs of progress than recession.
• The moderate economic agenda, like its constitutional or administrative agenda, thus remained largely unrealised.

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