Vol. 7, Issue 1, Part B (2025)

The drain of wealth theory is an economic theory that describes the transfer of wealth from India to Britain during the colonial period. Dadabhai Naoroji, the Grand Old Man of India, had propounded the Drain of Wealth theory in 1867. The drain of wealth theory refers to the portion of India's wealth and economy that foreigners captured. This drain of wealth is a dark side of the British East India Company’s colonial rule in India. It was a key factor in the Indian independence movement. During colonial period, British colonial government in India continuously transfers income to England, for which it has not received sufficient amounts of material or return. Indian leaders and economists have described this as a massive transfer of income from India to England. This was the drain of wealth theory. The economic drain that the East India Company caused was an inevitable consequence of its administrative and economic policies. One of the main problems with the colonial government was that it was utilising Indian resources not for developing India but for the benefit of the British. If these resources had been utilised for good within India, then they could have been invested, and the income of the people would have increased instead of being sent out of the country. It was the main reason behind poverty of the Indian people during the colonial rule that was draining the wealth and prosperity of India. It was a key factor in the Indian independence movement.