Drain Theory

Dadabhai Naoroji: ‘Poverty in India’ (1876)
He claimed that the drain of wealth and capital from the country which started after 1757 was responsible for absence of development in India.
Drain was done through trade, industry and finance
Two elements of the drain
- That arising from the remittances by European officials of their savings, and fro their expenditure in England
- Arising from remittance by non-official Europeans
India has to export much more than she imported to meet the requirements of the economic drain
In 1880 it amounted to 4.14% of India’s national income
Consequences of the Drain
- Prevented the process of capital formation in India
- Through the drained wealth, the British established industrial concerns in India owned by British nationals
- It acted as a drag on economic development

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