Glossary term
Drain of Wealth: Meaning and Definition
Reviewed and approved by Dr. Anamika ShrivastavaPublished Last updated
The drain of wealth was the transfer of India’s export surplus to Britain during colonial rule without any matching inflow of gold, silver or goods. The surplus paid for British administration, wars and invisible imports. Dadabhai Naoroji developed the idea, arguing that it impoverished India.
In more detail
Dadabhai Naoroji argued that part of India’s output left the country every year as payment for British services, debt interest and profits. He saw it as the cause of poverty, because the resources were not invested in India. Later historians debate its size, but the idea shaped the national movement’s economic thought.
Example
If India exported far more than it imported, but the surplus went to pay the colonial office in Britain and the cost of wars, the country earned no gain from its trade surplus.
Key points
- Export surplus without a return flow of gold or silver.
- It paid British government expenses and wars.
- Linked with Dadabhai Naoroji.
Common mistake
Treating the export surplus as a gain to India.
Related terms
Where it is explained
This term is explained in Class 11 Indian Economic Development Chapter 1: Indian Economy on the Eve of Independence.