The British Drain of Wealth: Why India’s Economic Past Still Shapes Its Present

As India asserts itself as one of the world’s largest economies, its leaders increasingly frame this rise against a long period of economic depletion. Speaking in 2024, External Affairs Minister S. Jaishankar observed that colonialism’s economic impact “is not a closed chapter — it shaped the inequities of the present.” That sentiment reflects a growing global reassessment of empire, extraction and historical responsibility.

The idea that British rule drained India’s wealth was first articulated by Dadabhai Naoroji in the 19th century. Once dismissed as nationalist rhetoric, it is now backed by extensive economic data.

In 1700, India accounted for nearly a quarter of global GDP. By the time the British left in 1947, that share had collapsed to under 3 per cent. This decline was not organic. It was engineered.

Economist Utsa Patnaik’s analysis of colonial trade data estimates that Britain extracted wealth equivalent to $45 trillion in today’s terms. Taxes collected in India were used to buy Indian goods, which were then exported to Britain, a system that allowed the empire to enrich itself without spending from its own treasury.

Manufacturing was systematically dismantled. India’s globally competitive textile industry was crushed as raw cotton was exported cheaply while British cloth flooded Indian markets. Agriculture was reshaped to serve imperial demand, forcing farmers into export crops like indigo and opium, often at the cost of food security.

The economic consequences were deadly. Between 1876 and 1902, more than 20 million Indians died in famines even as grain exports continued. Historian Mike Davis described these as “market-induced catastrophes,” not natural disasters.

By Independence, India inherited an economy in deficit: low literacy, short life expectancy, stagnant agriculture and infrastructure designed for extraction rather than development. The new nation did not start from zero, it started from behind.

These realities have re-entered public debate as conversations on reparations, trade imbalance and global inequality gain momentum. During the 2024 elections, several political leaders referenced colonial extraction to argue that today’s unequal economic systems did not emerge in isolation.

The renewed interest is not about blame. It is about context. Understanding why India had to spend decades simply catching up.

The documentary From Slaves to Bond: The Rise of the British Empire – Episode I adds to this understanding by tracing how empire-wide extraction operated as a system. Its exploration of preferential trade, plantation economies and resource diversion mirrors long-standing academic work on India’s economic drain, now reaching wider audiences.

As former RBI governor Raghuram Rajan noted in a recent lecture, understanding the past is essential not to remain trapped by it, but to appreciate how far India has travelled.

Britain left in 1947. The economic aftershocks did not.

Disclaimer:
This article is for informational and analytical purposes only. Views expressed are based on cited sources and do not necessarily reflect the views of the publication.