The “Drain of Wealth” theory explains the massive transfer of India’s resources to Britain during colonial rule. Dadabhai Naoroji first highlighted it in 1867, showing how unfair economic policies caused poverty and stagnation in India.

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• Drain of Wealth = steady transfer of India’s wealth to Britain
• First highlighted by Dadabhai Naoroji in 1867
• Detailed in his book Poverty and Un-British Rule in India (1871)
• Britain exploited cheap raw materials, sold costly finished goods
• Indian revenue funded British civil, military, and admin costs
• Export surplus to Britain brought no financial return to India
• Indian soldiers, workers paid less than British counterparts
• Heavy taxes in India, 14.3% of income vs 6.9% in England
• Public debt interest, pensions, remittances drained resources
• Impact: economic stagnation, weak industry, job loss in 18th–19th century
• Economists like R.C. Dutt and M.G. Ranade expanded the theory
• Known as “economic imperialism” or “capital flight” in modern terms