Dadabhai Naoroji introduced the Drain of Wealth Theory in 1867, explaining how British colonial rule systematically transferred India’s wealth to Britain.

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• Drain of Wealth Theory explained economic exploitation of India under British colonial rule.
• Dadabhai Naoroji first presented the idea in his paper “England’s Debt to India” in 1867.
• Theory was later detailed in his book “Poverty and Un-British Rule in India” published in 1901.
• Naoroji argued that British policies continuously transferred Indian wealth to England without return.
• India exported cheap raw materials while importing expensive British manufactured goods.
• British officials received high salaries, pensions and allowances which were sent back to Britain.
• “Home Charges” included payments for administration, debt interest and India Office expenses in England.
• Revenue collected from Indians was used to fund colonial administration and wars.
• Land revenue systems like Zamindari and Ryotwari imposed heavy tax burdens on peasants.
• British trade monopoly and industrialisation increased India’s economic dependency.
• Theory highlighted poverty, famines and decline of Indian industries due to colonial exploitation.
• Drain of Wealth became a major foundation for Indian economic nationalism and freedom movement.
• Indian National Congress adopted the theory in 1896 and linked it to poverty and famines.
• Thinkers like M.G. Ranade and R.C. Dutt also supported the theory.