What is economic drain theory?

Answer 1

According to the Economic Drain theory ,there is a continuous flow of wealth from one nation to another without any returns ,be it material or money,to the nation which is being drained.

Drain is a single flow direction with the drained nation getting no returns which is detrimental to the economy of the drained nation.

The theory was laid down by Dadabhai Naoroji,the first Indian to be elected to the British Parliament,in his book "Poverty and Unbritish rule in India" in 1867.

According to him ,India was being drained of its wealth by Britain due to the following reasons

1.India was being ruled by a foreign nation

2.India had to pay for the salaries and pensions of British officials.

3.India had to pay for the wars the British fought both inside and outside the subcontinent.

4.Free trade led to rise in exports ,as compared to imports ,with no returns to India.

5.India had to pay for the expenses of the Indian Government in Britain.

6.Prinicipal foreign earners would buy outside the country and would sometimes leave the country with money earned.

The effects of India's drain were drastic:

1.While India produced about 25 percent of world industrial output in 1750, this figure had fallen to only 2 percent by 1900.

2.It led to widespread poverty ,ruined the Handicraft Industries and suppressed the premature modern Indian Industries.