General Studies (Paper - 1) : Model Question & Answers

Question: Assess the contribution of the Moderates in exposing the “Drain of Wealth” by the British government.

Answer: The most significant historical contribution of the moderates was that they offered an economic critique of colonialism. This economic nationalism became a major theme that developed further during the subsequent period of the nationalist movement and to a large extent influenced the economic policies of the Congress government in independent India.

The contribution of the following leaders is important in this context:
(a) Dada Bhai Naoroji
(b) M G Ranade
(c) R C Dutt
(d) G Subramania Aiyar

• The main thrust of this economic nationalism was on Indian poverty created by the application of classical economic theory of free trade.

• They argued that the British rule had turned India into a supplier of raw materials and a consumer of manufactured goods from the mother country.

• India was reduced to the status of a dependent agrarian economy and a field for British capital investment. The key to India’s development was industrialisation with Indian capital, while investment by foreign capital meant drainage of wealth through expatriation of profit. It was argued that direct drainage of wealth took place through payment of Home Charges, military charges and guaranteed interest payment on railway investments. On an average this amounted to at least half of the total revenue incomeof the British Indian government.

• High land revenue demand led to land alienation and impoverishment of the peasantry, while absence of protective tariff in the interests of British manufactures hindered industrialisation and destroyed the handicraft industry.