Economic impact of colonial rule
How British colonial rule deindustrialised India, drained wealth, commercialised agriculture and impoverished the peasantry, with the nationalist economic critique.
The Drain of Wealth
The defining nationalist charge against British rule was the Drain of Wealth — the unilateral, unrequited transfer of India's resources to Britain for which India received no economic, commercial or material return. Dadabhai Naoroji systematised the thesis in Poverty and Un-British Rule in India (1901), having advanced it from 1867; R.C. Dutt developed it in The Economic History of India (two volumes, 1902 and 1904). The drain operated through Home Charges — payments remitted to England for the salaries and pensions of British officials, the India Office establishment, interest on the public debt raised in London, dividends to East India Company shareholders (until 1858), and the cost of military expeditions charged to Indian revenues.
Naoroji estimated the annual drain at roughly £30–40 million by the late nineteenth century. Crucially, the drain was financed through India's export surplus: India consistently exported more than it imported, but the surplus was appropriated as 'Council Bills' rather than returned as gold or goods. The economist Utsa Patnaik has recently re-estimated the cumulative transfer at sums in the tens of trillions of dollars, reviving the classical critique.
Deindustrialisation
India entered the eighteenth century as the world's leading exporter of cotton textiles. British rule reversed this. The Charter Act of 1813 ended the East India Company's commercial monopoly and threw India open to British manufactures; Lancashire's machine-made cloth, protected by discriminatory tariffs in Britain and free entry into India, destroyed the handloom industry. William Bentinck reported in 1834-35 that 'the bones of the cotton-weavers are bleaching the plains of India.'
The process had three stages: the ruin of the export trade in fine textiles after 1813; the displacement of artisans serving the domestic market by cheap imports through the 1830s-1850s; and the absence of compensating industrial employment because no large-scale modern industry replaced the lost crafts. Artisans were thrown back onto an already overburdened agriculture — the phenomenon of the 'ruralisation' or over-pressure on land. India was converted from an exporter of manufactures into an exporter of raw materials (raw cotton, jute, indigo, tea) and an importer of finished British goods, the classic colonial pattern.
One-way free trade and tariff policy
British commercial policy enforced one-way free trade: Indian goods entered Britain against prohibitive duties while British goods entered India duty-free or near-free. The 3.5 per cent cotton import duty levied in 1894 was offset by a matching countervailing excise duty on Indian mill cloth in 1896, designed solely to neutralise any advantage to the nascent Bombay textile industry — a measure nationalists denounced for decades until its abolition in 1925-26. The Inland Customs Line and the salt monopoly further illustrate revenue extraction structured to serve metropolitan interests over Indian welfare.