The Drain of Wealth theory was originally propounded by Dadabhai Naoroji and later it was developed and analyzed by R.P. Dutt, M.G.Ranade etc. This theory was merely a depiction as to how all the riches of India were being drained by the England. The constant flow of wealth from India to England for which India did not get any type of return is what is known as Drain of wealth theory.

All the resources that were present in India were being utilized by the Britain for their development. If the same resources would have been used in India back then, then the income of the people would have increased tremendously and thereby improving the living standards.

Factors that caused external drain are as follows;

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Outside rule and administration in India.

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India was paying for all the civil administration and army of England.

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The burden of territory building both inside and outside India was also in India.

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Major earners were foreigners only who never invested in India.

Apart from these, for various other services as well, India was paying heavily to the Britishers. Also, Indian labour was greatly undervalued at that time. It doesn’t ends here; East India Company was purchasing items from India with Indian cash and trading it to Britain.

So it can be seen how Indian economy was constantly drained out by the England people for so long.

of board of revenue,Madras best explains the drain of wealth theory

Even the worst of the foreign rulers used their revenue to build roads,irrigation facilities,in wars and in worst case scenarios on their personal luxuries. It ultimately encouraged Indian trade and created employment within India.This is because all these foreign rulers settled in India itself and made it their homes

However the British remained foreigners forever. They sent almost all their wealth gathered here through taxes,remittances etc ,back to England.The company even used this wealth to buy it’s exports from India.This deprived India even from the rightful returns that it deserved from its exports.

Thus , the wealth of our country being spent without India gaining anything out of this expenditure is popularly described as the drain of wealth