Conquest of India
Early Resistance to British Rule
Nationalism in India
Indian Freedom Struggle Under Gandhiji
Social Reforms in British India
Partition of India
Other Important Topics

8. Understanding Economic Critique of “COLONIALISM”


  1. Colonialism is a practice of domination that involves the subjugation of one set of population by another. Frequently the two concepts, Colonialism & Imperialism are treated as synonyms as they both involve political and economic control over a dependent territory.
  2. The etymology of the two terms, however, draws some distinction. The term colony comes from the Latin word colonus, meaning ‘farmer’. This reminds us that the practice of Colonialism usually involved the transfer of population to a new territory. Here, the arrivals lived as permanent settlers while maintaining political allegiance to their country of origin.
  3. Imperialism, on the other hand, comes from the Latin term imperium, meaning ‘to command’. Thus, the term Imperialism draws attention to the way thitat one country exercises power over another, whether through settlement, sovereignty, or indirect mechanisms of control.

Read more:- Colonialism


  1. The Moderates initially had belief in British justice & goodwill. They deemed the British Rule would serve the Indian interests, modernize India and would also deliver on to their demands.
  2. The Moderates adopted peaceful & Constitutional methods for achieving the same.
  3. However, with time the true nature of the British was exposed.
  4. The Moderates were now disillusioned as India’s progress was slow and its development was regressing.
  5. This led to a deeper probe into the reality of British Rule.
  6. All of this threw light on the economic critique of colonialism and the negative aspects of it.

Indian Intelligentsia – Its contribution to the critical analysis of Colonialism

  1. Amongst the Economists who studied the impact of Colonialism, Dadabhai Naoroji’s study was the most prominent.
  2. He was the Grand Old Man of India. He spent his entire life and wealth in forming a National Movement.
  3. He popularized the Drain Theory in his book- “Poverty & UnBritish Rule in India”.
  4. He also founded The Bombay Association in 1852 and the East Indian Association.
  5. Justice M.G. Ranade who happened to be his contemporary taught an entire generation of Indians the vitality of Industrial Development.
  6. Romesh Chandra Dutt analysed in minute details the economic impact of colonial rule since the period of 1757.
  7. G.V.Joshi, G Subramanium Iyer, GK Gokhale, PC Ray were the others who contributed to the critical analysis.
  8. They raised basic questions regarding the nature and purpose of the British rule and eventually concluded that colonialism was the greatest hindrance to India’s economic development.

Outcome of the Analysis

  1. The essence of colonialism lay in the fact that India was transformed into a supplier of food stuffs and raw materials to the metropolis. It had now become a sprawling market for the dumping of manufactured products.
  2. They understood that colonialism was leading to subordination of Indian Economy.
  3. The nationalist economic agitation started with the assertion that poverty was not seen as inherent and unavoidable.
  4. These nationalists stressed on the importance of industrialization and that it had to be based on Indian and not foreign capital.
  5. They now tried to look into foreign trade, railways, currency etc.
  6. The policy of free trade was another major obstacle to rapid industrial development.
  7. High taxation was also heavily criticized. It overburdened the poor and let the rich go scott- free.
  8. The Drain Theory was conceptualized by Dadabhai Naoroji in 1867.

Drain Theory

This theory was the focal point of the economic critique. It pointed out that a large part of India’s wealth was being transferred or ‘drained’ to Britain in the form of salaries and pensions to British officials working in India, interest on loans taken by Indian government, profits of British capitalists in India, the expenses of Indian government in Britain and Home charges such as expenses incurred to maintain administration, army, war expenses etc. The new slogan that came into being was ‘No drain’. This ultimately became an easy theory understood by even the downtrodden section of society and soon gave rise to national agitations.

Impact of the Economic Critique

  1. The work of the Economists and Moderates eroded the belief of the people in the benevolence of British rule.
  2. This period of 1875-1905 became a period for growing national consciousness and the seed time for modern Indian National Movement.
  3. At the end of 1905, even leaders like Dadabhai Naoroji put up the demand for Self Rule or Swaraj. It was first declared by Dadabhai in the 1906 Congress session at Calcutta.
  4. The new grown agitation on economic issues contributed to the undermining of the ideological hegemony of the alien rulers over Indian minds.
  5. The corrosion of faith in the British rule inevitably spread to the political field. It was believed that Indians had to have control over political power to bring on their development and growth.
  6. This led to the spreading of national consciousness and thus the period from 1875-1905 became the prime time for the growth of Indian National Movement.


  1. Highlight the contribution of the Moderates in exposing the “Drain of Wealth” by the British government.
  2. Examine the contribution of Moderates in the formative stages of the Indian National Congress.

Also read:- British Administration in India