During its nearly two-century-long rule over India between 1757 and 1947, the British Empire exploited the country’s resources, wealth and people. The impact of colonial rule is still felt today. According to renowned economist Utsa Patnaik, Professor Emeritus at Jawaharlal Nehru University, New Delhi, the British drained about $45 trillion from India between 1765 and 1938, which is 17 times Britain’s current GDP.
This figure is substantial, but how did such a huge amount of wealth come into British hands? The story begins with the British East India Company, which, after gaining control of India, established a monopoly on its trade. The company initially purchased goods from India using silver, but over time, they developed a clever system of exploiting Indian resources without paying for them.
The process was simple but complicated. The East India Company began collecting taxes from Indian farmers and weavers and instead of using the collected money for local development or compensation, they used a portion of it to purchase goods from Indian producers. However, these purchases were made with tax money collected from the same people. This system allowed the British to acquire goods for free, while Indian producers were essentially robbed of their wealth.
Most of the goods “purchased” from India were re-exported, generating huge profits for Britain and multiplying the returns to the colonial power. The British not only consumed these goods but also sold them at huge prices to other countries, pocketing not only the original price of the goods but also the profits.
The British Raj was established once in 1858. After the first war of independence in 1857, this system developed into an even more exploitative system. Indian goods were exported to foreign markets, but payments were still made through London. Merchants wishing to buy Indian goods had to use British-issued Council bills, which they could only buy with gold or silver. This meant that all the precious metals that should have gone directly to Indian producers ended up in the British treasury. As a result, while India had a trade surplus with the rest of the world, the benefits were effectively captured by Britain.
Utsa Patnaik’s research revealed how India was a major source of funds for Britain’s imperial ambitions. The wealth extracted from India financed British industrialization and also financed British wars of conquest, including the invasion of China in the 1840s and the suppression of the Indian Rebellion of 1857.
Furthermore, the income that should have been invested in India’s development was used to fuel European capitalist expansion, benefiting other parts of the world, including Canada and Australia.
This waste continued for decades and had disastrous consequences for India. During the period of British rule, India’s per capita income remained stagnant and even declined in the late 19th century. Famine, poverty and disease devastated the population, and British policies such as exporting food grains during famine resulted in the death of millions of Indians.
Despite this grim reality, some voices in Britain still promote the narrative that British rule in India was beneficial. Historian Niall Ferguson has suggested that British colonialism helped “develop” India, but Utsa Patnaik’s findings paint a very different picture. British rule in India was not a sign of philanthropy, but a systematic exploitation of the country’s resources for Britain’s benefit.
If India had been able to retain the wealth and resources it produced, the direction of the country could have been very different. With a $45 trillion infusion, India could potentially become an economic superpower, and avoid the poverty and suffering that followed British rule. The money Britain extracted from India played a key role in its industrialization at the expense of the very people it ruled.
