During the British rule, the structure and operation of Indian economy were determined by the interests of the British economy.
Drain of Wealth: The Constant flow of wealth from India to England for which India did not get an adequate economic, commercial or material return has described as the Drain of Wealth from India. Major Constituents of Economic Drain are:
Home charges: Dividend to the shareholders of the East India Company, Interest on Public Debt raised abroad, Civil and Military charges, Store purchases in England,
Interest on Foreign Capital investments
One way free trade: Cheap and machine-made imports flooded the Indian market after the Charter Act of 1813 allowing one-way free trade for the British citizens. On the other hand, Indian products found it difficult to penetrate the European markets due to high tariffs.
Deindustrialisation led to decline of many cities and a process of ruralisation of India. Many artisans, faced with diminishing returns abandoned their professions, moved to villages and took to agriculture. This resulted in increased pressure on land. Hence there was an increased dependence of population on agriculture which was a major cause of poverty.
The introduction railways in India inaugurated a new economic era. Railways served commercial, administrative and defence interests of British. In 1853, Dalhousie started the “guarantee system” by which the railway companies were guaranteed a minimum interest of 5% percent on their investment. The government retained the right of buying the railway at the end of the period of contract.
Emergence of Intermediaries: Under British rule, new intermediaries such as merchants, money lenders and other moneyed class emerged. These new zamindars, with increased powers but with little or no avenues for new investments, resorted to landgrabbing and sub-infeudation. Hence British led to increase in feudalism in Indian society.
Commercialisation of Agriculture: Agriculture began to be influenced by commercial considerations. Commercial crops like cotton, jute, groundnut, oilseeds, sugarcane, tobacco, Opium etc., increased.
Ishu