"Tribute" or "Drain"

CHAPTER III

“TRIBUTE” OR “DRAIN”

General Observations.

The question whether India pays tribute to England, or ever has paid it, has been and is the subject of bitter controversy among English publicists. One party asserts that India has been paying an enormous tribute to England and still pays it; that there has been going on a regular “drain” of India’s wealth to England ever since British connection with India began; that under the direct administration of India by the Crown since 1858, that drain not only has not ceased but has actually increased; and that this drain has impoverished India beyond description. The other party holds that India has never paid any tribute to England; that there is no drain from India to England; that what has been paid by India has been received by England in lieu of services rendered or capital loaned for her improvement; and that under British rule India has attained a prosperity which she had never known before in her history. We intend to state the case of both parties, with as much fairness as we are capable of, considering that together with all Indian publicists we agree with the former and have no doubt of India’s having been exploited and economically injured by British policy.

In the preceding chapter we have shown how England stood, economically, for more than two centuries, immediately preceding the battle of Plassy and thereabout; also how Indian treasure flowed to England and changed the whole economic outlook there. We do not know of a single publicist English or Indian who denies or questions the facts upon which the theory of drain is based. All parties are agreed that at least for thirty years, from 1757 to 1787, Bengal was “plundered” by the servants of the East India Company. What happened afterwards will be stated partly in the chapter relating to industries and completed in other chapters.

Drain: the Case Against England.

In a letter of July 2, 1901, published in the Morning Post, London, Mr. H. M. Hyndman, the great Socialist leader, said:

“More than twenty years ago the late Sir Louis Mallet (I presume with the knowledge and consent of Lord Cranbrook, then Secretary of State for India, and of my friend the late Edward Stanhope, then Under-Secretary) put at my disposal the confidential documents in the India office, from Indian finance ministers and others, bearing on this question of the drain from India to England and its effects. The situation is, to my mind, so desperate that I consider I am entitled to call on Lord George Hamilton to submit the confidential memoranda on this subject, up to and after the year 1880, for the consideration of the House of Commons. I venture to assert that the public will be astonished to read the names of those who (privately) are at one with me on this matter. As to remedy, there is but one, and it is almost too late for that: the stanching of the drain and the steady substitution of native rule, under light English supervision, for our present ruinous system.”

On page 208 of his book Mr. W. Digby gives the photographic reproduction of two pages from an Indian Blue Book containing admissions about the drain.

“Great Britain, in addition to the tribute she makes India pay her through the customs, derives benefit from the savings of the service at the three presidencies being spent in England instead of in India; and in addition to these savings, which probably amount to near a million, she derives benefit from the fortunes realised by the European mercantile community, which are all remitted to England.” Parl. Paper, 1853 (445-II.), page 580.

The following extracts are made from the “Reports of the Committees of the House of Commons” (Vol. V, 1781-82, printed 1804). Comparing Indian rule with the rule of the East India Company, Mr. Philip Francis, once a member of the Bengal Council, wrote:

“It must give pain to an Englishman to have reason to think that, since the accession of the Company to the Dewanee, the condition of the people of this country has been worse than it was before; and yet I am afraid the fact is undoubted; and I believe has proceeded from the following causes: the mode of providing the Company’s Investment; the exportation of specie, instead of importing large sums annually; the strictness that has been observed in the collections; the endeavours of all concerned to gain credit by an increase of revenue during the time of their being in station, without sufficiently attending to what future consequences might be expected from such a measure; the errors that subsist in the manner of making collections, particularly by the employment of Aumils: These appear to me the principal causes why this fine country, which flourished under the most despotic and arbitrary Government, is verging towards its ruin while the English have really so great a share in the Administration.”

Ten years later, says Mr. Digby “Prosperous British India,” p. 215. Charles Grant, of the Indian House, the greatest panegyrist of British rule in India—and, at the same time, himself the worst disparager of the Indian people known in British-Indian literature—was constrained to admit: “We apply a large portion of their annual produce to the use of Great Britain.”

The Honourable F. J. Shore, a retired Bengal administrator, says in his “Notes on Indian Affairs” (London, 1837, Vol. II, page 516):

“More than seventeen years have elapsed since I first landed in this country; but on my arrival, and during my residence of about a year in Calcutta, I well recollect the quiet, comfortable, and settled conviction, which in those days existed in the minds of the English population, of the blessings conferred on the natives of India by the establishment of the English rule. . .

“I was thus gradually led to an inquiry into the principles and practice of British-Indian administration. Proceeding in this, I soon found myself at no loss to understand the feelings of the people both towards the Government and to ourselves. It would have been astonishing indeed had it been otherwise. The fundamental principle of the English had been to make the whole Indian nation subservient, in every possible way, to the interests and benefits of themselves. They have been taxed to the utmost limit; every successive Province, as it has fallen into our possession, has been made a field for higher exaction; and it has always been our boast how greatly we have raised the revenue above that which the native rulers were able to extort. The Indians have been excluded from every honour, dignity, or office which the lowest Englishman could be prevailed upon to accept.” [Italics ours.]

And elsewhere he writes:

“The halcyon days of India are over; she has been drained of a large proportion of the wealth she once possessed; and her energies have been cramped by a sordid system of misrule to which the interests of millions have been sacrificed for the benefit of the few.”[^1]

John Sullivan, also an eminent English administrator, who served in India from 1804 to 1841 and was examined by the Select Committee of the House of Commons when the question of the renewal of the charter of the East India Company came up in 1853, said:

“Do you suppose that they (the people of India) have traditions among them which tell them that the economic condition of the population was better in former times under their native rulers than it is now?

“I think, generally speaking, history tells us that it was; they have been in a state of the greatest prosperity from the earliest times as far as history tells us.

“How do you account for the superior economic state of the people, and for their ability to lay out the money which they did in canals and irrigation and tanks, if they were wasting more wealth, and sacrificing more lives in war, than we do now, especially seeing that the wars were carried on very much upon their own territories, instead of being beyond their limits?

“We have an expensive element which they were free from, which is the European element, civil and military, which swallows up so much of the revenue; from that cause our administration is so much more expensive; that, I think, is the great reason.”

John Sullivan did not shrink from the logical conclusion of his opinions, when he was asked if he would restore British territory to native rule, keeping the military control of the Empire in British hands.

“4890. You would restore a great deal of territory to native rulers upon principles of justice?”

“Yes.”

“Because we have become possessed of them by violence or by other means without any just right or title?”

“I would do so upon principles of justice and upon principles of financial economy.”[^2]

He also said:

“As to the complaints which the people of India have to make of the present fiscal system, I do not conceive that it is the amount altogether that they have to complain of. I think they have rather to complain of the application of that amount. Under their own dynasties, all the revenue that was collected in the country was spent in the country; but under our rule, a large proportion of the revenue is annually drained away, and without any return being made for it; this drain has been going on now for sixty or seventy years, and it is rather increasing than the reverse. . . . Our system acts very much like a sponge, drawing up all the good things from the banks of the Ganges, and squeezing them down on the banks of the Thames. . . .” [Italics ours.]

Sir John Malcolm, Governor of Bombay in 1827 (one of the makers of British Empire in India) was examined before the select committee of the House of Commons in 1832.

“In your opinion, was the substitution of our government for the misrule of the native princes the cause of greater prosperity of the agricultural and commercial part of the population?

“I cannot answer this in every province of India, but I shall as far as my experience enables me. I do not think the change has benefited, or could benefit either the commercial, the monied, or the agricultural classes of many of the native States, though it may be of others. It has not happened to me ever to see countries better cultivated, and so abounding in all produce of the soil, as well as commercial wealth, than the southern Mahratta districts, when I accompanied the present Duke of Wellington to that country in the year 1803. . . .

“With respect to Malwa. . . . And I do not believe that the introduction of our direct rule could have contributed more, nor indeed so much, to the prosperity of the commercial and agricultural interests as the establishment of the efficient rule of its former princes and chiefs. . . .

“With respect to the southern Mahratta districts, of whose prosperity I have before spoken . . . I must unhesitatingly state that the provinces belonging to the family of Putwarden and some other chiefs on the banks of the Krishna present a greater agricultural and commercial prosperity than almost any I know in India. . . . Above all causes which promote prosperity is the invariable support given to the village and other native institutions, and to the employment, far beyond what our system admits, of all classes of the population.”[^3]

Sir George Wingate, who had held high posts in the government of Bombay, recorded the following observations for the consideration of his countrymen when the administration of the Empire passed to the Crown in 1858:

“If, then, we have governed India not merely for the natives of India but for ourselves, we are clearly blamable in the sight of God and man for having contributed nothing towards defraying the cost of that government. . . .

“With reference to its economic effects upon the condition of India, the tribute paid to Great Britain is by far the most objectionable feature in our existing policy. Taxes spent in the country from which they are raised are totally different in their effects from taxes raised in one country and spent in another. . . .

“The Indian tribute, whether weighed in the scales of justice or viewed in the light of our true interest, will be found to be at variance with humanity, with common sense, and with the received maxims of economical science.” Again,

“Were India to be relieved of this cruel burden of tribute and the whole of the taxes raised in India to be spent in India, the revenue of that country would soon acquire a degree of elasticity of which we have at present no expectation.” “Our Financial Relations with India,” by Major Wingate, London, 1859, pp. 56–64, quoted by Dutt “Early British Rule,” pp. 618–20. [Italics ours.]

On page 126 of his book “India in the Victorian Age,” Dutt quotes the opinion of Colonel Sykes, a distinguished director of the East India Company, who “spoke of the economic drain from India of £3,300,000 to £3,700,000 a year” and remarked that “It is only by the excess of exports over imports that India can bear this tribute.”

Henry St. John Tucker, the chairman of the East India Company, (quoted by Dutt), said that this economic drain was an increasing quantity, “because our home charge is perpetually increasing,” a prophecy which has been more than amply fulfilled.

Similarly another East Indian merchant quoted in the Parliamentary report of 1853, said: “I may say generally that up to 1847, the imports (of India) were about £6,000,000 and the exports about £9,500,000. The difference is the tribute which the company received from the country, which amounts to about £4,000,000.”[^4]

Mr. Montgomery Martin, a historian of the British colonies and dependencies, wrote in 1838:

“So constant and accumulating a drain, even on England, would soon impoverish her; how severe, then, must be the effect on India, where the wages of a labourer is from two pence to three pence a day.”[^5]

Prof. H. H. Wilson, historian of India, says of the annual drain of wealth:

“Its transference to England is an abstraction of Indian capital for which no equivalent is given; it is an exhausting drain upon the country, the issue of which is replaced by no reflux; it is an extraction of the life-blood from the veins of national industry which no subsequent introduction of nourishment is furnished to restore.”

Mr. A. J. Wilson, in an article in the Fortnightly Review, of March, 1884, wrote:

“In one form or another we draw fully £30,000,000 a year from that unhappy country (India), and there the average wages of the natives is about £5 per annum, less rather than more in many parts. Our Indian tribute, therefore, represents the entire earnings of upwards of six millions heads of families—say of 30,000,000 of the people. It means the abstraction of more than one tenth of the entire sustenance of India every year.”

Lord Salisbury, the great English statesman, spoke in 1875 of India as a country from which “much of the revenue” was “exported without a direct equivalent.”

Dr. J. T. Sunderland, a Unitarian minister of the United States, in his pamphlet “The Causes of Famine in India” (page 22), refers to the heavy drain of wealth that is going on as “the greatest of all the causes of the impoverishment of the Indian people.”

This synopsis of opinions about the “tribute” which India pays and has been paying for more than a century and a half to England, or about the “drain” of India’s wealth to England, is by no means exhaustive. In fact one could fill a volume with such extracts. Besides we have scrupulously kept back the opinions of those British statesmen (several of them very eminent Anglo-Indian administrators like Sir Henry Cotton—late Chief Commissioner of Assam, and once an M. P.; Sir William Wedderburn, retired member of the Bombay Council and once an M. P.; Mr. W. S. Caine, late M. P.; Mr. A. O. Hume, once a secretary to the Government of India; and many others), who have openly and actively identified themselves in one way or another, with the cause of Indian nationalism. Similarly we have made no mention of the opinions of Indians themselves. Some further opinions we hope to cite when we come to discuss the extent of the drain.

Drain: the Case for England.

Now we give below a summary of the opinions on the other side. It should be noted, however, that this school which holds that India pays no tribute to England and that there is no drain of India’s wealth to England is of comparatively recent growth. So long as the administration of India was vested in the East India Company, the presence of this tribute and the existence of this drain was admitted. It was hardly ever questioned. In fact that was the test by which James Mill judged the benefit to England of her occupation of India. It is more or less within the last thirty years that the fact of this drain has begun to be denied. We give below the explanation of the so-called drain, that is embodied in the new edition of the Imperial Gazetteer of India (an official publication), Vol. IV.

Discussing the “Home Charges” (which properly speaking should be called “Foreign Charges” met by Indian revenues), the compiler of the chapter says:

“These Home Charges have sometimes been erroneously described as a tribute which India pays to England in consequence of her subordination to that Country . . . figures will show that nearly 11 out of 17¾ million pounds consist of payments on account of Capital and materials supplied by England and belong to a Commercial rather than an administrative class of transaction. Of the balance 4½ millions represent furlough and pension payments and are a necessary concomitant of the British Administration, to which India owes her prosperity.”[^6] [Italics ours.]

We also make the following long quotation from a leaflet called “The Truth About ‘The Drain,’” published and distributed free by the East India Association of London (April, 1909):

“What are the facts about the drain of India’s wealth into Great Britain? It has been assumed that there is a drain, but the nature and extent of this drain has been highly exaggerated, and sometimes grossly misrepresented. The official ‘drain’ is included in what are known as the ‘home charges,’ and these ‘Home charges’ for the three years from 1904 to 1907 amount on the average to £19,000,000 a year, reduced to about £18,000,000 by deducting sundry receipts. These £18,000,000 can be roughly summarised and grouped under the following heads:

(1) Interest on money due or borrowed (chiefly for railways, etc.) about £10,000,000

(2) Purchase of stores £2,500,000

(3) Military charges (including pensions) £4,000,000

(4) Civil charges (including pensions) £2,500,000

“As will be seen (4) civil and (3) military charges, including pensions, amount to £6,500,000. This is no doubt a heavy charge, but it might well be regarded as a not unreasonable premium payable for insurance against foreign aggression and internal disturbance. The peace and security enjoyed in India may be taken as an adequate return for this outlay.

“It is not intended to justify every charge in the debt account, but (1) payment of interest on sums borrowed for the construction of railways, etc., or (2) disbursements on account of the purchase of stores, cannot fairly be described as a ‘drain,’ because in return for this money India has received adequate commercial equivalent in the shape of metals, machinery, railway plant, and miscellaneous stores. Such receipts have always been justly regarded as amongst the most valuable and permanent of commercial returns.

“It has, however, been urged that, in addition to these known payments, there is an unknown drain on India’s resources in the shape of private remittances, and the extent of this drain has been estimated at between £10,000,000 and £12,000,000 a year. This is, of course, a mere guess, and the probabilities are against the accuracy of this guess. The sum mentioned is more than double the annual pay of all the European officials in India, civil and military, and it seems idle to contend that the comparatively few European merchants in India earn more than all the civil and military European officials put together. It is well known that European officials in India cannot remit a moiety of their pay to England. Many of them spend their pay (and even more) in India. It must surely be the same with some European merchants.”

We give yet another quotation from a writer who may aptly be called the father of this school of Anglo-Indian economists. Sir John Strachey, who was Finance Minister of India in the administration of Lord Lytton, observes in his book, “India, Its Administration and Progress”:

“During the last ten years the average value of the imports into India fell short of the value of the exports by about £16,000,000 a year. In this calculation are included imports and exports both of merchandise and treasure, on Government as well as on private account. For the excess India receives no direct commercial equivalent, but she receives the equivalent in another form.

“English capital to a very large amount has been, and is still being, invested in India by the State and by private individuals in railways, irrigation works, and industrial enterprises, and interest on these investments has to be remitted to England. In addition to this, large sums are required in England for what are really investments for India of another kind. It is an inevitable consequence of the subjection of India that a portion of the cost of her government should be paid in England. The maintenance of our dominion is essential in the interests of India herself, and, provided that she is not compelled to pay more than is really necessary to give her a thoroughly efficient Government, and in return for services actually rendered to her, she has no reason for complaint. The charges to be met in England are numerous: interest has to be paid on sterling debt incurred for India in England; there are, among others, charges for civil and military administration, interest and annuities on account of state railways, and interest on the ordinary public debt, furlough allowances, pensions, payments to the Government in England for British troops employed in India, stores of every kind, railway material for use in India, and the Secretary of State’s administration at the India Office. The ordinary annual charge under the last-named head is about £200,000. The charges to be met in England necessarily vary from year to year; in 1909-10 they amounted to about £18,500,000.[^7]

A pupil of Sir John Strachey, Sir Theodore Morison, a member of the India Council, discusses the question at some length in his book called “The Economic Transition in India” and concludes thus:

“When viewed in this way I do not believe it is possible to resist the conclusion that India derives a pecuniary advantage from her connection with the British Empire [!!!] The answer, then, which I give to the question ‘What economic equivalent does India get for foreign payments’ is this:—India gets the equipment of modern industry, and she gets an administration favourable to economic evolution cheaper than she could provide herself.”[^8]

We have italicised the word “cheaper”: the arguments and figures we will notice later on.

Drain: Weighing the Evidence.

The reader is now in possession of the views of both sides on the question of “tribute” or “drain.” In forming his judgment he should consider that according to all sound systems of weighing evidence admissions by a party in his own favour are of little value. The question in essence is, whether Great Britain gets anything from India by virtue of her political domination of it and if so, what? One set of Britishers says she gets enormous sums for which India gets no “direct equivalent.” This they call India’s tribute or drain. Another set says she gets nothing as tribute, that what she gets is in lieu of “services” she renders. That she gets large sums is thus undisputed.

The only question that remains to be considered is the value of the services rendered. Every superior political authority, which exacts a tribute from an inferior, can justify the tribute on the same grounds on which the British do. So this quarrel seems to be nothing but a play on words. We do not intend, however, to leave the subject here and shall examine it more closely on the lines laid down by Messrs. Strachey and Morison.

In order to be absolutely clear on the point it is necessary to know (1) of what the drain consists, (2) the extent of that drain from 1757, when the political connection commenced, up to the present.

Speaking in general terms, whatever India has paid and still pays to England in money or in goods, without receiving an equivalent in money or in goods is the “drain.” That is practically what Lord Salisbury said. This includes (1) the treasure which the East India Company and their servants accumulated from India in the early years of their reign from 1757 up to 1849, the year of the annexation of the Punjab, or for very nearly a century.

I do not know if what is known as the “loot” of India from 1757 to 1772 and then afterwards up to 1815 is denied by the school of politicians to which Sir John Strachey and Sir Theodore Morison belong. The period stands by itself. The extent of the treasure removed to England during this period is not to be estimated by the excess of exports over imports. This treasure consisted of gold, silver, precious stones and merchandise.

The period of 1772 to 1785 is represented by the administration of Warren Hastings. During this period very large amounts of money and very large quantities of merchandise were obtained from the princes and people of India, for which the only return made was in the shape of “services rendered.” These “services” resulted in wars in the then Northwest Province, Oudh and Deccan. These exactions were of two kinds, (1) those made in the name of the company, (2) those made by the servants of the company and of which from the very nature of things there is not and could not be a record anywhere. Then again during the administration of Wellesley large sums of money were obtained from the princes of India, during the war carried on by that pro-consul. This state of things continued more or less actively right up to the end of Dalhousie’s administration. There is no record extant of the diamonds, rubies and other precious stones, worth millions, which were removed from India during this time. The Koh-i-noor, of almost fabulous value, which was last in the possession of Ranjit Singh, the ruler of independent Punjab, was only one of these. The system of international trade had not developed then and ways were open for the transference of wealth from one country to another otherwise than by means of trade. In fact it cannot be disputed that throughout India’s connection with England quantities of Indian treasure were transferred to England, which are not shown in any account. In the days of the East India Company, this treasure consisted of “loot” during wars and of presents by princes and nobility either voluntary or under compulsion.[^9] Since the assumption of the administration by the Crown this has consisted of presents given by, or obtained from, the native princes and nobility in the shape of jewels or valuable goods. That these presents are given and received is a matter of public knowledge in India and cannot be altogether unknown to the Anglo-Indian brotherhood of the East India Association. What the total value of these presents is, there is no means of ascertaining. But in no case can it be a trifling amount, and if we were to add compound interest, the amount would swell to a very large figure. One finds references to these presents scattered in histories, accounts of travellers, private letters published, and in other documents in the British Museum. That the recipients of these presents must have rendered “services” to the givers thereof, there can be no doubt. But that India has been drained to that extent remains an indisputable fact. Then it must be borne in mind that throughout the British domination of India a large portion of that part of the revenue of India which was spent in India has gone into the pockets of Europeans employed in the civil and military departments of the company, and after them, of the Crown. For a long time the natives were employed only in the very lowest possible offices, as menials or clerks or sepoys. There were very few, if any, natives, in the subordinate ranks of civil and military offices during the first 80 years of the East India Company’s rule. Even now a large portion of Indian revenues spent in India falls under that head. But in the days of the East India Company, especially from 1757 to 1833, when the services were at least in theory thrown open to educated natives the major portions of civil and military expenses went into the pockets of Europeans and with the exception of the sums spent in India were transferred to England.

It is clear that the amount of the treasure transferred from India to England during the century from 1757 to 1857 or to the present is not correctly represented by the excess of exports over imports; for to this excess should be added the amount of public debt that the East India Company contracted during this period.

The beauty of the English conquest of India lies in the fact that from the first to the last not one single penny was spent by the British on the conquest. India was conquered by the British, with Indian money and Indian blood. Further, almost all kinds of expenses incurred by the British in Asia, for the conquest of territories, for the expansion of trade, for research and inquiry, were borne by the Indian exchequer. The profits almost always went into the pockets of Britishers. The expenses and losses were debited to India.

R. C. Dutt points out how the total revenues of India have always been in excess of total expenditures incurred in India.

“The whole of the public debt of India, built up in a century of the company’s rule, was created by debiting India with the expenses incurred in England.”

The total Indian debt, bearing interest, was a little over seven millions in 1792. It had risen to ten millions in 1799. Then came Lord Wellesley’s wars and the Indian debt rose to twenty-one millions in 1805. In 1807 it was twenty-seven millions. By 1829 it had risen to thirty millions. The total debt of India (registered debt + treasury notes and deposits + home bond debt) on April 30, 1836, was £33,355,536.[^10] By 1844-45 the total debt of India had reached the figure of forty-three and one-half million pounds. This included the enormous expense of the Afghan war to which England contributed only a small part of the fifteen millions expended, although in the words of John Bright, the whole of this expenditure “ought to have been thrown on the taxation of the people of England, because it was a war commanded by the English cabinet, for objects supposed to be English.”

The annexation of Sindh, and the Punjab wars undertaken by Hardinge and Dalhousie, raised the debt to fifty-five million pounds by 1850-51. Then came the great mutiny in 1857 and the public debt was increased by ten millions sterling. On April 30, 1858, the public debt of India stood at sixty-nine and one-half million pounds sterling.

About the expenses incurred in putting down the mutiny, it is interesting to note the following opinions of Englishmen.

“If ever there was a case of justifiable rebellion in the world,” says an impartial historian,[^11] “it was the rebellion of Hindu and Mussulman soldiers in India against the abomination of cartridges greased with the fat of the cow and the pig. The blunder was made by British Administrators, but India paid the cost. Before this, the Indian Army had been employed in China and in Afghanistan; and the East India Company had received no payments for the service of Indian troops outside the frontiers of their dominions. But when British troops were sent to India to suppress the mutiny, England exacted the cost with almost unexampled rigour.”

“The entire cost of the Colonial Office, or, in other words, of the Home Government of all British colonies and dependencies except India, as well as of their military and naval expense, is defrayed from the revenues of the United Kingdom; and it seems to be a natural inference that similar charges should be borne by this country in the case of India. But what is the fact? Not a shilling from the revenues of Britain has ever been expended on the military defence of our Indian Empire.

“How strange that a nation, ordinarily liberal to extravagance in aiding colonial dependencies and foreign states with money in their time of need, should, with unwonted and incomprehensible penuriousness, refuse to help its own great Indian Empire in its extremity of financial distress.

“The worst, however, is not yet told; for it would appear that when extra regiments are despatched to India, as happened during the late disturbances there, the pay of such troops for six months previous to sailing is charged against the Indian Revenues and recovered as a debt due by the Government of India to the British army pay-office.

“In the crisis of the Indian mutiny, then, and with the Indian finances reduced to an almost desperate condition, Great Britain has not only required India to pay for the whole of the extra regiments sent to that country from the date of their leaving these shores, but has demanded back the money disbursed on account of these regiments for the last six months’ service in this country previous to sailing for India.”[^12]

But a far greater man than Sir George Wingate spoke on the subject of the mutiny expenditure in his own frank and fearless manner.

“I think,” said John Bright, “that the forty millions which the revolt will cost, is a grievous burden to place upon the people of India. It has come from the mismanagement of the Parliament and the people of England. If every man had what was just, no doubt that forty millions would have to be paid out of the taxes levied upon the people of this country.”[^13]

Surely very little of this debt, if any, represented British investments in public works, as there were no railways in India before 1850. When the Empire was transferred to the Crown it was provided that the dividend on the capital stock of the East India Company and other debts of the company in Great Britain and all the territorial and other debts of the company, were to be “charged and chargeable upon the revenues of India alone.” Thus the annual interest which India had till then paid on the capital of the company was made permanent. Is there anything parallel to this in the history of the world?

By 1860, the public debt of India had risen to over one hundred million pounds. Since then it has gone upward by leaps and bounds. In 1913-14 the total liabilities of the Government of India stood at £307,391,121. The argument that the whole of this debt is a commercial transaction from which India got a return in the shape of productive works is on the face of it untenable. It is a pity that eminent Englishmen when dealing with the question of “drain” should ignore this phase of the question and always harp on the misleading statement that the interest paid in England represents interest on capital invested in India on productive works for which India got a fair return in the shape of materials supplied by England. The compiler of the Imperial Gazetteer from which we quoted above makes the bald statement that out of the total home charges amounting to seventeen and three-quarter millions (of what year it is not stated) nearly eleven millions “consist of payments on account of capital and materials supplied by England.”

The Extent of the Drain:

It is impossible to state in pounds, shillings and pence, of how much India has been drained since 1757. We give the various estimates made by Englishmen themselves.

Montgomery Martin wrote in 1838:

“This annual drain of £3,000,000 on British India, amounted in thirty years at 12 per cent. (the usual Indian rate) compound interest to the enormous sum of £723,997,917 sterling; . . . So constant and accumulating a drain even on England would soon have impoverished her; how severe then must be its effects on India, where the wages of a labourer is from twopence to threepence a day?

“For half a century we have gone on draining from two to three and sometimes four million pounds sterling a year from India, which has been remitted to Great Britain to meet the deficiencies of commercial speculations, to pay the interest of debts, to support the home establishment, and to invest on England’s soil the accumulated wealth of those whose lives have been spent in Hindustan. I do not think it possible for human ingenuity to avert entirely the evil effects of a continued drain of three or four million pounds a year from a distant country like India, and which is never returned to it in any shape.”

Mr. Digby says:

“Estimates have been made which vary from £500,000,000 to nearly £1,000,000,000. Probably between Plassy and Waterloo the last-mentioned sum was transferred from Indian hoards to English banks.

“In estimating the loss to India in the nineteenth century the start must be made with Mr. Martin’s figures:

“Loss to India, prior to 1834-35 compound interest, at twelve per cent.. £723,000,000

“The average annual loss, taking the trade tables alone, has been shown to be about £7,500,000. If that sum for the whole period be taken, and a charge of five per cent. compound interest be made (though the money and produce were worth vastly more than five per cent. to the Indian banker, merchant, cultivator, artisan, and to all others in India who would have been in a position to employ capital to good account, were worth at least three times five, but I have taken only five) the result is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .£4,187,922,732

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .£4,910,922,732

“Thus, the adverse balance of trade against India during the last century, even at the low rate of interest I have adopted, reached the enormous total of nearly £5,000,000,000. If one could follow the money in all the ramifications through which, in India, it might have passed, its fertilising effect in every one of the five hundred and forty thousand villages, its accumulating power (‘money makes money’) fructifying in a land where its expenditure would have led to an increase in substance, it would, even then, be impossible to put into words the grievous wrong which (unwittingly but, all the same, culpably) has been done to India.

“Now that I have reached this point in my exposition, I turn to page 372–373 of the latest issue of ‘Financial and Commercial Statistics’ for another purpose, and find that, in taking £7,500,000 as a fair estimate of India’s annual payments to the India Office, I have greatly underestimated the facts. I ought to have reckoned those payments at £9,500,000 for each year. The ‘Amounts received in England at the India Office on Account of India’ during the period 1834-35 to 1898-99 were . . . . . . . . . . . . . . . . . . . . . . . £610,389,135

“To this must be added debt in England existing at the end of 1898-99. £124,268,605

Total . . . . . . . . . . . . . . . . . . . . . . . . . £734,657,740

(“Prosperous British India,” pp. 224, 225.)

“The figures indicating the drain of capital from India to England, given on page 225, must be amended.

“Loss to India, as already shown.. £4,910,922,732

“Add, for remittances to England on official account, not shown in the trade returns, nearly £2,000,000 per annum, since (and including) 1834-5, at 5 per cent., per annum compound interest.. £1,044,980,684

“Borrowings in England (net remaining after conversions, repayments, etc. . . . . . . . . . . . . . . . . £ 124,268,605

£6,080,172,021”

(Ibid, p. 230.)

Says Mr. H. M. Hyndman: [Bankruptcy of India, pp. 56, 57 and 58.]

“Now look at the trade figures for the twenty years: The total exports and imports of India, from 1857 to 1876 inclusive amount to £997,063,848 and £841,192,237 respectively. Discriminating between merchandise and bullion in the imports, we have merchandise to the value of £569,835,243 imported in that period, and £271,356,994 worth of bullion. Between 1857 and 1876 the total export and import trade together increased from £55,000,000 to £103,000,000, or very nearly doubled. Nothing could be more satisfactory is the general verdict. Trade doubled capital. Exports exceed imports—that is all right. Great inflow of bullion—the country must be getting richer.

“But to estimate correctly the above figures, which are calculated at the Indian ports, it is obvious that at least 15 per cent. must be added to the exports for profit, etc., and that therefore the value of the imports to balance these exports should not be less than £1,145,000,000.[^14] They were £841,000,000. Here is a discrepancy to start with of more than £300,000,000. Of the imports, however, £271,000,000 consisted of bullion. Now of this £271,000,000, certainly not less than £120,000,000 represents the proceeds of loans raised or guaranteed by Government, and brought into India as a borrowed fund, wherewith to pay the wages of labourers, engineers, etc., engaged on public works. It is a treasure which has been borrowed for a definite period, which is still owing, and which has to be repaid. This, therefore, is no trade import.

“We have thus the original disparity of more than £300,000,000 plus £120,000,000 as the drain from India in the twenty years. That amounts to £420,000,000, or £21,000,000 a year. It would be easy to show that the actual drain is much greater than this when the opium profits, and the import of treasure to carry on the increased private business (which is also a loan), are taken into account. The above figures are, however, sufficient to establish the principle for which I contend—that the export trade of India represents a most exhausting drain on the country.

“Even leaving out the profit and taking no account of the opium monopoly, India has sustained a drain of nearly £280,000,000 in the twenty years. The exports for 1876–7 were £65,000,000, and the imports, exclusive of bullion, were £37,427,000, with bullion, nearly £49,000,000.”

It is remarkable that the average of annual drain struck by Mr. Hyndman for the 20 years from 1857 to 1876 should coincide with the average estimate of “potential drain” found by Sir Theodore Morison on page 203 of his book, “The Economic Transition of India” (London, 1911).

He says:

“On the whole, I do not think that any one who studies the evidence and extends his calculations over a series of years will find any justification for estimating the potential ‘drain’ at more than £21,000,000 sterling.”

Writing in 1882, Mr. A. J. Wilson, late editor of Investor’s Review, an authority on finance, fixed the figure at thirty millions sterling a year.[^15] Writing in 1906 Mr. Hyndman estimated the drain at forty millions sterling a year, but Mr. A. J. Wilson thought that thirty-five millions would be a safe figure, though in his own opinion it represented a low estimate.[^16]

Figures.

We have taken the figures up to 1898-99 from Mr. Digby’s book. The figures from 1898-99 to 1913-14 are given below. The excess of exports over imports in the decade from 1899-1900 to 1908-09 is as below:[^17]

*These were the years when the Swadeshi Boycott was in force in Bengal as also in other parts of India.

The figures taken from the 48th and 49th Nos. of the Statistical Abstract relating to British India (1915 and 1916).

Mr. Digby’s figures of drain are up to the end of the nineteenth century. We will leave it to the reader to add the figures for the 13 years of the twentieth century given above and find out for himself the grand total of the drain from India up to the end of 1913–14.

In the decade covered by Sir Theodore Morison’s book, the total Home Charges (not total disbursements) amounted to £175,976,000, while the total excess of exports for the same period was only £150,512,000. This discrepancy is explained by Sir Theodore Morison by adding loans raised in England and sent to India in the shape of “stores, rails, machinery, etc.” as part of her imports. According to his calculations “the direct and guaranteed debt, charged on the revenues of India” increased by £41,931,036 during the decade from 1899–1900 to 1908–09. Adding this sum to the total excess of exports during the decade, he raises the sum that was available to meet the Home Charges to £19,244,000 per annum and argues that the margin of £3,502,000 per annum thus obtained, is sufficient “to defray the unknown remittances on private account.” Following this line of argument he should have deducted from imports the proceeds of loans raised in England for the Government of India in bullion. Besides, it should be remembered that in fixing the amount of excess of exports over imports Sir T. Morison takes no notice of the fact that the imports include about 15 per cent. for freight, insurance, and brokerage and that the exports do not include any of these items.

Sir Theodore Morison obtained his figures about the capital liabilities of India from the India Office, but the figures available to the public are those given in the Statistical Abstracts from which we take the following information for the years 1909–1910 to 1912–13. In 1909–10 the permanent debt in England stood at £176,105,911; in 1912–13 it rose to £179,179,193. The total liabilities of the Government of India at the end of 1913–14 were £307,391,121; on these liabilities £5,912,796 was paid for interest in England and £4,210,848 in India.

It is to be noted that in 1905–06 the public debt of India was classified as follows:—

In 1906–07 an alteration was made in the method of classifying the debt by which the portion “attributable” to Railways was raised to £168,344,748 and that “attributable” to ordinary debt reduced to £37,917,252.

The question of the drain for India is thus complicated by several factors. The excess of exports over imports is not a safe guide (a) because the value of the imports include shipping charges, insurance and brokerage in addition to the profits made by the manufacturer and the importer (Messrs. Hyndman and Wilson have estimated these charges at 15 per cent. of the total value), while exports are represented by the cost price of goods (mostly raw produce at the Indian ports). The only thing they include over and above the price realised by the cultivator is the railway freight to the port of export and the profit and commission of the middleman.[^18] (b) Because the debt raised in England is sometimes spent in England and must be added to the exports and the balance sent to India must be deducted from imports; (c) because private remittances sent by British servants of the Government and British merchants and manufacturers in India, in many shapes, are not necessarily included in the account; (d) because many transactions are settled by exchange entries in books. Many English firms dealing with India have their branch offices in India and they pay for imports not always in exports. Sometimes they invest large sums of money in India.

Mr. J. S. Cotton a retired Government of India official, who was the editor of the Imperial Gazeteer says:

“The trade for export, even in up country markets, is largely in the hands of a few European firms who make their purchases through brokers; and the business of shipping at the ports is almost entirely conducted by European firms to whom the Indian traders consign their purchases by rail. The import trade also is mainly in European hands.”[^19]

It might be added that a fair proportion of the exports are purchased by European firms directly from the producer.[^20]

On the preceding pages we have given the various estimates made by Englishmen; those made by Messrs. Martin, Digby, Hyndman and Wilson on the one side and those made by Sir John Strachey and Sir Theodore Morison on the other. We have also shown how the latter explain away the “Drain.” In the Statistical Abstract of 1912–13, the total interest paid in England in that year was £6,203,996 but in the table of Expenditure in England given on page 70 the interest on debt was as follows:

The total expenditure in England in 1912-13 was £20,279,572. If we deduct the interest paid on railway and irrigation debts, there will be left a balance of over eleven millions to be accounted for. Accepting the arguments of Sir Theodore Morison, we may also deduct the price of stores supplied.

Roughly speaking that leaves a balance of a little less than ten million pounds as expenditure in England for which India got no return in any shape or form.

It will also be noticed that the Home Charges are always on an ascending scale and the excess of exports over imports has risen considerably of late; i.e., since 1908-09, the last year for which figures were given by Sir Theodore Morison. In comparing figures of past years with later years it should be remembered that the figures in sterling do not give an exact idea of the increase. The economic value of the rupee (the unit of Indian coinage) was 2s. in the seventies of the nineteenth century. It is 1s. 4d. now, and that makes a huge difference.

We think we have established beyond doubt that:

(1) There is a drain. India does pay a tribute, which the Imperialists call compensation for services rendered.

(2) The extent of the drain differs according to the way it is looked at by different persons.

Mr. Hyndman fixed the amount in 1906 at forty million pounds sterling per annum;

Mr. Wilson fixed it at thirty-five millions per annum;

Sir Theodore Morison fixed the amount of what he calls “potential drain” at twenty-one millions. Computed in rupees it will be much larger.

In any case this is sufficient to establish the fact that Great Britain does make a huge profit by her political ascendency in India.