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What is Britain's debt to India?

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Britain owes India a debt for the economic exploitation that the country suffered during colonial rule.

Britain's debt to India is a complex and controversial issue. There is no single agreed-upon figure for the amount of debt that Britain owes India, but estimates range from trillions to tens of trillions of dollars.

The debt arises from the economic exploitation of India during the British Raj. Britain extracted vast amounts of wealth from India through taxation, trade, and the plundering of natural resources. This wealth was used to fund Britain's own industrial revolution and economic growth, while India was left impoverished.

Direct Costs

The loss of revenue from tariffs and other taxes that were imposed on India to benefit Britain is one of the most significant costs of Britain's debt to India. 

Under the British Raj, India was forced to impose tariffs on imports from other countries, while British goods were allowed to enter India duty-free. This gave British businesses a significant advantage over Indian businesses and led to a loss of revenue for the Indian government.

The cost of extracting and exporting Indian resources, such as cotton, tea, and indigo is another significant cost of Britain's debt to India.

Britain extracted vast amounts of natural resources from India, such as cotton, tea, and indigo. These resources were then exported to Britain and sold for high profits. The cost of extracting and exporting these resources was borne by the Indian people, while the profits went to Britain.

India contributed more soldiers to British forces fighting the First World War than Australia, Canada, New Zealand and South Africa combined.   

The cost of maintaining the British colonial administration in India was also a significant cost of Britain's debt to India. 

The British colonial administration was a large and expensive bureaucracy. The cost of maintaining this bureaucracy was borne by the Indian people, while the benefits went to Britain.

The cost of suppressing Indian uprisings and independence movements is another cost of Britain's debt to India. 

The British Raj was a repressive regime that faced frequent uprisings and independence movements. The British government spent a significant amount of money on suppressing these uprisings and movements. The cost of this suppression was borne by the Indian people, while the benefits went to Britain.

The cost of the damage done to India's economy by British policies

British policies such as deindustrialization and the imposition of the free trade doctrine is another cost of Britain's debt to India. These policies had a devastating impact on India's economy and led to the decline of Indian industries and the impoverishment of the Indian people.

Indirect costs

In addition to these direct costs, there are also a number of indirect costs that Britain's debt to India has imposed on the country. The economic exploitation of India during the period of British colonial rule had profound and long-lasting effects on the country, contributing significantly to its current levels of poverty and underdevelopment. These indirect costs extend far beyond any potential monetary reparations and have left a lasting impact on India's socio-economic landscape.

At the beginning of the 18th Century, India's share of the world economy was 23%, as large as all of Europe put together. By the time the British departed India, it had dropped to less than 4%.   
--Shashi Tharoor  

Disruption of Traditional Economy

The British imposed economic policies disrupted India's traditional agrarian economy. High taxation, land revenue policies, and land tenure systems favored British interests, leading to widespread poverty among Indian farmers and landlessness.

Underinvestment in Social Services

The British prioritized their interests over those of the Indian people. This meant that critical social services like education, healthcare, and infrastructure were underfunded, hindering human capital development and modernization.

Social Stratification

British policies often exacerbated social divisions based on caste and religion, which continue to affect India's social fabric today. The unequal distribution of resources during colonial rule created disparities that persist.

Legacy of Inequality

The economic disparities and inequalities created during colonial rule continue to shape India's socio-economic landscape. Extreme poverty, lack of access to quality education and healthcare, and income inequality are all legacies of this period.

Jon Wilson’s book India Conquered (2016) argues that Indian governance ‘had a dynamic economic and political order’ (p. 42), which the greed of the East India Company destroyed and which, under the Raj, was replaced by an Indian Civil Service memorably described by Jawaharlal Nehru as ‘neither Indian, nor civil, nor a service’.   

While it's challenging to put an exact monetary figure on this, the social, economic, and human costs have been immeasurable, necessitating ongoing efforts to rectify these historical injustices and promote inclusive development.

A number of prominent Indian writers and leaders have written about Britain's debt to India

Dadabhai Naoraji

Dadabhai Naoroji was one of the most influential Indian economists of the 19th century. In Poverty and Un-British Rule in India, a book he wrote in 1876, he argued that Britain was draining India of its wealth through taxation, trade, and remittances, leading to widespread poverty and underdevelopment.

Naoroji estimated that the drain of wealth from India was in the order of £30 million per year, a significant amount at the time. He argued that this was the main reason for India's widespread poverty and underdevelopment.

Naoroji's work was highly influential and helped to raise awareness of the economic exploitation of India by Britain. It was also used by other nationalist leaders to argue for Indian independence.

Naoroji's work on the drain of wealth theory is still relevant today. It helps to explain the economic underdevelopment of many former colonies, including India. It also serves as a reminder of the devastating impact of colonialism on the economies and societies of colonized peoples.

New research by the renowned economist Utsa Patnaik, published by Columbia University Press, draws on nearly two centuries of detailed data on tax and trade. Patnaik calculated that Britain drained a total of nearly $45 trillion from India during the period 1765 to 1938. It’s a staggering sum.   

B.R. Ambedkar

In his book titled "Thoughts on Linguistic States," Dr. Ambedkar highlighted that Britain had extracted immense wealth and resources from India during its colonial rule, which spanned for nearly two centuries. He argued that Britain's colonial exploitation had severely impoverished India and its people. Dr. Ambedkar believed that this exploitation resulted in economic, social, and cultural deprivation for the Indian population.

While Dr. Ambedkar did not provide a precise financial figure for the debt owed by Britain to India, his focus was on the idea that Britain, as a colonial power, had a moral responsibility to compensate India for the economic and social injustices it had inflicted upon the Indian people. This idea of a moral debt reflects his perspective on rectifying the historical wrongs of colonialism and promoting social justice in post-independence India.

Jawaharlal Nehru

Jawaharlal Nehru, India's first Prime Minister, wrote about the economic damage that Britain had inflicted on India during the colonial period in his book "Discovery of India" (1946). Nehru argued that British colonialism had caused significant economic harm to India, including the destruction of traditional industries, the exploitation of resources, and the imposition of high taxes

He believed that India's economic development had been stunted by British rule and that the country needed to pursue policies that would promote industrialization and modernization. Nehru's book was an attempt to explore India's history and culture and to understand the challenges facing the country as it sought to build a modern, democratic nation. 

$45 trillion is 17 times more than the total annual gross domestic product of the United Kingdom today.   

Lala Lajpat Rai

Lajpat Rai's book "England's Debt to India" (1917) analyzed the economic effects of British rule in India, taking an impartial view of the subject. Rai calculated the economic losses that India had suffered as a result of British rule, including the destruction of traditional industries, the exploitation of resources, and the imposition of high taxes. 

He argued that India had been drained of its wealth by unfair trade, the restraint on indigenous Indian industry, and the use of Indian taxes to pay the high salaries of British civil servants in India. Rai believed that Britain owed India a debt for the economic exploitation that the country had suffered. 

He also argued that India should not remain content to be a woodcutter and a drawer of water for the rest of the Empire. Rai's book is considered a vital resource for understanding the true picture of the economic effects of British rule in India.

Shashi Tharoor

Tharoor is a contemporary Indian politician and author. In his book "An Era of Darkness: The British Empire in India" (2017), he argues that Britain's colonial rule in India was a period of darkness and economic exploitation.

In the book, Tharoor cites a number of specific examples to support his argument, including

  • The huge drain of wealth from India to Britain through taxation, trade, and remittances.
  • The destruction of Indian industries and the imposition of a free trade regime that benefited British businesses at the expense of Indian businesses.
  • The exploitation of Indian resources, such as cotton, tea, and indigo.
  • The suppression of Indian uprisings and independence movements.
  • The widespread poverty and underdevelopment that resulted from British rule.

The issue of Britain's debt to India remains a controversial one. Some argue that the debt is too large to be calculated or repaid, while others argue that Britain has a moral obligation to compensate India for the economic exploitation that it has suffered.