Economic Critique of British Nationalism

This is one of the most important contributions of the Moderates—their economic critique of British rule. If their petitions and constitutional demands seemed “mild,” their economic analysis was sharp, radical, and eye-opening. In fact, this critique sowed the intellectual foundation of Indian nationalism. Let’s understand this:

From Early Hope to Disillusionment

• In the early 19th century, many Indian intellectuals welcomed British rule. They thought the British would bring modernisation, railways, education, and reforms.
• But by the 1860s, the reality became clear: instead of progress, Indians saw worsening poverty, stagnation in industry, and repeated famines.
• Gradually, thinkers realised that the colonial system itself was the main obstacle to India’s development.
• Thus began a powerful critique: showing how India’s economy was being sacrificed to serve Britain.

Leaders of the Economic Critique

Between 1870 and 1905, many Indian intellectuals turned into economic nationalists. Key names include:

• Dadabhai Naoroji
• M.G. Ranade
• R.C. Dutt
• Dinshaw Wacha
• G.V. Joshi
• G. Subramaniya Iyer
• G.K. Gokhale
• Prithwis Chandra Ray
• Bal Gangadhar Tilak
• Surendranath Banerjee

👉 These leaders may have differed in style, but they shared one conclusion: British imperialism subordinated India’s economy for British benefit.

Nature of British Economic Exploitation

Nationalists pointed out that Britain had reduced India to:

1. A supplier of raw materials (cotton, jute, indigo, opium).
2. A market for British manufactured goods (textiles, machinery).
3. A field for British investment, where profits went abroad.

Thus, India was made economically dependent, trapped in colonial exploitation.

Key Issues in the Economic Critique

(a) Drain of Wealth

• This was the most popular and powerful critique.
• It was simple, easy for even peasants to grasp: India’s wealth was literally being drained to England.
• Dadabhai Naoroji’s “Drain Theory” (in Poverty and Un-British Rule in India) explained how money flowed out through:
  • Salaries and pensions of British officials
  • Savings remitted abroad
  • Payments to British troops
  • Profits of British companies
• In 1896 (Calcutta Session), the Indian National Congress officially adopted the Drain Theory.

Books supporting this critique included:

• William Digby’s Prosperous British India
• G.S. Iyer’s Some Economic Aspects of British Rule in India
• R.C. Dutt’s Economic History of India

👉 The Drain Theory became a slogan of nationalist politics. It showed colonialism not as “benevolent rule” but as economic robbery.

(b) De-industrialisation

• Nationalists exposed how British policies destroyed India’s handicraft industries.
• Cheap machine-made imports from Britain flooded the Indian market, crushing traditional artisans.
• At the same time, modern industries in India were not promoted, leaving people without alternative employment.
• Result: de-industrialisation and ruralisation—millions were forced back into agriculture, making land overcrowded and poverty rampant.

(c) Free Trade Policy

• Britain imposed a policy of free trade on India.
• For Britain, this meant Indian markets were open for British goods without restrictions.
• But Indian industries, still at an infant stage, were thrown into unequal competition with advanced Western industries.
• The Moderates demanded tariff protection for Indian industries and government aid to modernise.

👉 They also began to promote swadeshi (use of Indian goods) and boycott of British goods as economic strategies.

(d) Opposition to Foreign Capital

• The Moderates welcomed industrialisation, but they wanted it to be based on Indian capital, not foreign capital.
• Why? Because British investment in railways, plantations, and industries:
  • Took away profits to England.
  • Suppressed the growth of Indian entrepreneurs.
  • Strengthened Britain’s economic and political control.

They warned that dependence on foreign capital would not only drain wealth but also enslave future generations.

The Larger Impact

This economic critique was more than just economics—it became the moral and intellectual foundation of Indian nationalism.

• It proved that colonialism was not about “civilising” India but about exploiting her resources.
• It gave ordinary people a simple truth: “British rule is making us poorer.”
• It united educated Indians, peasants, and workers under a common economic grievance.

👉 In fact, Gandhi later built on the same ideas of swadeshi, boycott, and self-reliance, showing how deeply the Moderates shaped the nationalist imagination.

(e) Agriculture under Colonial Rule

Agriculture was the backbone of colonial India—about 80% of the population depended on it.
Land revenue was also the biggest source of government income in the 19th century.

The Moderates harshly criticised British policies for:

• High land revenue demands – peasants had to pay a crushing share of their produce.
• Constant revision of assessments – uncertainty made cultivators reluctant to invest in better seeds, irrigation, or tools.
• Rigid revenue collection – even in years of drought or crop failure, revenue had to be paid.
• Evictions and punishments – peasants unable to pay were often forced off their land.
• Periodic hikes in revenue demand – pushing cultivators deeper into debt.

👉 The combined effect was capital drain from agriculture, declining soil fertility, food shortages, and recurring famines. Famines of the late 19th century (e.g., 1876–78, 1896–97, 1899–1900) killed millions.

Remedies Suggested by Nationalists

• Reduction of land revenue.
• Permanent tenure system – not the exploitative Bengal Zamindari type, but a long-term fixation of revenue so that peasants could have security.
  • This meant: peasants would know in advance what they had to pay and would not fear sudden hikes or confiscation.
• In short: Moderates wanted stability, fairness, and peasant security.

(f) Poverty of the Indian People

From the 1870s, nationalists consistently highlighted mass poverty as the most glaring feature of British rule.

• Dadabhai Naoroji wrote on the subject in his paper of 1870 and in The Poverty of India (1876).
• He argued that poverty was not due to laziness or fate, but because of the alien and exploitative character of British rule.

👉 This was revolutionary: it shifted blame from “Indian backwardness” to colonial exploitation.

(g) Public Finance

The Moderates also attacked the colonial taxation system:

On Revenue (tax collection):

• Taxes burdened the poor peasants and middle classes disproportionately.
• Meanwhile, the rich foreign capitalists and British officials escaped with minimal taxation.
• Specific demands:
  • Abolition of the salt tax (a tax that fell hardest on the poor).
  • Reduction of land revenue.
  • Reduction of high military expenditure.

On Expenditure (spending):

• Much of the revenue collected in India was not spent in India.
• Instead, it was used for:
  • Britain’s imperial wars (e.g., in Afghanistan, Burma).
  • Paying pensions and salaries to British officials (many of whom retired in England).
• Thus, Indian taxes ended up financing the British Empire, not Indian development.

👉 In essence: Indians paid heavily, but got very little benefit in return.

Early Roots of Economic Nationalism

It’s important to note: though Moderates systematised the economic critique between the 1870s–1905, the ideas were not brand new.

• Raja Rammohan Roy (early 19th century) had already complained against the huge “tribute” being sent to Britain.
• In the 1840s, Maharashtrian intellectuals like:
  • Bhaskar Pandurang Tarkhadkar
  • Govind Vitthal Kunte (Bhau Mahajan)
  • Ramkrishna Vishwanath

criticised British rule for:

• Destruction of handicrafts.
• No-tariff policy (leaving Indian industries defenceless).
• Suppression of modern Indian industry.
• Waging imperial wars at Indian expense.

👉 So, the Moderates were building on a long tradition of economic criticism, but they gave it clarity, statistics, and a national platform.

The Larger Legacy

The economic critique of the Moderates did three big things:

1. Exposed the exploitative nature of colonialism – showing that poverty and famines were not natural but man-made.
2. Shifted the blame – instead of blaming Indian society, they held British rule responsible.
3. Created a unifying cause – peasants, workers, and educated classes could all relate to the themes of drain, poverty, and exploitation.

This is why historians say:
👉 The Moderates’ greatest contribution was not petitions or councils, but their economic analysis of colonialism, which laid the foundation of Indian nationalism.

✨ To sum up:
The Moderates showed that British rule was not a blessing but a curse. It destroyed agriculture, drained wealth, imposed unfair taxes, neglected development, and condemned millions to poverty and famine. Their economic critique turned discontent into national consciousness—a powerful intellectual weapon that inspired the next, more militant phase of the freedom struggle.