1. The Drain of Wealth : The British were not interested in the development of Indian agriculture. They were interested only in safeguarding their commercial interests. They forced Indian farmers to produce commercial crops like cotton, tea, Indigo, etc., which were in great demand in the European markets. They converted India into a source for raw materials and a market for their finished goods.

Indian handicrafts could not compete with the machine made products and the British had not started any industres in India. The impact of the Drain was that employment within the country was scarce and artisans and craftsmen turned into labourers. Hence the stability and development of Indian villages also suffered.

The British exported India’s enormous wealth to England through various means and that India did not get any economic and material benefit in return is known as drain of wealth. Dadabai Naoroji explained the drain theory in his book ‘Poverty and UnBritish Rule in India’ (1876 C.E.). He declared that drain was the basic cause of India’s poverty and fundamental evil of the British rule in India.

2. Source of the Drain : India’s enormous wealth flowed into England in the form of salaries and pensions of civil, military and railway officers, interest on loans, profits by British capitalists and expenditure on administration. Excess taxes were imposed on Indian export goods and less taxes were levied on British imports.

Results of the Drain :

• The most important results of the drain was that India became poor. 
• The impact of the drain on income and employment within the country was harmful.
• The drain produced shortage of capital in the country. This hindered Indian industrial development. 
• Since the drain was mainly paid out of land revenue, it hit the peasantry the most and made them poor. 
• Nearly 12% of interest (6,30,000 pounds) was being paid out of Indian resources, for the loans raised by the English to construct Railways and seaports. Loans on unproductive items were also included.