Economic Nationalism

The origins of economic nationalism can be traced back to the second half of the 19th century when Indian leaders like Dadabhai Naoroji, Mahadev Govind Ranade and Romesh Chandra Dutt among others began realizing that the British rule was economically exploiting India and that it was largely responsible for keeping India under extreme poverty.

From this a whole generation of Indian leaders like Gopal Krishna Gokhle, Bal Gangadhar Tilak, G.V. Joshi and many others developed a systematic and comprehensive economic critique of the British rule.

They emphasized that the colonial rule was economically exploiting India in a variety of ways. Initially this exploitation was confined to heavy taxation of the peasantry and the unequal trade with India. It was an unequal trade because the British East India Company (which was granted a monopoly of trade with India by the British Parliament) bought Indian goods very cheap and sold British manufactured goods to India at a very expensive rate. This resulted in India’s wealth going to England.

It also destroyed the traditional handicraft industries of India. However, in the 19th century, whereas this form of economic exploitation continued, new and more complex forms of exploitation came into being. Now the colonial rulers exploited India as a supplier of raw material for their industries and a market where the goods produced in the British industries could be sold.

India was made to cultivate those raw materials (like cotton or jute) which were required by British industries. The impact of this was that India’s wealth, which could have been utilized for India’s industrialization and economic development, was utilized instead for Britain’s economic development. The Indian nationalist leaders learnt these vital facts and propagated them at the same time.

As a part of their understanding about a steady economic exploitation of India, the nationalist leaders, Dadabhai Naoroji in particular, propounded the drain theory. Naoroji, in his famous book Poverty and the Un-British Rule in India argued that India’s economic resources were being systematically siphoned off to England through trade, industrialization and high salaries to British officials which were being paid by Indian money.

According to their calculations this ‘drain’ amounted to one half of government revenues and more than one third of India’s total savings. It was that Britain’s enrichment and India’s improvishment were taking place simultaneously.

The early nationalist leaders argued that the British colonial rule, in a variety of ways, completely subordinated Indian economy to the economy of Great Britain. In their view the direction of the Indian economy was being geared to suit the needs of British economy. They demanded an end to the flow of Indian wealth to England and the industrialization of India with the help of Indian capital only, so that it would benefit India and Indian people. In order to achieve this, the nationalist leaders demanded self-rule, or self-government or Swaraj for their country.

The relevance of economic nationalism, as formulated by the nationalist leaders, was two-fold:

Firstly, it demolished the notion, generally held by the educated people in the first half of the 19th century, that the British colonial government was a benevolent government and would ultimately lead to India’s economic development. Many people had believed that, if the colonial rule would continue for a long time, India would, in the end, become prosperous like Great Britain.

The Indian nationalist leaders were able to demonstrate that this was wrong thinking and that the British colonial rule was actually harmful to the interests of the Indian people.

Secondly, economic nationalism laid the foundation for a powerful nationalist agitation against the British colonial rule which started in the 20th century under the leadership of Mahatma Gandhi and other leaders. These leaders took the ideas of the ‘economic nationalism’ to the Indian people and thus mobilized them into the national movement. Once the masses of Indian people joined the national movement, it became impossible for the British colonial rule to remain in India.