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CA Foundation · Business Economics · Indian Economy

Under British colonial rule, which of the following best describes the pattern of India's foreign trade, which created the 'drain of wealth' that early Indian nationalists such as Dadabhai Naoroji criticised?

India exported raw materials and imported finished manufactured goods, mainly from Britain, while running a large export surplus. The surplus financed British administrative and military costs rather than Indian development, which is the drain of wealth critiqued by nationalists such as Dadabhai Naoroji.

  1. AIndia exported raw materials and imported finished manufactured goods, mostly from Britain, and ran a large export surplusCorrect
  2. BIndia exported finished manufactured goods and imported raw materials from Britain
  3. CIndia's trade was balanced and mainly with other Asian countries
  4. DIndia imported food grains in large quantities and exported very little

Explanation

Colonial policy turned India into an exporter of raw materials such as cotton, jute and indigo and an importer of British finished goods like cotton cloth. India ran a large export surplus, but this was used to pay the costs of British administration and wars, not to benefit India. This is the 'drain of wealth'. The option describing the reverse pattern is wrong.

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