A common question often surfaces in discussions about Asia’s economic rise: if Japan could transform itself into a global economic powerhouse, why couldn’t India do the same? The answers usually drift toward self-criticism—claims that Indians lacked discipline, technical ability, or were constrained by rigid social structures. Some even argue that despite inheriting modern infrastructure from British rule, India failed to capitalise on it. Rarely, however, does the discussion turn to India’s own economic history, where the real explanation lies.
In the late nineteenth and early twentieth centuries, Japan underwent a dramatic transformation during the Meiji era. The country aggressively industrialised, exported goods, imported Western machinery and technology, built railways and communication networks, and laid the foundations of a modern industrial economy. India, with its skilled workforce, raw materials, and global trade connections, was fully capable of a similar trajectory. The critical difference was capital. Japan had resources to invest; India did not. Instead of funding factories and railways, India was battling recurrent famines and mass poverty—despite generating enormous wealth through trade.
This contradiction raises a fundamental question: if India produced so much wealth, where did the money go?
That question was rigorously examined by renowned economic historian Utsa Patnaik. In her groundbreaking 2017 research, Patnaik demonstrated that between 1765 and 1938, Britain extracted an estimated $45 trillion from India. This staggering figure is many times larger than Britain’s present-day annual economic output. The wealth siphoned from India not only powered Britain’s rise as a global empire but also financed industrial and infrastructure development across the UK, Europe and North America.
The mechanics of this extraction were neither accidental nor subtle. Indian thinkers such as Dadabhai Naoroji and R. C. Dutt had already identified this process in the nineteenth century, calling it the “drain of wealth.” They argued that colonial rule systematically transferred India’s surplus to Britain, leaving the colony impoverished. Patnaik’s work revisited this theory with detailed data, quantifying the scale of the loss and connecting it directly to the rise of modern Western capitalism.
Under the rule of the East India Company, the extraction began in a particularly perverse way. Indian producers exported goods, but payment did not come from British revenues. Instead, the Company paid exporters using tax money collected from Indians themselves. In practical terms, Britain obtained Indian exports without spending its own resources. Later, under direct Crown rule, the mechanism evolved, but the outcome remained the same. Foreign buyers paid for Indian goods using financial instruments settled in Britain, while Indian exporters were compensated from taxes raised within India. The actual export earnings never returned to the Indian economy; they were transferred to London.
As a result, India’s large trade surplus—which could have financed industrial growth, technological imports, and infrastructure development—was absorbed into Britain’s imperial finances. This wealth funded Britain’s administration, military expansion, and overseas investments, while India was left capital-starved. Japan, by contrast, retained its export earnings and reinvested them domestically, accelerating its industrial rise.
When Dadabhai Naoroji published Poverty and Un-British Rule in India in 1867, he could already see the devastating effects of this drain. What he could not fully calculate at the time was its sheer magnitude. Yet his core insight was correct: India’s poverty was not the result of cultural failure or lack of effort, but of a systematic economic extraction that redirected its wealth to UK coffers and elsewhere.
Understanding this history fundamentally reframes the question of why India did not follow Japan’s path. The issue was never capability or ambition. It was the absence of capital—capital that India produced but was never allowed to use.
Britain stole $45 trillion from the people of India. It is important that the UK acknowledges the cost of draining $45 trillion to build its worldwide empire. Today, India is the fourth-largest economy on Earth and will soon be the third. In 20 years, India will be number one in the world.