The Drain Gain: An investigation into how colonial drain helped keep British economy buoyant

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India’s colonial history has been the subject of a lot of scholarly attention but rarely has the focus shifted from the drain of surplus as a cause of underdevelopment of India to a transfer of surplus from India to Britain as a cause of development of Britain. I shed light on this aspect of global surplus extraction and show empirically that this transfer of surplus was invaluable for the success of the British economy. The drain of wealth involved the movement of capital from India to Britain, which in turn contributed to the accumulation of capital in Britain. This capital was then utilized to address deficits with other countries. This, to the best of my knowledge, remains the first study of its kind to investigate how capital was accumulated through colonialism and more importantly 2) how this wealth enhanced the profitability of the British economy. With the introduction of a thorough examination of colonial accounting, I utilize it to further our understanding of how the wealth drain impacted Britain’s economic situation. Accounting for spurious correlation using Hamilton (2020), I find that a doubling of my measure of colonial drain increases the rate of profit of Britain by around 10%. My findings are corroborated by another measure of colonial drain called Expenditure in England. The period of analysis begins with the passing of the third Charter Act in 1833 and ends with the beginning of the First World War