Abstract
The earliest work on colonial transfers from India originated in the Drain of wealth theory of the nineteenth century nationalists Dadabhai Naoroji and R. C. Dutt. While the theory displays an implicit understanding of the linking of India’s internal budget and its external accounts to facilitate tax financed transfers to Britain—a feature unique to the colonial economy, it lacked the macroeconomic concepts to make explicit its details. Utsa Patnaik’s methodological framework over the last four decades on imperialism and colonial transfers in particular has contributed significantly towards revealing not only the precise mechanism of extraction of tax financed transfers from India but also formulating accurate estimates of the same. This article focuses on two of Patnaik’s methodological contributions. The first being the use of suitably modified modern macroeconomic concepts in a sovereign economy to lay bare the link between India’s tax revenues and trade surplus and second, the use of Council Bills as a proxy for India’s merchandise surplus which has helped overcome conceptual lacunae in the existing trade data and literature about the colonial period and enabled greater accuracy in the estimation of the transfers.
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