Foreign Trade In India During The Colonial Rule


India has been an active player in foreign trade from the times before colonial rule. However, the colonization and selfish behavior of the British reduced the large trade market of India to a large extent. Therefore, we must start with the pre-colonization situation to correctly explain the state of foreign trade in India during the historical period.

Pre-colonial Period

Before the British came to India, India had worldwide fame for its consumer products. India had foreign trade relations with countries such as Portugal since 1500. Vasco Da Gama arrived in Calicut in 1498 and he saw the richness of Indian trade during that period of time. He had mentioned this in the ancient notes about Indian trade.

  • In 1500, Pedro Alvares Cabral, another Portuguese trader, set out for India. He had established Portuguese trade stations in Calicut and Cochin before coming to Portugal in 1501 with spices produced in India. These spices included ginger, pepper, cardamom, and cinnamon. The revenues generated from this excursion were enormous which initiated the excursions of many other Europeans toward India.

  • In the pre-colonial period, India had a global market for its consumer products. The excellent grades and quality of craftsmanship of Indian artisans were highly in demand and the products had a worldwide reputation.

    India was a global leader in textile manufacturing and Handicrafts in those times. Kashmiri and Punjabi shawls and rugs were exported to foreign in large quantities while they also had a big local market in India. Other items, such as Banaras saris, & Nagpur silk textiles also had a sizeable demand.

  • Pre-colonial India was also famous for its creative handicrafts, including brass, iron, other metal products, silver and gold ornaments, marble art, timber, ivory, stone carvings, and elegant crockery. These demanded products along with spices, opium, pepper, and indigo accounted for India’s net exports.

  • India was an important foreign trade partner to European nations and had a substantial market share in the global economy. It is believed that India’s share in pre-colonial times trade was up to 20% globally.

However, after the British took over India and started their colonial rule, India’s foreign trade situation changed drastically.

Foreign Trade in India During Colonial Rule

Following features were notable in the foreign trade in India during colonial rule −

Britain’s Monopoly

Britain had complete monopoly control on India's foreign trade. Britain was the manager of India’s accounts and all kinds of trades that occurred at that time were authorized by the British.

Half of the foreign trade of India was with Britain while the rest half was with other countries like Ceylon (Sri Lanka), China, and Persia (Iran). This shows that India’s foreign trade was totally controlled by British rulers. Indians could hardly take part in the trade and most of the businesses were carried out by the British on India’s behalf.

The Suez Canal was established in 1869 which enhanced India’s trade connections with Britain. This was an example of how the British looted India by large-scale export at marginal costs. Indians did not benefit in any manner due to such policies of the British. Indian businessmen had no say in the matters of foreign trade and it was just a 100% monopoly of Britain.

Export and Import

India had become a net exporter of raw materials during the British Raj. The items exported from India included raw silk, cotton, wool, sugar, indigo, jute, etc. This meant that the British established their authority over the natural agricultural resources of India and took away every raw material from Indian geography to their nation.

These raw materials were then converted to finished goods and light machinery that were imported and sold in India. These imported commodities included finished consumer goods like cotton, silk, and woolen clothes, and capital goods like light machinery.

Drain of Wealth

The drain of wealth refers to economic policies that snatch economic resources away from a country without paying the proportional amount of wealth to the country. In other words, the drain of wealth is a policy to loot the country. In such a system, one party engages in excess export of goods that are free or bought with meagre prices to its home country.

As the British engaged in the drain of wealth, there was always a net surplus of exports due to the excessive amount of export from India. The British took advantage of its position and exported raw materials in large quantities.

It was a norm during the British Raj to pay with silver or gold in the case of exports and imports. However, the surplus export during the colonial rule did not bring any gold or silver to India. The British empire did not pay India for its products. They were only interested in doing injustice and illegal trade with India.

Income from export surplus was used in the following subjects −

  • The British engaged in unethical behavior and used the proceeds from export surplus in managing the offices in Britain. These offices were made up to manage illegal and unethical business practices wherever colonial rule was present. Nothing was paid to the Indians and no expense for social upliftment was made with the export surpluses. The British showed extreme selfishness in handling the proceeds of excess exports.

  • A part of the income was spent in wars fought by the British in other parts of the world. Instead of paying and spending the money earned from Indian raw materials, the British used it for their expansionary policies. Increasing its footstep around the globe was a major aim of the British and they spent a considerable amount of money for this purpose.

  • The British also used the money earned from excess exports in importing invisible items. The end users of these items were not Indians. Instead, the British used it for themselves to stay on the best of their terms.

All the points stated above show that the colonial rule in India was more for loot than doing any social good in the country. In fact, the British took away whatever was left in India as raw materials and bagged it in their treasuries. This hampered India in a lot of ways and made India a poor nation. The ramifications of British loot have been present in the Indian economy for a long time.


The British Raj era of India is a tale of dark stories and unfair means all the way. The British not only looted the raw materials from India but also pushed India into extreme poverty. As India’s backbone of foreign trade was dilapidated, India suffered from extreme pain in recovering from the malfunction. However, as time elapsed after colonial rule, India gathered its strength and it is now one of the biggest economies again. This shows the enormity of the Indian economy and the resolve of Indians to make their country the greatest one.


Q1. Which country had foreign trade relations with India even before colonial rule?

Ans. Portugal and other European countries had foreign trade relations with India before the colonial rule period.

Q2. What was the most notable factor that hampered Indian foreign trade during the British Raj?

Ans. The drain of Indian wealth is the most notable factor where Indian money was used in foreign for matters of the British Raj.

Q3. Who were the other nations that had a foreign trade relationship with India during the British Raj?

Ans. Ceylon (Sri Lanka), China, and Persia (Iran) had foreign trade relations with India during the colonial rule period.