Previous Year Question
Consider the following statements and select the correct answer from the codes given below the statements:
Assertion (A): Generally India had a favourable balance of trade during the British rule.
Reason (R): The drain of wealth took the form of unrequited exports.
Codes:
Both (A) and (R) are true and (R) is the correct explanation of (A).
Both (A) and (R) are true but (R) is not the correct explanation of (A).
(A) is true but (R) is false.
(A) is false but (R) is true.
Correct Answer: A
Detailed Solution
During British rule, particularly after 1813, India's merchandise exports exceeded imports in many years. In this sense, India generally displayed an export surplus or favourable balance of trade.
However, this favourable trade balance did not represent a normal economic gain accruing to India. India did not receive the entire value of its export surplus back in the form of goods, bullion or domestic capital. Part of it was used to meet Home Charges and other payments to Britain for which India received no equivalent return.
Such exports were described as Unrequited Exports—exports for which an equivalent economic or material return did not accrue to India. The export surplus therefore became one of the mechanisms through which the colonial Drain of Wealth was transferred abroad.
Thus, there is no contradiction. India could show a favourable merchandise trade balance on paper while a portion of that surplus was transferred abroad rather than being retained within the Indian economy. This is why the Reason explains the Assertion.
The answer to this question was later challenged. UPPSC's notified final key marked option (a), while petitioners argued for option (d). In its judgment dated 30 March 2018, the Allahabad High Court declined to interfere with the Commission's answer, leaving the final-key answer undisturbed.