TRANSFERS, SECULAR DEFLATION, AND THE ENIGMA OF THE INDIAN ECONOMY, 1860-1900

This study focuses on India's external account during the late 19th century. It examines its components, showing the heavy weight of fixed charges and how the financial system burdened the poor and sacrificed development. Contemporaries viewed India's "Tribute" (Home Charges) as harming growth. Theoretical advances since the 1930s, especially transfer theory, seem to confirm this perception. Yet, scholars analyzing India's underdevelopment have consistently ignored the external account. This paper redresses this situation by applying transfer theory to "drain," focusing on the process of transferring factor incomes. Over decades, this process generated massive secular deflation and arrested growth. © 1990.