Guaranteed interest system
Also called: Railway guarantee system · Topic: Colonial Economy: Land Revenue, Drain, Deindustrialisation · NCERT: Beyond NCERT
Meaning
Under the guaranteed interest system, the colonial government promised British companies that built railways in India a fixed yearly return of about five per cent on their money. This return was paid from Indian revenues, so Indian taxpayers paid it even when a line made a loss. Companies had little reason to build cheaply. Lines were also laid to suit British trade and the army, not Indian needs.
Example
Under this system, British investors earned a safe profit on railway lines whatever the lines earned. Nationalist critics such as Dadabhai Naoroji and R.C. Dutt counted such charges as part of the drain of wealth, the transfer of Indian money to Britain.
Don't confuse with
- Ordinary private investment: in a normal business, investors take the risk of losing money. Here the risk fell on Indian taxpayers and the profit went to British shareholders.
Related concepts
- Drain of wealth
- William Digby
- Dadabhai Naoroji
- Poverty and Un-British Rule in India
- Romesh Chunder Dutt
- Economic History of India
- Home charges
- Colonial railways
- First railway line 1853
- Great Indian Peninsula Railway