1. The greatest impact of British policies was the drain of wealth from India.
2. The Indian economy, no doubts, was primarily a rural economy, but Indian artisans produced goods in bulk to meet the demands of Indian & European buyers.
3. There had been a great demand for ‘muslin’ from Bengal & silk from Bengal & Benares.
4. British merchants bought these Indian products in large quantities.
5. But, at the beginning of the 18th century, Britain & other European countries passed laws prohibiting the entry of cotton & silk textiles from India although there was a demand for it.
6. After the advent of Industrial revolution, India was forced to produce cotton, indigo & other products which British industries required.
7. Indian markets were flooded with cheap, machine-made textiles manufactured in England.
8. While British goods were exempted from duties while entering Indian markets, Indian goods entering England were burdened with heavy customs duties.
9. Thus, the self-sufficient economy of India collapsed under the impact of British colonial policies. With the decline of the cotton industry, the towns that had flourished as centres of trade or industry also declined.