Is modern India truly anticolonial? At first glance this would seem like a ridiculous question. Of course it is, Colonial India is a vivid image of European excess being funded by exploitation of non European masses. The mills of England working with cheap Indian cotton, and selling English cloth at heavily discounted rates to undercut local Industry in India for instance. Peasants of India being forced to grow cash crops for harsh taxation even as famine looms over the horizon. Modern India, has in it's 70+ years of existence, never had a famine. It has a government which though exuberant has institutional safeguards, is democratically elected and subject to democratic pressures. The citizens on India have franchisee rights, and exercise them every so often in elections for their national, federal unit, and local government as applicable. On the surface, this structure is sovereign, accountable, and definitely not colonial. However in this post, I will make the point that this is not the complete case.
All That Glitters
A key insight here is provided by looking at gold, and how the Indian public, and the Indian state interact with it.
The modern Indian state has peculiar relationship with household gold. The citizens of India love household gold. For various historical, cultural, and contemporary reasons, Indian households love purchasing gold. Far far exceeding the amount that is present in their country. Even up to the extent that India's private gold stocks would dwarf those of several central banks put together 1 2. These reserves, for Indian households represent an important safe store of value, and for very rational reasons. Gold is, by the virtue of being a material asset, inflation indexed. It can survive currency depreciation that Indian Rupee cannot.
Given the Government of India's consistent fiscal deficit which consistently devalues the rupee, Gold seems to relatively shine. Gold also survives the temper tantrums of political instability better than other assets, in fact often performing best when conditions are volatile. All of this makes gold a valuable hedge against usual capital trends in India, thus making it a very rational holding.
The Indian government however, takes a more cautious, and sometimes outright hostile view towards the persistence of household gold. For the Indian Government, the gold appetite of its people represents a multi pronged inefficiency.
Firstly, it is a massive drain on the foreign exchange reserves of the country. For instance in 2025–26 India imported ~72 Billion USD worth of gold. This is an insane amount, slightly more than 10% of the entire foreign exchange reserve of India. The same reserves that also pay for more critical goods like fuel, fertiliser, and raw material and enable various other imports in India.
Gold, is also a relatively static asset, it does not flow through the economy the way Rupee would and creates value throughout the process. It is essentially economic dead weight. Capital that stays lying in wait, doing nothing. Instead of the Indian households buying gold, the Indian household would much rather have you buy Rupee or Rupee backed assets injecting your household capital in the economy.
There is good reason for this injection to be desirous for the government. Every Rupee injected into the economy, has to come from the government, and ultimately return to the government. In effect when you convert your assets to Rupees, you give the government capital. It is a capital transfer to the Government of India. And like every other government, the government wants it.
Inclusion and Exclusion
For a vast majority of Indian people, formal finance remains unavailable. In rural India, the most common assets a person owns are whatever is in their house, their time, and labour, their farm animals, and if they have land their farm. Inclusion in formal finance has been terrible. A consequence of this is captured in Rajiv Gandhi's famous quote:
... only 15 paise of every rupee meant for welfare of downtrodden reaches them ...
While steeped in rhetoric, this is not far from being reflective of the reality. Indian finance, and consequently access to credit has remained disproportionately exclusive towards the majority of rural India. This the beginning of the second argument, credit, and capital is exclusive but taxation is inclusive.
A large portion of tax revenues of India come from the people of India. It takes the form of tax on personal incomes, which labour employed in the formal sector pays. It is followed by GST which every Indian pays on the goods and services they consume. Which, in turn, is followed by corporate taxes, which the firms operating in India pay. Which, again, is followed by miscellaneous duties like excises, customs, etc. The tax burden is consequently borne largely by the people of India, transferred to the government which deploys this capital as it sees fit. And as we shall see in later sections, as it sees fit somehow ends up benefiting New Delhi more than it benefits the taxed.
The Instruments of Public Finance
While the poor of India, are largely outside the financial ambit of the state, there is a class of households which is inside, the (as or writing, shrinking) middle class. The middle class household typically has a small salary to draw from, and a small pool of savings, the insight here is to look at where these savings rest. Some of it manifests as assets: a motorcycle, or a moped for instance, which would show up as assets they own. However, a large part of these savings, are deployed in Banks, and Postal Savings.
Most banks in India - especially after Indira Gandhi's disastrous nationalisation push - have been state enterprises, wielded for pursuing state goals as the cost of business profitability, and business needs. Banks in India are also required by regulation to hold a certain portion of their deposits as sovereign bonds. By RBI Mandate, this is 18% of Government deposits. That's 18% of an astounding 253 Lakh Crore. By Contrast, the union budget expenditure for 2026-27 is ~55 Lakh Crore.
Banks hold G-Secs worth the entire budget of the Union Government, and most banks are controlled by the Union Government, either through RBI or through direct ownership. Banks therefore serve by and large as an instrument of government policy, by acting as a captive liquidity pool the government can tap into as required for its borrowing expenses. Again, essentially culminating in transfer of wealth from the savers of India to the Government of India.
Although to be fair, this transfer does ultimately end up quite literally paying dividends and interest it is still by its nature a subsidised loan pool to the government.
Deployment
Revenue extraction from its people has been, and will remain one of the core pillars of governance in any country. It is although just one side of the modern colonial story of India. It is gathering of wealth. The actual transfer happens when it is deployed. By and large the main kinds of expenses the government spends on are:
- Operational Expenses, staff salaries, running costs like electricity or water.
- Capital expenditure in the form of roads, bridges, rails, highways, ports, airports etc.
- Social Welfare programs.
- Military Spending.
- Addressing existing Debt.
Let's get the operational expenses out of the way, operational expense is inevitable for the government. At this scale it needs to pay salaries of several professional bureaucrats plus the usual costs of paperwork. It is however also largely a payment made to the English speaking IAS class of the country.
In the last ten years or so years, the governments capital expenditure has increased steadily. There has been a massive highway boom in India. Railways has gotten new trains, several urban areas got metros, Swacch Bharat meant urban local bodies got funding to construct sanitation infrastructure and so on. This capital is deployed often to construct high visibility projects or through Special Purpose Vehicles SPVs. Port, Airports, etc. These are often constructed with the help of big name firms owned by industrialist. In effect the government takes its money and deploys it to these firms, often also giving these firms rent rights as well in the process. The rights to collect tolls for instance.
Given the nature of collection which is from the people of India, and the nature of deployment to industrial houses of India, this is not all too dissimilar to British India. In modern India there exists a class of Industrialists and capitalists the government actively supports often taking the wealth of the nation and giving it to them from where it never does percolate down back to the people of India. There also exists a middle class, which through SIPs and other market investments is invested just enough to feel better about themselves, but in reality are just as much of a victim of this transfer.
A transfer within India, or without does not make this less colonial. The end result is largely the same. An urban metropole, a middle class that gets just enough privilege to not question the system and an oppressed labour class being exploited. To the minds of the masses in rural India. New Delhi might as well be London for all its extractive system design and moreso in its intention to extract even more.
And at the very end, coming to the most tragic part of this almost colonial relationships.
The State and the Peasant
Indian Government has had a rocky relationship with the farmer. Starting with British India who's absentee landlord policies created a Zamindar class of absentee landlords, followed by market distortions to grow cash crops instead of food and the disastrous recurring famines which plagued British India. By contrast the modern Indian state's relation with the cultivator seems much more harmonious. It is, however still based on the same premises as that of colonial India. Where British India distorted markets to favour cash crops, Modern India does it to favour selective food crops via measures like Minimum Support Prices. Where there used to be an intermediary class of Zamindars is now the institution of APMC.
The state uses market controls like subsidies to encourage the production of food crops, or devastating cash crops like Sugar in the dry regions of Interior Karnataka and Maharashtra. The relentless market pressure today has led to a marked drop in soil quality, established an intermediary class that regularly underpays cultivators, discourages the development of cold storage and keeps the food market in India essentially under lock and key. A rent seeking class which extracts value by the virtue of being the intermediary between the farmers and the formal economy of India.
For all the rhetoric of जय जवान जय किसान, the government of India is not really all that different from British India, sure the skin is different, but the underlying systems being run are very much point to point identical.