This research examines the structural transformation of the Indian economy under British colonial rule, arguing that institutional interventions systematically engineered a framework of long-term underdevelopment. By analyzing the transition from a prosperous, self-sufficient pre-colonial state to an extractive colonial dependency, this paper highlights the pivotal roles played by land revenue systems, infrastructure development, and discriminatory industrial policies. The investigation utilizes a mixed-methods approach, synthesizing qualitative historical analysis with quantitative interpretations of census data and trade statistics. Key findings demonstrate that mechanisms such as the Permanent Settlement and the Ryotwari systems dismantled traditional agrarian stability, while the deliberate erosion of local handicrafts through onesided tariff policies crippled indigenous manufacturing. The analysis reveals that colonial infrastructure, particularly the railway network, functioned primarily as a conduit for resource extraction and market penetration rather than internal development. The research further explores the enduring legacy of these colonial institutions, demonstrating how bureaucratic frameworks and entrenched social stratification hindered post-1947 development efforts. By reconciling classical “drain of wealth” theories with modern economic perspectives, this study provides a comprehensive overview of how imperial policies prioritized the prosperity of the metropole at the expense of local human capital. Ultimately, this work offers a critical perspective on the historical path dependency that continues to influence contemporary socio-economic challenges in India.