Which of the following statement (s) is/are correct in the context of India's foreign trade during colonial times?

Statement 1: There was generation of a substantial export surplus.

Statement 2: Essential commodities like sugar, cotton, and wool were scarce in the domestic market despite export surplus .

Only Statement 1 is correct.

Throughout the colonial period, the most significant characteristic of India's foreign trade was the generation of a substantial export surplus. However, this surplus came at a tremendous cost to the country's economy. Essential commodities like food grains, clothes, and kerosene were scarce in the domestic market. Additionally, this export surplus did not result in the inflow of gold or silver into India. Instead, it was utilized to cover expenses incurred by a colonial government office in Britain, expenses related to wars fought by the British government, and the import of invisible items. All these factors contributed to the draining of Indian wealth.