Question

Write a note to explain the effect of the following: The Great Depression on the Indian Economy

Answer 1

The Great Depression on the Indian Economy

The Great Depression had a severe impact on Indian Economy as well, it affected the economies, societies and lives of people.

• The Great depression had an immediate impact on Indian trade.
• In the 19th century, colonial India was an importer of manufactured goods and exported agricultural goods.
• Prices in India also crashed, as the international prices plunged.
• Between 1928 and 1934, wheat prices in India fell by 50%.
• Between 1928 and 1934, the exports and imports of India, reduced by half.
• More than the urban dwellers it was the farmers and peasants who suffered the most.
• The colonial British Government refused to reduce their revenue demands, despite massive reduction in agricultural prices.
• The worst hit in India due to the Great Depression was the peasants who were producing goods for the world market.

Bengal – Jute Producers

• Peasants who had borrowed more money with the hope of fetching higher income and producing more were the worst hit.
• They kept falling deeper into debts as the prices kept falling.
• The price of raw jute had collapsed by 60% due to the collapse of gunny bags exports.
• The raw jute that was grown in Bengal, was later processed in factories to manufacture gunny bags.

Effects of Great Depression on Peasants Across India

• Peasants’ indebtedness increased across India.
• Peasants had to sell whatever valuable they possessed.
• Peasants were forced to sell their precious metals, jewellery, mortgaged lands and savings.

Effects of Great Depression – Urban India

• Under pressure from Indian Nationalists, industries received tariff protection from the British Government. Hence Industrial investments grew.
• People in urban India did not face the same kind of crisis faced by people in rural India.
• middle-class salaried employees, town-dwelling landowners were people who received fixed incomes, they were in a better position as the prices kept falling and everything cost less.

Global Economic Recovery Due to India – John Maynard Keynes

• India became an exporter of precious metals, especially Gold, during the years of the Great Depression.
• As per John Maynard Keynes, a world famous economist, global economic recovery after the Great Depression was promoted by Indian Gold exports.
• These Gold exports helped the British, but it hardly had any positive effect on the Peasants suffering in India.
• In 1931, Mahatma Gandhi launched the civil disobedience movement, it was the time when rural India was seething with unrest.