Great Depression Impact in India PART-1

Great Depression Impact in India PART-1

INTRODUCTION: 

Great Depression, worldwide economic downturn that began in 1929, and lasted up to 1939. It was the biggest economic crash the western world had ever seen. The great depression also had several impacts on India. Which was then under rule of British Raj. The government of British India adopted a protective trade policy which through the beneficial to the UK , caused great damage to the Indian economy. During the period 1929–1937, exports and imports fell drastically crippling seaborne international trade. The railways and the agriculture sector were the most affected.

The international financial crisis combined with detrimental policies adopted by the Government of India resulted in soaring prices of commodities and goods. High prices along with the stringent taxes prevalent in British India had a dreadful impact on most Indians. The discontent of farmers manifested itself in rebellions and riots. The SALT SATYAGRAHA of 1930 was one of the measures undertaken as a response to heavy taxation during the Great Depression.

The Great Depression and the economic policies of the Government of British India worsened already deteriorating Indo-British relations. When the first general elections were held according to the government act of 1935, anti-British feelings resulted in the pro-independence INC winning in most provinces with a very high percentage of the vote share. 

ECONOMY OF BRITISH INDIA: 

Indian economy had been largely agricultural before and during the rule of the British. However, during British rule, there was a major shift from the growth of food grains to the cultivation of cash crops. This change was fostered by India's British rulers in order to provide for the textile mills in England, the most important of them being the cotton mills of Manchester and Lancashire which were fed with raw cotton produced in India. Since 1858, committees were established to investigate the possibility of cotton cultivation in India to provide raw materials for the mills in Lancashire. New technologies and industries were also introduced in India, albeit on a very small scale compared to developed nations of the world.

The major economy just smashed. The unemployment rate increase day to day. People was helpless. The most impact was in the Share market. 

PROBLEMS CAUSED BY THE GOLD STANDARD: 

The fundamental cause of the Great Depression in the United States was a decline in spending, which led to a decline in production as manufacturers and merchandisers noticed an unintended rise in inventories. It began on October 24, 1929, a day that is referred to as "Black Thursday", when a monumental crash occurred at the New York stock exchange as stock prices fell by 25%.

Gold was used to determine the value of the pound sterling thoughout the 19th century and the first quarter of the 20th century. the value of the pound sterling depended of the amount of pound sterling need to purchase a fix quantity of gold. At the onset of the first world war, the cost of gold was very low and therefore the pound sterling had high value. But during the first world war, the value of the pound fell alarmingly due to rising war expenses. At the conclusion of the war, the value of the pound was only a fraction of what it used to prior to the commencement of the war. It remain low until 1925, when the finance minister of U.K. restored it to pre war levels. As a result, the price of gold fell rapidly. The United Kingdom began to look to its possessions as India to compensate for gold that was sold. 

THE GREAT DEPRESSION STOCK MARKET CRASH :

A global economic depression broke out in 1929 following the American stock market crash of 1929 and rising speculations among the investors. However, the causes were more diverse and multi-pronged, with the decrease in costs and economic deflation of the post-war period being one of the main reasons. This deflation was caused by excessive manufacturing activities during the First World War.

War time expenditure had reduced the countries of Europe to a state of heavy debt. Protective economic policies of European countries made their condition even worse. The United States of America was not affected, partly because it had participated on the side of the victorious Allies and partly because the American states were never under attack during the span of the war. As a result, the United States of America emerged as a superpower and the principal creditor to European countries.

The Treaty of Versailles and its conditions had impoverished Germany. Germany lost a lot due to its involvement in the war. The country now owed extremely high debts. However, contrary to expectations, Germany did not pay off their debt by exporting manufactured goods. Instead, Germany paid off its debts by borrowing from the UK. The United Kingdom, meanwhile, paid Germany by borrowing from the USA. This created a situation wherein all European countries became dependent on the USA. When the American stock market suffered its first crash on October 24, 1929, there was a dreadful psychological effect on the nation. America stopped providing loans to foreign countries, thereby leading to a global financial disaster.

INDIA AT THE ONSET ON DEPRESSION: After the British came to India, They just smash Indian culture. Indian economy dependent in the British Raj only export raw materials. India had provide large quantities Iron, Steal and other raw materials for the manufacture of the arm in world war. Manufacturing units were gradually established and for the first time, the British Raj adopted a policy of industrialization. India acted both as a supplier as well as a sprawling market for finished British goods in order to sustain Britain's wartime economy.

When the war came to an end, the Montagu-Chelmsford reforms were enacted in order to provide certain concessions to Indians in return for their loyalty to the Empire during the war. In 1923, the British Raj offered government protection to nine industries posing them as a sincere bid to industrialize the economy. However, the measures appeared symbolic and were intended to finance and protect British enterprise as was evident from the fact that all the benefactors were British-run industries. At the onset of the Great Depression, as it had been always, much of India's imports were from the UK. On the eve of the First World War, India was the British Empire single largest market with its exports to India at Rs. 730 million making up over one-sixth of the country's total exports.

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