Question

Write a note to explain the effects of the following:

The Great Depression on the Indian economy.

Answer 1

The effects of the Great Depression on the Indian economy were as follows:

1. By the early twentieth century, the world economy had become more integrated. The crisis in one area of the world spread fast to other sections, hurting people’s lives, economy, and societies. Colonial India had become an exporter of agricultural goods and an importer of manufactured goods. As a result, the Indian commerce suffered greatly during the recession. Between 1928 and 1934, exports and imports decreased by half.
2. Prices in India fell sharply. For example, wheat prices fell by 50% from 1928 and 1934.
3. Peasants suffered more than urban people. Despite the drop in agricultural prices, the government did not diminish its land revenue. Peasants producing for the global market were the hardest hit; for example, the collapse of gunny exports caused the price of raw jute to plummet by more than 60%.
4. In general, peasants’ indebtedness increased. To cover their expenses, they utilized their savings, mortgaged land, and sold jewels and precious metals.
5. However, India began to export gold. The famous economist John Maynard Keynes believed that Indian gold exports aided world economic recovery.
6. People in urban India, on the other hand, fared better because prices had plummeted, allowing them to spend more with their fixed income. Industrial investment grew as a result of tariff protection for industries under nationalist pressure. Thus, while the Great Depression had a negative impact on the rural economy, it was less detrimental to urban India.