What Economic Impact did the First World War have on India?

By BYJU'S Exam Prep

Updated on: November 9th, 2023

The economic impact of the First World War on India was an increase in the demand for goods from India to Britain. After the First World War, the economy of India underwent drastic changes. Indian industries suffered as much inconvenience as before the war. The goods were imported from Britain and Germany.

Inflation occurred as a result of a short supply of goods. In a short time (in the six years after 1914), the prices of industrial goods doubled. This affected not only the industrial sector but also the agriculture sector faced many challenges as the ratio of export and import prices shifted against the agricultural sector.

Economic Impact of First World War on India

Although India was not directly involved in World War I, it faced many challenges after the war as it was mainly dependent on British and German goods. The condition of British and German industries was unfavorable due to the war, and eventually, India faced a shortage of goods.

The economic impact of the First World War on India is as follows:

  • There was a significant increase in expenditure on defense.
  • The colonial government of India fell.
  • The focus on taxes shifted to personal and business profits. Taxes on business profits and personal income were increased.
  • Opportunities for the development of industries were highly sought after by Indian business groups.
  • As the demand for war materials increased and military spending was high, the prices of raw materials increased.
  • The demand for food supplies, especially cereals, led to a sharp rise in food inflation.
  • The steel industry benefited greatly due to the high demand for armor.
  • Simultaneously, the manufacturing industries, especially the cotton industries, benefited after the British goods in the post-war market dwindled

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