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

By Shivank Goel|Updated : September 6th, 2022

The economy of India was altered drastically after the First World war. Because of the First World war, there was an increase in the demand for goods from India to Britain. Indian industries had to face a lot of inconvenience as before the war; the goods were imported from Britain and Germany. The short supply of goods resulted in inflation. The prices of industrial goods increased to double in a short period of time (in six years after 1914). It not only affected the industrial sector but also the farming sector had to face many challenges as the ratio of export to import prices shifted against the agricultural world.

Economic Impact of First World War on India

Though India was not directly involved in the first world war, it faced many challenges after the war as it was primarily dependent on British and German goods. The condition of British and German industries was adverse because of the war, and ultimately, India had to face a scarcity of goods. The economic impact of the first world war on India is as under-.

  • There was a significant increase in the expenditure on defence.
  • The colonial government of India fell off.
  • The focus on taxes shifted to individual and business profits. The taxes on the business profits and personal income were increased.
  • There was a high demand for opportunities for the development of industries by Indian business groups.
  • As there was an increase in the demand for war materials and military expenditure was high, the prices of the raw material increased.
  • Demand for food supplies, particularly cereals, led to rampant food inflation.
  • The steel industry benefited a lot because of the high demand for armour. Along with this, the manufacturing industries, particularly the cotton industries, benefited after the British goods were reduced in the market after the war.

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  • The first world war became a matter of concern for the Indian economy. A lot of pressure rose in the Indian industries as there was a shortage of goods (earlier, it was imported from Britain and Germany. Also, food was scarce.

  • After the first world war, the pressure on the Indian economy shifted towards the agricultural sector as there was a shortage of food supplies, especially cereals. This resulted in inflation.

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