1. Impact of World War I on Indian Economy
Anil Kumar Bharti Assistant Professor Department of Economics Central University of Jammu

2. Introduction
The World War I ( ) was the first such war fought not just on a national but continental scale and for so long.
It was for the first time that war touched every aspect of a nation’s economy, whether that nation was or was not directly involved in the war.
The war affected every sector of the Indian economy – agriculture, industry, trade and commerce, banking and finance and so on.
Certain developments during the war determined the direction in which the country would move in future and thus considerably influenced India’s future course and pattern of her economy.

3. World War I and Indian Agriculture
The years were years when monsoon was normal and so were the agricultural crops.
The year saw failure of crops practically all over India experiencing a famine like situation.
As a consequence of the war, agricultural prices showed a rising tendency.
As war disrupted the normal channels of trade , there was widespread disparity in prices of imported and exported goods.
The prices of the exportable agricultural goods rose less than the prices of the imported manufactured goods.

4. World War I and Industries
When world war I was declared, India hardly had any worthwhile industries except cotton textile and jute manufactures.
The declaration of war cut off India’s imports from enemy countries and considerably reduced imports from UK and other friendly countries.
This not only showed the dangers of extreme dependence upon foreign countries but also convinced the British Government of the military significance of developing India industrially.
The above realisation led to the appointment of the Industrial Commission in 1916 to examine the possibilities of Industrial development of the country.

5. Continued...
The Industrial Commission submitted its report in 1918 which laid emphasis on the role of the Government in bringing industrial development of the country.
The Government of India also established in 1917, the Indian Munition Board as an emergency measure.
The objective of the Board was to help development of India’s industrial resources, specially keeping in view the war needs.
The Indian Munition Board gave assistance to industrial firms and individuals who wanted to established new industries or expand old ones.
The Board gave special attention to the development of what are commonly known as ‘Key Industries’.

6. World War I and Some Major Industries
Cotton Textiles Industry: On the eve of World War I, cotton textiles industry was in a depressed condition but the war gave it a boost and by 1916 the industry was in a prosperous condition.
The factors responsible for the prosperity of the cotton textile industry were:
-Large Government orders
-Heavy import duties imposed on cotton textiles
-Increasing freight charges
-Increasing demand from abroad
-Rising prices

7. Continued...
Jute Industry: World War I gave a great fillip to the jute manufacturing industry on account of large demand for jute piece goods.
-The reduction in the supply of flex was also responsible for increase in the demand for Indian jute goods.
Iron and Steel Industry: TISCO held almost monopolistic position and prospered during the war because of increasing demand from the Government and cutting down of imports.
-By the old Tata plant was in full swing producing 147,497 tonnes of pig iron, 139,433 tonnes of steel ingots and 98,726 tonnes of finished steel.
-The Tata company earned good profits right up to

8. World War I and India’s International Trade
The World War I brought about disruption of normal international trade channels.
Trade with Germany ceased immediately and trade with Great Britain became difficult because of shortage of shipping space.
The immediate impact was decline in both India’s imports and exports.
But soon exports started moving up as there was increasing demand from foreign countries for India’s cotton textiles, iron and steel, mica, saltpetre, wolfram and wheat.
As Britain was gradually losing the Indian market and Germany was completely shut off , Japan and USA were capturing the Indian Markets
Japan began to export to India cotton piece goods, glassware, paper etc. Whereas USA started exporting iron and steel hardware to India

9. Continued...
But India’s exports to Great Britain and Empire countries went on increasing.
The Great Britain’s share in India’s exports rose from 23.4% in to 29.2% in
The share of Empire countries in India’s exports rose from pre-war average of 41% to 52% during the war period.
Considerable diversification took place in the direction of India’s export as they were completely stopped with Germany, whereas increased with USA and Japan.

10. World War I and India’s Commercial Policy
On account of increasing need for revenue, the Government of India raised in 1916 general import duties from 5% to 7.5%.
The number of duty-free articles was also reduced and export duties were levied on jute and tea.
In 1917, import duty on cotton piece goods was raised from 3.5% to 7.5%, also export duty on jute goods was doubled.
In 1919, export duty was also levied on hides and skins.
It was also decided in 1917, that India should make a special war contribution of £100 millions to the Imperial Government.
There was heavy deficit in the budget for the year necessitating raising of general import duties from 7.5% to 11%.

11. World War I and Indian Banking
A number of commercial banks came to be established as a result of World War I and the post war boom.
But at the same time a number of banks went into liquidation.
During , as many as 161 commercial banks with paid-up capital of Rs 6.75 crores went into liquidation due to:
-Low ratio of cash to deposit liabilities
-High rates of interest offered to attract deposits.
-Absence of statutory regulation
-Dearth of qualified staff
-Lack of cooperation among commercial banks
-Prevalence of fraudulent practices among bankers

12. World War I and Indian Railways
Indian railway system saw a great pressure during World War I because of heavy demand by the defence department.
Due to shortage of ships, the movement of coal etc. was to be made by the railways which further increased the pressure.
Also it was difficult to get railway engines, wagons and other equipments from the UK which was then the main supplier.
Because of financial difficulties during the war period, capital expenditure as also maintenance expenditure could not be incurred on railways.
This implied a heavy depreciation of railway engines and other equipments creating serious problems of rehabilitation of railways for the post World War I period.

13. World War I and Labour Movement
Indian labour movement hardly existed during the pre World War I period.
The conditions created during the war led to the awakening of industrial labour in India.
Rising prices with wages lagging behind combined with worsening conditions of work led to the attempts at unionisation of labour.
In 1918, B.P.Wadia established the Madras Labour Union which might be said to be first trade union as such in India.

14. Concluding Remarks
Although the impact of the war did raise the expectations of Indian industry, it only bestowed the doubtful blessings of artificially high prices on Indian agriculture.
The masses of the people did not experience a revolution of rising expectations, but only noticed an inflationary rise of all prices.
This led to a general discontent, which soon found an expression in terms of a rising tide of Indian nationalism.

15. To sum up, the World War I because of its global nature and long duration and close involvement of India in war-efforts created profound impact on practically every sector of the Indian economy.

16. References
Tirthankar Roy, The Economic History of India , Oxford University Press, 3rd edition, 2011.
B.R.Tomlinson, The Economy of Modern India , Cambridge University Press, 2005.
Desai and Bhalerao, Economic History of India, Himalaya Publishing House, Mumbai, 2004.
Dietmar Rothermund, An Economic History of India: From Pre-Colonial to 1991, Routledge Publications, 2002.
N. Jayapalan, Economic History of India: Ancient to Present Day, Atlantic Publishers and Distributors (P) Ltd,