how the Indian economy were affected by the world war??
The First World War led to a huge rise in the defence expenditure of the Government of India. The government in turn increased taxes on individual incomes and business profits. Increased military expenditure and the demands for war supplies led to a sharp rise in prices which created great difficulties for the common people. On the other hand, business groups reaped fabulous profits from the war. The war created a demand for industrial goods such as jute bags, cloth and rails, and caused a decline in the imports from other countries into India. As a result, Indian industries expanded during the war.
- It created a new economic and political situation by leading to huge expenditures in defence which were to be financed by increasing taxes and raising custom duties.
- Forced recruitment of soldiers bred resentment in villages.
- Crop failures and spread of influenza epidemic led to widespread hardships.
- The business classes reacted against policies that restricted their business.