The Great Depression and the Indian National Congress

Nghia Mai
17 min readAug 18, 2020


Between 1929 and 1939, within the interwar period, the world went through a substantial period of several economic depression, commonly referred as the Great Depression, and the predominantly agricultural colonial economy of India was no exception to its damaging effects. The economic effects included declining exports and imports due to decreasing global prices of agricultural goods such as cotton and the protective trade policy of the British Raj, which negatively affected the Indian peasantry along with other groups in Indian society during this period and thus, increased discontent which could be mobilised for political agitations. In the context of the Indian struggle for independence, this period was also characterised by major events such as the Civil Disobedience campaign between 1930 and 1934, led by Mahatma Gandhi and the Indian National Congress, along with the Round Table Conferences to discuss constitutional reforms in India in the same period, which resulted in the Government of India Act of 1935. It can be seen that there were effects from the Depression on the political situation in India during this period, particularly in regard to the activities and policies of Congress in terms of its political struggle for purna swaraj (complete self-rule), which had been the party’s goal at the onset of the Depression, gaining momentum. These effects included increased support for Congress and its activities from marginalised groups in society who were impacted by economic hardships, deterioration in relationship between India and Britain, and internal disagreements within Congress itself at different levels. Thus, it is important to assess the effects that the Great Depression had on Congress and the successes and failures of its activities and policies during this decisive period in the history of the party. This would be done through examining case studies, particularly at provincial level, on Congress party activities and policies during this period to further understand the impact of economic changes on socio-political movements within a colonial society such as that of India during the interwar period.

In order to understand the impact of the Depression on the activities and policies of the Indian National Congress, it is important to examine its socio-economic effects on Indian society under British rule during this period. As a whole, at the onset of the Depression, prices of Indian exports fell by 31.5 per cent and continued to be very low going into 1932.[1] The value of India’s exports fell from Rs. 361.34 crores in 1929–1930 to Rs. 152.86 crores in 1932–1933.[2] As the economy of British India was predominantly agricultural, particularly centred on the cultivation of cash crops for exports which were vulnerable to fluctuations in world market prices, the rural sector was expected to be hit the hardest due to continuing decline in world market prices of said goods such as cotton. This led to drastic reduction in peasants’ income, whilst did not decrease demands for rent and land revenue. According to Dietmar Rothermund, the high prices for agricultural produce in the early 1920s raised the credit rating of peasants and eventually, increased rural indebtedness so the slump in prices and incomes during the early years of the Depression without a reduction in debt service and other revenue demands negatively affected the peasantry. This also completely upsets all credit relations in the agricultural markets.[3] This was demonstrated by the huge distress sales of gold and jewellery, seen as the last resort of any peasant family.[4] In Madras, the Depression significantly undermined social control in the countryside, which was held by the ‘big landlord-moneylenders’ who controlled the flow of capital and access to markets and village bosses who controlled most of the liquidity in the rural economy as peasants struggled to fulfil their debt obligations, which resulted in less profits for the rural elite who had invested in the cultivation of cash crops and opportunities for new markets.[5] In East Bengal, the slump in jute prices as a result of the Depression also upset the relations of production and surplus appropriation based on rural credit, which characterised agrarian social structure in the region.[6] Thus, this demonstrated the effects of the 1930s economic depression upon the socio-economic fabric of rural India, which led to increased discontent and violence from the peasantry in the countryside.

In regard to Congress at this point, the period between 1929 and 1930 could be seen as a decisive one in its history. This was demonstrated through the resolution adopted at the Lahore Congress on December 31, 1929 as a result of Gandhi’s meeting with the viceroy Lord Irwin in which Congress’s proposals for dominion status and majority status at the proposed Round Table Conference on constitutional reform were rejected.[7] The adopted resolution affirmed the primary objective of Congress as the ‘attainment of Complete Independence for India’ and urged Congress members to boycott future elections and resigning from their Legislatures and Committees as a tactic.[8] Moreover, January 26 1930 was declared as Independence Day, in which pledges were to be taken across the country that resulted in the Civil Disobedience campaign from 1930 to 1934, which started with Gandhi’s salt march to the coast at Dandi in Gujarat. Denunciation of British rule could be seen throughout the pledge, particularly its economic records in India, which allegedly ruined the country. This included heavy taxation based on land revenue derived from the peasantry and salt tax, the destruction of village industries such as hand-spinning and the manipulation of customs and currency which further burdened the peasantry.[9] It can be seen that economic grievances, particularly that of marginalised groups, were intrinsically linked to the overall strategy of Congress, particularly during a time of economic depression. However, it could be difficult to see whether there was direct causation link from the Depression upon the activities of the Congress since there had been political developments in the years leading up to 1930 that directly influenced Gandhi’s and Congress’s decision-making. At the same time, it is important to consider the fact that financial aspects played an important role in terms of Congress and other stakeholders’ perceptions of the problem. This was due to the belief from these stakeholders that the problems caused by the Depression were being exacerbated by policies from the British government, including high interest rates and currency contraction, that aimed to maintain India’s external financial obligations at the expense of its domestic economy, which led to repudiations of external debt to be part of Congress’s platform for Civil Disobedience.[10] Thereby, one could argue that perceptions of the effects of the Depression on India’s economy helped to justify and strengthen the claims made by the Congress in terms of propaganda and mobilisation of support from marginalised groups in society such as landless labourers, women, adivasis (tribal groups) who had previously not been part of the nationalist struggle. In turns, this helped to legitimise Congress’s role as representatives of Indian national aspirations.

According to Rothermund, the severe impact of the Depression on the Indian peasantry allowed the nationalists under Gandhi’s leadership to channel peasants and other groups’ grievances into acts of political agitations, who had demonstrated a greater interest in rural India than their predecessors through two primary methods, the use of regional languages and ‘diligent fact-finding’ used by Congress volunteers in the provinces.[11] This was demonstrated in Madras, where Congress volunteers organised demonstrations as part of the Civil Disobedience campaign, in which they were able to tap into the discontent of many sectors of the population, including the unemployed and students, aggravated by socio-economic conditions of the Depression. This was particularly true in the countryside, where they able to associate the anti-zamindari and resettlement campaigns, which were also happening at the same time in Madras with Congress.[12] This demonstrates the use of a national campaign as a vehicle for longstanding issues in a local area. In Gujarat, while Gandhi and Congress already had a foothold and the allegiance of the Patidar farmers for over a decade, they were more willing to take part in a campaign of non-payment of land revenue and social boycott, which led to the Gujarat government to almost collapse.[13]Thus, this showed that Congress benefitted from popular disenchantment with government policies as a result of the impact of the Depression in terms of mobilising support from a wider section of the population.

While the impact of the Depression helped to strengthen Congress’s methods of political agitations and popular appeal, it also demonstrated the changing nature of the party’s relationship with Indian industrialists who were affected by the Depression and their conflict of interest during this period, which arguably had a more significant influence on Congress activities and policies. Thus, demonstrating the intertwining of business and politics during period of economic downturn. During the early period of the Depression, whilst the economy of India on a whole was affected, the industrial sector, particularly that of Indian capital for domestic consumption, was not affected as heavily as other sectors i.e. agriculture and even remained relatively stable. Claude Markovits noticed that the contraction in the domestic market in demands for manufactured products was compensated by the slump in imports, which benefitted domestic producers. At the same time, real urban incomes also rose due to low food prices resulting in an expansion of market for luxury goods and Indian industrialists also benefitted from higher falls in wage bills and costs of raw materials than the finished products so the impact was not as dramatic as expected as the export sectors, which tended to be British-owned.[14] The effects of the Depression on industries owned by Europeans allowed indigenous capitalists to play a bigger role in import substitution, thus gaining a bigger share of the domestic market.[15]However this did not mean that Indian capitalist class were immune to the effects of the Depression and still recovering from industrial action of the earlier years, which eventually drove them into supporting Civil Disobedience, whom believed that they could extract further economic concessions from the colonial government through engagement in nationalist politics whilst controlling the latter. Initially, there was a reluctance from the industrialists, who favoured more moderate and constitutional methods in supporting Congress’s movements as it may cause disruption to their businesses. In letters to Gandhi, Purushottamdas Thakurdas, a leading industrialist who held nationalistic views, expressed doubts about launching a campaign of such nature and worried about the impact of the Lahore Resolution on repudiation of debts upon Indian securities markets in London, which would have an effect on the entrepreneurs.[16] This was also not the first time that Gandhi had to deal with Indian capitalists regarding one of his campaigns considering the process and outcome of the Ahmedabad satyagraha. It can be seen that the impact of the Depression eventually pushed the indigenous capitalist class to support Congress and Civil Disobedience as it convinced mill owners in Bombay that a boycott of British cloths as a desperate opportunity to avoid collapse and made businesses more willing to accept disturbances since business operations were already stagnant anyway. Furthermore, the passing of the Cotton Industries Protection Bill, which created differential duties on British and non-British goods, also resulted in increased discontent amongst indigenous entrepreneurs who viewed it as imperial preference.[17] Both Chatterji and Markovits would agree that businesses gravitated toward Congress and supported Civil Disobedience in terms of a mean to extract concession from the British government, as they viewed the Depression in India was more to do with the British government’s policy reactions to it rather than the actual worldwide crisis itself.[18] Therefore, this gave an impetus for Indian industrialists to strive for greater control of the economic sphere in India, which would be possible through association with Congress, an intertwining of economic and political nationalism.

Even though business’s financial support for Congress ensured the success of Civil Disobedience, the main point of disagreement was the nature of the acts committed during the campaign. This was due to the rising level of violence and lack of orders, particularly in the provinces, where local grievances took precedence, during the first few years of Civil Disobedience as a result of the imprisonment of established Congress leaders, Gandhi included and placed the running of the campaign in the hands of leaders at provincial level and pressure from below, which worried businesses who traditionally favoured constitutional methods to advance their interests. This led to most scholars to view pressures applied by Indian capitalists upon Gandhi, whom maintained amicable relationship with many of them, to halt the Civil Disobedience as a key factor in reaching a compromise with the British government that culminated in Gandhi’s pact with Lord Irwin in London in March 1931 before the Second Round Table Conference later that year for concessions and constitutional reform, with Congress being represented. This also exposed the ideological division within Congress in terms of opposition to the cessation of the agitation and the pact by left-wing Congressmen, notably Jawaharlal Nehru, who had held socialist views and viewed capitalist interests with indifference at the onset of the Depression.[19] The importance of business support in the success or failure of Congress’s political agitation was demonstrated when Gandhi revived Civil Disobedience in January 1932 as increasingly effective repressive measures employed by the British deterred businesses from participating, which led to a decrease in financial support for Congress and not to mention, the split in the business community between Bombay mill owners and their Ahmedabad competitors who benefitted from the continuation of agitations and boycott of British goods.[20] Moreover, the decline of British position in the Indian economy and emergence of other foreign competition such as textile from Japan, as a result of a depreciation in the value of the yen and of a reduction in production costs in Japan, would have place higher priority for economic survival than nationalistic ambitions.[21] This would ultimately resulted in the failure of the second round of Civil Disobedience.

Moreover, the failure of the second round of Civil Disobedience by 1934 also exacerbated the existing ideological division in the Congress into three factions, the Gandhians who were devoted to Gandhi’s ‘constructive works’; the Swarajists and the Socialists via the Congress Socialist Party (CSP) formed in May 1934. The presence of the left wing in Congress resulted in a rapprochement between Indian industrialists and the Congress Gandhian leaders out of pragmatism, in which the Gandhians needed financial support to regain control of the Party and the industrialists favoured relationship with a reconstructed Congress to re-establishing a balancing factor toward the colonial government in order to get the best terms possible over the outcome of negotiations on constitutional reform.[22] It can be seen that the impact of Depression upon commercial interests permitted Congress to gain access to financial support, which was necessary in ensuring success for political agitation but this support depended on the self-interest of the capitalists so it proved to be unstable. At the same time, the relationship between Congress and the industrialists could be viewed as a marriage of convenience as a result of different perspectives in means to achieve certain goals and the opposition to capitalist interests from the left wing of Congress.

As in most countries, the Depression in India lasted until the outbreak of the Second World War, thereby it is necessary to examine the activities and policies of Congress from 1935 onwards, following the passing of the Government of India Act of 1935. The Act, which aimed to increase Indian participation in political affairs through increasing the numbers of voters to one in six adults was proposed, including women, and guarantee of greater provincial autonomy was criticised by most Indian politicians as offering little if any concession from the Act of 1919.[23] It is important to remember that despite the uniform criticism, Congress was split on the Act, especially the holding of elections by the British in 1937 under the terms of the 1935 Act. Leading figures within Congress such as Gandhi and Nehru had always opposed to the parliamentary path along the lines of British constitutional means for India.[24] However, during the first few years of the Depression when Congress undertook political agitation, the failure of political agitation to achieve desirable goals, coupled with external factors, often resulted in decline of unity within Congress and emergence of different factions. In this case, the right wing of the party was able to convince Gandhi on Congress participation in the British-held elections, as another campaign of political agitation similar to that of Civil Disobedience was not possible at this point.[25] The 1937 elections saw Congress ministries being formed in seven out of eleven provinces of British India, with the exception of the Punjab, Bengal, and Assam.[26] However, the impact of the Depression also affected the effectiveness of the new ministries in managing various expectations and fulfilling campaign promises once they were formed, as provincial finances were in a bad state as the Depression had resulted in the previously mentioned fall in land revenue due to the fall in commodity prices, which was the main source of revenue for provincial governments, which would have prevented their abilities to deliver socio-economic developments.[27] Moreover, they wanted to maintain a broad class alliance, which included those who were affected by the Depression including landlords, moneylenders and tenants.[28] Thereby, this deterred many Congress provincial ministries from taking bold actions regarding the land revenue system, which may have affected the interests of any group.

The period of 1937 onwards also saw increased labour militancy as a result of Congress’s election victory in the provinces. This was shown through the strike of the Calcutta jute workers in a British-owned industry that was already affected by the Depression, which received backing from the Congress. Despite improving economic situation in the latter half of 1930s for industries, there were still concerns of continuing recession, exacerbated by heightened labour militancy that could spread through provinces that Congress held control. Thereby, the Congress ministries had to balance the interests of two opposing groups who were affected at various degrees by the Depression, workers and capitalists.[29] Therefore, it can be seen there was an imperative to maintain broad support in any case, which prevented Congress ministries from implementing drastic and decisive measures being taken. This reluctance would have attracted criticisms from leftist, as shown by Nehru describing the Congress ministries as ‘merely carrying on the traditions of the previous governments.’[30] However, it is vital to consider on a case by case basis. In Bihar, rent increases after 1911 were abolished with share-cropping was abolished and tenants were given the right to pay their rents in cash whilst it was made impossible for landlords to eject tenants from their holdings.[31] Furthermore, in United Provinces, the Sugar Factories Control Acts ensured an increased minimum price of sugarcane for the peasantry and total control of the production of sugar in the province through a licensing system for factories.[32] Therefore, it can be seen that measures and legislations were enacted by the Congress which would be beneficial for sections of the population that was previously affected by the Depression without alienating vested interests. At the same time, even though measures were adopted, their effectiveness were limited by the conditions of the time. According to Rothermund, in the case of remedial action for tenancy protection in four major provinces, it only benefitted the upper strata of the peasantry who had been most directly affected by the Depression and that the British and Congress tried to woo.[33] Furthermore, the period from 1937 to 1939 also witnessed increased spontaneous militant expression of popular discontent, often in many provinces that Congress controlled. This was due to continued hardships as a result of the Depression despite some improvements but this did not trickle down the most vulnerable sections of the population, many of whom had previously participated in the Civil Disobedience campaign who felt their sacrifices were in vain and the absence of influential figures such as Gandhi who by this time, temporarily turned away from politics, to engage in mediation. In addition, one could see the tensions within the nationalist movement between the landed elites and rural working class masses, aggravated by economic downturn. Thus, this demonstrated how the Depression did not benefit Congress in terms of engagement in experiments of responsible self-government in the final years of the 1930s, as they struggled to maintain a balance between maintaining broad class alliance and mitigating the effects of the Depression on the population in the provinces that they controlled.

To conclude, the Depression significantly the activities and policies of Congress during the interwar period. This was shown through its impact upon the socio-economic fabric of Indian society, particularly in the rural area. This resulted in greater discontent, which pushed more deeply affected sections of the population, who had not previously been part of the nationalist movement, toward the banners of Congress as they affirmed the goal of attainment of purna swaraj in the Civil Disobedience campaigns. Hence, this gave Congress a broad base of support and their legitimacy as the voice of pan-Indian demands strengthened. In addition, the Depression also pushed indigenous industrialists, who took advantage of the Depression to gain further concessions, into supporting the endeavours of Congress. Their financial support was crucial to the successes of Congress’s agitational campaigns, especially during the first round of Civil Disobedience. However, it is important to be aware that this collaboration was based on circumstances, rather than mutual self-interests as shown through disagreements and leftist criticisms of capitalists’ influence in the Gandhi-Irwin Pact of 1931. This also exposed the ideological divide within the Congress between the right and left wings of the party in the trajectory of achieving purna swaraj. The long-term effects of the Depression also impacted upon the ability of Congress to deliver promises of remedial action whilst maintaining broad support once they gained control of the provinces following the 1937 elections. Overall, the Depression period proved to be a challenging one for Congress as it emerged as the leader of the Indian independence movement.

[1] B. Chatterji, “Business and Politics in the 1930s: Lancashire and the Making of the Indo-British Trade Agreement, 1939,” Modern Asian Studies 15, no. 3 (1981): 531.

[2] B. R. Tomlinson, The Political Economy of The Raj 1914–1917: The Economics of Decolonization in India (London: MacMillan Press, 1979), 122.

[3] Dietmar Rothermund, India in the Great Depression 1929–1939 (New Dehli: Manohar Publications, 1992), 79–80.

[4] Crispin Bates, Subalterns and Raj: South Asian since 1600 (New York: Routledge, 2007), 146.

[5] Christopher John Baker, The politics of South India 1920–1937 (Cambridge: Cambridge University Press, 2009), 175.

[6] Sugata Bose, Agrarian Bengal: Economy, Social Structure and Politics, 1919–1947 (Cambridge: Cambridge University Press, 1987), 190.

[7] Bates, Subalterns and Raj, 142.

[8] “The Independence Resolution, 31 December 1929,” in The Evolution of India and Pakistan 1858–1947: Select Documents, ed. C.H. Philips (London: Oxford University Press, 1962), 237.

[9] “Pledge taken on Independence Day, 26 January 1930,” in The Evolution of India and Pakistan 1858–1947: Select Documents, ed. C.H. Philips (London: Oxford University Press, 1962), 238.

[10] Tomlinson, The Political Economy of The Raj, 125.

[11] Rothermund, India in the Great Depression, 203.

[12] Baker, The Politics of South India, 213.

[13] J. Brown, Modern India: The Origins of an Asian Democracy (Oxford: Oxford University Press, 1985), 268.

[14] Claude Markovits, Indian Business and Nationalist Politics 1931–1939: The Indigenous Capitalist Class and the Rise of the Congress Party (Cambridge: Cambridge University Press, 1985), 43.

[15] Chatterji, Business and Politics, 560.

[16] Markovits, Indian Business, 70.

[17] Ibid, 71–72.

[18] Chatterji, “Business and Politics,” 533.

[19] Bates, Subalterns and Raj, 148.

[20] Markovits, Indian Business, 82.

[21] C. Markovits, “Indian Capitalists and Imperial Preference in the 1930s: A Case Study in the Ambiguities of Economic Nationalism, “Proceedings of the Indian History Congress 39, no. II (1978): 638.

[22] Ibid, 98.

[23] Bates, Subalterns and Raj, 149.

[24] Rothermund, India in the Great Depression, 215.

[25] Ibid.

[26] Ibid, 229.

[27] Markovits, Indian Business, 151.

[28] Rothermund, India in the Great Depression, 233–234.

[29] Markovits, Indian Business, 152–153.

[30] Bates, Subalterns and Raj, 151.

[31] Ibid, 152.

[32] Shahid Amin, Sugarcane and Sugar in Gorakhpur: An Inquiry into Peasant Production for Capitalist Enterprise in Colonial India (Dehli: Oxford University Press, 1984), 226–227.

[33] Rothermund, India in the Great Depression, 255.


- Primary sources:

“The Independence Resolution, 31 December 1929”. In The Evolution of India and Pakistan 1858 to 1947: Select Documents, edited by C.H.Phillips (London: Oxford University Press, 1962), 237.

“Pledge taken on Independence Day, 26 January 1930”. In The Evolution of India and Pakistan 1858 to 1947: Select Documents, edited by C.H.Phillips (London: Oxford University Press, 1962), 238.

- Secondary sources:

Amin, Shahid. Sugarcane and Sugar in Gorakhpur: An Inquiry into Peasant Production for Capitalist Enterprise in Colonial India. Dehli: Oxford University Press, 1984.

Baker, Christopher John. The Politics of South Asia 1920–1937. Cambridge: Cambridge University Press, 1978.

Bates, Crispin. Subalterns and Raj: South Asia since 1600. New York: Routledge, 2007.

Bose, Sugata. Agrarian Bengal: Economy, Social Structure and Politics, 1919–1947. Cambridge: Cambridge University Press, 1987.

Brown, J. Modern India: The Origins of an Asian Democracy. Oxford: Oxford University Press, 1985.

Chatterji, B. “Business and Politics in 1930s: Lancashire and the Making of the Indo-British Trade Agreement, 1939.” Modern Asian Studies 15, no.3 (1981): 527–573.

Markovits, C. “Indian Capitalists and Imperial Preference in the 1930s: A Case Study in the Ambiguities of Economic Nationalism.” Proceedings of the Indian History Congress 39, vol. II (1978): 634–645.

Markovits, Claude. Indian Business and Nationalist Politics 1931–1939: The Indigenous Capitalist Class and the Rise of the Congress Party. Cambridge: Cambridge University Press, 1985.

Rothermund, Dieter. India in the Great Depression 1929–1939. New Dehli: Manohar Publications, 1992.

Tomlinson, B. R. The Political Economy of The Raj 1914–1947: The Economics of Decolonization in India. London: MacMillan Press, 1979.



Nghia Mai

Ireland-based Vietnamese humorist interested in making people of all creeds and species laugh and think. Cultural Ambassador (Whatever that means).