The genesis of communalism in India can be found in the British conquest of India and its impact on the people. The British conquest marked the decline of upper class Muslims, particularly in Bengal where they lost their preeminence in employment in army, judiciary and administration. Slowly with the Permanent Settlement of 1793 along with the making of English the official court language in 1833 the upper class Muslims began to lose their power and influence. In the Indian situation, the loss of Muslims was the gain of Hindus as they had responded more positively to education and other modernizing forces.
Nehru wrote about this lag in a letter to a friend in 1939, "Hindus developed a new middle class during this period whereas the Muslims continued to remain largely feudal. The Hindu middle class laid the foundation of the nationalist movement but about a generation later the Muslims went the same way, took to English education and state services and profession and developed a new class also. A conflict arose between the various middle class elements for state services and this was the beginning of the communal problem in its modern phase."
Post 1857, British shifted to a policy of 'concession, counterpoise and coercion' to accommodate new rising class, to counterbalance strong class and to browbeat recalcitrant class.
The revivalistic tendencies of the 19th century, while doing some good also contributed to development of schism between the two religions. This culminated in Jinnah declaring that Hindus and Muslims were two nations also because they had a different history and often the hero for one was the villain for the other!
Certain innocuous political trends, though not communal in themselves, obliquely led to its growth. For example, Sir Syed Ahmad Khan who was not a communal to start with (his political allegiance is even now ambivalent) but his pitch for Muslims, derision for Congress as a Hindu body and the fear of the majority gobbling up the minority sowed the seeds of communalism. Communal organizations like the All India Muslim League (1906) and the Hindu Mahasabha (1915) abetted the hatred and mistrust from which communal forces drew their sustenance.
Lord Curzon added fuel to the fire with the Partition of Bengal in 1905 to carve out Hindu and Muslim majority areas to weaken the national movement. Further mistrust was added by the Swadeshi Movement, where Hindu idioms like Ramrajya etc. had been used to consolidate the masses. The Swadeshi Movement coincidentally, was largely led by Hindu leaders.
Introduction of separate electorates (grouping of constituencies, voters and elected candidates on the basis of religion- famously known as Morley Minto Reforms of 1909) further contributed to the worsening of the situation. The weakness of the national movement and the failure of the leadership to correctly assess the situation led to the Congress giving more concessions to the Muslim League under Lucknow Pact of 1916. This also, implicitly acknowledged that the Muslim League was the lone representative of the Muslims in India. Soon even this Pact became redundant as Government of India Act of 1919 (Montagu Chelmsford Reforms) gave in much more to Muslims.
The weakening of the Khilafat Movement representing Hindu Muslim unity coincided with the revival of the Muslim League 1922-23. As a corollary, the Hindu Mahasabha got activated. The Tabligh and Tanzim movements started amongst Muslims in response to Shuddhi and Sangathan movement samongst Hindus. The RSS was founded in 1925.
In the wake of the Simon Commission, one more opportunity was given for religious reconciliation. But rejection of the truce formula by the Hindu Mahasabha along with rejection of the Nehru Report by Jinnah led to what Jinnah called "parting of ways" and his demands attained more stridency. After the election under the Government of India Act 1935 showed lack of popular Muslim support for Jinnah, he went on a massive drive to cultivate the Muslim masses. Jinnah's hardening stance led to the demand for Pakistan at the Lahore Session in 1940.
The year 1937 was a turning point in the history of communalism in India in so far as it concerns the stridency and intensity of politics of hatred. In the elections held for the provincial legislative assembly, the Muslim League won only 109 out of 492 reserved Muslim seats and only 4.8 % of the total Muslim votes showing thereby the lack of popular support for Muslim League even among the Muslim population. The League then resorted to the cry of 'Islam in danger' and the impending 'Hindu Raj'. And what followed was a communal propaganda 'full of fervor, fear, contempt and bitter hatred' (WC Smith).
It must be pointed out here that the Hindu fundamentalists had fared worse than their Muslim counterpart in the 1937 elections. For example, the Hindu Mahasabha had won only 12 seats out of 175 in Punjab. Their predicament was aggravated in 1938 when Congress disallowed communalists from working within the Congress. Consequently, the Congress was condemned by them for "supporting our inveterate enemies". This led to the Hindu fundamentalists' version of the 'two nation theory'.
After the outbreak of World War II, the Muslim League was assiduously cultivated by the Viceroy Lord Linlithgow and the demand for Pakistan was used to counter the Congress demand that the British should promise to free India after the War. The British wanted a settlement between the League and the Congress before anything concrete could even be contemplated and promised that no political settlement would be made which was unacceptable to the League thereby giving Jinnah a kind of a 'veto' power which he was to use to catastrophic effect in future.
The Cripps Mission of March-April 1942, though constituted with the avowed intention of 'the earliest possible realisation of self-government in India', actually promised Dominion Status and that too after the war, nomination of people of princely states in the proposed Constituent Assembly by their princes, control of British over defence in the new executive council and implicit backdoor recognition of Pakistan via the 'local option clause' by which the princely states were allowed to directly negotiate with the British if they chose to reject the Constitution to be framed.
At the end of the War, at the initiative of Viceroy Wavell, the Congress leaders were freed from jail in mid June 1945 and invited to Shimla to work out an interim political arrangement under which the Indians would be responsible for running the country. Jinnah now insisted that only the League had the right to nominate Muslim members to the Executive Council. Lord Wavell announced the breakdown of talk rather than bypass the League thereby upholding the 'veto' promised to the League by Linlithgow.
Elections held in the winter of 1945-46 to the Central and Provincial Legislative Assemblies were fought by the League with a straight forward communal slogan-"A vote for the League and Pakistan was a vote for Islam", and it was a choice between the Gita and the Koran. The League made a clean sweep of the Muslim seats in the polls.
The Cabinet Mission was sent to India in March 1946 to establish a national government and constitutional arrangement for transfer of power. The then British Prime Minister Clement Attlee, in sharp contrast to Wavell's position, declared on 15th March 1946 that "a minority would not be allowed to place a veto on the progress of majority." He believed that Pakistan would not be a viable entity and hence made a plan to safeguard the interests of Muslim minority within the overall framework of unity of the country. At this stage a deadlock ensued leading to the failure of the Cabinet Mission.
Interim Government: An Interim Government was formed on 2nd September 1946 with Nehru as its de facto head and reversing the earlier stand of the British to placate and take the League with it. This infuriated the League to actualize its threat of Direct Action the call for which was give on 16th August 1946 in Calcutta with a new slogan 'Larke lenge Pakistan' (We will fight and get Pakistan). Widespread communal riots followed, forcing the British to go back to their conciliatory approach towards the League. Lord Wavell and the Secretary of State for India Pethick Lawrence believed that if the Muslim League was ignored, civil war would become inevitable in India. Consequently, the League joined the Interim Government on 26th October 1946 and continued its fight from within the government.
Lord Wavell was replaced by Lord Mountbatten and Prime Minister Attlee reaffirmed his government's resolve to withdraw from India latest by '30th June 1947'. The League went on a final offensive, and brought down the coalition Punjab government led by Khizr Hyat Khan of the Unionist Party.
Creation of Pakistan: On the 3rd of June a plan was devised to accommodate both the parties- by creating a sovereign Pakistan to accede to Jinnah's demand but to make it as small as possible so as to accommodate the 'unity' demand of the Congress. Dominion Status was to be given to India and Pakistan on 15th August 1947. Some other demands of Congress were acceded to so as to placate the Nationalists.
The country gained independence at a great cost and to paraphrase Jinnah "a truncated and moth eaten country" was born.