Great Depression of 1929 - Causes, impact and measures taken. Impact on India

The economic depression of early 1930's was one of the most important events of the world between the two wars. It is called 'Great' as it adversely affected almost all the great countries of the world except USSR. The Great Depression which began in USA extremely affected the European countries

Causes

-The main cause of the depression was the collapse of American share market. The share market collapse was due to speculation on borrowed money.

-Bank Failures-:Bank deposits were uninsured and thus as banks failed people simply lost their savings.

-Reduction in Purchasing Across the Board

-American Economic Policy with Europe

-Drought Conditions in Mississippi Valley in 1930

In 1929 Herbert Hoover became the President of America. During his period the share market reached its zenith. Share market was the greatest craze in America. People from all walks of life bought shares not for the dividend but for resale value .By that they wanted to become rich quickly.

"The Great Depression" began on Oct 24, 1929 with the fall in the prices of shares.

It created panic and people began to sell their shares speedily which led to a further fall. This was followed by the failure of banks which led to the non-availability of credit which affected industrial growth and agricultural produce. 

Remedial measures of the American President Hoover:

In 1932, Hoover, the American president adopted many remedial measures. He set up the Reconstruction Finance Corporation to lend money to banks and industries, but the people lost faith on Hoover.

When the Presidential election came in 1932. Franklin D. Roosevelt, commonly known as FDR became the President of U.S.A. In his election manifesto he said “I pledge you, I pledge, myself to a New Deal for the Americans”. He assumed office on March 4,1933.

Franklin D Roosevelt:

-The policy formulated to compact depression by FD Roosevelt is known as New Deal. It Includes Relief, Recovery and Reforms

-The Tennessee Valley Authority was established for the promotion of construction of dams, power plants, navigation projects, flood control projects, soil conservation, and reforestation programmes.

-The Federal Emergency Relief Administration (FERA) was set up to provide with 500 million dollars to be given to the state and local governments.

-Federal Reserve Bank was set up to provide loans to banking institutions and industries.

-The Security Exchange Act 1934, issued license to stock exchange.

-The National Industrial Recovery Act (NIRA) was passed to reform the conditions of the workers by raising wages and lowering their working hours.

-The Agricultural Adjustment Act (AAA) was passed to provide compensation to farmers who curtailed agricultural production there by to raise prices.

Effects

O Despite few limitations, the New Deal strengthened the American economy.

O It restored confidence among the people.

O It laid a firm foundation for industrial prosperity and led to increased production.

Many ideas of the new deal like,

a.            Collective bargaining between the employee and the workers.

b.            Regulation of stock exchange

c.            Restriction on hours of work are now accepted as part of the American pattern of life.

New deal has become synonyms with reforms throughout the world. By 1940 there was normal economic activities in the USA.

Great Depression 1929 and its Impact on India

In the nineteenth century, colonial India had become an exporter of agricultural goods and importer of manufactures. The great depression immediately affected Indian trade.

 1. India's exports and imports nearly halved between 1928 and 1934.

 2. As international prices crashed, prices in India also plunged. Between 1928 and 1934, wheat prices in India fell by 50 per cent.

 3. Peasants and farmers suffered more than urban dwellers. Though agricultural prices fell sharply, the colonial government refused to reduce revenue demands. Peasants producing for the world market were the worst hit. Across India, peasants' indebtedness increased. However, the depression proved less grim for urban India.

4. The Government of British India adopted a protective trade policy which, though beneficial to the United Kingdom, caused great damage to the Indian economy. During the period 1929–1937, exports and imports fell drastically crippling seaborne international trade. The railways and the agricultural sector were the most affected.

5. The international financial crisis combined with detrimental policies adopted by the Government of India resulted in the soaring prices of commodities. High prices along with the stringent taxes prevalent in British India had a dreadful impact on the common man. The discontent of farmers manifested itself in rebellions and riots. The Salt Satyagraha of 1930 was one of the measures undertaken as a response to heavy taxation during the Great Depression.

6. The Great Depression and the economic policies of the Government of British India worsened the already deteriorating Indo-British relations. When the first general elections were held according to the Government of India Act 1935, anti-British feelings resulted in the Indian National Congress winning in most provinces with a very high percentage of the vote share.