Question

Write a note to explain the effects of the following: The Great Depression on the Indian economy.

Answer 1

Hint: In the history of the industrialised world, the Great Depression was the greatest economic decline, lasting from 1929 to 1939. It started after the October 1929 stock market crash, sending Wall Street into a panic and wiping out millions of investors.

Complete Answer:
Due to the Great Depression, consumer spending and investment plummeted over the next few years, triggering sharp declines in industrial production and jobs as struggling businesses laid-off employees.
Following were the major effects:
1 Colonial India became an exporter of agricultural products in the 19th century and an importer of manufactured goods. During 20th century law, the situation persisted. The depression had an adverse effect on Indian trade, and between 1928 and 1934, India's exports and imports halved.
2. In India, prices also decreased as a result of the international price crisis. Between 1928 and 1934, wheat prices dropped by 50 per cent. Owing to the fall in prices, peasants and farmers both suffered. Their revenue was reduced, but the Colonial government declined to decrease the income they received, contributing to their difficulties.
3. Bengal's jute producers were also hit hard by the collapse of exports of gunny bags, jute prices plummeted, peasants who lent in the hope of raising their output fell into debt by 60% due to the collapse of jute prices.
4. Peasants used their savings, mortgaged land, and sold whatever jewellery and hard assets they had to pay for their expenses.
5. There was not much negative influence on urban India from the depression. With the declining prices of food grains and other goods, town dwelling landowners who earned rentals, individuals with fixed income or salaried classes became better off. As the government extended tariff protection to industries, industrial investments were not much affected.

Note: - The COVID-19 pandemic and the regulations that resulted have had detrimental effects on livelihoods and the broader economy. It is predicted that the economic impact of COVID-19 will be greater than the health impact itself. It is predicted that the global economy will undergo one of its worst years in history, and not only does the Indian economic recession mean a decline in GDP numbers, but it represents a reversal of years of growth.
- The Twin Balance Sheet syndrome is the burden on both the lenders and the borrowers' balance sheets (Corporates). Banks are suffering from stressed assets that are much less likely to be entirely revived, and businesses have debt and interest commitments that are beyond their current financial position.