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India’s War Economy: The Home Front 1939 to 1945

Two and a half million volunteers, sterling balances that reversed the drain, and inflation that halved the rice bowl: the ledger of the Raj's last performance.

India’s War Economy: The Home Front 1939 to 1945. Photo credit: The Indic Journal / source image.

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While the politicians deadlocked and the movements rose and were jailed, the Second World War remade India’s economy and society with a force no resolution matched, and the remaking cut both ways at once. The war years industrialised, monetised and mobilised India on a scale the peace had never attempted, and the same machinery of extraction, run at wartime pressure through an economy of the poor, produced inflation that halved the wage earner’s rice bowl and, at the catastrophe’s Bengal extreme, the famine whose chapter follows in this series’ account of the 1940s. The home front of 1939 to 1945 is thus the indispensable background to everything political in the decade, the ledger in which the Raj’s last performance was entered.

The mobilisation’s scale still astonishes. The Indian Army grew from under two hundred thousand men in 1939 to some two and a half million by 1945, the largest volunteer force in history, recruited far beyond the old martial races into Madras, Bihar and the towns, and its campaigns, North Africa and Italy, the defence of the Middle East, above all the Burma front where the Fourteenth Army broke Japan at Imphal and Kohima, made it by the war’s end a national institution in waiting, thirty Victoria Crosses and a new officer corps, Thimayya and Manekshaw among the King’s commissioned Indians, carrying into the coming republic the army partition would divide. India became the eastern war’s arsenal and base, two million labourers building the airfields and roads, the Ledo road cut toward China, Calcutta and the eastern ports serving the Burma and China theatres, and the supply contracts pouring demand into Indian industry.

Industry answered as far as its fetters allowed. Steel, cement, chemicals and engineering expanded, Tata’s works becoming the empire’s largest single steel plant, textiles ran double shifts clothing armies, and the war compelled what tariff politics had long refused, licensed manufacture and the beginnings of machine tool, shipbuilding and aircraft assembly capacity, Hindustan Aircraft at Bangalore born of the emergency, while the managing agencies and the new industrial houses, Birla and Dalmia beside Tata, accumulated the capital and confidence that funded, in 1944, the industrialists’ own Bombay Plan for a state led post war economy, the strange concord of business and socialism that shaped Nehruvian planning. The deepest transfer was financial. India’s war expenditure, advanced against Britain’s promise to pay, reversed in six years two centuries of the drain, the sterling balances accumulating in London to some thirteen hundred million pounds by 1946, Britain converted from India’s creditor to its greatest debtor, the economic bond of empire dissolved by the empire’s own war, a solvent historians rank with the movements in explaining 1947.

The bill was presented at the bottom of society. The war was financed, beyond the sterling IOUs, by the printing press, currency in circulation multiplying five fold, and prices followed, the official indices tripling and the bazaar knowing worse, while wages crawled, the urban worker’s real earnings falling by a third and the strike wave of 1940 to 1942, Bombay’s mills out for weeks, answering. Procurement for the army and the cities, the denial policies stripping coastal Bengal’s boats and rice against invasion, the collapse of Burma’s rice imports and the priority of the war over the poor produced the hunger that stalked the eastern provinces from 1942 and broke over Bengal in 1943, the famine, treated fully in its own chapter, that killed its millions within a war the government insisted India could afford. Rationing came late and stayed past the peace, the controls, licences and food administration of the emergency becoming, in one of the war’s quieter legacies, the permanent equipment of the Indian state.

The home front’s summary is the paradox the transfer of power inherited. The war left India with a swollen industrial base, a mass army, sterling claims on London, an administrative machine schooled in control, and a population that had paid for all of it in hunger and inflation, radicalised in the cities, embittered in the villages, and persuaded, across every division the politicians managed, of the single proposition the post war explosions confirmed, that the Raj’s balance sheet no longer contained a reason for its existence.

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CategoryBritish RajReading Time4 minAuthorIndic EditorialPublishedSep 4, 2026UpdatedSep 4, 2026

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2026Article first published by The Indic Journal.
2026Latest editorial update recorded.
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Two and a half million volunteers, sterling balances that reversed the drain, and inflation that halved the rice bowl: the ledger of the Raj's last performance.

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