Indian labour also became more organized. The number of registered trade unions and their total membership almost doubled in these years.31 As businesses began raking in profits, the workers were better positioned to bargain collectively for their wages and other demands. The number of stoppages – strikes and other disruptions – increased during the war years. Two-thirds and more of these stoppages were due to demands for better wages, bonuses and dearness allowances or for fewer working hours. Interestingly, while the number of strikes rose, the man-days of production lost showed a significant downward trend. The two anomalous years are easily accounted for: in 1940 there was a general strike in the cotton mills of Bombay; in 1942 there was considerable disruption owing to the wave of panic that washed over the country.
Industrial Disputes during the War
Source: Indian Labour Yearbook 1946 (Delhi: Government of India, 1948), Table 32.
The drop in man-days lost was partly due to the elaborate machinery of industrial dispute resolution evolved and used by the government – especially after the appointment of B. R. Ambedkar as labour member of the viceroy’s Executive Council in mid-1942. But it was also partly due to the fact that from 1942, the Communist Party of India, which exercised growing influence over the labour movement, switched its stance and supported the war effort.
The CPI asked the workers to focus on increasing productivity and downplay disputes with the management. ‘Win freedom and bread’ was the slogan they offered. Striking at work was described as a ‘betrayal’ of the working classes. Important labour unions followed suit. As Gangadhar Chitnis, general secretary of Bombay’s Girni Kamgar Union, observed: ‘Let the international struggle be over, then we can go on with our own struggle.’32 The Bombay communist leader, Lalji Pendse, put it more graphically: if labour did not help the war effort, the British might lose and then the workers ‘would no longer be able to ventilate their grievances as the invaders would shoot them’.33 Indeed, overtly political strikes occurred on a large scale only during the Quit India revolt of 1942, when labour in several parts of the country went on strike for up to three months, protesting against the government’s crackdown.34
The bottlenecks in industrial production came not from labour but from three other supply-side constraints. In the first place, there was a serious problem with the Indian railways. The war placed a significant burden on the railways by requiring them to transport unprecedented levels of personnel and goods. While the number of passengers carried during the six years of war increased by 75 per cent, the number of passenger-miles more than doubled. While in 1938–39 each passenger was transported over 35 miles on average, the figure increased to nearly 41 miles by the end of the war. Similarly, the tonnage of goods transported by rail increased by 32 per cent.
Source: Statistics Relating to India’s War Effort (Delhi: Government of India, 1947), Table 33
Figure 4. Freight rail traffic, 1938/9–1942/3
The burden on the railways rose sharply from early 1942. The Japanese advances resulted in the closure of shipping lanes along the eastern coast of India. Thenceforth, all important supplies had to be moved across India from the west by rail. Military preparations to meet the Japanese threat and to prepare India as a major base for the Allied effort added a crushing load on to the railways. Until the end of April 1943, for instance, the railways had to carry almost 5.5 million tons of freight simply for airfield construction. In early 1944, the Indian government estimated that the shortfall in rail transport for civilian requirements amounted to 22 per cent of the traffic carried in 1942–43. They may have understated the problem by assuming that all steel and cement output was only for military purposes.35
The inability to meet civilian, including industrial, needs stemmed from several sources. First, between September 1939 and December 1941, India had sent to the Middle East and North Africa some 1,500 miles of tracks, 206 locomotives and 8,000 wagons – all of which amounted to at least a tenth of its railway equipment. Two railway workshops had also been handed over to the military for munition production. Not surprisingly, by mid-1942 Wavell was demanding new locomotives and wagons to meet India’s war demands. This shortfall was compounded by a second problem. The 41,000-mile rail network in India was made up of four different gauges: a broad-gauge, a metre-gauge, and two narrow gauges. About 48 per cent of the network, connecting the most economically important parts of India, was broad-gauge. This – as well as the other gauges used in India – differed from the standard gauge used in the railways of Britain, Canada, the United States and most of Europe. In consequence, India’s attempts to import railway equipment faced a double problem of different specifications as well as high global demand.36
Between July 1942 and September 1943, orders were placed in the United States, Canada and Britain for 595 broad-gauge and 605 metre-gauge locomotives as well as 25,649 broad-gauge and 29,480 metre-gauge wagons. By end of 1943, only four broad-gauge and five metre-gauge locomotives had reached India. In April 1944, the Indian government hoped that 185 broad-gauge locomotives would be shipped by the following month. But in practice the entire order was not expected to be completed, if at all, before August 1945. By this time, however, the demands on the railways had increased even further. Apart from the existing order, India wanted another 361 broad-gauge locomotives and 24,700 wagons to meet the military load and to enable ‘civil traffic to be restored to a level essential for the maintenance of the economy’. Even if freight were restored to pre-war levels, New Delhi argued, it would require no fewer than an additional 196 broad-gauge locomotives and 14,300 wagons.37
The problem of the railways was also exacerbated by the second supply-side bottleneck in the Indian economy: coal. Almost 80 per cent of all coal – and 100 per cent of high-grade coal – was mined in Bengal and Bihar, and from early 1942 there was a substantial decline in coal production in eastern India. The proximity of the coal belt to the eastern theatre of war, as well as nervousness about a Japanese attack, led to a considerable exodus of labour from the collieries. When calm was restored, there was an increasing demand for labour in the military works – construction of airfields and supply bases – that got underway. Coalfield workers found this work both more congenial and more remunerative. The upshot was a mounting scarcity of labour to mine the coalfields and a substantial drop in output.
Source: Statistics Relating to India’s War Effort (Delhi: Government of India, 1947), Table 12
Figure 5. Coal production, 1939–44
By the end of 1943, the situation became so critical that the government had to take steps to ensure that other industries, including the military, did not wean away the labourers. Wages for the coalminers were increased, and government contractors were forbidden from recruiting in districts that traditionally supplied workers to the coalfields. In January 1944, the government even raised its own 1,000-strong labour force to work the mines. Perhaps the most striking decision was to allow women to work underground.38
The declining production resulted in a shortfall of coal for the railways throughout India. By mid-1943, stocks which should have been maintained at forty-five to seventy-five days of supply had fallen to an average of seventeen days of supply. This naturally limited the operations of the railways. The relationship between coal and the railways ran the other way too. Over 40 per cent of the total tonnage transported by the railways was in fact coal. From the collieries of eastern India, coal had to be transported to other industrial hubs in north, west and southern India. Apart from the steel industry, which was located near the coalfields of eastern India, coal had to be transported by rail to textile and munition factories in Calcutta and Cawnpore, Bombay and Ahmedabad, Madras and Lahore. From early 1942, railway allotment for the transportation of coal for industrial purposes sharply dropped. Although the Indian government moved to take full control of coal production and distribution, it was caught in the mutually reinforcing problems of coal and railways.
Throughout 1942 and early 1943, the coalf
ields of Bengal and Bihar had much trouble getting their desired allocation of 2,800–3,000 railway wagons a day. At most, they received only 2,300–2,500 wagons a day. By the end of 1943, when coal output had dropped, more wagons were available but the railways’ own stock of coal was running low. More importantly, many factories engaged in war production were subsisting on a day-to-day basis and had to periodically stop work. A complete breakdown was only avoided by cutting back on passenger trains by as much as 40 per cent.39 Even in August 1944, GHQ India was worried that the ‘coal situation as yet shows no appreciable improvement’:
Unless more coal is raised the whole community of India will suffer; it is suffering already; the war effort of India is impeded … The three greatest consumers of coal in India are the railways, the steel industry and the textile industries. None of them today are getting sufficient coal for their needs, not to mention the innumerable other consumers.40
The combined problem of rail and coal placed unprecedented pressures on the Indian forests. Already, the demands of the war were bearing down heavily upon the Forest Department, which was called upon to provide materials for an extraordinary range of military and industrial needs – from ammunition boxes to rifles and textile mill shuttles to electricity transmission poles. The Japanese occupation of Burma dealt a double blow. The demands of war, especially for construction, surged even as imports of teak from Burma ceased.
On top of this came the rising requirements of the railways, especially for sleepers. The Forest Department was forced to improvise. The vast demand from the railways was met not only from the deciduous forests, but more and more from evergreen rainforests by felling hitherto unused timber. At the same time – as with coal – the growing burdens on the rail network implied a reduced ability to transport this timber. Further, the drop of production and supply of coal led many industries to turn to firewood – charcoal – for power. Some 18,000 tons of charcoal were required every month just for charcoal-gas. Unsurprisingly, there were shortages. As A. K. Chettiar observed, from 1942 buses in the city of Madras had begun running on charcoal-gas and yet ‘people were paying the fare and pushing the buses’.41
As a consequence, millions of tons of wood from Indian forests were felled and turned into grist for the war machine. By 1942–43, the production of timber alone stood at 863,000 tons – a threefold increase from 1940–41. By the end of the war, annual production of timber touched a million tons. The Forest Department and the Forest Research Institute struggled to ensure that their basic principles of conservation were not entirely abandoned. Besides, they looked on at the ‘widespread devastation of forest lands which lay outside the jurisdiction of the Department’. Environmental destruction was also accelerated by the ‘Grow More Food’ campaigns launched by the government to increase the number of acres under crops. Swamps and grass areas in wastelands were leased out for cultivation during the war. The pioneer farmers were even provided with weapons for protection against animals to allow them to push ahead in uncultivated areas. The Forest Department was forced to release considerable areas of scrub-land from its reserves. The cumulative impact of these policies was immensely destructive.42
The rail-coal problem was also directly related to the third major supply constraint on the Indian economy: food. Here too the problems were mutually reinforcing. On the one hand, the decline in coal production was due to the labour force moving to find better sources of income. And the decision to look for better-paid employment in far-away places essentially arose from the increasing scarcity of food and its rising price. The decline in coal production, on the other hand, imposed constraints on the railways – the principal mode of transporting food-grains in India. In fact, there was no aggregate problem of decline in food production during the war. The production of all cereals – rice, wheat, millet, barley – went from 46.5 million tons in 1938–39 to 55.3 million tons in 1943–44, and dropped slightly to 52.3 million tons in 1944–45. Military procurement of food, for troops as well as workers, never exceeded more than 1.1 per cent of total production in any year. Food exports as a proportion of production were also negligible.43
The reason food became a constraint lay partly in the problem of distribution between surplus and deficit regions – a problem that was bound up with that of the railways. More important, however, was the manner in which the government was mobilizing finances for the war.
Following the onset of war in Europe, the old question of who would pay for India’s military – especially external – commitments had reared its head again. The financial proposals accompanying the Chatfield plan were overtaken by the burgeoning demands of the war. India not only was called on to raise and send formations for overseas service but had to mobilize the economy to provide for the war effort. In this context the problem of ‘joint liabilities’ to be shared by the Indian and British governments became more acute and urgent. The two governments negotiated the terms for a fresh financial settlement that was concluded in February 1940.
Under the terms of this settlement, India was to bear a fixed annual sum representing the peacetime costs of the army in India; the costs of such measures deemed to have been undertaken by India in its own interests; and a one-off payment of Rs. 10 million towards the cost of maintaining Indian troops overseas. Britain would shoulder the costs of the Chatfield measures for the modernization of the Indian army; the entire cost of additional forces raised by India for service outside India – but only after they were actually sent abroad; and the cost of military stores supplied by India for all British forces in the Middle East.44
Two unforeseen developments during the war sent the sums involved for both governments soaring. After the fall of France in 1940, India’s contribution to the war in the Middle East and North Africa rapidly increased. And then Japan entered the war. Between the financial years 1939–40 and 1940–41, India’s financial commitment only doubled, while Britain’s shot up from £40 million to £145 million. In 1941–42, India paid £200 million and Britain £230 million. In the next two years, India’s share, at £297 million and £343 million respectively, exceeded Britain’s at £283 million and £330 million.45
Whatever the fluctuation in expenditure, the fact was that Britain was not paying in real time for the bulk of its share. The supplies for the Middle East, for instance, were procured by the Indian government at its own cost. The British government would credit an equivalent amount in sterling – at a fixed exchange rate – to a government of India account in London. So Britain’s share of the joint expenditure primarily accumulated as sterling balances in London. Further, the wartime decline in British exports to India – due to both problems of shipping and the absorption of Britain’s industrial output for its own war effort – led to a steady increase in India’s sterling balances. Some of these sterling balances were used to repatriate India’s sterling debt, amounting to some £360 million, and so end India’s contractual obligations to British bond-holders and annuitants.46 This led to a remarkable transformation by 1943 in India’s longstanding relationship with Britain – from a debtor to a creditor country. The economic rationale of the Indian empire, if ever there was one, evaporated in the white heat of war. Even so, India’s sterling balances continued to pile up, reaching a whopping £1,321 million by the end of 1945.
Source: R. S. Sayers, Financial Policy 1939—45 (London: HMSO, 1956), p. 259
Figure 6. Sterling balances of India, 1942–5
The accumulation of sterling balances amounted to the gaining by India of a substantial claim on Britain’s real resources after the war. If India were not paid back by British exports during the war, it would have to be once the war ended. As the significance of the growing sterling balances dawned on the British government, there were increasing calls for a revision of the financial settlement. The chancellor of the exchequer told the war cabinet that the burden on Britain was simply too onerous. The right principle was that of reciprocal aid: ‘we should supply without charge whatever costs sterling, and Indi
a should supply without charge whatever costs rupees. We should not abandon that principle, even if it cannot be fully implemented at the present time.’ For the time being, India’s share of expenditure in the settlement had to be increased.47
The Indian government was appalled at the suggestion. Linlithgow warned Amery that if the current arrangement were altered, ‘very gravest consequences would be quite certain to ensue’. Apart from the predictable protests of the nationalists, even those ‘sections of the commercial and well-to-do public which are disposed to be sympathetic now will certainly be alienated’.48 Amery too advised the British government not to rock the boat. ‘Even to-day’, he wrote, ‘the agreement has worked out much more unfavourably to India than was ever contemplated at the beginning of the war.’49 Churchill harangued the cabinet at great length about ‘the monstrous idea that we should spend millions upon millions in the defence of India, then be told to clear out, and on top of it all owe India vast sums incurred on her behalf’. Although the prime minister stuck to his misapprehension about sterling balances, he was prepared to let the agreement stand – on the understanding that the question could be revisited at a later date.50
Influential voices in Britain, however, continued to hold that Britain was being altogether too generous to India. The Economist quipped in March 1943 that ‘it will surely go down in the Imperial record that Britain gave twice and gave quickly’.51 Insinuations were also made that Indian supplies were being provided at unconscionably high prices. The following year, no less a personage than John Maynard Keynes published an article in The Economist calling for a revision of the 1940 settlement. Keynes advanced a particularly ingenious argument that an increase in India’s financial liability would not result in any increase in the real burden on the Indian people. Leading Indian capitalists were already concerned about the mutterings in Whitehall about the sterling balances. They feared that after the war Britain might disavow the balances on the principle of reciprocal aid, or whittle down their rupee value by depreciating sterling. Thakurdas, Birla and others responded ferociously to Keynes’s essay, calling it ‘cynical and fallacious’. They argued that it ‘amounted to a pure and simple repudiation of England’s debt to India’, and that Britain would not contemplate such a move with any of the Dominions.52
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