Hi Surinder,
the general outline seems to be that the British first gave themselves a healthy loan from India's earning of seath and blood.
Indian expenditure largely paid for the absolutely massive expansion of the Indian armed forces and the GoI, and of Indian industry public and private industry to supply them. Look at HAL for example - its establishment as a private Indian firm and its expansion were intimately tied to the war.
These bulk of these forces served in India and Burma fighting the Japanese. The largest deployment outside the Indian Ocean region was the Indian 8th Army which served Egypt/North Africa and then Italy.
India in 1950 was the 10th most industrialised country in the world, with one of the world's largest standing armies.
The UK in part under US pressure had to accept financial responsibility for the bulk of this GoI war expenditure.
The fact that Gandhi & Indian leaders would support India's participation in the two wars and not educate us on the concomittant enconomic blood-bath to us is most saddening.
Firstly, the basics of the economic and strategic realities of WWII were hardly secret at the time.
Secondly, Nehru withdrew support for the war when the Viceroy committed India without consultation with the Congress govt, and of course in 1942 there was the Quit India movement.
So rather than blame the leaders, the question is why there wasnt the same wave of nationalist resistance to the war effort - why in fact there was the opposite; mass cooperation at the lowest point in British power since 1857.
Marxist critiques point to the fact that the nature of GoI spending in the period benefited certain classes of Indians, particularly the ones who were at the forefront of the Indian nationalist movement.
The expansion of the Indian armed forces and civil services gave huge numbers of Indians was something that was welcomed not simply as an opportunity to earn, but also the chance to build a world class Indian state. Whether as bureaucrats, engineers or officers, the war presented opportunity. The Indian capitalist class that underwrote the national independence movement also INC profited greatly, and took advantage of opportunities to expand. Small and medium businesses did well as urban populations swelled. Organised labour also expanded as both state and industry expanded.
Educated Indians, and the Indian business classes foremost objection to colonial rule was the way they were shut out of industry, service and government. In both cases the war opened the door. In WWII in particular Indians stormed through that door in huge numbers to make sure it could never shut on them again. In that sense the more the GoI spent, the better.
This was perhaps the ultimate reason the INC's Quit India campaign, or Bose's appeals failed to mobilise. The war represented opportunity to the places and classes where the nationalist movement was strongest.
The Indians who didnt benefit, the landless peasant, the ones who bore the most devastating costs of the war were the one least represented in any of the strands of the independence movement. Gandhi who supposed to be their voice failed to make their plight the centre of his campaign.
In the process causing famines and shortages.
There were famines in earlier periods of the Raj, at times when London was financing the GoI. The link between colonial misrule and famines is separate from the GoI's contribution to war finances.
Then they changed the terms of the loan and played with currency valuations to reduce the value of that loan.
The devaluation of the pound sterling was driven by the huge trade imbalances with dollar area which was now globally economically dominant. Devaluation was intended to boost the competiveness of exports to the US in particular. You can see a major jump in British and Sterling area exports following the devaluation.
Then they refused to pay this loan.
The post-war debt was 1.17 billion pounds
As I understand it the post-war agreement reached was that India would be able to directly draw on its sterling balance at 35 million pounds per year, which was estimated at 15% of GoI budget.
Is this hugely different from repayment rates for Lend-Lease, Marshall Plan, etc?
There is no way that British economic policies can be separated from American choices after the Lend-Lease agreement, and even less so after the Marshall Plan in 1947.
The only way the UK could have repaid at a faster rate would have been to use American aid to repay India. What the Americans wanted the UK to do was spend that aid on American goods.
Some of it (As per Johann) was paid in weapons, which meanth that the money went back to their own industries. All the while encouraging TSP so that the need for the said weapons increases.
- In the 1947-1950 period British industry was still recovering, and unable to supply both India and Pakistan simultaneously. Supplies came from war time stores. In fact Pakistan in particular was so dissatisfied with repayment via arms (the debt to undivided GoI was also partitioned) that it spent huge amounts buying from the international market.
India on the other hand had inherited the bulk of the complete ordnance chain that produced small arms, uniforms, ammunition, etc that it paid for during the war.
- Nehru's choice of purchases in the 1950s wasnt just driven by US military aid to Pakistan. It was also pushed by his desire to make India an independent strategic force capable of minimising outside influence, and determining the future of Asia. There is no other context in which you can understand purchases such as the Vikrant. Where Nehru went wrong was in assuming that Western power would be the real challenge to Indian freedom of action, rather than Asian powers, in particular China.
Imagine for a second if India had not been a colony of the British during WW-1 & WW-2, Britain would have been decimated.
Let us imagine the Indian independence movement had succeeded a little earlier, and India was a dominion, or even a Republic in 1939.
Although Nehru (like Churchill) had condemned Chamberlain's failure to stand up to Hitler in the 1930s, let us assume the Indian government chose to maintain neutrality throughout. Let us also assume the Japanese empire chose to respect this neutrality.
Would it have made any difference to the Fall of France in 1940? Would it have made any difference to the Battle of Britain and the Battle of the Atlantic? Would it have made any difference to Midway? Would it have made any difference to the Fall of Singapore & Malaya? Would it have made much difference to Stalingrad? Would it have made any difference to Hiroshima and Nagasaki?
The greatest contribution of Indian forces (which Indian money paid for) in WWII was to Egypt and Burma. Egypt was important as a link to India and the Far East; Burma was important because India and the Indian Ocean were important.
The people who would have felt the impact would not have been the British Isles (whose survival depended on North American supplies and financing), but those in or adjacent to the Indian Ocean region - Australia, and China. Without Indian manpower to blunt the Japanese and keep supply lines open, they might well have fallen entirely to the rising sun.
The overal effect would have been to lengthen the war, which could only have been resolved through nuclear weapons on both Germany and Japan.
The US, UK and other commonwealth colonies had the collective material and manpower capacity and the will to fight and eventually defeat the Germans and the Japanese in both world wars.
The lack of access to India as a source of financed, trained and equipped manpower would have meant essentially a longer, bloodier war and a significantly smaller share of British political credit with the Americans at the close of the war. But its Australia and China that would have paid the real price under Japanese occupation. Not to mention Germany when the nukes fell on Berlin and the Ruhr valley.
