The First World War was fought between the European powers mainly to acquire power in Europe but echoed all over the globe including India. It altered the economic and political situation in India.

The First World War (1914-1918 A.D) had the following economic impact of India:

1. Rise in defense expenditure: It led to a huge rise in the defense expenditure of the Government of India.

2. Heavy Taxes: To meet the expenditures government in turn increased taxes on individual incomes and business profits. This deteriorated the condition of farmers.

3. Rise in Prices: Increased military expenditure and the demands for war supplies led to a sleep rise in prices which created great difficulties for the common people.

4. Profit to Businessmen: On the other hand, businessmen grouped reaped fabulous profits from the war. As demand for industrial goods increased such as jute bags, cloth and rails.

5. Rise of Industries: The war created demand for industrial goods and caused a decline of imports from other countries.

6. Fast Development: Indian industries expanded during the war, and Indian business groups began to demand greater opportunities for development.

7. Unity was witnessed among Hindu and Muslims in khilafat and home rule movements.