5 - Business, the central government and the Congress 1937–1939

Summary

Between July 1937 and October 1939 the political attitudes of Indian businessmen were determined by a complex interplay of national and provincial factors. The advent of Congress governments in the majority of the provinces gave crucial importance to the provincial arena of politics and provincial trends directly influenced the overall relationship between Indian big business and the Congress. However, developments on the all-India scene also contributed to shaping the politics of business. These developments mainly related to the economic and commercial policy of the Government of India which met with growing opposition from Indian business circles. Of particular importance was the negotiation of the Indo-British trade agreement which started in July 1937 and was concluded in March 1939.

Indian business and the Indo-British trade agreement

When the negotiations started in London between the two governments, the Indian advisers adopted a policy of offering concessions to Lancashire (the exact shape of which remained undisclosed) in return for a complete acceptance of the rest of their demands by the Board of Trade. This approach suited the Government of India well, since it was anxious to placate both Lancashire and Indian business and was less preoccupied with other British interests. The Indian delegation took a hard line at the outset of the negotiations, asking for a surrendering of five-sixths of the preferences enjoyed by British goods in India, the free entry of jute and other Indian manufactures into the UK, plus some extra concessions. Understandably the Board of Trade, which had to take into consideration a variety of British interests, took a very different position.