Economic context

The economic promises of the 1971 elections, centred on the Garibi Hatao (Remove Poverty) slogan, did not translate into real improvement for most Indians. Instead, the period after 1971-72 saw a rapid deterioration in living conditions, driven by a combination of external shocks, policy decisions, and natural disasters.

The first major blow came from the Bangladesh crisis. The influx of about eight million refugees from East Pakistan placed an enormous strain on India's resources. This was followed by a war with Pakistan, after which the United States government stopped all aid to India. At the same time, oil prices in the international market rose manifold, triggering a global spike in the cost of all commodities.

The result was runaway inflation. Prices rose by 23 per cent in 1973 and by 30 per cent in 1974 — levels that caused immense hardship for ordinary people. Industrial growth remained low, and unemployment, especially in rural areas, was very high. To cut government expenditure, the government froze the salaries of its own employees, which added to the widespread dissatisfaction.

Agriculture was hit hard by the failure of monsoons in 1972-73. Food grain output declined by 8 per cent, worsening the scarcity of basic necessities.