The decade of 1930s witnessed the rapid growth of socialist ideas within and outside the Congress.
In 1929, there was a great economic slump or depression in the United States, which gradually spread to the rest of the world resulting in economic distress and unemployment on a large scale (across the world). But the economic situation in the Soviet Union was just the opposite. There was not only no slump, but the years between 1929 and 1936 witnessed the successful completion of the first two Five Year Plans, which increased the Soviet industrial production by more than four times.
The world depression, thus, brought the capitalist system into disrepute and drew attention towards Marxism, socialism, and economic planning. Consequently, socialist ideas began to attract more and more people, especially the young, the workers, and the peasants.
The economic depression also worsened the conditions of the peasants and workers in India. The prices of agricultural products dropped by over 50 per cent by the end of 1932.
The employers tried to reduce wages. The peasants all over the country began to demand land reforms, reduction of land revenue and rent, and relief from indebtedness.
Workers in the factories and plantations increasingly demanded better conditions of work and recognition of their trade union rights. Consequently, there was rapid growth of trade unions in the cities and the Kisan Sabhas (peasants' unions) in many areas, particularly in Uttar Pradesh, Bihar, Tamil Nadu, Andhra Pradesh, Kerala, and Punjab.
The first all-India peasant organization, the All-India Kisan Sabha was formed in 1936. The peasants also began to take a more active part in the national movement.
In his presidential address to the Lucknow Congress in 1936, Nehru urged the Congress to accept socialism as its goal and to bring itself closer to the peasantry and the working class.
In 1938, Subhash Chandra Bose had been re-elected as the president of the Congress even though Gandhi had opposed him. However, an opposition by Gandhi and his supporters in the Congress Working Committee compelled Bose to resign from the President-ship of the Congress in 1939.
During the period of 1935-1939, Congress actively participated for the development of world affairs. It had gradually developed a foreign policy based on opposition to the spread of imperialism.
In February 1927, Jawaharlal Nehru on behalf of the National Congress attended the Congress of oppressed nationalities at Brussels organized by political exiles and revolutionaries from the countries of Asia, Africa, and Latin America, suffering from economic or political imperialism.
In 1927, the Madras session of the National Congress warned the Government that the people of India would not support Britain in any war undertaken with its imperialist aims.
Popular struggles by the princely states were waged in many of the states including Rajkot, Jaipur, Kashmir, Hyderabad, Travancore, etc.
People of many of the princely states now began to organize movements for democratic rights and popular governments.
All India States’ People’s Conference had already been founded in December 1927 to coordinate political activities in the different states.
In the Government of India Act of 1935, the proposed federal structure was so planned as to check the forces of nationalism. It was provided that the princes would get 2/5rd of the seats in the Upper House and 1/3rd of the seats in the Lower House.
The Nizam of Hyderabad declared that the popular agitation was anti-Muslim; the Maharaja of Kashmir branded it as anti-Hindu; while the Maharaja of Travancore claimed that Christians were behind the popular agitation.
The National Congress supported the states' people's struggle and urged the princes to introduce democratic representative government and to grant fundamental civil rights.
In 1938, when the Congress defined its goal of independence it included the independence of the princely states.
In 1939, Jawaharlal Nehru became the President of the All India States' People's Conference. The States' people's movement awakened the national consciousness among the people of the states. It also spread a new consciousness of unity all over India.
In 1940, the Muslim League passed a resolution demanding partition of the country and the creation of a state to be called Pakistan after independence.
The Muslim League propaganda gained by the existence of such communal bodies among the Hindus as the Hindu Mahasabha.
The Hindu communalists echoed the Muslim communalists by declaring that the Hindus were a distinct nation and that India was the land of the Hindus. Thus they too accepted the two-nation theory.
The Hindu communalists actively opposed the policy of giving adequate safeguards to the minorities so as to remove their fears of domination by the majority.