In the first half of the 1970s, India faced significant economic and social challenges. High inflation was a major issue, exacerbated by the 1973 oil crisis which caused a substantial rise in oil import costs. Additionally, the financial burden of the Bangladesh war and refugee resettlement, coupled with food shortages due to droughts in parts of the country, further strained the economy.

This period saw increasing political unrest across India, fueled by the high inflation, economic difficulties, and allegations of corruption against Prime Minister Indira Gandhi and her government. Major events included the Railway Strike of 1974, the Maoist Naxalite movement, student agitations in Bihar, the United Women's Anti-Price Rise Front in Maharashtra, and the Nav Nirman movement in Gujarat.^[45]

In the political arena, Raj Narain, a candidate from the Samyukta Socialist Party, contested against Indira Gandhi in the 1971 Lok Sabha elections from Rai Bareli. After his defeat, he accused Gandhi of corrupt electoral practices and filed an election petition against her. On June 12, 1975, the Allahabad High Court found Gandhi guilty of misusing government machinery for election purposes.^[46] This verdict sparked nationwide strikes and protests led by various opposition parties, demanding Gandhi's resignation. Prominent leader Jaya Prakash Narayan united these parties to resist Gandhi's rule, which he termed a dictatorship, and even called for the Army to intervene.

In response to the escalating political crisis, on June 25, 1975, Gandhi advised President Fakhruddin Ali Ahmed to declare a state of emergency under the constitution. This move granted the central government extensive powers, purportedly to maintain law and order and national security. The emergency led to the suspension of civil liberties, postponement of elections,^[47] dismissal of non-Congress state governments, and imprisonment of around 1,000 opposition leaders and activists.^[48] Gandhi's government also enforced a controversial compulsory birth control program.

During the emergency, India's economy initially saw benefits, with the cessation of strikes and political unrest leading to increased agricultural and industrial production, national growth, productivity, and job growth. However, the period was also marked by allegations of corruption, authoritarian conduct, and human rights abuses. Police were accused of arresting and torturing innocent people. Sanjay Gandhi, Indira Gandhi's son and unofficial political advisor, faced severe criticism for his role in implementing forced sterilizations and the demolition of slums in Delhi, resulting in casualties, injuries, and displacement of many people.^[49]