The failure of the Cripps Mission, though unfortunate in many ways, resulted in strengthening of the Muslim League case for Pakistan. The positive outcome was that Pakistan was considered seriously and not merely regarded as a stunt or bargaining counter. The Congress leadership had tried to exploit the difficulties of the British to wrest power for itself but it had refused to acknowledge the demands made by the Muslim League. A section of the Congress realizing the causes of their failure to compel the British and realizing the danger to India's defense from the advance of Japanese armies, decided to reconsider the question of Pakistan with an intention to arrive at a settlement with the Muslim League without which there could be no political advance in India. Rajagopalacharya, an elderly statesman, accepted in principle the Muslim League demand for Pakistan and passed, Madras Resolution, calling upon the Congress High Command to negotiate with the Muslim League on the question of Pakistan with the object of establishing a national government in India to organize the defense of India. Towards the end of April 1942, in a meeting of the All India Congress held in Allahabad, the Madras Resolution was rejected and the Congress leaders made angry and fiery speeches against Jinnah and his concept of Pakistan. The Hindu Press took the cue from the All India Congress Committee and launched a virulent hate campaign against Jinnah and the Muslim League, holding Jinnah responsible for blocking the path to India's freedom and meanest of all, accusing him of playing the British game.

The Congress decided to launch its final assault on British imperialism in the movement that came to be known as the "Quit India" movement. Gandhi called upon the people to take initiative and "to do or die" in a last struggle for freedom, throwing off the initial pretences of non-violence. He did not consult the Muslim League or any other party and went ahead with his plans in the hope that the momentum of the mass movement would take violent forms and would involve all parties and sections of the people of India. He made a grave mistake of under-estimating the reserves of power of the British to deal with the Indian movement, when they were too deeply involved in their military struggle against the Japanese. Inspite of being warned by the government that it would use all its powers to suppress any movement which obstructed their war effort, the Congress passed the "Quit India" resolution in August 1942. The Government swooped down upon the leadership and locked up them all in jail, including Gandhi. There was turmoil in parts of India for about three months. The rail communications were damaged, police stations were attacked, sacked and burnt, the Congress Socialist Party and other terrorists got busy doing everything they could do to paralyze the war effort, destroy the agencies of the Government and spread anarchy. After a short span, the Government was able to suppress the movement. Large sections of the people who were involved in the war effort and were thriving on war contracts, recruitment to the army and defense services, ignored the Congress appeals and went about their business as usual.

To the Congress slogan of "Quit India", the Quaid's answer was "Divide and Quit". When the Muslim League Working Committee met in Bombay on 16 August, 1942, there were many who wanted the League to plunge blindly into the struggle, while others went to the extreme of giving full and unconditional support to the British and crushing the Congress. The Quaid wisely advocated a middle course avoiding both the Congress and the British traps and concentrated more on building up the Muslim League organization and removing some of its inherent weaknessess.