The Fall of the Textile Industry in India

The industrial revolution took place in 18th to 19th century with impetus from cotton industry. Though raw material for the cotton industry (raw cotton) couldn’t be produced in Britain at all and had to be imported thousand miles from America and later on from Asia. Origin of cotton industry traces back to 17th century. British had to wear uncomfortable clothes made up of either wool or leather in hot summer days. But as cotton clothes were introduced to them which were comfortable to wear in summer, it gained popularity among common people. Demand for printed and painted fabrics rose up and this attractiveness of the comfortable cotton material produced threat in the traditional woolen industry. Hence to squeeze the competition from exported Indian clothes, petition was filled in the parliament.

In 1700 an Act was passed against the import of any of such fabric from India, Persia and china. All the goods seized in the process were to be confiscated, sold by auction or re-exported. But the Act could not bring desired result. Consumers were not ready to give up use of imported cotton materials. Many pamphlets were published by representative of woolen industry to prevent consumers from buying those cotton goods. The envy of woolen weavers could not be limited to words and was expressed in the streets via attacking people dressed in cotton material and even the houses with any of such cotton materials found were damaged. However this violence could not hold back the need of people to be clothed in something other than wool or leather. This tremendous violence and protest had to be addressed with new Act of prohibition. However this Act did not impose any ban on trading of cotton fabrics but they had to be kept in the warehouses and re-exported to other parts of the Europe. When the imports from India were restricted, imitators found a golden opportunity to make profit out of depressed demand of consumers. As rightly said, “Necessity is the mother of invention”, deliberate effort was taken by the carpenter (in absence of engineers) to discover the substitute to the cotton material. Though, replication of years old skills and talent was not that easy. The Lancashire spinners couldn’t reproduce Indian cotton clothes and the fabric spun were too coarse or too weak. This attempt resulted in making material of mixed linen and cotton, linen as warp and the cotton as woof. These mixed materials were not as good as the cotton fabrics; nevertheless they provided a useful substitute to consumers in need. The remarkable skill gifted in the hands of Indian weavers had to be substituted and alternative to human skill was searched for.

The petition was again filed saying thousand of workmen would be deprived of work and bread. As a result in 1721, British parliament passed much more comprehensive Act than the older one, according to which anybody found in possession of these fabrics had to bear penalty. The penalty amounted to £5 for the private individuals and £20 for merchants. To retain monopoly in the textile industry, traditional woolen industry did almost every thing. They tried to limit the growth of cotton industry in its initial stage.

The innovation of spinning mill took more than three decades, when John Wyatt and Lewis Paul developed some type of the spinning mill. This attempt by no possible means got even near to quality of cotton material weaved by Indian weavers. The first invention which was able to make its presence felt was ‘fly shuttle’ by John Kay in 1733 which was the first weaving machine to use steel comb replacing the early wooden combs. But the basic problem with fly shuttle was width of material, which was limited to two arms of a workman. Woolen manufacturers and weaver accused John Kay of depriving daily wage and bread of workmen.

Then in 1765, a new innovation of textile machine build up popularly known as Hargreaves’s jenny with eight spindles and these spindles would be increased to many. Since jenny was a simple machine, it did not require setting up special workshop and could be managed by small employers. A single worker could spin threads at once. So jenny raised labor productivity and reduced the cost.

Finally in 1767, Arkwright’s water frame was invented. This machine was powered by water springs, required to be situated near the springs and powered by water flow. The invention of Arkwright helped in setting up the factory system. And only at the request of the Richard Arkwright the Act passed in 1721 came to end in 1774.

Free trade was emphasized by Ricardo as beneficial for every player in international trade. But this theory of comparative advantage has logical flaw. Let’s see Ricardo’s original example- two countries (Britain and Portugal) and two goods (cloth and wine) model. Let us assume England requires 4 and 2.5 person-days to produce a unit of cloth and a unit of wine while Portugal needs 2 and 1 person-days to produce a unit of cloth and a unit of wine respectively. Further Portugal has 200 person days and Britain has 400 person days. If both the countries dedicate half of person days available, to each of the product then Portugal can produce 50 units of clothes and 100 units of wine and Britain can produce 50 units of clothes and 80 unit of wine. Then Portugal can either produce either 100 units of the clothes or 200 units of wine and Britain can produce either 100 units of clothes or 160 units of wine. So Portugal has absolute advantage in producing both of the goods.

For example, Portugal to shift more resources into higher output of clothes the opportunity cost of each extra cloth is two units of wine. For Britain, the same decision has an opportunity cost of 1.6 unit of wine. Therefore, Britain has a comparative advantage in production of cloths.
Were Portugal to reallocate resources to wine, the opportunity cost of one extra unit of wine is 0.5 of a unit of cloth. For the Britain the opportunity cost is 0.625 unit of cloth. Thus the Portugal has the comparative advantage in producing wine.
Table 1
Person –days per Unit Output Pre-trade output/consumption
Good Portugal Britain Portugal Britain Portugal + Britain
One unit of cloth 2 4 50 50 100
One unit of Wine 1 2.5 100 80 180

On the other hand if Portugal specializes in producing wine and Britain specialization in producing cloth in that case Portugal can produce 200 units of wine and Britain can produce 100 units of clothes. These countries can benefited through trade, as extra 20 unit of cloth is produced.

Table 2
After Specialization output in unit per day Prost-trade consumption
Good Portugal Britain Portugal Britain Portugal + Britain
Cloth 0 100 50 50 100
Wine 200 0 110 90 200

But the problem of the whole argument is that grapes are required for processing wine but Britain can’t produce grapes in commercial basis. Hence we can’t even identify cost of production of grapes in Britain i.e. can’t define transformation frontier of one good to another.

Ricardo’s argument has fallacy in drawing conclusion from invalid premise-“both the countries can produce both goods”. This type of fallacy in literature of logic is known as ‘converse fallacy of accident’. Ricardo’s argument further has a verbal fallacy. The use of the term ‘grow wine’ is completely a mistake. Since wine needs to be processed from the grapes and grapes are to be grown. It involves two different processes: one is cultivating the grapes and another is processing grapes into wine. Such a crucial distinction was over viewed. Even if we consider Britain can’t produce grapes there is tiny or no possibility in the above example that trade improves consumption pattern in both the countries. Consider the case in which Britain can’t produce grapes then Portugal can produce 50 units of clothes and 100 units of clothes whereas Britain can produce 200 units of clothes.
Table 3
Person –days per Unit Output Pre-trade output/consumption
Good Portugal Britain Portugal Britain Portugal + Britain
One unit of cloth 2 4 50 100 150
One unit of Wine 1 NA 100 0 180

If Portugal, as Ricardo says specializes in producing wine then it can produce 200 units of wine and Britain can produce 100 units of clothes. Post- trade Britain has 50 units of clothes and 100 units of wine to consume whereas Portugal’s situation is same as before.

Table 4
After Specialization output in unit per day Prost-trade consumption
Good Portugal Britain Portugal Britain Portugal + Britain
Cloth 0 100 50 50 100
Wine 200 0 100 100 200

The output of cloth declines by 50 units so there is no vector wise improvement rather Portugal suffers deindustrialization and shift towards export of primary product. Britain enjoys diversified consumption in terms of wine and clothes. If we consider shortage of land in the Portugal then there is possibility of shift in cultivation from food grains to commercial crops (grapes). Thus Portugal will face a shortage in food grains and she may have import food grains too. Situation of Portugal worsens as the effect of specialization and trade. Despite of Portugal’s loss, trade between Portugal and Britain continued for many years due to navigation Act passed where she was compelled to trade with Britain. Similar situation reproduces in India where she suffered deindustrialization in the textile industry.

Many writers in the literature believed that reversal in the pattern of trade in cotton textile occurred due to the shift in the terms of trade. Deindustrialization in India as explained by K N chaudhary was due to existence of surplus labour and uncultivable land as comparative advantage assumes full and continuous employment of factors of production. This caused lack of efficiency, limitation of market and little incentive to maximize potential output. Thus India Lost its share of manufacturing output to Britain. Since cotton textile requires raw cotton to produce its output, which is quite impossible to produce in Britain. So the total concept of defining comparative cost is erroneous as in the case of Portugal defined in the example above.

The reason for reversal of pattern of trade in cotton textile between Britain and India in the early 19th century lies in the more than 125 years long commercial and discrimination policy followed by British government. Starting from 1700 when first attempt was initiated to ban Indian printed and painted clothes to 1846, they continued to do every thing possible to retain bullion in their own country. Different form of barriers ranging from quantitative restriction to high tariffs was levied on Indian textile. Only under such a harsh commercial policy it was possible for them to copy manufacture of the textiles and reverse the trade pattern. It had nothing to do with the shift in the comparative costs as mentioned by many writers. Even after ban imposed in 1700 and 1721, further they had to impose tariffs. Textile market is segmented and could never be out competed in the entire sector. Additional ad valorem duty was imposed to prevent Indian export to Britain. In 1813 the tariffs were ranged between 27 to 71 per cent and increased in 1824 to 37-75 per cent and only in 1846 these tariffs were completely abolished. With this discrimination, Britain was not only able to take over the India’s export market but also expanded to India’s own domestic market. Further American civil war (1861-1865) caused cotton prices to rouse high and led Indian farmers to turn towards cultivation of raw cotton.

This innovation led fall in cost of textile manufacturers in Britain held back the handloom manufactures in India and were successful to export through out the globe. There was a huge decline in India’s share in world manufacture output. The share in 1750 was 24.5 per cent which declined to 6.9 per cent in 1830.

Table 5
Tariff rates for import of muslins, calicoes & other cotton clothes manufacturers in Britain
Year Tariffs (in %)
1813 27-71
1824 37-75
1830 30-10
1846 Abolished
(Source: Tribute transfer and balance of payment, Utsa Patnaik)

This discrimination policy displaced hand loom workers and it can be seen in the table below where export of raw cotton was only 4.9 per cent in 1811-12 increased to 21 per cent by 1834-35. Not only the raw cotton but export of other primary commodities like Indigo, sugar etc also increased in significant proportion. The export of piecegoods declines gradually in the early 19th century. In 1811-12 the export share of piecegoods was 33 per cent which decreased by about 19 percent and by the year 1834-35 the export of piecegoods remained only 7 per cent. Between 1813 and 1930 Bengal piece-goods practically disappeared from the investment list of East India Company.
Table 7
Indian exports: commodity composition, percentage share of selected items in total value
Year Raw cotton Piecegoods Indigo Raw silk Opium Sugar Total
1811-12 4.9 33 18.5 8.3 23.8 1.5 90
1814-15 8 14.3 20 13.3 N.A. 3 58.6
1828-9 15 11 27 10 17 4 84
1834-5 21 7 15 8 25 2 78
(Source: Foreign trade and the balance of payment –K N chaudhary)

There was also decline in in the export of cotton piece goods and twist yarn in the first half of the 19th century.
Table 8
Annual Export of Indian cotton piece goods and twist yarn:
Year Pound
1790-95 to 1803-04 £242 million
1849 £0.69 million

The machine made fabrics were cheaper then hand looms fabrics but still complete washout was not possible. The reason for this was that some of the segment could never be produced. Other few reasons were, continued attachment of poor to the coarse cloth and wage level of unskilled labour was much below that of the weavers and fulltime weaver did the weaving job as part time jobs.

There was no vector wise improvement at all and countries like Portugal and India lost from trade. Still the theory of comparative advantage survived for long period of two hundred years. Because it is beneficial for some countries popularize this idea and diversify their consumption basket.

The story of destruction of the renowned Indian textile industries dates back to the period 1881-1931. Deindustrialization can be defined as the movement of labor out of manufacturing and into agriculture. The brunt of deindustrialization within the country is different from the brunt of industrialization of one country on the secondary sector of the other country. Later is the case where rapid expansion of the cotton textile industry in Britain ruined indigenous industry in India. In Britain, industrial revolution was their own and destruction of handicrafts and loss of employment in the cottage industry was compensated by much larger employment opportunity created in the secondary sector. The traditional giant woolen industry felt little effect of the technological revolution as different measures of protection was used but no state help was rendered in response of the destruction of indigenous industries in India. In addition, cotton industry was relatively new industry and effect of the revolution was limited to the small section of the society and opposite was the case for India were the tradition cotton industry constituted enormous part of industrial sector.
The visualization of this process of de-industrialisation can be seen through its adverse impact on the population dependent on cotton industry as shown in the data collected by the Buchanan Hamilton, of the large part of Bihar and north Bengal. He defined De-industrialisation as a decline in the proportion of the working population engaged in secondary industry to the total working population or a decline in the proportion of the population dependent on secondary industry to the total population. The estimate of population dependent on the industry includes two assumptions (a) that every spinners supports one person besides himself and (b) that every spinners support himself only. Based on the assumption (b) total population dependent on the industry in 1809-13 were 1,806,776 and this accounted for about 18.6 per cent of total population. The dependence of total population on industry in 1901 was 937,752 which accounted to just 8.5 per cent of total population. Thus it is easy to notice that the decline in percentage of dependence on population was roughly about 10 per cent.

Table 9
Industrial population in selected in Bihar districts around 1809-1813
District absolute no. of the population on industry Percentage of the industrial to total population
Assumption(a) Assumption (b) Assumption(a) Assumption (b)
Patna-Gaya 985,947 655,551 29.3 19.5
Bhagalpur 454,965,965 286,080 22.5 14.2
Purinea 874,860 587,860 30.1 20.2
Shahabad 446,775 287,285 31.5 20.2
TOTAL 2,762,457 1,806,776 28.5 18.6
(Source: De-industrialisation in Gangetic Bihar, A K Bagchi)

Table 10
Population Dependent on industry in 1901 in selected Bihar District
District absolute no. of the population on industry Percentage of the industrial to total population
Unadjusted Adjusted Unadjusted Adjusted
Patna 279,093 179,695 17.1 11.1
Gaya 287,732 187,016 14 9.1
Shahabad 346,400 228,051 17.7 11.6
Monghyr 281,325 155,439 13.6 7.5
Bhagalpur 222,796 115,618 10.7 5.5
Purnea 220,506 121,933 11.8 6.5
TOTAL 1,638,662 937,752 14.3 8.5
(Source: De-industrialisation in Gangetic Bihar, A K Bagchi)

In period of de-industrialisation, the component of industrial sector which suffered most was cotton textile industry. The analysis of data collected by Buchanan Hamilton clearly shows the massive destruction of traditional cotton weavers and spinners. The population dependent on cotton weaving and spinning in 1809-13 was about 1,124,331 which declined to 148,716 in the year 1901. The per cent of population dependent on cotton weaving and spinning was 62.3 per cent and 15.1 per cent in 1809-13 and 1901 respectively. Therefore the decline in per cent of population dependent on cotton textile was about 47.2 per cent. Hence the extent of decline in the cotton industry was enormous as observed from massive fall in percentage of dependence on cotton textile industry.

Table 11
Industrial population dependent on cotton weaving and spinning
District Total no. Dependent on cotton weaving & spinning Percentage of the industrial to total population
Year 1809-13 1901 1809-13 1901
Patna-Gaya 379,396 64,154 58.0 34.8
Shahabad 194,625 25,258 67.6 11.1
Purniya 354,775 16,777 60.3 15.1
Bhagalpur 200,035 19,034 69.9 16.5
Monghyr – 23,493 – 13.8
TOTAL 1,124,331 148,716 62.3 15.1
(Source: De-industrialisation in Gangetic Bihar, A K Bagchi)

This created huge unemployment in the Gangetic Bihar. The estimation of weavers and spinners thrown back in the soil as referred by nationalist writer was about 10, 00,000 in Bengal and Bihar by 1828. The cotton industry which formed large fraction of industry in India was destroyed to the extent which could never be compensated for.

British initially entered in India as traders. And with the establishment of East India Company in 1600 AD, they tried to acquire monopoly in trade of India. In 1765, East India Company got Diwani of Bengal i.e. right to collect tax revenue. As they got right to collect revenue in Bengal, Company ceased importing of gold and silver which was used to pay for goods imported by Britain. The demand for the cotton textile roused was curtailed by exceptionally harsh protectionist policy during the period 1700-1846. These measures supported an environment where innovation of the textile machinery could take place. The machine made fabrics out-competed handloom fabrics of India. In 1750, India exported mostly fine cotton textiles but by the third decade of 19th century it transformed into exporter of raw materials like raw cotton, Opium, indigo etc. Increase in the cultivation of raw cotton was basis for decline in the availability of food grains. Thus two hundred years long British rule can be characterized as a period of de-industrialisation, suppression and massive transfers which caused disruption in the path of development.

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