European Managing Agencies, which dominated industrial production in India, were interested in certain kinds of products. They established tea and coffee plantations, acquiring land at cheap rates from the colonial government; and they invested in mining, indigo and jute. Most of these were products required primarily for export trade and not for sale in India.
When Indian businessmen began setting up industries in the late nineteenth century, they avoided competing with Manchester goods in the Indian market. Since yarn was not an important part of British imports into India, the early cotton mills in India produced coarse cotton yarn (thread) rather than fabric. When yarn was imported it was only of the superior variety. The yarn produced in Indian spinning mills was used by handloom weavers in India or exported to China.
By the first decade of the twentieth century a series of changes affected the pattern of industrialisation. As the swadeshi movement gathered momentum, nationalists mobilised people to boycott foreign doth. Industrial groups organised themselves to protect their collective interests, pressurising the government to increase tariff protection and grant other concessions. From 1906, moreover, the export of Indian yarn to China declined since produce from Chinese and Japanese mills flooded the Chinese market. So industrialists in India began shifting from yarn to cloth production. Cotton piece- goods production in India doubled between 1900 and 1912.
Yet, till the First World War, industrial growth was slow. The war created a dramatically new situation. With British mills busy with War production to meet the needs of the army, Manchester imports into India declined. Suddenly, Indian mills had a vast home market to supply. As the war Prolonged, Indian factories were called upon to supply war needs: jute bags, cloth for army uniforms, tents and leather boots, horse and mule saddles and a host of other items. New factories were set up and old ones ran multiple shifts. Many new workers were employed and everyone was made to work longer hours. Over the war years industrial production boomed.
After the war, Manchester could never recapture its old position in the Indian market. Unable to modernise and compete with the US, Germany and Japan, the economy of Britain crumbled after the war. Cotton production collapsed and exports of cotton cloth from Britain fell dramatically. Within the colonies, local industrialists gradually consolidated their position, substituting foreign manufactures and capturing the home market.
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