East India Company

The Age Of Industrialization of Class 10

East India Company

However, once the East India Company established political power, it could assert a monopoly right to trade. It proceeded to develop a system of management and control that would eliminate competition, control costs, and ensure regular supplies of cotton and silk goods. This it did through a series of steps.

1. The Company tried to eliminate the existing traders and brokers connected with the cloth trade, and establish a more direct control over the weaver. It appointed a paid servant called the gumasta to supervise weavers, collect supplies, and examine the quality of cloth.

2. It prevented Company weavers from dealing with other buyers. One way of doing this was through the system of advances. Once an order was placed, the weavers were given loans to purchase the raw material for their production. Those who took loans had to hand over the cloth they produced to the gomastha. They could not take it to any other trader.

As loans flowed in and the demand for fine textiles expanded, weavers eagerly took the advances, hoping to earn more. Many weavers had small plots of land which they had earlier cultivated along with weaving, and the produce from this took care of their family needs. Now they had to lease out the land and devote all their time to weaving. Weaving, in fact, required the labour of the entire family, with children and women all engaged in different stages of the process.

Soon, however, in many weaving villages there were reports of clashes between weavers and gomasthas. Earlier supply merchants had very often lived within the weaving villages, and had a close relationship with the weavers, looking after their needs and helping them in times of crisis. The new gomasthas were outsiders, with no long-term social link with the village. They acted arrogantly, marched into villages with sepoys and peons, and punished weavers for delays in supply – often beating and flogging them. The weavers lost the space to bargain for prices and sell to different buyers: the price they received from the Company was miserably low and the loans they had accepted tied them to the Company.

In many places in Carnatic and Bengal, weavers deserted villages and migrated, setting up looms in other villages where they had some family relation. Elsewhere, weavers along with the village traders revolted, opposing the Company and its officials. Over time many weavers began refusing loans, closing down their workshops and taking to agricultural labour.


In 1772, Henry Patullo, a Company official, had ventured to say that the demand for Indian textiles could never reduce, since no other nation produced goods of the same quality. Yet by the beginning of the nineteenth century we see the beginning of a long decline of textile exports from India. In 1811-12 piece-goods accounted for 33 per cent of India’s exports; by 1850-51 it was no more than 3 per cent.

As cotton industries developed in England, industrial groups began worrying about imports from other countries. They pressurized the government to impose import duties on cotton textiles so that Manchester goods could sell in Britain without facing any competition from outside. At the same time industrialists persuaded the East India Company to sell British manufactures in Indian markets as well. Exports of British cotton goods increased dramatically in the early nineteenth century. At the end of the eighteenth century there had been virtually no import of cotton piece-goods into India. But by 1850 cotton piece-goods constituted over 31 per cent of the value of Indian imports; and by the 1870s this figure was over 50 per cent.


  • Cotton weavers in India thus faced two problems at the same time : their export market collapsed, and the local market shrank, being flooded with Manchester imports.
  • Produced by machines at lower costs, the imported cotton goods were so cheap that weavers could not easily compete with them.
  • By the 1850s, reports from most weaving regions of India narrated stories of decline and desolation.
  • By the 1860s, weavers faced a new problem. They could not get sufficient supply of raw cotton of good quality. When the American Civil War broke out and cotton supplies from the US were cut off, Britain turned to India. As raw cotton export from India increased, the price of raw cotton shot up.
  • Weavers in India were starved of supplies and forced to buy raw cotton at very high prices.
  • By the end of the 19th century factories were established in India also. They also flooded the market with cheap factory made clothes. This was yet another problem faced by the weavers.


The first cotton mill in Bombay came up in 1854 and it went into production two years later. By 1862 four mills were at work with 94,000 spindles and 2,150 looms. Around the same time jute mills came up in Bengal, the first being set up in 1855 and another one seven years later, in 1862. In north India, the Elgin Mill was started in Kanpur in the 1860s, and a year later the first cotton mill of Ahmedabad was set up. By 1874, the first spinning and weaving mill of Madras began production.


(i) The history of many business groups goes back to trade with China. From the late eighteenth century, the British in India began exporting opium to China and took tea from China to England. Many Indians became junior players in this trade, providing finance, procuring supplies, and shipping consignments. Having earned through trade, some of these businessmen had visions of developing industrial enterprises in India. Dwarkanath Tagore (Bengal), Dinshaw Petit and Jamsetjee Nusserwanjee Tata (Bombay), Seth Hukumchand and the father as well as grandfather of the famous industrialist G.D.Birla, all made their fortune in the China trade.

(ii) Capital was accumulated through other trade networks. Some merchants from Madras traded with Burma while others had links with the Middle East and East Africa. There were yet other commercial groups which operated within India, carrying goods from one place to another, banking money, transferring funds between cities, and financing traders. When opportunities of investment in industries opened up, many of them set up factories.

(iii) As colonial control over Indian trade tightened, the space within which Indian merchants could function became increasingly limited. They were barred from trading with Europe in manufactured goods, and had to export mostly raw materials and food grains. They were also gradually edged out of the shipping business.

(iv) Till the First World War, European Managing Agencies in fact controlled a large sector of Indian industries. These Agencies mobilised capital, set up joint-stock companies and managed them. In most instances Indian Financiers provided the capital while the European Agencies made all investment and business decisions. The European merchant-industrialists had their own chambers of commerce which, businessmen were not allowed to join.

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