On a significant day in India's economic history, the government took a bold step to empower its domestic textile industry. March 1, 1925, marked the official abolition of the excise duty levied on cotton textiles, a move that provided much-needed relief to local manufacturers and aligned with the growing spirit of economic nationalism.
The Burden of the Cotton Excise Duty
For years, the Indian cotton textile industry labored under a financial handicap. An excise duty was imposed on cloth produced within the country, while imported British textiles entered the market duty-free. This created an uneven playing field, making it harder for Indian mills to compete with cheaper foreign goods, primarily from Lancashire in England. The duty was seen not just as a revenue tool but as a symbol of colonial economic policy that favored British industrial interests over Indian ones.
The situation fueled discontent and became a rallying point for the Swadeshi movement, which advocated for the use of Indian-made goods. Indian industrialists and political leaders argued that the tax stifled the growth of a vital domestic industry and hurt the common consumer.
The Man and The Budget Behind the Change
The pivotal change was ushered in by Sir Basil Blackett, the then Finance Member of the Governor-General's Executive Council. He presented the budget for the fiscal year 1925-26, which contained the historic proposal to remove the contentious levy. Blackett, recognizing the political and economic unrest it caused, deemed the duty's abolition essential for industrial peace and progress.
His budget speech highlighted the government's desire to support a key sector of the Indian economy. The removal of the duty was a direct response to the sustained agitation from Indian business chambers and the Indian National Congress, which had long championed this cause as a step toward economic self-reliance or 'swadeshi'.
Immediate Impact and Long-Term Significance
The immediate effect of the abolition was a wave of optimism across India's industrial landscape. Indian cotton mills could now produce cloth without the added cost of the excise, making their products more competitive against imports. This led to a reduction in prices for consumers and provided a significant boost to production and employment within the sector.
In the longer term, the decision of March 1, 1925, is remembered as a major victory for Indian economic policy advocacy. It demonstrated the power of collective agitation and negotiation in influencing fiscal policy. The move strengthened the foundation of India's textile industry, which would go on to become one of the largest and most important sectors of the nation's economy post-independence.
Furthermore, it set a precedent for using fiscal policy as a tool for industrial promotion and national development, a principle that continues to guide economic planning. The abolition day remains a landmark event, symbolizing a shift towards policies that prioritized indigenous industry and economic sovereignty during the colonial era.
