The decline of traditional artisanal industry in colonial India crippled the rural economy

Deindustrialization refers to the process of a continued and marked industrial decline. 

• In the pre-1757 period, 80 to 90 per cent of the East India Company's exports from India were financed by bullion imports. After the assumption of the Diwani of Bengal the pressure on the East India Company to import bullion into Bengal to finance its investments decreased. 

• The Company abandoned free competition to secure its goods in the local markets. 

• The reckless and anarchic attempts to increase their purchase while forcing down the price adversely affected the traditional Indian export industry, especially the cotton textile manufacture. 

• The shift in the commodity composition of Indian exports from manufactured goods to primary products since the early nineteenth century is accompanied by a complimentary increase in the share of manufactured goods in Indian imports. 

• This general change in the composition of India's foreign trade and the resultant impact that it had on the country's domestic industry led to the deindustrialization or the destruction of Indian Industry. 

• British textile manufacturers at home had begun to force the British Government to impose restrictive import tariffs and bans on the import of fine Indian textiles. These restrictions on Indian textiles in England further weakened Indian industry. 

• The income of weavers and spinners were drastically reduced, thereby restricting any possibility of capital accumulation and technological innovations in this traditional industrial sector. 

• In the same period Britain had begun its Industrial Revolution and was rapidly expanding its industries by revolutionizing its technology as well as organization along principles of capitalist production. 

• The British industry had a rapidly developing technological base, it had the advantages of economies of scale and finally it was carefully protected in its formative years from foreign competition. 

This completely changed the traditional structure of the economy and made it a colonial economy designed to meet the needs of the newly emergent industrialized economy of Britain. It destroyed the self-sufficient village economy as the destruction of the traditional industries led to overcrowding in the agrarian sector.