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Institutional Changes and Relative Growth of Small and Large Scale Industries in Bangladesh, 1947-77 : A Case Study of Cotton Weaving

Nuimuddin Chowdhury

 

Abstract

In presenting evidence about long-period changes in the absolute and relative levels of output of the handloom and mill-weaving sectors of the Bangladesh cotton textile industry, this paper makes an attempt to isolate some of the most important influences that conditioned the process of change over a thirty-year period. As would be expected, the level and continuity of assistance is found, in both periods, to be a critical contributory factor, though not the primum mobile, in initiating and sustaining relative growth of any particular sub-sector. It is found that in the preliberation period assistance favouring the handloom activity arising out of differential product taxation, and of liberal and interest-free trade credit, frequently from the owners of private sector mills (themselves recipients of cheap finance from term-finance and commercial banking institutions) made significant contribution to the increase in their relative size within the weaving industry. The real driving force, however, behind the framing of industrial policy and institutions remained, inter alia, the bestowal of massive financial and other assistance of the large scale textile industry, from which a fractional and largely circumstantial fall-out was provided to the mainstream of small producers in hand-weaving. The explanation of that real driving force lay in the web of social and political factors that have interacted with, sometimes over-riden, economic arguments concerning the objectives, nature and ramifications of industrial policies in the pre-liberation Bangladesh. During 1972/73-1976/77, formulation of industrial policy has again been preoccupied with large-scale industry, including an all-out effort to raise, to the greatest extent possible, the own-conversion of yarn spun by the now invariably publicly-owned textile mills. This has not only reduced the marketed surplus of yarn for handlooms but, more importantly, also reduced them to become the ultimate cushion for adjustment to unpredictable, sweeping and sometimes adverse changes involving its composition and costs. Demand conditions, as over, being not exactly helpful, the handloom industry has declined in terms of relative share.  

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