This paper seeks to place the development of the handloom industry in a wider social context within which an appropriate set of interventions can be designed. It identifies the continuing importance of the industry in meeting the clothing needs of the country notwithstanding the growth of alternative sources of supply. It is argued that the continuing importance of the handloom industry is however not just an economic issue. The earnings of over three quarters of a million, mainly rural people, are tied-up in the fate of the industry.

Through an ongoing process of structural adjustment the handloom industry has maintained its economic competitiveness against imports and managed to remain both absolutely and at the margin the main source of cloth supply to the domestic market. This suggests that any strategy for promoting the development of the industry would satisfactorily reconcile the objectives of cost-effectively clothing the population of Bangladesh with the improvement in the incomes of a large number of relatively impoverished households.