COTTON DUTIES (INDIAN). The controversy with regard to these duties dates back to 1894 when the Government of India, finding itself in financial difficulties as the result of the position of the exchanges, wished to reimpose the customs tariff which had been dropped since 1882, but decided to omit cotton yarns and fabrics from the new list of dutiable articles. This exception provoked a great deal of criticism in India where it was maintained that the exclusion of cotton goods and yarns was intended to favour Lancashire to the prejudice of the Indian budget. After two years' discussion a further act was passed in Jan. 1896 which imposed an import duty of 31% (as opposed to the general rate of 5%) on all cotton piece goods, but not yarns; but in order to prevent the new duties having a protective effect on the growing cotton mill industry in India, an equivalent excise duty was imposed on all cotton goods manufactured in the Indian mills, and it was these excise duties that later became the focus of criticism. India maintained that they were intended to give protection to Lancashire against Indian producers, while Lancashire maintained that they were merely intended to prevent the Indian industry protecting itself against Lancashire.
The agitation against the duties never quite died down, and in 1916 it broke out afresh, partly as the result of the tariff reform movement in England. At the same time the position of the Indian mills was being rendered more difficult by the competition of the Japanese mills, not only in India but also with Indian products in China. In 1917 the question came to a head in con nection with India's contribution towards the cost of the World War. In order to raise the additional revenue required, further taxation was necessary and it was proposed to raise the import duty on cotton goods from 31% to 71%, but leaving the excise duty at the previous figure of 31%, thus giving the Indian mills protection to the extent of the difference of 4%. This proposal aroused great protests in Lancashire, but it was carried through parliament with the support of the Opposition on the understand ing that it would be reconsidered at the end of the war. In 1921, the import duty was raised to I1%p, with 5% on yarns (1922). In 1925-26, however, the position of the Indian budget having become more favourable, the general duty was reduced to 5% and the excise duty first suspended and then abolished altogether. In 1927 the import duty of 5% was modified in the case of the cheaper yarns worth less than 3o annas per lb. to a specific duty of I - annas per lb. which was said to be an attempt to differ entiate against the cheaper imported yarns from Japan.