If the 19th century saw the rise of a cotton mill industry in India, most of the 20th has seen a dismantling of weaving in the mills, and its shift to small weaving factories, called 'powerlooms'. Textile scholarship in India has seen the powerlooms' growth mainly as a distortion created by government policy. This article disputes this view, and interprets the growth as a pattern of industrialisation founded on (1) unlimited supply of low-quality labour, (2) developing systems of inter-firm co-ordination, (3) agglomeration based on such systems, and (4) continuous accumulation of capital 'from below', in artisanal activities in the past, and in modern small-scale industry and agriculture more recently.