As late as the 18th century, India had a cotton industry that was at least as advanced as the European textile industry. But when England conquered most of the country, she felt that it was too competitive with her woolens industry. So England taxed India's cotton industry and otherwise prevented it from developing. Same with a number of other industries in the country.
Instead, under "mercantilism," India was made to produce raw, not finished goods.

So [colonization][1] appears to be the culprit.

[1]:https://en.wikipedia.org/wiki/Economy_of_India_under_Company_rule