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In India, Khadi refers to the handwoven and hand-spun cloth. Weavers prefer yarn produced by mills because it is more robust and consistent in quality. The Swadeshi movement of boycotting English products during the first two decades of the twentieth Century was popularized by Mahatma Gandhi and Indian mill owners, who, backed by Nationalist politicians, called for a boycott of foreign cloth. Gandhi argued that the mill owners would deny handloom weavers an opportunity to buy yarn because they would prefer to create a monopoly for their own cloth. However, handspun yarn was expensive and of poor quality. Thus Mahatma Gandhi started spinning himself and encouraging others to do so. He made it obligatory for all members of the Indian National Congress to spin cotton themselves and to pay their dues in yarn. He further made the Chakri (spinning wheel) the symbol of the Nationalist movement. Initially, the Indian flag was supposed to have a chakri, not the Ashoka Chakra at its center. Mahatma Gandhi collected large sums of money to create a grass-roots organization to encourage handloom weaving. This was called the 'khaddar' or 'Khadi' movement.

Under the British, Raj Indians were forced to buy expensive clothes, since the British exported the raw materials for the cloth to English fabric mills, then re-imported the finished cloth to India. The Indian mill owners wanted to monopolize the Indian market themselves. Ever since the American Civil War caused a shortage of American cotton, Britain would buy cotton from India at cheap prices and use the cotton to manufacture cloth. The khadi movement by Gandhi aimed at boycotting foreign cloth. Mahatma Gandhi began promoting the spinning of khadi for rural self-employment and self-reliance (instead of using cloth manufactured industrially in Britain) in the 1920s, thus making khadi an integral part and an icon of the Swadeshi movement.