What was the main reason for decay of handicrafts during colonial period?

Availability of machine made goods of lower price

The handicrafts industry declined because the Britishers produced their products with the help of machinery that resulted in low production costs and eventually lower prices, causing the demand to shift from the Indian goods to Foreign goods. These import goods were readily available in India due to the Britishers policy of promoting their economic interests in India. Britishers did not develop modern industries in India. Hence statement 2 is incorrect.