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Role of Merchant Networks

Merchants, Traders and Entrepreneurs: Indian Business in the Colonial Era by Claude Markovits

Role of Merchant Networks


he present collection of essays on the Indian mercantile world in the colonial period broadly ranges over three areas: the links between business interests and political nationalism; the entrepreneurial dynamism of some prominent merchant communities; and the evolution of Indian merchant networks, both within India and abroad. The epilogue, an exploration in recent historiographical developments, adds value to the volume.

Business and Politics

The first article in the book dwells on the evolution of the relationship between the pioneering Indian capitalists and the Congress Party against the backdrop of the nationalist movement in the first half of the last century. An attitude of ambivalence marked this relationship. Given their immediate business interests, the Indian capitalists seemed reluctant to be seen as being too close to the nationalist party. Moreover, they were not comfortable with the ideological stance of the Congress, in particular Gandhi’s open indictment of western industrialism and his exhortation to industrialists that they regard themselves as trustees rather than owners of their business. At the same time, they were far-sighted enough not to ignore the potential of the Congress to emerge as the ruling party after independence.

The experience of the Congress Party in running governments in several provinces during the mid-1930s (this has been discussed in some detail in the second essay of the first part of the collection) seemed to have broken the ice; there developed a pragmatic understanding on several issues, in particular, on fiscal and labour policies. Industry also veered round and accepted the inevitable: it recognised that it must learn to work within the framework of socialist economic planning to which the Congress stood politically committed. By the time India attained independence, the

Economic & Political Weekly

february 14, 2009

book review

Merchants, Traders and Entrepreneurs: Indian Business in the Colonial Era by Claude Markovits

(Ranikhet: Permanent Black), 2008; pp xii + 292, Rs 695.

private sector succeeded in having its role adequately recognised. While multifarious forces – political and cultural, formal as well as informal – were at play in bringing about this spirit of accommodation and understanding, what the author has set out to do, within the short span of a few pages, is to give the reader some insight into the dynamics of this delicate and sensitive relationship.

In the concluding portion of the essay, Markovits makes certain observations on the structure of business-polity relationships in independent India, which, although being in the nature of obiter dicta, are somewhat intriguing. He asserts that “the present-day Indian State reveals striking similarities with precolonial state formations” (p 21). Similarities arise, in his opinion, between the current process of “commercialisation of power” and the one witnessed in the pre-British era. The forms of “commercialisation of power” that he has in view are “the modern equivalent of tax farming” that can be seen “in institutionalised corruption, the financing of political parties, especially the ruling party, by business houses and state financial support to private monopolies”. Certainly, state power can be commercialised, opening the floodgates for political and social corruption and tax farming can also lead to extensive corruption, but political corruption, as we are witnessing today in India, is attributable to diverse factors. We cannot understand or explain this phenomenon by linking it in any way with the kind of tax farming that existed in the pre-colonial era.

Let me turn to another interesting topic: the distinctiveness of a class of merchants,

vol xliv no 7

traders, and middle and small industrial entrepreneurs within the emerging middle class in India. The middle class is a conglomeration of diverse groups, that seem to defy integration despite the expo

nential growth of consumerism they are experiencing individually. Entrepreneurs within the middle class can be classified under various socio-economic groups. Markovits has chosen to adopt a broad two-sector classification: those who can trace their lineage back to the 16th century as members of an extended family and a new breed of entrepreneurs which is making its mark today in the thriving agro-industrial sectors. Will the differences between the two groups persist or are these likely to melt away under the impact of liberalisation? In the author’s perception, the differences between the two groups are significant and will persist. The first group is so substantially dependent on the benefits they had been enjoying under the old economy that they would continue to act as a brake on the process of liberalisation, whereas the other group would welcome the market as the great liberator.

The first group is not as homogeneous as is made out to be. The impact of liberalisation is breaking it up through the c reation of a variety of profit-making entrepreneurial opportunities. Even if these entrepreneurs prefer to remain family based, one cannot surmise that they would necessarily have an antimarket bias. We all know that many of the world’s dynamic entrepreneurs have grown out of family business and remain loyal to the family while, at the same time, being tough competitors in a marketbased system. In an ambience when things are changing fast, socially and e conomically, prima facie observations based on limited data and experience may be deceptive. If we are to understand the dynamics of the different socio-economic classes across India, we need to have extensive socio-economic research to understand the question rightly posed by the author: Are the two classes getting subsumed into the ensemble that is called the “Great Indian Middle Class”, or will the rising economic prosperity


strengthen rather than weaken the b arriers of caste and family loyalties?

Pan-Indian Merchant Networks

Two essays on the evolution of pan-Indian merchant networks need special mention. Drawing on several sources and his own research, Markovits has described how close bonds between ruling regimes and merchant communities facilitated the commercial penetration of certain merchant groups from the dry regions of the northwest to the whole of north India. In some Rajput principalities, in Rajasthan and Saurashtra, merchants came to occupy important political positions and exercise a measure of control over state finances. These links continued to widen and deepen, the Mughals finding them useful, and the merchants, many of them Hindu and Jain, being adaptive enough to make themselves close to the political powers for the advancement of their business interests. The weakening of Mughal power made little difference. The merchants consolidated their positions by forging close links with the emerging dynasties in different local regions; their role as financiers of the Nawabs-Nazims of Bengal is well known. When the British came, these merchant groups used their political skills, which they had acquired in the previous political regimes, to entrench themselves in the financial and trading network that the colonial power started establishing in India. In the opium trade with China, the Marwaris and Gujaratis became prominent in vast areas in western, northern and central India. Later, in the eastern sector, the Marwaris became privileged intermediaries between the British firms at the ports exporting indigo, jute and tea, and the peasant proprietors in the regions of production. Different merchant communities became prominent in specific areas: the Agarwals were prominent in banking, the Maheswaris in the opium trade, and the Oswals in military contracting. With the wealth thus accumulated, certain banking houses rose to prominence, one being the famous Mathura Seths. The development of pan-Indian merchant networks contributed in its own way to the unification of markets in India, and also, to a very significant extent, to the rise of Indian nationalism. In the conclusion of this essay on merchant networks, Marcovits repeats an interesting question (he has raised it in several other essays in this compilation), namely, “whether, after independence, the mono poly exercised over trade, finance and most of industry by businessmen belonging to a limited number of communities has tended to discourage talent and innovation and therefore limit economic growth”. To an extent this might have been valid in the pre-reform days when big business houses belonging to some of the merchant communities had been consolidating their position through pre-emption of licences and permits, but in the post-reform period, their hold, to all appearances, is slowly slackening.

The survey on merchant networks outside India contains a mine of information. Two findings need special mention. First, the Indian merchant diaspora was diverse and deeply segmented. Second, Indian traders abroad were not (though currently this is the received wisdom) typical middlemen doing most of the spadework for


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february 14, 2009 vol xliv no 7

Economic & Political Weekly


the penetration of British capital in newly colonised territories. The essay takes the focus away from such abstract entities as India or Indians or the “British imperial system” and concentrates on actual operational networks as they spread out to different countries.

‘Tata Paradox’

A few other essays deserve mention. The one on the Tata House is a refreshing change from the existing literature, which usually confines itself to a somewhat heroic conception of the entrepreneurship of this house. Titled “Tata Paradox”, this essay argues that the Tatas were not as much a favourite with the ruling party as the Birlas were, because of the Tatas’ closer proximity to the colonial regime, and also the role they played in the setting


up of the Forum of Free Enterprise, an anti-socialist think tank and their alleged support in the creation of the Swatantra Party. Another essay on the Partition of India throws interesting sidelights on the behaviour of Hindu and Muslim business classes during the period of intense turmoil that the subcontinent went through. Was it a zero-sum game? The author guesses so, but the issue deserves a closer look.

In the epilogue, after a scholarly review of different studies on the mercantile world of India, the author wonders whether in the Indian historiographical scene we have given due recognition to the role of the merchant. Arguably, in colonial India, markets were the main threads connecting society, much more than the apparatus of an alien colonial


state or a so-called Brahminical hegemony, and merchants, rather merchant networks, were the foremost actors in markets. In this regard, the author suggests several lines of research so that we can get a balanced view of India’s past. Many of the studies on Indian economic history are centred on the role of the Indian bourgeoisie, set mostly in the Marxist perspective or in some variants of it. The focus has to change, and to that end it has been very thoughtful on the part of Markovits to have brought out in a single volume what he has been speaking and writing on: a collection of essays, particularly those on the evolution and the role of merchant networks as an integral part of Indian society and polity.

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Economic & Political Weekly

february 14, 2009 vol xliv no 7

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