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Insights into India's Business History

The Oxford India Anthology of Business History edited by Medha M Kudaisya (Delhi: Oxford University Press), 2011; pp 492 + xxviii, Rs 1,295.

Insights into India’s Business History

D N Ghosh

arket organisations, central to the functioning of economies, are driven by entrepreneurs in their insatiable urge to generate surpluses through myriad economic activities. This anthology of business history under review focuses on the profiles of fi rms and entrepreneurs in India in the 19th and 20th centuries. A variety of complex and interrelated factors had an impact on their profiles: formal and informal rules regulating property rights, governance structures and rules of exchange, and equally, if not more importantly, forms of intervention of the ruling political regime and its ability to intervene. Medha Kudaisya has carefully chosen a collection of 41 articles that give us an insight into the forces and circumstances – socioeconomic and cultural – that have, over a period of time, moulded the profi les of our merchant communities; and their evolution and development that lie at the core of our business history.

The anthology is divided into fi ve sections. Section one looks at the gamut of transactional aspects of business. The second section takes us through the stories of the dominant mercantile communities, followed, in the next section, by the structure of their organisations and the decision-making processes. The fourth section covers how the shift from trade to industry took place for some of the leading business groups. We come in the end to the early 1990s in the fi nal section – the post-reforms era.

Market Structure

The first section titled “The Bazaar” starts with a seminal essay by Rajat Ray on the structural characteristics of the Indian market in the pre-Independence period. It was a market with an integrated credit-and-agency nexus connecting 1,718 market towns with 12 nodal points: a long distance network that facilitated the essential flows of the Indian

Economic & Political Weekly

march 17, 2012

review article

The Oxford India Anthology of Business History

edited by Medha M Kudaisya (Delhi: Oxford University Press), 2011; pp 492 + xxviii, Rs 1,295.

economy, the outflow of agricultural produce and the inflow of manufactured goods, precious metals and hard cash. Two supplements to Ray’s article provide some deep insight into certain aspects of the market: one by L C Jain on the hundi, and the other by Timberg and Aiyar on informal markets and systems. These market instruments played an important role in the urban economy by providing credit to wholesale and smallscale business units, before modern banks started entering the area.

The picture that Ray has portrayed is one of a seamless web of credit and exchange by means of transactional devices that helped move money rapidly and regularly across the length and breadth of India. He draws the conclusion that the “economy of India in the late colonial period was not a dual economy, cleaved between capitalist international enclaves on the one hand, and a primitive, precapitalist peddling sector on the other” (p 43). True, the indigenous sector was not in any sense a trivival sector; it was highly organised and integrated in its own way, providing critical support to the East India Company during their phase of territorial and economic consolidation of the subcontinent. However, from the beginning of the first decade of the 19th century, the colonial power started establishing, one by one, its own banks in Bengal, Bombay and Madras to manage its finances, cater substantially to its remittance needs, and ensure stability in the market prices of the Company’s securities. The market network that these three banks started creating, in association with the overseas exchange banks, became the core of the organised

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sector. This had its support in the currency and the banking policy of the colonial government.1 If we are to understand the perpetuation of this duality as the structural characteristic of the market organisation of the 19th century and a good part of the 20th century, we have to ask ourselves: How and why did the gap between the organised and unorganised sector widen? What is it that prevented these indigenous entrepreneurs from setting up institutions as competitors to the presidency banks? Was it a reflection of their entrepreneurial short-sightedness? It would have been nice if these issues had been addressed in this section.

Market Communities

The second and third sections are on the merchant communities: their organisations and way of life and how these shaped the market structure. There are writings on several mercantile communities: the Marwaris, Parsis, Nattukottai Chettiars, Sindhis, and Bohras. The theme essay by C A Bayly is on the Benares group of merchants: a broad overview of their levels of trading and commercial activities and the nature of solidarity among them, driven and moulded more by business considerations than caste leanings. Three articles deserve special mention. The article on the Marwaris by Dwijendra Tripathi is focused primarily on themes of assimilation and integration associated with Marwari migration. The range of activities of the Nattukottai Chettiars and their links with the colonial regime are discussed at length in Christine Dobbin’s article. Ashok Desai’s piece on Parsis brings out their entrepreneurial dynamism, while emphasising at the same time the benefits they drew from the British patronage.

While recognising the importance of the cultural aspects, as brought out in most of the writings in these two sections,


we should not overlook how the interrelationships between trade and politics shaped the profiles of the mercantile communities in the 18th century. A fl avour from the past – the conjuncture of circumstances that influenced the profiles of the mercantile communities starting from the peak of the Mughal p eriod at the close of the 17th century, followed by its dis integration and finally the intrusion of European powers – would have enriched our understanding further.

Historical Perspective

The political governance in Mughal I ndia extended over territories that were more or less coextensive with what later came to be known as British India, including the princely states. Trade fl ourished along the routes that connected the two coasts with the imperial cities of Delhi and Agra, with links to central Asia via Lahore and Kabul. The most important trading area in the Mughal empire was the subah of Gujarat with its chief port of Surat, the principal outlet for the whole axis connecting Gujarat with the imperial cities and the link of the oceanic, inter-regional trade of Asia with the coastal and subcontinental trade of India. Merchants from all over northern, central, and north-western I ndia were to be found in Surat, with the Multanis, Kashmiris and northern Khatris forming major groups among the l ocal mercantile communities. This was the period when the Khojas and Bohras, the indigenous communities who had converted to Islam, came into prominence in trade. The most numerous among merchants were the Banias of Gujarat and Rajasthan conducting the business of trading in money as well, exchanging different currencies and remitting from one place to another. Business dealings were generally untouched by religious considerations. This does not however mean they were not regulated by certain principles, but that these principles were more or less secular and were recognised by all merchants as equally valid.2

The mercantile communities in the trading regions in the Mughal period had flourished in an ambience of autonomy. This was a tradition that had c ontinued from the earlier centuries. The links between merchants and rulers were generally through a levy of taxes. Merchants paid taxes routinely. Unlike European guilds, the local governments exercised no control or restrictions over them. They were generally left free to regulate their own matters. There was a kind of “continental aloofness” in their attitude to commerce. Mughal aristocratic participation in trade was spasmodic and limited; it never presented a problem to the merchant communities. Local officials taking an interest in trade might have created occasional problems, but such embarrassments were never a permanent problem. The structure of medieval trade always left enough margin for merchants to make their f ortunes. At the end of the 17th century, Abdul Ghafur of the Bohra community was the richest merchant in Surat, if not in the whole of India.3 The structure of which Ghafur was a part appears to have existed essentially throughout the period 1500 to 1800. What changed were the routes, the cities and the communities of merchants who lived by trade.4

Under conditions of a dissolving Mughal structure in the early 18th century, administrative instability became a serious and insurmountable problem for Indian merchants. The oppression of merchants by the Mughal administrators in their continuous quest for revenue led to the decline of the leading mercantile families one after the other. The entry of the English and the Dutch and their quarrels with the Portuguese in the waters of north-western India and southern A rabia unsettled trade and swept the I ndian merchants into the middle of the conflict. They had to perform a balancing act between these powers. When it became clear that the Dutch and the English were the new naval powers of the Indian Ocean, the Indian merchants quickly adjusted themselves and accepted their protection.5 The trading structure that grew under English dispensation lacked the kind of freedom the Mughal administration had preserved in the 17th century. Muslim ship-owners of S urat, Calicut, Masulipatnam and Hooghly were completely swept out. There was a gradual erosion of the independent merchant.

Colonial Patronage

In the completely altered political context the merchant communities started looking for new business opportunities, and, gradually, the relations between the foreign powers and the indigenous merchant communities grew to be mutually beneficial. Colonial trade and the colonial government were vulnerable in the early years and Indian mercantile communities

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Economic & Political Weekly


fully exploited the opportunities arising from such vulnerability. The guarantee of credit and the support of local groups were a basic ingredient in the territorial and business expansion of the colonial power. The funding of military activities in the heyday of expansion during the times of Cornwallis and Wellesley was done through the issue of Company securities, which used to be liberally subscribed to by the indigenous business houses. The Jagath Seths of Murshidabad, the house of Kashmiri Mal in Oudh, the firm of Hari Bhakti in Baroda, the Poddars of Ramgarh, and the Hyderabad Sahukars were conspicuous examples.6

The emergence of the Marwari community as a pan-Indian network during this period is an interesting story.7 The process started around 1810-20, coinciding with the final thrust of British conquest in the third Maratha war. Supplying provisions to the armies of the Company offered a vast field of endeavour to various contractors and merchants in which the Marwaris from the dry zone occupying most of the north-west of the subcontinent appeared to have fi gured prominently. Also, the opportunities for smuggling opium on a big scale to China using the ports of Portuguese India, in open defiance of the Company’s monopoly, were cleverly exploited, apart from the Marwari traders, by many merchant groups from Kutch, Kathiawar, Shikarpur and Hyderabad in Sind. Bombay Parsis and Ahmedabad merchants also had a significant role in this activity.

These merchant communities had thus amassed large capital and forged political connections with the rulers of various native states of central India in whose territories poppy cultivation took place. The wealth accumulated went later to other branches of trade, in particular, cotton and grain.8 In eastern India, large-scale production of export commodities such as indigo, jute and tea attracted British capital on a signifi cant scale and the Marwaris gradually emerged as the privileged intermediaries between the British exporting firms and the peasant proprietors or salaried employees in the regions of production. They also acquired a prominent position in the import trade

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in cotton textiles from Lancashire and dominated the distribution network of Manchester cloth all over eastern India, which was the major market in India for British textiles. The Marwaris and Gujaratis, with the prominence they acquired in the vast areas of western, northern, and central India and the Deccan, rose to the status of merchant princes. One banking house of “migrant” origin that rose to prominence in the first half of the 19th century in northern and central India was that of the “Mathura Seths”. The founder was a Gujarati brahmin, Gokul Das, who became the treasurer to the Gwalior durbar.

Trade to Industry: Role of the State

Building upon the trading profi ts that the Indian merchant communities had generated in the earlier decades, the various mercantile groups branched out into industry. This is the burden of section IV. The theme essay by Tirthankar Roy brings out the milestones of Indian industry since the mid-19th century. Omkar Goswami highlights how during 1918-57 the Marwari community succeeded in taking control of the Britishowned enterprises in eastern India. In western India, middlemen and brokers from the mercantile communities of Parsis, Gujaratis, Sindhis, and Cutchi Memons started pioneering industrial growth.

The aspirations and innovativeness of the Tatas is told in absorbing detail by Dwijendra Tripathi and Makrand Mehta. It is a story of their being a bridge, as they say, “between the colonisers and the colonised”. We cannot skip the story of Scindia Shipping, which prospered despite the subtle and overt manoeuvring of the various British shipping interests. Much of the industrial ventures of the 19th and 20th centuries occurred in the twin cities of Bombay and Calcutta; the story of their dual dominance is narrated by Claude Markovits. The interwar period was especially significant in that several industrial houses became dominant in this era. These were the houses of Singhanias, Jamnalal Bajaj, Ramkrishna Dalmia, and Karamchand Thapar. An informative story of their gradual maturity is told by Dwijendra Tripathi.

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In the post-Independence era, a different set of factors comes into play. The State takes upon itself a positive and leading part in a development strategy intended to guide industrial growth in a direction desired by it. A fallout of this strategy was that it cut at the roots of flexibility and innovativeness – the soul of entrepreneurship. The 1990s have changed that, clearing the decks for the emergence of entrepreneurs who were not heard of even a few years ago. Today if we look at the top 25 firms on an asset basis, we find that only a very few of the old vintage have survived. The article on post-liberalisation business successes by Dwijendra Tripathi and Jyoti Jumani provides us with an excellent overview of the transition post-1991.

An anthology is not intended to answer all the questions that readers may have. The great merit of this book is that some of the key research findings in the area of business history have been brought together at one place, highlighting what we have known so far and what remains to be researched. Thoughtfully, for those who wish to pursue any specifi c areas, the editor has, in her masterly introduction, appended a fairly comprehensive bibliography and so have most of the contributors. Considering the fact that the canvas chosen is wide, the editor has done an admirable job.

D N Ghosh ( is the chairman of ICRA.


1 D N Ghosh, Banking Policy in India, An Evaluation, Chapter 1, “Currency and Banking Policy in the Colonial Period” (Delhi: Allied Publishers), 1979.

2 Ashin Das Gupta, The World of the Indian Ocean Merchant, 1500-1800, Chapter 5, p 105 (Delhi: OUP), 2001.

3 Ashin Das Gupta, Indian Merchants and the Decline of Surat c 1700-1800, Franz Steiner Verlag. Wiesbaden, 1979, Chapter 2, Mulla Abdul Ghafur.

4 Ibid, Chapter 4, p 101.

5 S Arasaratnam, “India and the Indian Ocean in the Seventeenth Century” in India and the Indian Ocean 1500-1800, edited by Ashin Dasgupta and M N Pearson (Calcutta: OUP), 1987.

6 Lakshmi Subramaniam, Bania and the British, The role of indigenous credit in the process of imperial expansion in western India in the second half of the 18th century, in Modern Asian Studies, Vol 21, No 3, 1987, pp 473-74.

7 Claude Markovits, Merchants, Traders and Entrepreneurs,Indian Business in the Colonial Era, Chapter 8 (Ranikhet: Permanent Black), 2008.

8 Ibid: 198.

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