Introduction

 World War II came as a godsend to Indian business

 The great depression was not so severe in India as in the
developed countries
 Imports were disrupted, demands for indigenous goods
went up with it its prices
 Industrial firms stretched to extreme limit
 Producers and distributors made handsome gains
 To ensure maximum production , the government offered a
series of incentives to manufacturers and invoked the
infamous Defence of India rules to ban strikes and lockouts
Cont..
 Several provisions of the factory act were relaxed
 Necessary steps were taken to ensure unhindered
supply of raw material to the production centres
 The war years on the whole were a period of
uninterrupted prosperity for Indian business in
general
Cont...
 The world wars and Great Depression drove a wedge
between the mainly Indian-owned businesses that
sold goods in India and the foreign owned businesses
that sold goods in the world market, strengthening the
one and weakening the other
 In turn, the two groups developed conflicting interests
in politics and saw themselves as potential competitors
 The situation destroyed trust between Indian business
and the British Indian state, and forced European and
Indian firms to take sides in the nationalist movement.
Business and politics
 Expatriates were weakened by Economic crisis, but Indian
industrialists were empowered- because of windfall profits earned
during the war and secondly by tariff protection
 An alliance between INC and some business groups developed in the
Interwar period
 Some industrialists close to congress were:
 Kasturbhai Lalbhai (Arvind Mills)and Ambalal Sarabhai (textile based
conglomerates of Ahmedabad
 Jamnalal Bajaj –Trader and Industrialist- Steel and engineering
Factories
 G.D. Birla- Jute Manufacturing
 All of them close to Mahatma Gandhi
 Tata had also political influence but not close to Gandhi
 They participated in public debates for the future economic policy
Cont...
 They were not considered as representatives of Business world at
large
 Business world- Trading firms, bankers, moneylenders , foreign
firms and small firms
 Corporate world was divided during this time
 Foreign and domestic capitalists – did not collaborate in politics
 Some industrialists joined the political mainstream because of
fearing trade unions
 Developed alliance b/w publicly engaged business leaders and
political leaders after 1937
 Relationship between business and congress or politics was a
complex one
 Nehru was pro-socilaistic, not liked by capitalists
 Gandhi and Sardar were pro- capitalistic
Cont...
 For shaping the future of Indian Economy, National
Planning Committee of Congress- started around 1938
 Congress projected a vision for development of India
 Drafting of Bombay plan by business leaders of the city
for the economic development of India in 1944
 It gave importance on industrialisation and devaluation of
trading
 The signatories of the plan were J. R. D. Tata, Ghanshyam
Das Birla, Ardeshir Dalal, Lala Shri Ram, Kasturbhai
Lalbhai, Ardeshir Darabshaw Shroff,
Sir Purshottamdas Thakurdas and John Mathai
End of Discriminating Protection
 In 1940’s- Tariff Board was not so much active
 Congress politicians and nationalist economists
demanded for an indiscriminate and unconditional
tariff protection as an industrial promotion policy
 According to them, the protection policy provided by
British government to Indian industry was “policy of
half a loaf which is better than none”
 So demanded for full of loaf which would serve the
national interest
Cont....
 A policy framework containing 100 pages document was
made by Indian leaders for industrialisation
 During world war II, protection against foreign capital and
labour was given more importance than protection against
trade ( by Indians )
 All India Manufacturers Conference (1941) organised for
the development of native industry
 It represented mainly small-scale industrial interests
 Passing of a motion for investment regulation and India’s
industrialisation for the benefit of the “sons of the soil”
 It should be regulated on “non nationals’ not only from
owning industry but also from participating in
management
Cont....
 Economists raised the voice on conditional protection of
British government and on foreign capital
 Excise duties on cotton textiles of India delayed the rapid
development of Indian industry as the Indian market was
reserved for the British producers
 Many Economists and intellectuals made the case for
rejection of discriminating protection
 M. Visvesvaraya (first Engineer of India), the former PM of
Mysore and founder of AIMCO- blamed the weak
protection policy –responsible for India’s
underdevelopment( mentioned in a plan published in
1944)
....
 V.K.R.V.Rao ( a Cambridge –educated economist) criticised
the protection policy of Bitish government
 Called for “unqualified “protection that is for tariff wall to
be raised so high that would protect the Indians to survive.
 Sriman Narayan Agrawal , a congress politician and
Intellectual – the doctrine of free trade is now dead .”
advocated for a protection for small scale industry from
large scale industry
 Economists also demanded that foreign firms should be
forced to train Indians rather than hire managers and
skilled workers from abroad
 Foreign firms should be forced by law to register in Indian
share markets and mandatorily sell 50% shares t o Indians
Cont...
 According to Marxists , British empire impoverished
India by causing deindustrialization, draining
resources, and nurturing an exploitative class
structure.
 Economic policy in British India was guided
throughout by the desire to achieve market integration
between Britain and India.
 Main aim was to keep Indian commodity markets
open to British goods
Partition and its aftermath
 Partition of India affected all sections of Business abruptly as
they were unprepared for it.
 Both foreign and Indian trading firms suffered a lot
 Rallis , a great foreign firm operated in India was one among
them- its assets divided between two countries
 Karachi and Lahore were two important large and populous
business towns of India before independence
 Most of the business were owned by Hindus,Sindhis, Parsis, and
Sikhs
 Most of them left Pakistan for India
 Khatri Business and trading firm like Shri Ram left western
Punjab(Pakistan)
 Muslim merchants left India for Pakistan- some of whom had
main offices in Calcutta
Cont...
 In 1960, Invitation to some prominent Muslim firms of India by
Pakistan government
 Provided land grants and later on bank loans and import licences
 All Major communities of Muslim merchants responded to open
invitation
 Some of the merchant communities who migrated were- Halai Memon
Community of Gujarat who migrated to Karachi and took over textile
trade
 Ismail Khojas from Bombay and East Africa
 Dawoodi Bohras of Western India
 Chiniotis( a small group from Punjab- Chiniot) who had migrated to
Calcutta and engaged in leather trade , returned to their homelands
 Pakistan’s leading Business families- Monno and Crescent groups were
Chiniotis
Cont....
 Adamjee and Kassim Dada were Gujarati Memon firms
 Saigols were Punjabis based in Calcutta
 Ahmed Dawood from Kathiawar
 These trading firms were engaged in textile production and
financial services in Pakistan
 Pakistan’s largest private bank, Habib Bank , founded by
Gujarati Ismail Mohammad Ali Habib
 Saigols headed the United Bank from 1959
 They all influenced the Economic policy of Pakistan
 In Pakistan , business and politics held a broad outlook on
trade and not regulated too much except during 1970s
Cont...
 Indian government adopted extreme form of protectionism after
independence
 Free trade and foreign capital and discriminating protection –
responsible for decline of Indian economy during British period said by
Indian Politicians
 Trade was relegated to a low position in Independence India as
trade was undesirable and money lending was evil
 Protectionist Industrialisation was given more importance in Indian
business
 Soviet style Industrialisation was prime focus of Indian politicians
 Most important fields on Industrialisation- Metals, machines and
Chemicals
 No bother about loss of trading firms to Pakistan by Indian leaders
Conclusion
 Trade, textile and foreign capital- three pillars of Colonial
government- receded in priority
 More focus was given on industrialisation and reduced the role
of world economy
 Thirty years on- Port cities had more bankrupt businesses than
healthy ones
 Limitation of agricultural trade but not banned
 Land trade and sea trade disconnected
 Decrease in exports and increase in Imports- led to serious
balance of payment crisis
 State regulations of market was increased
 That led to the fall of many business persons and rise of many
indigenous business conglomerates in India
Introduction
 Nehruvian Era- From Independence to late 1960s
 Goal of the government was to establish a socialist
pattern of society
 Establishment of National Planning commission on
15th March, 1950 with PM as the chairperson
 Emphasised on mixed economy
 Similar to Bombay Plan(1944)
 First Five year plan- 1951-1956
 Second Five year plan- 1956- 1961(Mehalanobis Model)
 Third Five Year Plan-1961-1966
Objectives of Five Year Plans
❖Economic growth.
❖ Self- Reliance.
❖ Removal of Unemployment.
❖ Reduction in income inequalities.
❖ Elimination of poverty.
First Five Year Plans
 Main aim was to get the country out of poverty.
 K.N.Raj, a young Economist drafted this plan
 Seven areas covered in this plan were:
• Agriculture as well as community development.
• Energy as well as irrigation.
• Communication and transportation.
• Land rehabilitation, Social services, Miscellaneous.
• Industrial sector.
Cont...
 Harod- Damor model(Keynesian model of economic
growth) with few modifications
 Agricultural based economy
 Most important feature was the active role of govt.
in all economic sectors
 Primary focus was on the primary sector
Achievements..
 National income was increased more than per capita
income of population
 Many irrigation projects like Bhakra Dam , Damodar valley
dam, Mettur dam.and Hirakud dam were initiated
 UGC was set up to take care of funding and take measures
to strengthen the higher education in country
 At the end of the plan,Five IITs were started as major
technical institutions
 The Govt took steps to rehabilitate the landless workers.
 Family planning started in 1952.
 Atomic Energy commission was formed in 19 4 8 with
Homibhaba as first chairman.
 The target growth rate was 2.1 annual gross domestic
product but the achieved growth rate was 3.6 percentage
Second Five Year Plan
❖To make country more industrialized(rapid
Industrialisation)
❖Famous as Mehalanobis model ( P.C.
Mehalanobis)
❖ Focus was mainly on heavy industries.
❖ To increase employment opportunities.
❖ To determine optimum allocation of investment
between productive sectors
❖Importance on Public sector
Achievements...
❖HYDROELECTRIC POWER PROJECTS.
❖ More railway lines were added.
❖ ATOMIC ENERGY COMMISSION was formed.
❖ 5 STEEL plants at BHILAI,
BOKARO,ASANSOL,DURGAPUR and ROURKILA
were established with help of Russia ,Britain and
West Germany
❖ Increased in coal production
❖More railway lines were added in the north-east
Cont....
❖ Tata Institute of Fundamental Research and Atomic Energy
Commission –
❖ A talent search and scholarship program was begun to find talented
young students to train for work in nuclear power.
❖ The growth rate was 4.5 Percent
❖ But the actual growth rate was 4.7 percent.

This plan got a MODERATE SUCCESS. due to-

❖ UNFAVOURABLE MONSOON in 1957-58, 1959-60.
❖ SUEZ CRISIS which blocked international trading and increase
the commodity prices.
❖ High TARIFFS
Third Five Year Plan-1961-66
❖ More stress to agriculture. 1. Subsidies.
2 Sufficient help.
Improvement on the production of wheat
❖ To increase the national income by 5% per year.
❖ To provide employment to people.
❖ To establish EQUITY among all the people of country.
❖ To achieve 5.6% growth rate of GDP but the actual
growth rate was 2.4 percent
Achievements
❖Decentralization.
❖ Organization formed – 1. Panchayats
2. Zila Parishads
❖ Laid emphasis on- Oil conservation, Irrigation
,Aforestation and Dry farming
❖Many cement and fertilizer plants were established
❖Starting of Green Revolution
❖Production of abundance of wheat by Punjab
Cont...
❖ Many fertilizers and cement plants were built.
❖ State Electricity Board and State Secondary Boards were
formed.
❖ Panchayat elections were started
❖ Many primary schools were started.
❖ Focused on defense industry and Indian army

Problems faced
❖ SINO INDIAN WAR, India witnessed increase in price of
products, resulting INFLATION.
❖ Indo-Pakistan war in 1965-66
Progress of Older Houses
 House of Tata- number one in the private sector of Indian
business world
 TISCO- the largest company on the country on the eve of
independence
 Govt. provided Rs. 10 crore in advance for its development- that
led to its modernisation and expansion
 Its capacity was doubled – from 1 million tonnes to 2 million
tonnes by 1958
 But Tata had faced little problem in securing the necessary
permits and licenses from the government and a huge credit
from International Bank of Reconstruction and Development-
largest industrial loan provided by World Bank
 Govt. of India did everything to facilitate TISCO’s expansion
Cont…
 Tata’s expansion in business- Tata Engineering and Locomotive
company(TELCO)-manufacturer of locomotives for Indian
railways
 Wanted to manufacture of trucks and other commercial
vehicles but was not given licence under the guidelines of Tariff
Commission in 1953
 Collaborated with Daimler-Benz AG of Germany-a world leader
in automobile industry to produce passenger cars – not given
licence
 still it produced 3000 vehicles in 1954-55 and also doubled in 3
years
 Tata Chemicals- struggling a lot due to competition from
multinationals- and technological deficiencies but later
established its stability in 1960s
Cont...
 Tata was denied permission to expand the business in Fertilisers
production
 Air transport was reserved for Public sector( Industrial policy ,1948)
 Tata Airlines operating within India and planning to launch an
international carrier
 Air India International was born out of Joint sector- Tata had 20% stake
, Govt. Had 49% and remaining 31 % was left for public
participation(1948)
 In spite of opposition from Tata , Govt. Nationalised air transport-
Indian airlines to operate domestically and Air India- internationally
 To recognise Tata’s role in developing air transport, J.R.D Tata became
chairperson of Air India and a number of Indian Airlines abroad
Cont...
 Tata lost its insurance business in 1950s as a result of
nationalisation of life Insurance
 Tata compensated this loss with the acquisition of Forbes,
Campbell & co., McNeil and Berry (an oldest British house)
 Also controlled over collieries, jute companies and tea
 Volkart Brothers , a Swiss trading firm operating in
Bombay and converted into Voltas Ltd. By Tata in 1954
 David Sassoon-a large investment firm
 Tata Finlay launched in 1963 with partnership of James
Finlay- to produce tea
 Tata Consultancy Services set up in 1968
Cont..
 1950s-1960s- a period of adjustment for the house of
Tatas than initiatives
 Still it retained as number one in the Indian business
world
 Number of Companies under Tata- more than 150 by
1969 as against 102 in 1951
 Total assets was more than 505 crore
 But its growth rate was slower than other business
housed during Nehru Era
Birla
 Birla had more impressive growth than the Tatas
during Nehru Era
 First major post war venture of Birla was Gwalior
Rayon- first producer of rayon fabric in India
 Developed after independence- came to be known as
Grasim Industries- factory was in Nagda in MP
 Hindustan Aluminium Company(HINDALCO) at
Renukoot in UP- started with the collaboration with
Kaiser Corporations of USA in 1958- grew into largest
company within few years
Cont...
 Digvijay Woollen Mills in 1948
 Established Cement company –second largest to
ACC(Associated Cement Companies)
 Textile Machinery Corporation (TEXMACO) and
Hindustan Motors
 Acquisition of Century Spinning and Weaving
Mills(Old cotton company founded by famous Wadia
family in 1898 in Bombay); Sirpur paper, Sirsilk.
Hyderabad Asbestos, Balley Jute, Rameswar Jute ,
Soorah Jute, and Air Conditioning Corporation and
Digvijay cotton in Saurastra
Cont.....
 New business started by Birla- banking, insurance, coal, tea, starch,
engineering and passenger cars
 By 1947- it had 13 companies
 By 1969- added 30 more major companies
 Birla also explored business opportunities in other developing
countries
 Established Textile mill in Ethiopia as a joint venture with government
in 1950s
 Three more companies in Nigeria to produce engineering goods, paper;
a paper mill in Kenya
 Three other initiatives taken by Aditya Vikram Birla(grandson of
G.D.Birla and son of Basant Kumar)
 He was an MIT graduate in engineering
 His first overseas venture – Ind0-Thai Synthentics at Bangkok in 1969
Other business houses
 Other prominent business houses during Nehru Era
were:
 Thapars
 Kirloskars
 Mafatlals
 Lalbhais
 Walchands
 Shri Ram
 First three were improved a lot but others were
overtaken by new entrants
Thapar
 Karam Chand Thapar was the founder of Thapar business house
 Thapars’s acquisition of Greaves cotton(one of the oldest and most
prominent British business houses in Bombay , originated in 1859)and
its affiliate Crompton Greaves
 Other acquisitions were: Ballar paper and Straw Board Mills limited
 Ballar paper was merged with Gopal Paper Mills and came to be known
as Ballarpur Industries Ltd.
 Several sugar mills and coal mines added to the Thapar’s group of
Industries
 Also started producing oil engines and electrical products besides
trading in engineering products
 50 companies were under its control
 It was the fourth largest houses in the country- by end of Nehru
Era
Mafatlals
 They were essentially a textile group at the time of independence
 Founder of it-Late Mr. Mafatlal Gagalbhai
 Led by Navinchand, son of Gagalbhai after independence
 Acquired Sassoon Spinning and Weaving Company and Union
Mills ( under control of expatriate house)
 Another textiles at Dewas in MP
 Came to the frontline of textile producer of the country
 Acquired Indian Dyestuffs Industries (set up by Aanandlal Seth
at Kalyan near Bombay in 1954)
 It also developed in other fields like Chemicals and
petrochemicals
 Established National Organic Chemical Industries (NOCIL) and
Polyolefin Industries Ltd.(PIL) in 1960s with American and
German collaboration
Cont...
 It also promoted National Machinery Manufactures
Ltd. to produce spindles and looms for textile
industry- (in collaboration with reputed international
firms-Platt Brothers-the famous British suppliers of
textile machinery to Indian cotton producers before
independence)
 Tariff protection with efficient management led
to large market for its products in India
 This house rose into third position in the Indian
business world by 1969
Kirloskar
 Founder was Laxmanrao Kirloskar
 Kirloskars during Nehru era was led by S.L. Kirloskar, eldest son
of Laxaman Rao Kirloskar(retired in 1945)
 His sons were in charge of specific group of industries
 Some of the important field of Kirloskars’ business were:
 Kirloskar Oil Engine-exported its products to fourteen countries
 Kirloskar Pneumatic in 1958 to manufacture compressors for air
conditioners
 Kirloskar Cummins Ltd. in 1962- as a joint venture with
American firm- produced internal combustion engines- became
one of the most profitable company in private sector
 Kirloskar Electricals- producing different electrical products like
motors, generators, transformers etc
Walchand Hirachand
 From shipping Walachand Hirachand diverisfied his business into
engineering(Walchand Nagar industries near Pune) , Hindustan
Construction , Sugar at Ravalgaon and automobiles (Premier
automobiles)
 Indian Hump Pipe established in 1926 also developed a lot after
independence as single largest manufacturer of pressure pipes in India
 Its Hindustan Air craft and shipyards were nationalised in 1953
 His successors continued to manange other enterprises- Premier
automobiles, premier construction, and Ravalgon industries – both in
India and abroad
 After the death of Hirachand, one of his associates , Narottam Morajee
controlled over Scindia steamship
 Hirachand’s brothers ,Lalchand Hirachand and Vinod Doshi managed
other companies
Other houses ...
 Shapoorajis, Khataus and Seshasayees –other houses that prospered only
marginally or even declined after independence
 Some others who declined during Nehru Era were :
 Ramakrishna Dalmia and his son-in-law-Shreyansh Prasad Jain-
 Upward movement for a decade after independence
 Acquired a number of companies like Bennet, Coleman and
Co.(publishers of Times of India, Punjab National Bank, three large jute
mills of Andrew Yule
 Their Rohtas Indsutries diversified into
sugar,peper,vanaspati,chemicals,spun pipe etc.
 Division of property in 1952
 Shady business practices led to their fall
 Calcutta Based Martin Burn-largest in the country in iron and steel,
engineering, power, construction , light railways till end of 1960’s .
 Declined due to poor management by Sir Biren Mukherjee and labour trouble
 Govt. Acquired it in 1967
New Entrants during Nehru Era
 Bajajs – Jamnalal Bajaj- and his sons- Kamal Nayan and
Ramakrishna and grandson Rahul Bajaj
 Rahul diversified into electrical appliances, two wheelers
and three wheelers- famous for Bjaja Chetak-scooter
 Mahindras- Jagdish Chandra Mahindra and Kailash
Chandra Mahindra- in 194 5
 Became famous for manufacturing of Jeeps,
elevators,tractors,alloy steel and hydraullic equipments
 The Godrezs
 The Singhanias
Cont...
 The Bangurs- acquired many jute mills from European
managing agencies and other British companies and
expanded its business after independence
 Some of other new entrants in the business world were:
 Goenkas, Kalyanis, Khaitans
 Dhirubhai Ambani of Reliance , Mammen Mappilai of
MRF tyres
 Brij Mohan Lal Munjal of Hero
 S. Anatntharakrishnan of the Amalgamation Group
 Ramanbhai Patel of Cadila
Cont....
 Uttambhai Mehta of Torrent
 Raunaq Singh of Apollo Tyres
 Bhai Mohan Singh of Ranbaxy
 Mohan Singh Obrei of Obrei group of hotels
Public Sector
 Undue importance to public sector at the cost of private
sector by Nehru
 Development of 67 public sector undertakings
 50 were engaged in business activities
 Others were in consultancy services in various fields,
developing physical infrastructure like roads and bridges
and organising warehouse facilities and helping agriculture
with better seeds and other inputs
 15 out of 50 companies were large organisations requiring
heavy outlay such as BHEL, ONGC, Indian Oil corporation,
Air India and Indian Airlines, HMT, Four Steel plants, oil
refineries and Chemical companies
Cont....
 None of the public sectors showing any profit due to lack of
experience in enterprise management on the part of the
govt.
 Colonial govt. left behind a reasonably efficient
bureaucracy but hardly equipped to manage industrial
enterprise
 Post-independence government had to depend upon the
same administrative infrastructure to run the public sector
undertakings
 For developing efficient management, a special
managerial cadre for Public-sector undertakings
developed in late 1960s
Expatriates and Multinationals
 Private sector was displacing the British Expatriates
 A large number of expatriates sold of their enterprises
 Few brave spirits like Andrew Yule and Bird decided to stay for
some years in West Bengal
 Andrew Yule sold some of its companies to Indian houses like
Dalmias,Bangurs and Goenkas
 By 1960’s , few companies remained under its control
 It was taken over by government as it could not manage the
labour unrest
 Martin Burn was also taken over in 1967 for the same reason
 Many Expatriate houses were also taken over by Govt. in later
part of 1960s and early 1970s

Cont....
 Some of the Calcutta based expatriate firms adopted other ways
to meet the situation
 Shaw Wallace, Mackinon and Mackenjie and James Warren who
had partnership firms , converted into Public Limited Or Private
Ltd companies, opening themselves to financial participation by
Indians
 Few like Macneil and Barry, James Finlay s and Gillanders
Arbuthnut sold off their large equity stakes to reputed Indian
Houses or individuals
 Several expatriate groups were acquired by Indian houses
 Many Old expatriate firms gradually disappeared by 1980’s
 Assam company continued to exist upto 1991 when it was taken
over by Mehta group(a textile mill owner of Porbander)
Cont...
 Some young firms ran against the current situation
 After facing many challenges, Larsen and Toubro(L&T) founded by
Danish Engineers later emerged as one of the most reputed and largest
engineering enterprise in nations’ private sector
 It used to import and supply capital goods to Indian industries and its
demand increased after independence- changed to manufacturing
front when govt. Cancelled its import licenses- That became a blessing
in disguise for Larson & Toubro
 Some Indianised their management and changed their names
 One among them was Unilever(India) became Hindustan lever
 Ltd.(HLL) in 1956
 Appointed Indian as Chairman in 1964
 Another one was Imperial Tobacco company- changed to Indian
Tobacco Company(ITC)
Conclusion
 Nehruvian period was one of the turning point in the
history of Indian business
 That saw the rise of public sector undertakings in
India though could not get profit and many were
struggling to live upto the expectations of government
 Though the government gave less importance to
private sector, still there was growth of many Indian
business houses and private sector enterprises
 Major set back of this period was the closer of most of
the Expatriates and Multinationals companies in India
except very few
Introduction
 National Policy after 1947- changed the balance
between industrialisation and trade which prevailed
during of inter war colonial period
 Industrial policy resolution of 1948
 Prioritisation of Industrialisation-mostly production
of machinery and chemicals in India
 Devalued the traditional activities like textiles and
trade
 Greater participation of State in the regulation of
markets and more participation in Industrial
development of the country
Cont...
 Reduced the role of world economy as driver of
economic development
 Exclusive right of the State to establish basic industries
 Private sector was left free to operate within a
framework of regulation and control in the remaining
spheres
 Decision of government for economic planning within
a frame work of mixed economy
Cont...
 Colonial govt.- seldom imposed restriction on the
freedom to conceive, organise and implement business
plans- business actors were free to do their business on
the basis of their understanding of the world around
them
 Indian govt- determined what they would produce ,
how much they would produce and at what price they
would sell
Protectionist Industrialisation
 Protectionist Industrialisation by Indian Government
under Nehru
 It was away from older foundation of capitalist enterprise ,
trade and textiles
 Govt. raised industrial investment
 Rewarded entrepreneurship and permitted them to buy
technology from abroad through collaboration
 Benefitted already established conglomerates-engaged in
production of machinery, chemicals, cement and metals
 Encouragement to little known business groups to become
conglomerates
Cont...
Two types of cost or effects of Protectionist Industrialisation:
1. Closed economy affected former business –that
integrated with world economy
 That led to bankrupt of corporate textile industry
 Trade and banking were part-nationalised, part regulated
and part- outlawed
 Restrictions imposed on cross-border capital and labour
movement-damaging managing agency companies
 Reduction of profits from foreign trade
Cont...
2. Compromised macroeconomic stability
 Earlier India exported agricultural commodities and
bought machines and services in return
 Traditional exports were restrained to conserve
investment funds
 Repression of trade , textiles and global firms led to
hamper the capacity of trade and earn exchange
 Decision was taken for heavy Industry that needed
more imports
Cont...
 Pressure on Banks to lend new clients of uncertain
capacity like peasants
 Nationalisation of Banks(1969)
 The economy’s capacity to pay for investment was
hampered
Cont...
 This new regime saw the gainers and also losers in
business history
 A new dawn of capitalism after the dark age of colonial
repression
 These years saw India fall behind the world average
growth
 Public and Private sectors – new entrants into
economic vocabulary
 Business shaped the policy and policy also shaped
the business
Business and Policy making.....
 Emphasis on Large fields of investment for the State
 Regulated private enterprise
 Slow in business and economic growth of the country in
1950s and 1960s –compared to recent times (after 1990s-
economic reforms)
 India was influenced by socialist ideology
 Repression of capitalism
 No free movement of goods, capital, labour and technology
 Socialist policies of Nehru and Mrs. Gandhi were India’s
darkest economic decades- said by one of the Influential
commentator of India’s economic development
Cont....
 Big business was dominated by public sector and
bureaucratic intervention
 Small firms-involved in export business
 Trading firms were dwarf family units- not much in common
with Industrial companies
 Multinational companies had a low profile
 Socialist politicians repressed capitalists
 Monopoly power of big-business- before 90’s ( French Marxist
Charles Bettelheim)
 This regime was ” Tycoon capitalism”- said by an Indian Marxist
 Capitalists had more power than they deserved ( in one article of
“Economic and Political Weekly”- a reputed centre left
Magazine)
Cont...
 Though State repressed capital in 1950’s and 60’s but
capitalists gained massively from state protection in
these years
 Some of best known consumer brands emerged since
1950s- Ambassador car, Godrez typewriter, Bajaj
scooter , Usha sewing machine- could not have
survived at all but for the generosity of the state
 State did everything to drive out foreign competition
for these products
 But the constriction of the world economy made
Indian capitalism weaker than it could be
Policy shaped Business
 New Regime-called as Import Substituting Industrialisation
(ISI)-as average level of tariffs on manufactured goods was raised
 Many developing countries adopted ISI during late 20th century
 ISI was much more than protectionism in India
 ISI –added three elements in India
 First- it deliberately away from traditional foundation of
industrialization, textiles,and trade .
 1950-1980- the share of cotton mills in domestic cloth production
fell from 80 % to 40%
 Textile policy of 1950- intended to protect craft textiles from mill
competition
 Growth of power looms
Cont....
 Secondly- State defined what kind of industry it
wanted to sponsor- capital and intermediate goods
industries
 The govt. reserved for Industrial investment on
certain fields- steel, oil , fertilisers,
telecommunications and heavy engineering
 Major industrial investment on steel, Oil and
equipment by State
 Government took over private firms like finance(
nationalisation of banks) and aviation
Cont....
 Third feature was licensing to conserve capital and foreign
exchange
 Private investment was allowed but investment and foreign
exchange demands were regulated by licences
 Traditional industry needed to buy technology from abroad for
modernisation and heavy industries needed technology for
starting operations
 Technology came under licensed technical collaboration with
foreign firms
 But these licenses were provided to heavy industries mainly
 Restraints imposed on Private trade and finance
 Restraints were imposed on hiring abroad and private borrowing
abroad and joint ventures in India
Credit Facilities
 Sponsoring of credit facilities by Government for private
enterprise with large funds for industrial projects
 Industrial Finance Corporation of India(IFCI) in 1948
 National Small Industries Corporation(NSIC)
 Industrial Credit and Investment Corporation(ICICI)
 Industrial Development Bank Of India(IDBI)
 Industrial Refinance Corporation of India(IRCI)
 National level Financial Corporations by every state govt.
to meet the credit needs of medium and small scale
industries
Trading Corporation by State(State
as Trader)
 To reduce private trade, in 1956, a public Company called State
Trading Corporation was established
 It purpose was to canalise imports , assist small firms with
exports and interfere in domestic trade where there was chance
of excessive profits being made
 1970- 4% of foreign trade was managed by the Corporation-
which acted as a major intermediary
 Its duty was to import food, fertiliser, steel, milk products and
coal and export the odd product like human hair used in wigs
 But it was failed in later period time- as it acted as an enemy of
the capitalist, all board members were bureaucrats who did not
understand trade
 There was no member from merchant community in this
corporation
Cont...
 Its mission was broad and undefined
 Ministers made contradictory demands on its services
 Inexperienced bureaucratic interference in the
corporation
 Examples: corporation involved in the marketing of
cement and baby food
 It promoted export abroad but no expertise in it
Small scale industry
 In 1947- 90% of industrial employment was in small scale industry
 1950- small scale industries were composed of mainly traditional
handicrafts
 Growth of power loom factories where they were located because of
low rents and wages ,a flexible labour market , local repair industry,
cooperation and coordination among community members,
accumulation of capital among artisans
 Textile policy of government also helped them by restraining capacity
expansion of cotton mills
 Power looms were obstacle for the growth of handlooms
 But local politicians supported them and also many were set up by
handloom weavers themselves
 They had poor capital and could not use high capability equipments to
deliver good quality
 But could produce basic clothes cheaply but poor in marketing
Cont....
 In 1977- new government (inspired y Gandhian
ideology) strengthened support for small firms
 By 1980’ number of products reserved for small firms
exceeded to 800
 Items which can be produced by small manufacturers
is banned from production by any other means
 Small firms had advantages in this respect
 Small firms making consumer products had huge
disadvantage in marketing , advertisement, quality
control and brand creation
Development of Industries(the
State as Industrialist)
 Large Public companies were established by Government
 Steel Authority of India Ltd. (SAIL)- Combined enterprise - five
steel companies of India
 By 1964- half of domestic steel production came from public
sector
 Indian Telephone Industries(ITI) in 1948-to make
telecommunication equipments
 Hindustan Machine tools in 1953- later diversified into tractors
and watches
 Heavy Engineering Corporation(1958)- to make steel plant
machines
 Bharat Heavy Electricals Ltd.(BHEL) -1964- manufacturing
machines and components for power utilities
Cont..
 Bharat Earth Movers Limited-for making railway
coaches and mining equipments
 In late 1960’s – major investment by government in
Petrochemicals- extension of government owned oil
refineries
 All these industries were developed due to govt.
Investment
 Case study of BHEL and ITI
Repression of trade and finance
 From discriminatory protection to” Sons of the soil “type of protection
 Discriminatory protection- Tariff Commission considered the case for
protection on the case by case basis in response to applications from
industry ( done by Tariff Board during inter war period)
 Protective Tariffs were given to fewer industries after 1947 and numbers
declined steadily
 Some industries were officially de-protected
 Case by case basis of providing protection in response to applications
was necessary due to indiscriminate revenue tariffs set at high levels
 Direct import controls that were tightened from 1958
 Tariffs were raised progressively and sharply after 1947
 Before 1992, average tariff rate in India was over 100 %-highest among
large countries in the developing world
Cont...
 Tariff protection was reinforced by non-tariff barriers like licence, quota,
quantity, security concern etc..
 In the export –oriented industries, like jute and tea, there was trade repression
 The exchange rate was state-managed and over valued (led to bad commercial
export)
 Exportable goods like tea and jute paid a large export tax in the mid-1960s

 The total exports in tea fell from 20 % in 1947 to nearer 10 % by 1960s

 Tea and Jute had to pay large export tax in mid 1960s
 Govt.imposed restrictions on them to import machinery from abroad and
foreign markets
 These led the tea industry turned to home market, reduced investment,
neglected stocks and relaxed on quality
 Home market did not consume higher grade tea
 Export production ratio declined from 70% in 1950 to 27 % in 1991
Cont..
 Jute packaging faced international competition due
to Polypropylene from the 1960s
 100 old Jute textile mills of Calcutta went bankrupt due
to change in leadership, lack of access to capital,
technology and managers
 Significant restrictions on commodity trade like jute
,tea, textiles etc..
 Essential Commodities act of 1955 declared many
commodities besides food as essential and
government issued licences and fixed prices on them
Cont...
 Government discouraged private trade
 Govt. banned on export of agricultural goods , on their
future markets, on private trade and sale of these
goods except approved sites by govt.
 Coastal trade was also not fully nationalised , but
protected for Indian –origin firms
 Prices were regulated by govt and a Public Sector
trading firm established to intervene in private trade
Cont...
 The Industries Development and Regulation Act, 1951 – Central
and State governments took over some industries and regulated trade
in manufactured goods
 Scheduled industries had to be registered with the governments
 Licensing requirements placed serious restrictions on the freedom of
private enterprise
 The Import and Exports control Act- 1947 – empowered both State
and central government to regulate foreign trade
 Government’s price control policy in cotton, cement and steel
(essential intermediate goods) had two purposes
 Two purposes of this policy- to make the goods cheap for consumers
and to ensure a reasonable profit to the producers
 Intervention in trade discouraged investment and turned trade into a
field of intense lobbying
Cont...
 Apart form IDRA(Industries Development and
Regulation Act) , many Sectoral Regulatory Acts
were also passed to regulate the sectors
 Cement Control Order 1956- reserved the
distribution and sale of cement for the State
Trading Corporation
 This Corporation fixed prices of cement-keeping low
for consumers and barely profitable for producers
 That led to fall of fresh investment in the cement
industry and acute shortage in 1980s
Cont...
 Cotton Corporation of India started buying and
selling cotton in bigger quantities
 The Maharastra govt monopolised cotton trade
 Paper control production order passed in 1974- that
forced the producers to produce a fixed proportion
between white printing, cream laid papers and other
varieties- led to shortage of paper
 The trade repression led to the falling of trade to
GDP ratio in 1950’s,1960’s and 1970’s
Cont...
 In Private Finance, Private money lending was less visible
after 1947
 Marwari money lending firms in the interior towns
disappeared from banking studies and surveys after 1950s
 In 1920s- there many banking houses in India in Mathura,
Beneras, Ahmedabad, Patna, Jabbalpore , Jaunpur
etc..(according Banking Enquiry Committee and
contemporary resources)
 But after 1947- they were extinguished
 Bankers and moneylenders who run machines of grain
trade and rural credit were gradually declined due to
repression of agricultural trade
Cont...
 Corporate banking remained private and had a healthy
growth between 1947-1960s
 The largest corporate banks were owned by big industrial
conglomerates like Tata( Central Bank), Birla(United
Commercial Bank) , Dalmia(Bharat Bank) , and Thapar(
Oriental Bank of commerce)
 Banks preferred to lend to big businesses at the expense of
small ones and socially weaker sections( public criticism)
 So govt. adopted a policy called “social control” of banks
 In 1969- Banks were nationalised , except a small number
of foreign banks
 They were forced to lend to farmers and small business
De-globalisation and De-
industrialisation
 Govt. of India did not provide a formal equality between
foreign and indigenous capitalists
 Unlike the Indian origin Industrial capitalists, foreign
investors were not invited to discuss and negotiate policy
with politicians
 They were offered policy packages in a take it –or –leave-it
spirit
 By 1950s- two types of foreign firms in India:
---MNCs selling goods to Indians
--British owned companies , run by managing agencies-
selling goods in the export market
Foreign capital....
 MNCs were encouraged for investing foreign capital in
engineering, chemicals and metals
 Managing agencies (selling goods in London and
colonial markets) mostly discouraged
 Industrial policy 1956- forced these companies to
register in India
 Regulation closed off the foreign capital markets and
forced the firms to Indianise management
 These provisions hit the British managing agencies
Cont...
 The finance act of 1955 reformed the tax system
 That raised the tax burden on the expatriates
 That led to the fall of British mercantile community in India
 Overall, foreign capital declined
 Foreign direct investment-was declined to 2 % in 1950s’-from 10
% (before world war II) and remained depressed
 Foreign companies were insignificant as investors in the 1950s
and 1960s, despite of having money
 Domiciled foreign houses(British Managing agencies at
Calcutta)had only one percent of approved (licensed investment
in 1958-1966
 Multinational companies had investment of 7 %
Cont....
 India’s share in global tea exports fell sharply after
independence
 Indian cotton textile as a global brand destroyed as
India receded from exports while other countries built
their industrialisation on textile export
 No development in cotton mills due to lack of
government support
 Same condition for Jute Mills in India (1950-70)
Private trade
 Private trade subjected to numerous controls
 Governments’ textile policy denied the textile mills to grow
and diversify
 Cotton textiles were sold wholesale and retail in Bombay’s
Moolji Jetha market
 Cloth was picked up by wholesalers and sent to regional
shops
 Garment manufacturers took over certain part of the
output
 In 1965, there were 1,000 units manufacturing garments
 The Garment industry served urban retail shops and
produced mainly men’s apparel such as shirts and set up
their own shops
Cont..
 In Jute, Calcutta’s Marwari houses had their own
trading firms
 They made an integration of trading and production
functions
 Contracted orders from abroad and shipped goods
 They compromised innovation in marketing ,never
advertised or sought buyers and markets abroad
 Worked in unimaginative ways
 In tea, marketing depended on auction houses of
Calcutta and London
Cont..
 In day to day consumer goods like oils, soaps and packaged food,
wholesalers ruled the market
 Manufacturers owned warehouses or depots(finished goods
stored)
 Manufacturers sent goods to freight forwarders and clearing
agents
 Agent arranged to collect goods from these depots and sent these
to sub-agents in different regions
 Neighbourhood shops collected goods from the latter
 The manufacturers’ sale team did not deal with consumers
directly
 In late 1970’s , government moved to reserve many consumer
goods for the small-scale producers
 That discouraged investment in direct marketing
Conclusion
 1947-1960’s – was a period of bad agricultural economy
 Govt. adopted more of a socialism for the development of the
country as it was the need of the hour
 Led to development in steel, cement and chemicals and also the
infrastructure of India
 That declined the trade of India, affected Indian tea, textiles and
other trade and traders and merchants of India
 IRDA(Industries Regulation and Development Act) regulated
the trade and business as per the requirement of the State
 Period saw the decline of foreign conglomerates and British
mercantile community in India
 After all, the policies of government changed the business
scenario of India
Changing Indian Economy after
1858
 Integration of Colonial Indian economy integrated with world
capitalism or tied to British economy after British Raj in Indian in 1858
 Integration of agricultural production with overseas trade was built on
a stronger foundation than before due to modern transport and
communication infrastructure, British administration and military
integration of the interior with the coastal areas and a new legal
framework
 Intervention of Imperial State in the economy mainly by legislating
property and contract
 Property law was to ensure revenue and contract was to integrate
the Indian economy with the British centred world economy
 Standardisation of commercial law during British period
Cont...
 Manifold growth of trade in volumes
 Technologies like railways, steamships and telegraph –
reduced trade costs
 Development of companies in manufacturing,
trading ad banking
 Most firms- corporate or family run, Indian or
European- traded directly or had an interest tied to
trade
Cont...
 Trade was free within imperial sphere
 From 1860 onwards, there was increase in British capital
inflow into India and also migration
 Indian based company could hire and borrow managers
and technicians from abroad
 There was large scale of business
 Expansion of financial system in India and growth of trade
due to funding
 Commercialisation of Agriculture
 Agricultural business doomed
 Corporate banks and big indigenous banking firms
financed merchants
Cont...
 Singular feature of capitalism during this time
was interdependence between trade, finance and
industry
 Holding these three parts together was
agricultural trade
 Without export of agricultural commodities, the cost
of purchases such as overseas capital and labour could
not be paid for
 Integrated economic system was confined to port cities
and towns closely linked to the major ports
Commercialisation
 India was transformed into a chief market for British manufactured
articles.
 India became a rich source of supply of raw materials for Britain’s
industry
 Many commercial crops like jute, tea, tobacco were introduced to meet
the demand in Britain.
 The commercialization of Indian agriculture started post 1813 after the
industrial revolution in England
 Commercialization of agriculture became prominent around 1860 A.D
(during American Civil War which boosted demand of Cotton from
India to Britain as America was not able to export Cotton)
 The beginning of the plantation crops like Tea, coffee, rubber, indigo
etc heralded a new era in agricultural practices in India. These were
essentially meant for markets
Cont...
 Commercialization led to beneficial of traders, planters and
manufacturers , moneylenders
 That led to stagnation of peasants’ economy
 The poor peasant was forced to sell his produce just after harvest
at whatever prices he could get as he had to meet in time the
demands of the government, the landlord, the money lender and
his family members’ requirements.
 Profit of grain merchants
 Decline in food production and frequent famine in India
 Some regional variations found in the conditions of peasants
 Specialisation of crops in different areas- cotton in Bombay,
indigo and Jute in Bengal, opium in Bihar ,wheat in Punjab etc.
Cont...
 Capitalist sectors- trade and manufacturing did
extremely well in Colonial India
 Volume of income in trade and commerce was much
larger than industry
 Income in trade increased about three/four times
between 1800-1940
 Volume of trade increased more than hundred times
 Less growth in Agriculture (in some areas there was
decline in agriculture)
 Gaining of Capitalists and exploitation of peasants
Cont..
Cont...
 Railways carried major agricultural products like grain
and cotton
 Ports carried high-valued textiles or tea and also grain
and cotton
 Major part of growth in goods carried by the railways
 Railways took away business from boats, carts and
caravans
 In Deccan plateau, pre -railway transportation system
was extremely slow due to labour intensive bullock
caravans
Cont..
 In business history national income is analysed
through three divisions- agriculture(main) ,
government, private industry and services
 Acceleration in private enterprise around 1870
and also continued till 1941
 Growth of agriculture till 1920 and then
decelerated
Cont...
 There was modern economic growth driven by
productivity gains in trade and manufacturing
 Absence of modern economic growth in agriculture
 Population growth was slow in 19th century and rapid
in 2oth century
Conclusion
 Commercialisation transformed the Indian economy into
capitalistic form.
 The important contribution of commercialisation reflected
in the integration of Indian economy with world economy
 The integrated economic system was based on agricultural
trade
 That led to the growth of high level of social and economic
system.
 It also created a base for growth of national economy
 National agriculture and agricultural problem acquired
national form.
Introduction
 Bank is a financial institution that serves as a financial
intermediary to receive deposits and make loans
 Its function is called banking
 Modern Banking system was originated during British
period
 Establishment of different banks like Corporate banks,
Family banks etc.
 Different merchant communities also played most
important role in the process of banking in interior
area
Value of cash...
 Liquidity was the key to agricultural trade
 A great deal of trading in the interior was conducted by
negotiable instruments issued by bankers
 Through Hundi , money was circulated between the
interior and the port cities
 Bombay and Sholapur, Patna and Calcutta, Coimbatore
and Madras were networked through this process of hundi
 In the big city financial market, corporate banks and big
Indian banking firms participated on equal footing
 In dealing with small-town bankers and traders,
indigenous bankers needed to lend on personal security
Cont...
 Corporate banks and European banks could not operate
easily like Indian banks as Indians had a deeper and more
extended network of personally known clients than the
European agents or Corporate banks
 Trustworthy and social network was mattered more
 Banking and bullion were connected
 Gold ornaments were mortgaged in large consumption in
loan deals
 Gold was the next best thing to cash in the finance of
agricultural trade
 Parsis, Gujaratis and Europeans dominated the port city
markets, while Marwaris supplied liquidity in interior of
the country
Corporate Banks
 Corporate banking was developed as a part of agency
houses ( trading houses)during British period
 After 1858, joint-stock banking re-emerged on different
foundations
 Company law strengthened the legal standing of banking
firms
 During the British rule in India, The East India Company
had established three banks: Bank of Bengal, Bank of
Bombay and Bank of Madras – all called as the
Presidential Banks.
 These three banks were later merged into one single bank
in 1921, which was called the “Imperial Bank of India.”
Cont...
 Business provided by the princely states led to the
establishment of few Indian banks like Bank of
Baroda
 Agricultural trade provided good business to Local
banks in Punjab and South India
 Corporate banks used to finance only long
distance traders and other bankers
 Local banks financed local merchants, warehouse
owners , transporters
Cont...
 The first bank of India was the “Bank of Hindustan”, established
in 1770 and located in the then, Indian capital, Calcutta
 Following the path of Bank of Hindustan, various other banks
were established in India. They were:
 The General Bank of India (1786-1791)
 Oudh Commercial Bank (1881-1958)
 Bank of India (1906)
 Bank of Baroda(1908)
 Central Bank of India(1911)
 Punjab National Bank (1894)
 Union Bank ( 1828- 1848)
Indian Family Firms in Banking
 Indian Bankers – Specific caste and communities like Multani
and Marwari, Bengali Saha,Nattukotai Chetiyar,Kallidaikurchi
Brahmins in South India , Gujaratis in Bombay, Rohila Afghans
 Small group of income tax payers were these bankers in 1920s
 South India- Banking business was dominated by Nattukotai
Chetiyars, the Multanis, the Marwaris,Kalidaikurchi Brahmins in
1920s
 Chettiyar community in Burma and Malay and Madras upto 1930
 Multani Bankers engaged in financing agricultural trade and
acted as intermediary between merchant and Joint-stock banks
 They did not pay directly to peasants
 In busy seasons they borrowed from the Imperial Bank and
their principals in Sikharpur
Cont...
 These bankers never financed peasants , but financed each
other, and bigger clients like landlords, warehouse
owners,merchants with personal reputation,agents of
outstanding trading firms, tea estates, traders buying
tobacco, jute and chilli crops etc.(mostly cash crops)
 Discounted Trade Bills and remittance instruments were
issued by them
 Financed merchant transporters who could furnish bills
from the railway company
 Some firms were comparable with corporate banks
 Six indigenous banking firms in Calcutta did as much as
business as the state-run Imperial bank
Cont...
 Big firms did not exist in isolation of the small
banking firms
 Main function of the banking business was to finance
agricultural trade and production
 Small firms used to finance local moneylenders who
gave unsecured loans to the peasant cultivator
Cont....
 Interest rate was high during sowing and harvest
seasons of the main crop
 In the off season- money was ready to spare
 No big firms and branches of banks in rural areas
 The inland grain merchant was a banker
 Link between grain trade and money lending(
Provincial Banking Enquiry Committee-1929-30)
Network of Business in Banking..
 Banking business was a network of personal
connections
 Big merchants supplied money to a group of
commission agents who travelled between the town
and countryside
 These merchants provided money to traders settled in
cultivating area
 These local traders or moneylenders provided loan to
the peasants
 Informal credit ruled this world not the formal credit
Cont...
 In cotton trade, the first buyers of the crop were travelling
merchants or commission agents rather than salaried agents of
the mills or exporting firms
 Bombay agents getting cotton from the larger market connected
by rail
 In Jute trade , European exporters and mills had local agents, but
these agents or brokers bought goods from local trading firms
rather than from the cultivators
 Banks did not lend to this business directly
 Some communities did business more significantly than others
as hey had network with city banker, town banker and local
merchants
 Marwaris were the better than others in network development
Marwari Banking
 Marwaris had hold over banking and intra-community
lending
 They had collectively easier access to liquid wealth or
cash
 They did not believe in the prospect of low long term
return
 Two representatives of Marwari Trades Association of
Calcutta also confirmed the fact that banking was
indeed the chief business of the Marwari community
Cont...
 Banking was adopted by them in variety of forms
 Neighbourhood moneylender and shopkeeper in an
agricultural village
 As jute trader,textile importer,stockbroker,bullion dealer
and banker located in Calcutta and Bombay
 Small moneylenders in the metropolitan cities
 Big players in the commodity trading zone
 Some of the big players were-Khandelwal Banking house of
Mathura, The Oswal Bankers of Middle Bengal, The
Srimali and Porwal bankers in Ahmedabad,and Maheswari
Bankers in Jabbalpur abd Deviprasad in North Bihar
 They operated more or less like any commercial bank
Cont..
 Marwari engaged in money markets in two
spheres- one is Rural and another in
Metropolitan
 The rural credit market was stimulated by colonial
property right reform in land-around 1840
supported by adequate documentation, legislation,
judiciary and police
 Much of the rural lending was unsecured
 Land mortgage became easier for providing loans
 Agricultural commercialisation led to greater
circulation of cash in the countryside
Cont....
 Rural lending business of Marwari –involved in Political
scandal in Bombay-Deccan region
 Indebted peasants of Poona and Ahmednagar districts of the
Deccan attacked moneylender property and burnt account books
as moneylenders were taking possession of mortgaged land
 Deccan Riots commission (established after this incident)
referred to moneylender simply as Marwari or rapacious
Marwari in their report
 Government passed legislations restricting transfer of
mortgaged land
 Marwaris were being criticised by others also
 A Professor of Poona College in 1852, also described them in his
book,as “ race of foreign moneylenders- the Marwaris”
Cont...
 British rule had empowered the banker and
transformed them into an exploitative character
 The introduction of English law of contract and
transfer of property , and the increase in the habit of
litigation’.
 This law led to the indebted peasants to loose their
land to foreign capitalists
 Marwaris were looked as exploitative and
opportunistic players ready to take advantage of their
peasant clients( impression of Colonial officers
towards Marwaris)
Cont...
 After the Deccan riots in 1875, many more big bankers
shifted to the city for trade
 A series of provincial legislation- restraining the bankers,
and the increasing prevalence of landlords and rich
peasants providing loans , pushed the professional bankers
to involve in agriculture indirectly
 By 1900, Marwari bankers and traders settled in other
towns of India besides South India
 They migrated to eastern India in large numbers and
created a “ zone of Marawri dominance in Bengal,
Assam, Orissa and Bihar” said by Thomas Timberg in his
book,” The Marwaris, From Traders to Industrialists”
Cont....
 Most of the Marwari houses of the city had migrated to
Calcutta around 1900
 Some of the houses were- Baldeodas Birla, Badridas
Goenka,Banshidhar Jalan,H.P. Poddar,Babulal
Rajgarhia and many others
 Engaged in jute bailing, mining, land holding and import
agency
 During inter-war period these firms also involved into jute
industry
 On a smaller scale, also entered into
sugar,paper,cement,construction and share-broking
Cont...
 Engaged in raw jute trade in Calcutta
 Owned a number of Jute Presses and bailing units in
the Jute growing regions of Bengal
 Exported Jute to a limited extent but supplied raw
materials to the several dozen jute mills around
Calcutta(owned and managed by Scottish)
 Also entered into gunny export business as speculative
sellers not export firms
 Buying small lots from the mills and hold stocks or sell
forward to the shippers
Cont...
 During the great depression , one or two Jute mills
were started with Marwari capital, and European mills
borrowed money from Marwari merchant bankers
 Relationship was developed between Marwari
merchants and jute mill management
 Sometimes they also faced the rude treatment from
the European Mill managers
 But most Marwari firms remained tied to trading
and banking
Conclusion
 Growth of Banking system during the British period
 Lot of banks were established
 Most of these banks also continued in the post –independence India
 In port cities, money market was well developed in the 20th century
 There were joint-stock banks which had prospective shareholders
 In overland trade, there were very few banks and those that exist
would not lend money to the peasants
 Merchants and bankers dealt with the people they knew personally
 Family and community networks were important in the banking
system during British raj
 In Rural areas and agricultural trade , Money lenders and merchants
played important role as bankers
 Many merchant communities were involved in this business of banking
 Marwaris were the most important one
Introduction
 World war and protection provided by the government created
opportunities for the rise of some Indian capitalists and the rise of
modern industries in India
 Protection provided them opportunities to diversify their business
from cotton textiles to other fields
 Several Business houses/ conglomerates emerged during the Inter war
period were:
 Marawari Family, Birla,
 Ramakrishna Dalmia
 Shri Ram
 Walchand Hirachand
 R. and V. Seshasayee –Tamil Brahminns from Tiruchirapalli
 Laxaman Rao Kirloskar
 P.C.Roy
Birla
 Birla was the second largest native business house during
inter war period
 First business of Birla group in its journey of business was
cotton trading firm, established by Shiv Narain – a
merchant from Pillani in Rajastan
 After the death of Shiv Narain, his adopted son Baldeodas
Birla, expanded his business and shifted to Calcutta
 Four sons of Baldeodas- Jugal Kisore, Rameswar Das,
Ghanshyam Das Birla and Braj Mohan
 G.D. Birla – key figure in the running of Birla business firm
 They all entered into business during inter-war period
Cont..
 Jugal Kiashore- inherited trading firm with interests in
cotton, jute and opium trades
 Ramesawr Das acquired several textile mills including
century mill of Bombay (established by Nowrosjee
Wadia)
 The third son, GD.Birla and fourth son, Brajmohan
were pioneering industrialists
cont
 Birla had Managing agency firm during interwar period
 First Mill of Birla empire- Birla Jute Manufacturing Company
in 1919( first Indian owned Jute firm)
 Cotton Mills- Jiyajorao Cotton Mill in Gwalior in 1923
 Took over Kesoram Cotton Mill in Calcutta in 1919
 From cotton and jute, the group diversified into other fields
 Established Machinery and machinery parts of cotton and Jute
textiles named- TEXMACO(Textile Machinery Production)
and CIMMACO( Central India Machinery Manufacturing
Corporation)
 Other industries developed by Birla – Orient Paper Mill (First
Indian Paper Mill at Brajrajnagar- 1939), Five Sugar Mills in UP
by 1930s, Jayshree Tea in Assam, Banking, Insurance, coal
mining , engineering, shipping, newspaper etc.
Cont...
 Automobiles-Hindustan Motors near Calcutta in 1942
 Silk and Synthetic Fibres – Gwalior Rayon in 1948
 Newspaper- Hindustan Times
 Banking-Commercial Bank in 1943 to finance to the
growing empire of the group
 Hind Cycles Limited in 1942
Sri Ram
 A North Indian Merchant, Gopal Roy established
Delhi Cloth and General Mills Company (DCM) in
Delhi in 1889 , along with two Agarwal bankers
 Gopal Roy was an employee in one of these firms and
was a Agarwal
 Held a small quantity of shares in it and officiated as
the Secretary of the company- managing Director
Cont...
 The majority shareholders of this company were Bankers,
landlords and other businesses of the town
 Around 1900- Gopal Roy’s nephew named Sri Ram joined
the business and took charge of the company in 1909
 Sri Ram’s father, Madal Mohan Lal was also a paid secretary
of DCM
 During the time of war, father and son supplied tents to the
army and government
 Tent was produced by a separate tent company in which
DCM had 50% share and remaining 50 % was shared
between Sri Ram and a contractor who had close contact
with government
Cont...
 Emerged as a man of great reputation due this business
 With this money earned from army contract, Sri Ram and
his father increased the share holdings in DCM t0 16% by
1921
 DCM became a fiefdom of its paid secretaries
 Production facilities were expanded in DCM
 It was the only textile producer in Punjab and Delhi region
 Company increased its sales more than 3 times between
1923 and 1929
Cont...
 In 1930s- during great depression- the company faced
tough competition from Japanese textile mills
 Still , both the sales and profits of the company
increased between 1931 to 1939 for three factors:
1. Accent on production of coarser and cheaper
varieties of cloth
2. Gandhiji’s call for boycott of foreign goods in 1930s
3. A number of incentives, including bonus of sales
given to sales agents
Cont...
 Encouraged by this result , DCM management set up
another textile mill – Lyallpur Cotton Mills in 1935 in
Western Punjab where there was abundance of cotton
production but no textile mill( now it is in Pakistan)
 Also set up Daurala Sugar Works near Delhi
 Took over Bengal Potteries(started in 1895) in 1934
 Acquired Jay Engineering Works(JCW) – produced sewing
machine
 Later it produced other items like electric fans, Cooking
ranges, pressure gauges ,water meters etc. but could not
successful as it had to divert its resources in producing
goods required by the government during world war II.
Walchand Hirachand
 Decline in Indian ship and ship building due to
invention of steam engine
 Intercontinental trade –carried only by British owned
and British made ships
 Both Cargo and Passenger traffic between India and
Europe –dominated by Mackinon and Mackenjee
 British India Steam Navigation Company(one of the
largest shipping companies in 19th century world)-
established by Mackinnon and Mackenjee
 In 1913-14- it merged with Peninsular and Oriental
(P&O)
Cont....
 Walchand Hirachand –a merchant banker from Solapur
 His father Hirachand (Gujarati jain Family) selling agencies
of a few textile mills in Sholapur
 Walchand thought of doing other business
 Purchased a ship named S.S.loyalty-a steamer owned by
Maharaja Scindia of Gwalior
 A shipping company was developed by Hirachand along
with three enterpreneurs- Kilachand Devchand, Narottam
Morajee and Lalubhai Samaldas
 It was known as Scindia Steam Navigation Co.
 It was a challenge to Mackninon and Macjkenjee in
interwar period
Cont...
 Faced the trouble when entered into India-Burma
trade in rice and timber ( which had traditional
monopolies of P&O)
 The rival reduced prices, offered concessions to traders
and pushed it into bankruptcy
 On several occasions in 1921-22, Inchcape management
, tried to buy Scindia and faced lot of problems
 In 1923- a compromise was made that Sindia would
give up any ambition to enter the Bombay-UK lines ,
passenger service and restriction on capacity
expansion
Cont....
 1933- Agreement was ratified with government
participation
 1937- Scindia expanded into passenger service for the
Hajj with a new company called Moghul Lines
 It was profitable for the company
 More favourable condition for Scindia after
Independence
 In 1947- Government of India announced strong and
unrestricted protection for Indian Traders for coastal
shipping
Cont....
 Scindia dominated the market with almost no foreign
competition in India after 1952
 Expanded its intercontinental shipping
 In nutshell it can be said that Hirachand had ventured
into highly capital- intensive business and could not
compete with foreigners
 But due to Governments’ intervention , it was
survived and developed
Ramakrishna Dalmia
 Pioneer Industrialist and founder of Dalmia –Jain Group or
Dalmia group
 Sugar Factory , established in 1933 , was the nucleous of the
Dalmia Jain Group
 Dalmia Jain Group was also known as Sahu-Jain Group
 Since 1907- this factory site was connected to Delhi- Calcutta
railway line through a railway link – Dehri- Rohtas railway-
managed by a Calcutta Firm named Octavious Steel
 This factory site was grown into an industrial complex by 1950
 Cement, Paper, Chemicals, spun pipes and vegetable oil
manufacturing were its other group business
 This factory complex later named as Dalmianagar
Cont...
 Reasons for success:
 Protective tariffs on sugar by government
 Ramakrishna Dalmia acquired controlling some stakes
in British firms based in Calcutta, Kanpur and Bombay
 Usually involved in doing secret deals with stock
market brokers
 Used one firm’s cash reserve to acquire another firm
Cont....
 Dalmia Cement Company with factories in Bihar,
Punjab, Sind and Madras
 Some companies acquired by Dalmia group:
 New Central Jute Mill
 Punjab National Bank
 Bharat Insurance
 Bennet Coleman(Publishers of Times of India)
 British India Corporation
Other Groups
 Some of the Important groups in South India were:
 R. and V. Seshasayee –Tamil Brahmins from
Tiruchirapuri- An Electric supply Company in 1920s-
Indianised in technology to some extent
 Diversified the business into chemicals and fertilisers
 Metur Chemical and Industrial Corporation
 Fertilizer and Chemicals Travancore Ltd.
Cont...
 Famous Engineer –entrepreneur – Laxmanrao
Kirloskar
 Set up a small metal products shop in his home town
Belgaun- then set up a factory making agricultural
tools especially iron plough and shaft Cutter
 Diversified business into oil engines, electric motors,
machine tools, furniture and automobile chassis
 His son,Shantanu Kirloskar- MIT trained Engieer
Cont..
 T.K Gajjar- A Chemist from Baroda-established a
Technical College in Baroda
 Koti Bhaskar- Chemical and Pharmaceutical Factory-
Alembic in Baroda
 Ratanji Dharmasi Moraji –Phosphetic Fertiliser
Company in Bombay
 P.C. Roy- Chemical and Pharmaceutical works in
Calcutta
Introduction
 The first world war created a favourable climate for the
Indian business and industry.
 War disrupted imports
 Rise of domestic demand for India-made goods
 The attitude of government underwent drastic changes
 Instead of giving a step motherly treatment(given
previously) , government followed the policy of
conciliation
 It is because of the support of native business to
government during the war period
 Government thought of providing protectionism to Indian
Industries for their contribution to the war effort
 Cont....
 State aid was not confined to protectionism, but also state
provided help to all types of business
 The formation of elected legislature in the provinces under
two constitutional reforms (1919&1935) empowered
politicians and campaigners to intervene in favour of
indigenous capitalists
 For first time in the history of British empire, State gave
more importance to industrialisation but not trade.
 Trade and finance were served by small firms, industry was
by large firms with political voice
 Voice of industrialists not traders, moneylenders and
artisans unfolded for next twenty years over the future
shape of economic policy in India
The origins of Protection for
Industry
 Import substituting industrialisation(ISI) started in 1920s
 The contribution of Indian resources to allied power during war led to three
commissions of enquiry:
 Indian Industrial commission(1916-18) fact finding mission- examined what
the govt. could do to provide an improvement to Industrialisation.
Recommended a Fiscal Commission to look into question of Tariff protection to
Indian Industries
 Fiscal Commission(1922) – not recommend tariff protection to Indian
Industries , but favoured a case-by-case scrutiny
 Tariff board set up for this task – it policy was famous as discriminating
protection .It recommended for the protection of selected industries of
domestic origin .
 It was better than the hands-off approach (pursued till then)that worked to the
advantage of British manufacturers and detriment of the Indian interests
 The Stores Purchase Committee(1920 - recommended that government
should buy manufactured articles for its own use from Indian sources as far as
possible
Cont....
 Govt. –principal buyers of metals, machines, chemicals, railway
material and construction material(Govt. was the main investor)
 Protectionism is the economic policy that protected domestic
industries against foreign competition by means of tariffs , import
quotas and some restrictions on the imports of foreign competitors
 Before 1920- Stores Department of India office in London bought
goods on behalf of the Govt. of India
 It was a highly bureaucratic process
 Transaction took much longer than necessary and cost more money as
well
 It also compromised on the quality of after sales service
 India office stood between supplier and consumer
 Large construction projects and railways projects required sustained
service contracts between the supplier and consumer but it could not
ensure since India office was between the two
Cont...
 Both Buyers and sellers resented London’s meddling and
favoured private contract
 Some Indian and British trading firms formed a lobby to induce
British government to change this policy
 Late in the 19th century, an Engineering Trading firm Richardson
and Cruddas started the campaign
 After the war, others trading firms also joined in this battle –
tried to expand their Indian operations
 Some of them were Tata steel and Martin Burn , cluster of
British Engineering firms and some other Indian trading firms
 The Marwari Chamber of Commerce, and United Provinces
Chamber of Commerce – expressed strong support for Indian
procurement
Cont....
 British Engineering Firms had interest in a reformed
stores purchase
 Indian Business firms had a stake in tariff protection
 Protection was available after 1925 – for revenue and
industrial promotion measure
Cont...
 Before world war- 13 industries –protective tariffs
 Cotton Textiles, iron and steel, Paper , matches, sugar,
gold thread, Artificial silk, salt, heavy chemicals ,
plywood and tea chests, wheat and rice
 First 11 cases –imposed by Tariff board and periodically
revised
 Last two by government without reference to Tariff
Board
 Protection reshaped Indian industry in quite different
ways as conditions of the industries differed
Cont....
 Two other ways of nurturing domestic
industrialisation were:
 One was- Foreign Investment
 Second- setting up domestic Industry with skilled labour
from abroad
 Post modern factories such as steel,engineering, cement,
sugar, and paper, chemists and technical supervisors were
filled by Europeans and later by Americans
 Tata Steel relied heavily on foreign Engineers –in all
departments of the factory
 In European firms- managerial and technical positions
were occupied by Europeans
Criticism against protectionism...
 Congress Governments formed in Provinces 1935
 Congress politicians, intellectuals and businessmen
discussed about tariff policy and Congress Working
Committee gave a report on tariff policy
 Rejected the discrimination element of protectionist
policy
 Claimed that protectionism should be used more as a
tool to nurture indigenous capital
Cont....
 Imperial preference treaty in early 1920s was also
criticises
 The Imperial preference treaty protected British industry
in India while protecting Indian industry against non-
British competition
 Congress leaders along with some section of business
leaders criticised govt for protecting British trading interest
in India
 Many industrialists signed this treaty reluctantly with the
hope of securing the protection of government against the
competition of other countries
Success and Failure of
Discriminating Protection: Steel
At the end of world war I- there were four large steel
producers of India-
1. Tata Iron and Steel-TISCO
2. Indian Iron and Steel-IISCO
3. Mysore Iron works
4. Bengal iron Company
Tata Steel
 Disruption to the supplies of Continental steel
 After the war, factory was left with a large underemployed
workforce-with overpaid foreign workers and Engineers
 Industry suffered from worldwide overproduction
 Japan (buyer of Indian pig iron ) imported from Korea and
Manchuria
 Tata’s negotiation with Tariff Board
 Protection for next two years and was granted higher tariffs
 Government did not let Tata perish in the crisis, rather
Government induced railways to buy the entire
requirements of rails from Tata
Cont....
 Government support for Tata
 Between 1925 and 1935-Tata reduced workforce from
32,000 to 25,000
 Installed more modern machinery, relieved many high
paid foreigners
 Recruitment of efficient Indian workmen
 By 1940- Tata Steel did not need protection from
government
 The very idea of discrimination made Tata a
competitive producer of steel
Cotton Mills
 Low Labour productivity in Indian cotton mills
 1931- One weaver in Osaka –handled six looms
 In Bombay- one weaver handled two looms
 In 1940- 450,000 workers in cotton Mills processed 3 to 5
million bales of cotton
 In Japan- same quantity of cotton was processed by 190,000
workers
 Most Chinese mills were owned by Japanese
 They were more efficient than mills of Bombay and
Ahmedabad
 This is may be for managerial decisions or labour
institutions
Cont....
 Most 19th century employers of wage labour hired
labours through contractors who were also in charge
of training and personal management
 Mill owners gave more importance in managing
money than interest in technology and personal
matters of employees
 Looked at their selfish interest not thinking about
skill formation
 They were also not skilled people but influential
Cont...
 In 1890- Bombay faced its first major failure as it lost the
Chinese market for Yarn to Japanese Producers
 In Inter war period- competition of Indian textiles with
Japan
 That undermined Indian mills in Indian markets
 During world war I- Bombay and Ahmadabad improved
quality of cloth but the labour-equipment ratio is higher
than its competitors in the world market
 Wages were higher in North America and Europe
 But wages were similar b/w India and Japan
 Inefficiency of Indian mills
Cont...
 Cotton Mills wanted protection from Manchester
(1927)and from Japan(1932)
 First Tariff Board Enquiry on Textiles in 1927- emphasised
on efficiency and rationalisation of mills
 Some firms of Bombay made improvement in operational
efficiency in some cases
 Tariff Board was dealing with 200 odd firms of different
conditions
 So not possible for industry-wise plan for modernisation
 Industry wise rationalisation was also blocked by militant
trade Unions
Cont....
 Second enquiry of Tariff board conducted in 1932
 According to its inquiry, modernisation was not a
significant issue
 Demand for tariff protection by Indian Mills due to
competition with Japanese
 Indian mills were models of welfare in comparison to
Japan ( Japanese workers were over-exploitated
 As cotton was being exported to Japan and had trade
relations between two, a market share agreement was
made
Cont...
 Discriminating protection in regard to cotton
mills failed to improve due to-
 Deep rooted structural inefficiency of Indian mills
 Industry was too diverse
 Resistant of labour to change
 Managers failed to see the existence of a virtuous circle
between wage and efficiency
 Some cotton mill owners joined in nationalist
campaigns
Introduction
 The disintegration of Mughal empire in 1700s led the
merchants and bankers to leave their former settlements
on overland trading routes and settled in capital cities of
newly established independent states like Awadh, Bengal,
Hyderabad, and Maratha domains in central India, and
Gujarat
 In the last quarter of 18th century, East India company
established its political supremacy in Bengal, one of the
richer independent states of Mughal India
 Its status was changed from being a Business firm to
political entity
 Established a strong military force in Bombay and Madras
Cont...
 India was changed from being a textile exporter to
textile importer after the industrial revolution
 Also started exporting agricultural goods like indigo,
opium, cotton and tea etc. to Britain
 In early 1800s Sea trade and land trade began to
converge
 Companies formed ,stock markets developed and public
money was invested in industry and banking
 A new economic system based on a closer integration
of trade, banking and industry was emerged closer to
the seaboard
Indian Ocean-Going Merchants
 Rise of European dominance in the Indian Ocean
 Decline of the Mughal ,Ottoman and Safavid power over the
Arabian Sea
 Indian merchants, bankers and shippers adopted to this
situation as they lost their ground due o political change
 Indian Traders turned into middlemen (comprador by
Marxists)
 Many ship-owning merchants could not survive due to the
decline of three empires
 Acording to Aswin Das Gupta, the decline of the Indian
merchant marine began when the local rulers increased pressure
on them to fund wars
 Surat finally became a company’s territory in 1759
Cont...
 Kachchhi merchants ,operated in the Arabian sea ‘s
market before the advent of the British, gained profit
from European trade
 They could do so as they had their well-developed
institutions of commerce and banking, knowledge of
seas, shipping and ship building , history of
collaborating with political actors , and access to both
maritime and overland trade routes
Cont...
 Many merchants and shippers of Coromandel and Gujarat
continued coastal trade without too many problems
 The Company’s own ships did not transport materials and
supplies, such as grain or timber, along the Indian coast
 They did not even shuttle between three company ports often
 But growth of these ports and their strategic value in the
warfare encouraged coastal trade
 While Surat’s great ship-owning merchant groups declined
in 1600’s, Indian coastal groups overall benefitted from the
rise of British power in the Arabian sea
 Gujarati merchants in Mozambique, Musqat, and East Africa
signify the dominance of Indians over the Arabian sea
 Merchants of Bombay and Surat retained control over the
Arabian sea in coastal shipping
Cont...
 On the Konkan and Malabar coasts, Muslim
merchant communities and shipwrights carried
on coastal trading
 Marakayyars of Coromandel and the Mapillahs of
Malabar( carried on spices and horse trading)
 They paid their allegiance to local kings and played
limited political part as compared to their
counterparts in the states of Indo-Gangetic basin
 In 1800s, these groups were also engaged in agriculture
and service besides mercantile
Cont....
 There were few ship-owning merchants and of more limited
capability in the Bay of Bengal
 Navigation in Bengal delta presented more difficult conditions
for ocean going ships and no opportunity for them
 A study of Akrur Dutta
 Construction and use of small vessels that distributed cargo from
ocean-going ships along the rivers of Bengal Delta butthis business
could not survive as Company ceased to trade
 Bengali Merchants could not do as well in Calcutta as their
counterparts in Bombay
 The northern part of Bay of Bengal had never been as large a trading
zone like the Northern Konkan was
 The Arabian sea trades connected powerful and wealthy empires but
Bay of Bengal did not
Parsis of Bombay
 Paris were the Zoarastrian population of Iran
 Migrated first to Hormuz and Khorasan in the 7th
century and then to the coast of Gujarat in 8th century
 Settled in towns of Gujarat coast and engaged in
variety of professions
 They were no destitute citizens-engaged in variety of
professions like-soldiers, farmers and few had social
Insurance Institutions . They had above average living
standards
Cont....
 Before 1700, Parsis were not a seafaring population but
several Parsis entered into Indian Ocean trade in
the mid-1700s, looking at opportunities of trading
with the consolidation of BEC as a political power in
western India
 Paris solidarity,egalitarianism and education
helped them to develop and make use of new
opportunities
Cont....
 Migration of Parsis from Surat to Bombay in 1700s
 Shipwright Lowsee Nusserwanji Wadia from Surat was given the
responsibility to set up a ship-building yard in Bombay for
Britishers
 Some of the Parsis were engaged in ship-repair and ship building
with the company
 Some were engaged in coastal trade in Malabar teak
 Others engaged in coastal shipping and eventually joined in
Indo-Chinese trade in Malwa opium
 A system of apprenticeship helped in passing down the skills
from Master builder to other family members
 Training of ship making in England by sons and nephews of
shipwrights
 That reinforced the skill formation
Cont....
 1838- sending of two sons and nephews to England for
getting training in craft of building steam ships by
Nowrojee JamsetJi
 Parsi -ship-owning merchants played a great role in
India-China opium trade as they bought and refitted
some of the ships of BEC and used them for coastal
and China trade
 Their ships were used heavily for supplies during wars
with China and Burma
 Heavy opium exports to China in return of tea imports
Cont..
 Parsis of Bombay also engaged in business of procuring safe and good
quality of liquor for the city
 In 18th century, one group of families, Wadia developed shipping and
others engaged in commerce with Burma, China,Mauritius and Aden
 Several firms engaged in India-China trade and connected Bombay
with Mauritius,Aden, and Canton in a network of exchange of goods,
money and manpower( between 1813-1839)
 From shipwright –broker –artisans of Gujarat to export merchants in
Asian and African ports
 Money flowed from overseas trade to variety of local enterprises- from
real estate of Bombay to tea plantation in Malabar
 Among the leading Parsi merchants of the 19th century, Jamstjee
Jejeebhoy who started his career as an assistant in several Parsi firms
selling opium in China and Jamsetji Tata doing apprenticeship in China
Cont...
 Use of steam ships by Parsis
 Ardaseer Cursetjee (belonging ro Wadia ship building
famly) , head of the dockyard of Bombay was in charge of
repair and maintenance of ships in the government marine
under the company(chief engineer and inspector of
machinery)in 1852
 He was apprenticed to the master builder of Bombay
dockyard
 Got training in constructing and maintaining steam
engines in England by his master
 Famous for designing and launching a 60 ton ocean going
ship called Indus and also constructed steam engine which
had installed on Indus
Cont..
 Reasons for their success may be due to the community
rituals and social practices
 Parsis recruited top managers and partners in their farms
from Parsi families
 Some exceptions to the rule are there.
 Jejeebhoy formed partnership with a Gujarati Hindu and a
Muslim merchant in his trade and business
 Dinshaw Manockjee Petit was a partner to a European
and his father was a broker in a European firm
 Adenwala Parsi Firm- Hormusjee Dinshaw
 Collaboration with Europeans was common due to
participation of Parsis in Arabian sea trade
Inland Merchants
 Indian merchants and bankers operating on overland routes
experienced a rise and fall in wealth with the decline of Mughal empire
 Many of them migrated to the successor states of Mughals
 As Rajput states suffered repeated incursion of the Maratha forces of
central India and succession disputes, bankers in those states suffered a
lot and led to bankruptcy
 Along the coast, import of Spanish silver coins
 Indian bankers arranged to have them re-coined for a fee(exchanged
the peso for Indian money)
 Bankers were lending money to company when bullion ran out and
converting the currency of one kingdom into that of other
 In 18th century, profits and revenues earned in company ruled Bengal to
other branches by means of Banker’s draft or hundi
 Major operators in hundi market were Indian bankers
Marwaris...
 Migration of Marwaris to Hyderabad and Indore and
other princely states in 18th century
 Business opportunities dried up in those states as they
became weak to protect trade and trade routes
 Marwari merchants involved in the inland trade in
central Indian opium, formed a link between company
port of Bombay and central India
 In 19th century, Marwaris migrated to the British
territories of Bengal like Calcutta
 Found more in Kassimbazar –trading town of Bengal
in 17th and 18th centuries
Cont..
 Oswal house ,known as the Jagat Seth (founded by Hira
Nand Sahu) were the principal licensed money changer in
Bengal under the rule of Nawabs
 Manekchand and Fateh Chand were two important successors of
Hira Nand
 They had immense importance as financial firm during Nawab’s
rule and also during Company’s rule in mid 18th century
 The European traders could not get anywhere in business
without their service as the firm converted imported silver to
local money
 Jagat seth was a secret ally of the company and politically
influential

Cont...
 When EEC tried to unify the monetary system, the
importance of the house of Jagat Seth gradually
declined
 Some of the prominent Oswal firms became
moneylenders and landowners and shifted to other
towns in central Bengal
 Kassimbazar lost its importance by 1820
Cont...
 In 19th century, Marwari entry into Calcutta was in larger scale
and engaged in diverse business interest
 Rarely joined Indo-European firms as partners or Agents
 Engaged in the trade of raw jute and share broking in late
1800s and retained hold over banking throughout
 They were called as founders of “great firms” (by Thomas
Timberg)
 In Bombay- few Marwari houses who shared economic space
with the more prominent Parsis and Gujarati Jain
merchants
 But their position was stronger in Calcutta
 Import of Large scale machine made textiles from
Manchester attracted indigenous merchants to come to
Calcutta for business
Cont...
 Marwari did not have ritual identity like Parsis
 But they had settlement in every business town of
northern India by 1850
 Used to speak different language forms like that of their
clients
 Relatively wealthy, transacted with town people in variety
of ways and had visible minority and easily assimilated
with local people
 Marwari and Khatri migration was mainly on Indo-
Gangetic basin
Importance of Caravan runners..
 Caravan runners were active in the Deccan
Plateau in 18th century
 Two factors led to Caravan operations :
1. The demand for raw cotton in coastal weaving
villages on Coromondel and Bengal making textiles
for Europe trade
2. Supply of grain to mobile armies as moving grain
from the ports to the interior
Cont...
 None of the major powers of the time like Hyderabad , Mysore and
Marathas had significant access to the sea
 Banjaras played important role as caravan runners and
protected by kings
 British Company also needed them while fighting wars in
interior, in spite of better access to sea
 Sometimes Banjaras were involved in politics
 They were being offered great incentives to be loyal to the
company and also same tactics by regional powers but given
punishment for breach of contract
 Banjaras formed of two main camps- Rathor and Bartia , together
in charge of 17,000 animals,or a combined capacity to carry 10-
12,000 tonnes
 Importance of Banjras declined after the introduction of railways in
business
Artisans
 In late 19th century- artisans producing luxury goods,
lost sponsorship and jobs after the fall of Mughal
empire
 Migrated to other places like merchants
 In some princely states, consumer owned Karkhanas
continued to exist
 Urban artisan Industries and their workshops started
to be owned by merchants and trading their products
 From 1810, the artisan industries suffered a lot due to
the increasing import of British textiles to India
Trade in British Indian Empire
 British Government had established free trade in British Indian
empire
 Regarding the status of Indian traders in British empire , there is
controversy among scholars
 Marxists assumed that Indian traders played as second fiddle-
compradors or agents of the foreigners
 Historian Rajat Roy says that Expatriates( European Traders
and Merchants) were the ‘ascendant and dominant forces’,
and Indian traders possessed unique advantages in an
expatriate- dominated commercial system
 He has referred to Indian traders as “Bazar firms” and said that
Bazar formed an important link between the European firms and
Indian peasants
Cont....
 European concentrated on Overseas trade
 Indian firms controlled overland trades feeding into the
seaports
 Indians also dominated banking, especially that financed
agricultural operations and post-harvest trade
 Indians knew better in the kind of financial transactions needed
to fund peasant production
 Land trade and sea trade imposed different kinds of demand
upon credit transactions
 Indians knew the countryside better
 Europeans knew the Intercontinental trade and potential
partners of Liverpool and London better
 One side could not function without other
 There was integration of land trade and sea trade
Cont....
 Indians were more dominant in land trade
,whereas Britishers or Europeans were in sea
trade firms
 Some significant exceptions were also found –
Khwajas of western India expanded their business in
kenya, Uganada and Zanziber
Cont....
 In the early 1800s Indian traders understood this
interdependence well and defended Company’s rule
 Supported Britishers during 1857 revolt
 Without their support British could have lost their
Indian rule in 1858
 They were thinking British Raj better than the
remnants of Mughal Feudal warlords
Cont...
 British India did not have a well articulated economic
policy except an imposition of free trade and low tariff
trade in the empire
 Indian merchants did not have any complain about free
trade as they were profited
 Bombay’s merchants exported cotton to Liverpool, sold
opium and cotton yarn in Hong kong and imported textile
machines and foremen from Manchester
 Calcutta’s Marwari merchants were dependent on the
custom of the European managing agency houses
 Khwajas of western India(Gujarat and Sind) expanded their
business in Kenya, Uganda and Zanziber(East Africa)
Criticism on British Indian
Economic system
 The Parsi merchant –publicist –Politician Dadabhai Naroji, (a critic of
British Indian Economic System)- criticised British economic policies –
drain of wealth from India to Britain ( in his book-Poverty and Un-
British Rule)
 Foreign Capitalists make profits from the resources of British India,
and take away these profits to their own countries
 British Indian State paid a large sum of money to Britain on account of
the pensions and salaries to expatriate officers
 Army was also used in imperialist battles not for defending Indian
borders
 Another Parsi Parliamentarian , Mancherjee Bhownagree , defended
the empire for which he was deeply unpopular in India
 But he was agreed with Naroji regarding British Indian Military
expenditure but not with Naroji’s sentiment about foreign business
Cont...
 Naroji’s anti-globalisation view was supported by
Nationalists not capitalists
 Silence of Merchants on this issue appeared to hold
that Merchants supported the globalisation
 Their attitude remain a matter of speculation
Global Trading Firms
 Most of the Global firms were British origin
 Sassoons from Iraq or the Ralli from Greece developed
strong links with Britain
 Charles Forbes from Bombay
 Thomas Parry, Binny and Finlay of South India
 Pierce , Lesile and Co. in Kerala- conducted trade in
Malabar spices and agents of British India Steam
navigation Co.
 Lewis Alexander and George Wallace (London Merchants)
trading firm in Bombay- trade in indigo,pepper, spices etc..
 Volkart and Ralli established business empires in India
 Toyo Menka of Japan
Indian Traders
 Decline of Asian Empires hit the Arabian sea trade and ship-
owning merchants
 The Parsis who did well in Indo-China trade moved to
manufacturing , import trade, real estate , and to other
professions due to decline of China trade in late 19th century
 They also shared business with the Great Indian Peninsular
Railway
 Biggest field of investment of Indian merchants was the
grain and cotton
 Gujurati Merchants and bankers in Bombay engaged in
cotton export trade all along the Gujarat coast
 That interlinking Bombay, Broach , and Ahmadabad in network
of exchange of goods, money, and capitalists
Grain Trade
 Small firms and their local financiers dominated the
overland trade
 In local grain trade- two major players – one was
commission agent and another was buyer’s agent
 Commission agent had rent house in market (ware
house) and sold in bulk to the buyer
 Buyer’s agent or Company agent used to visit villages
and contacted with peasants for purchase of grains
 Third minor player was local landlord cum-
moneylender
 The landlords, shopkeepers, and professional bankers
used to lend money to cultivators and accepted
repayment in grain that they sold to other two actors
Cont...
 First two groups operated from towns that had railway
stations and banks
 Indians were engaged more in local transactions but
not Europeans
 Very occasionally Europeans acted as Commission
agents and company agents near railway town - in
Punjab and Krishna –Godavari delta
Cont....
 Main centre of grain cultivation for export was the Indus-Gangetic plains
 Main ports carrying grain for export were- Bombay, Karachi,Calcutta and
Madras
 Some other areas were Khandesh or western Deccan, Punjab and
Krishna Godavari delta
 In late 19th century, construction of canal colonies made the Punjab plains
central to long distance trade and stimulated an agricultural based
Urbanization
 Lyllpur or Faisalabad (now a leading industrial town of Pakistan) developed in
trade and banking due to its location in prosperous agricultural zone
 Karachi and Multan also contributed to trading and financial services
 Karachi (from 1860’s) developed as a major port to receive cargo from Punjab
and Sind down the Indus
 A new urban area developed in this area and formed west Pakistan after 1947
Cont..
 Railways played most important role in the grain
trade as it reduced the costs of transportation and
secondly provided price information and enabled
local actors access to capital( draw bills of
exchange(hundi) from indigenous bankers based in
Calcutta , Bombay and Madras , and cash that bill in
the bank)
 Much of the bulk business took place near railway
stations
Features of Inland commodity
Three institutional features of Inland Commodity trade
in Business history were:
1. Traders known in the interior by their community names
rather than the names of firms– examples Marwari in
Jute trade, Muslim and Eurasian merchants in the leather
trade, Hindus and Jain merchants in grain trade---
sometimes a few individuals or families acquired a
reputation distinct from their community– like Birla in
Jute trade
2. A local trade can not be separated itself from a local
credit- in exceptional cases a local merchant firm was
mentioned by name as it was a banker as well and issued
hundi bearing the name
Cont...
 Third institutional feature of inland commodity ---
3. The agent of Foreign companies , despite of sponsored by
European firms , did not carry much weight in the
countryside
The buying agencies of trading firms like Ralli, Volkart, or
Toyo Menka had backing of foreign firms and joint-stock
banks. But their agents could not go very far without the
help of commission agents
In 19th century, the Ralli Brothers tried to buy wheat and
oilseeds directly from farmers and Bullock caravan
runners in the western Gangetic plains, but switched to
commission agents in inter-war period
Trading of tanned hides
 Trading of tanned hides had some similarities with grain
trade
 Like grain , it came from countryside
 A similar flow of capital from outside to the interior
 Leather export was a major field for Muslim merchants
 Hides and skins were processed in the locality and
established strong ties between the local merchants and
the tannery owner
 From the last quarter of 19th century, hides and skins
emerged as major exported commodities
 Before world war-1, ,1 lakh tonnes of hides and skins were
exported
Cont...
 Tanned and cured hides came form the countryside like
grains
 Muslims, Parsis, Eurasians, Chinese dominated this trade
as Hindu Merchants had strong dislike for this trade
 Many German trading firms like Schroeder Smidt,
Schmidt Cohen and Fuchs, Wutto Guttman were
prominent in this trade through Calcutta
 The exit of Germans after World war led the Muslim
Merchants to consolidate their hold on this trade and its
manufacturing
 In Bombay, Bohras and Memons , the Muslim trading
castes owned tanneries and controlled over its export
trade
Geography
Introduction
 A Big part of India is Indo-Gangetic Basin-formed of two
floodplains of river Ganga and Indus- heart land of Indian
trade and business
 Long Coastline having settlement of traders who carried
maritime trade around Bay of Bengal and Arabian Sea
 Western deserts –an important overland trade
 Mughal Empire(1526-1720) on Ind0-Gangetic plain
 Ruled by small States and semi-independent Vassals of
Mughal Empire nearer the coast
Cont....
 Existence of both maritime and overland trade as two types
of capitalism
 Land trade –carried through Indo-Gangetic Basin-
sustained by wealthy consumers
 Use of wheeled traffic, navigable rivers and cities
 Bullock carts linked Indo- Gangetic Basin with Deccan
Plateau
 Small Pack animals used for Himalayan regions to link
other parts of Asia
 Surat and Hoogly –two important ports under Mughal
Empire
Cont…
 Export and Import goods on land trade were-
silk,grain,textiles, wool,horses,precious stones and other luxury
items
 Main clients of land trade were residents of towns of
Northern India- mostly consumed by Political and military
elite of Mughal cities
 Khatris and Marwaris dominated land trade
 Sea trade carried by Kachchhis and Tamil speaking Muslim
merchants like Marakkayars and Labbais and Parsis after
1700 and several European trading firms and merchants
 Main clients in sea trade were-West Asia, Africa, South East
Asia and after 1700- Europe
 Sea trade carried mainly textiles
Cont..
 Two Business worlds – sea trade and land trade had poor
interaction b/w them
 Reasons for it was:
1. High trade and transportation cost before the
introduction of railways
2. Politics involved in trade and business-
 Sea trade was marginal importance to Mughals as a source of
revenue though it gave them a convenient income and access
to silver
 Two Mughal Provinces with extensive sea trade – Gujarat
and Bengal were far away from political centres of Delhi and
Agra
 Separation between land and sea trade came to an end after
coming of European merchant Firms- BEC , DEC ,PEC etc…
Merchants and Bankers in Land
Trade
 Merchants settled in Urban centres of Indo-
Gangetic plains- owned boats and transported
variety of goods along the major rivers
 There were three big long distance channels of
trade-
1. Movement of Bengal silk to North India
2. Grains by Bullock caravans from the Indo-Gangetic
Basin to the coasts
3. Cotton from Central and southern India to the textile
producing areas
Cont…..
 Existence of large banking firms in major cities of
Mughal empire- business deal with the military and
political elite
 Less information is available regarding their names,
business practices and histories of these firms
 Involvement of Mughal Nobles in Business
 Three Governors of Bengal –Mir Jumla, Shaista Khan and
Azimush-Shan , invested in trade directly or through other
merchants
 Negotiation of Europeans with them for commercial taxes
and access to supplies
 Involvement of other merchants and bankers along with
warlord-merchants
Cont....
 Indian Mechant communities like Punjabi
Khatris and Marwaris involved in trade
 Invasion of Bengal due to steady migration of Khatris
into Bengal in 1595 CE
 They used to work as court officers, military officers
and landholders under some of the larger states
known as Jagirs
 Prominent position of Khatris in Calcutta as brokers
and agents of European firms in mid 19th century
 One of the principal agent of BEC in 1750’s was
merchant-cum-banker Amirchand
Cont…
 Development of the Trading house of the Jagatseths
in Bengal.
 The founder of the firm was Hiranand Sahu, hailed from
Nagaur, migrated to Patna in 1652
 Patna was a city of commercial importance due to the
eastward spread of the empire.
 His sons continued to look after the North Indian
branches of the family banking business
 The eldest son Manik Chand, took over the Bengal
branch.
 In the early 18th century the Jagatseths emerged as
effectively as the state banker of Mughal empire
Cont...…
 Marwaris replaced the Khatris
 Belonged to Marwar(Jodhpur region) in south western
Rajasthan,speaking Marwari language
 Oswal bankers spread in northern India belonged to
this community
 Outside Marwar, the Marwari also included more than
a dozen endogamous groups- Agarwal,
Khandelwal,Srimali,Maheswari,Jaiswal and Oswal
Cont....
 Several of the merchant lineages were found in the arid
desert, which was important for trade and banking
business rather than producing goods for commerce
 Jodhpur was the intersection of two overland trade
routes of Mughals and Safavid dynasty (17th Century)
 Roads connecting Agra with Kandahar (border town of
Mughals and Safavid) and Ahmedabad and Agra-
important trade routes- these roads joined trade traffic of
river Gangas and its tributaries
 Individual Marwaris also joined the Mughal court .
 One among them was Raja Todar Mal
 Courtier merchants owned vast landed estates
Cont...
 Marwaris close to the regional Rajput States in 17th century
 Recruitment of Merchants and Bankers into high
offices(according to European officers –cum-chroniclers
James Tod and Alexander Forbes)
 Building of a city State in Phalodi on the western border of
Jodhpur by a merchant
 Marwaris started to circulate on other regions of India
 Like Khatris few Marwaris also settled in Eastern India
around 1600 after Mughal expansion
 Silk textiles and banking were their main business in
18th century
Cont....
 Riparian highways connected with sea ports like Surat
and Hoogly with the Punjab
 Trans Himalayan caravans goods from Central Asia
and West Asia were coming to Punjab for sale in fairs
 As small pack animals were used through this route
and low –bulk , high value articles , such as silk and
wool were traded
 Wool trade linked to sheep rearing
Cont....
 In Deccan plateau, bullock caravan was the main mode
of transportation due to few roads and rare navigable
rivers
 Bullock trains carried bulk goods like grain or cotton
 The Caravan runners were not usually merchants like
trans-Himalayan caravans
 Caravan routes started from market points located on
the Ganges(Mirzapur) and the Indus and went
towards Central, western and Southern India
 The transporters were known as Banjaras or lombadas
managed these caravans
 During the military campaign in the Deccan , armies relied
on caravans
Cont..
 Gujarat had a larger number of merchants with great
business power and a centre of commercial life in India
 When Surat was famous for maritime trade , was for land
trade and a vigorous trading community
 Khusalchand , grandson of Shantidas Javeri was a great
busninessman involved in jewellery and banking business
 Others were Kapurchand Bansali,Padam Gopal,Vanmalidas
Tapidas
 A class of brokers in business
 Famous for textile manufactures-cotton, silk and wool and
silver and gold brocades, gold and silver jewellery
 Also famous for industries like dying, bleaching,
embroidery and needlework and paper making
karkhanas
 Artisans (lived in towns) also played an important role in
business
 Some of the master artisans acted as merchants,certainly as
employers but few details are available about their
enterprise
 Most skilled form of art work was taken place in
Karkhana(word derived from the persian word)
 Karkhana was a place where “business is done”
 More often the place was a workshp or a warhouse
 Karkhana was the pre-modern factory
Cont....
 Workshops were owned or sponsored by the court
officers
 These officers formed a part of the consumer class , so
they can be called consumer-owned
 In 19th and 20 the centuries, the term karkhana used
for Punjab carpet and shawl industries
 In mid-20th century, a cluster of textile –producing
factories in Southern Maharastra region(Sholapur)
was also called as Karkhana
 Most of Karkhanas were owned by Artisans
Cont....
 Three types of Karkhanas – Consumer owned, merchant
owned and artisan owned
 Karkhana of Mughal cities was mainly consumer-
owned
 Mughal court officer ,Abul Fazl said that town adm. had a
say in the appointment of guilds and guild masters
 These guilds worked together with Karkhanas
 They were also owned by courtiers and individuals close to
the court
 Among the heirachy of karkhanas , Imperial karkhana
was at the top
Merchants in Sea Trade…
 Importance of sea trade in Arabian Sea
 The cities and settlements on the Arabian sea traded
with each other for centuries
 Exchanged Indian textiles for horses ,armaments, pearls,
and ivory
 Some of the textiles were passed on to the Atlantic
slave trade in Africa as a medium of exchange or sent
overland to European markets
 Coastal merchants were involved in this business and
developed sophisticated systems of banking and ship-
building to support the mercantile enterprise- Hindu and
Muslim merchant traders of Kachchh(example)
Cont.....
 Arabian sea trade flourished due to the three
powerful empires- Ottoman in Turkey,Safavid in
Iran and Mughals in India
 Transactions between these empires led to
Golden age of Arabian sea trade(17th century)
 Discovery of sea route from Europe to India by
Vascodagama(1498) through Cape of good Hope
 Made Western European merchants to travel to India
without travelling overland in west Asia, controlled by
Ottoman and Venetian and Geneovese merchants -
Cont....
 In the 17th century other European nations joined in Indian
Ocean trade
 This trade was quite different from the overland trade
integrating India with West Asia, East Africa, Southern
Asia and China
 Settlement of European trading companies in India
 Arabian sea trade and Coromondel trade are better
researched than the northern and eastern half of Bay of
Bengal connecting Burma, Indonesia, Malaysia and China
(Asian Control)
 Trans- Himalayan overland trade that joined the Bay of
Bengal trade with northeast India and East Asia( not more
researched )
Cont....
 Merchant firms in the city of Surat –had ships, carried
valuable cargo and employed own staff
 A Bohra merchant -Mulla Abdur Gaffar. and two Jain
merchants-Virji vohra and Shantidas Jhaveri were
expert in trade ,shipping and banking
 Mulla Gaffar had twenty sailing ships and great
reputation in foreign as well as internal trade
 Jhaveri involved in religious politics
 “jain monks needed businessmen as much as the
businessmen needed them”(political importance of
merchants)
Cont...
 Merchants Used to lend money to Europeans and forced
them to trade with them or trade in Arabian sea on their
behalf
 Big merchant firms had ships but shipping was not a
popular field of investment as ships were owned
individually and not coming under insurance
 Some other business families of Surat were
Chellabys,Parekhs,Rustomjis and Travadis
 Chellabys were shippers and engaged in procuring goods
from Red Sea and Persian gulf ports
 Rustomjis and Parekhs were brokers and the Travadis were
bankers
Cont...
 Some merchants working as agents of principal merchants
 Below them, were many small scale merchants who carried
generic cargo
 Those who had both trade and shipping were either partners or
rivals of European firms
 Indian shipping charged lower freight than European ships
 Kuchchh involved in lot of trade in the Arabian Sea due to
its poor agricultural resources and western coastal regions ,
ruled by small states depended heavily on income from trade
 Mandvi was an important port in Kutch
 Merchants and bankers helped business of governance like
collecting taxes, revenue farming, providing loans and
taking part in administration.
 In return , State helped them by offering lucrative contracts
Cont....
 Merchant groups established Diaspora network in port
cities around Arabian sea
 Conducted financial operations like Bills of exchange
(hundis) and insurance and their bills were accepted in
distance trading points
 Vaisnavite temples and monasteries acted as banks,
clearing houses, and guarantors of reputation
 Existence of community law for trade
 Interest in ship-building led to timber trade by some
merchants
 More development of banking,trading, ship building and
navigation
European Merchants
 Entry of Europeans in 1500 and became an important actors in
the coastal world after 1650’s
 Reaching of Portuguese mariners in the Indian Ocean with the
intention of taking control over the Indonesian spice trade.
 The move led to several well-defended settlements on the coasts
of Konkan, Persia, the Arab peninsula, East Africa, and Malacca
in the Malay Peninsula
 Establishment of English East India Company as a trading firm
with a licensed monopoly to trade in Indian Ocean in 1600
 Reaching of English East India Company in 1613 and Dutch East
India Company in 1605
 Purpose was the same like Portuguese – to control over spice
supply from Indonesia
 Shareholders of these companies were merchants
Cont...
 Conflict of European companies in India for
establishing their monopoly over trade
 BEC established his position by defeating Dutch and
Portuguese and later French
 Dutch consolidated their position in Southeast
Asia and south-eastern coast of India
 Spices were most desired Asian good and then
Indian textiles
Cont...
 After 17th century, Indian textiles emerged as an
article of trade in their own right
 Cotton cloth entering Asian market was plain cloth
 Cloth sent to Europe was printed, dyed, embroidered,
or painted
 Indian cloth was famous in European market for
its sophisticated use of colour and design;
particular shades and fineness
 Much before the Europeans came, Indian cloth
and muslin of certain areas of Bengal was known
to International market
Cont....
 Competition of Europeans to establish trade with small
independent states of India
 Dutch and English had political involvement more in Konkan
and Coromondal coasts
 Negotiations for trading rights with the rulers of Bengal , a major
province of Mughal empire through bribery and diplomacy
 English established three important fortified settlements – in
Bombay (1661), Calcutta (1690) and Madras (1632)
 Madras was purchased from the tiny Kingdom of Chandragiri
 Bombay as a gift from the Portuguese King to Charles II of
England
 Calcutta was developed on the three villages (Sutanati,
Govindpur and Kolkatta)of Bengal
Cont...
 Establishment of Royal navy by EEC in 1660 to consolidate
its position in India
 Facing of troubles by EEC in England and In India due to
the English Civil war, the glorious revolution(1688) and the
uneasy relationship between Crown and the Parliament
 Granting of monopoly of trade to EEC in India by British
Crown through a Charter
 That hampered the interest of private traders and
company’s employees who were involved in trade
 Many European Privateers and Pirates in the Arabian Sea
whom the company officers secretly helped
 Aurangjeb almost ended English trade in Surat and
Bombay due to such corruption by company officials
Role of Brokers or Agents..
 All European firms in India worked through an Indian
Agent or broker
 Broker belonged to commercial group
 The broker was more than an intermediary, but a figure
with considerable managerial responsibilities
 Was responsible for the enforcement of contracts between the
trading firm and the hundreds of artisans residing in villages and
working from homes
 Increase Scale of business and contractual transactions led to the
importance of the Agent or contractor in the commercial
machine
 The relationship between the Agent and the firm was
fraught with mutual distrust as well as dependence due to
absence of commercial law
Cont...
 In the early 1600s, the chief agents of Coromandel coast were
local warlords and chieftains
 By the end of 1600s. The profile of the brokers changed
 The new generation of brokers were merchants with
considerable financial resources as well as easy access to
the textile artisans
 In Calcutta – agents were recruited from the families of
Seths and Basaks, textile merchants in the mid-1700s
 In Murshidabad(capital of Bengal)-agents were north-
Indian merchants
 Agents were Telugu merchants in Madras
 The chief agents in Surat were Parsis who were engaged in
diverse professions and also involed in trade
Cont...
 Work of the agents was quite diverse , ranging from secretarial
or managerial to contractual and the enforcement of
contracts
 The agent was also working as a type of head merchant with
whom the Company contracted in the first instance for the
supply of goods( called as broker)
 In South India , agents were called as “dubash” meaning
interpreter ( designated more of managerial role)
 Ananda Ranga Pillai was probably the most famous of all such
agents because he kept a diary that was translated and published
more than a hundred years ago
 Pillai managed a great deal of the FEC’s trade in 1740s and
occasionally managed the private trade of some of the officers
Cont...
 In doing so he had to maintain an army of subcontractors ,
and supervise skippers, transporters, bankers, and artisans
spread over a coastline of thousand miles long
 But his expenses were heavy but profit was relatively less
 Some of the other brokers of this period were:
 Indranarayan Chaudhuri of Bengal (who worked for the
French in early 18th century)
 Narasu pf Pondichery and his rival Sunku Rama and
Russian Manek or Manock of Surat
 The brokers used to make a great deal of money and often
taking a great political and professional risks to do so
Cont..
 Agents were sometimes unhappy about their situation while companies
were almost wary of the agents’ influence
 Agency was not hereditary , but the debts of the deceased agent to the
company passed on to the next generation
 In India such liability was limited but in Europe this liability was
unlimited
 Sometimes agents were powerful figures and were suspected of double
crossing
 Many examples were there how they were being punished
 In 1678-9, the Dubash of Mausalipatam, Kola Venkadri , secretly
negotiated with the King of Golkanda and was imprisoned by the
English as punishment
 In 1670, Khem Chand Sahu, chief merchant of Balasore was caught
between the Mughal governor and the company establishment and
harassed by both
Cont....
 Bengal, Coromandel and Gujarat were the main
textile supply regions for the European traders
 In all three regions , textiles for export were produced
in large villages easily accessible from the port city, like
Surat, Mausalipatam or Calcutta
 The company officers did not travel to the interior
often ,so provided incentives to weavers to establish
near the warehouses
 Around 1700, such settlements of artisans were
growing in the periphery of Calcutta and Madras
Cont...
 Headmen in these exporting villages used to contact
with the agents and brokers of the companies to
supply a certain quantity and quality by a certain date
 They used their power in negotiations, breach of contract
on delivery time and quality of cloth delivered with
Europeans
 Power of headmen as they used their power to bully or
exploit the weavers
 Weavers tended to accept a headman’s authority more
readily when the latter was seen as a caste fellow and
contested authority when he was from outside the
community and an imposition from above( Swarnalatha’s
research on the coromandel textile manufactures)
Conclusion
 Traditional business communities ruled over trading and
banking in interior
 In the maritime world, traders, agents and bankers were
found more
 Textiles and horses dominated both maritime and overland
trade
 The balance between the land trade and sea trade started
to be changing
 Europeans started to dominate over Indian sea trade
 Some merchants lost their importance while some grew
with Europeans
Birth of Modern Industries in India
 Growing interaction between Europeans and Indian
business interests led to great change in the climate of
business environment in India
 British political power provided new opportunities to
Indians
 The capital moved from trade to mills
 The interdependence between trade, finance and industry
led to growth of Industrialisation in India
 Modern Industries were developed in western part of
India-Bombay and Gujarat region due to its long history of
trade and commerce and capital accumulation
Cont...
 Industrialisation in India started with the
establishment of cotton textile mills in India
 Cotton textile mills were first established in Bombay
and Ahmedabad
 By 1850, both Bombay and Ahmedabad had huge
complex of cotton trade and also financing the cotton
trade in the western India
 Some pioneering owners of cotton mils were Dinshaw
Petti,Nowrosje Wadia,
J.N.Tata(Parsis),Currimboys(khoja),Sassoons(Jews),
Bhatias from Kutchch,Gujarati traders and bankers
Cont....
 Some other towering persons in the business scenario
of India were: Jamsetji Jejeebhoy ,and Cowasjee
Nanabhoy Dhavor of Bombay Ranchodlal Chotalal in
Ahmedabad
 A group of merchants of Surat also planned to set up a
Joint-Stock company to produce cotton goods, using
modern technology and machines
 Some Englishmen living in Gujarat also acted as their
technical consultants
 But the project could not go beyond conception stage
due to the nervousness of the promoters
Ranchhodlal Chotalal
Ranchodlal
 Did not belong to any trading and banking family but belonged
to Nagor Brahmin family of Gujarat
 Proved to be great industrial entrepreneur
 Nagor families normally train their children for government jobs,
teaching the languages and subjects that would make them fit
for position in Bureaucracy
 Ranchodlal was a highly educated of his times
 Proficient in four languages
 Started as a career as clerk and promoted to the position of
Assistant Superintendent in Customs Department
 Contact with many English officers who had close link with
textile manufactures and machinery makers
 One among them was Captain George Fuljames
Cont...
 His knowledge about economic transition in India and
contact with British officers led him to think about setting
up industrial venture
 Got Information from Fuljames about technical details
and cost estimates secured for the Surat merchants
 For this cotton manufacturing venture, he approached
bankers of Baroda- Haribhaktis, Samal Bechar and
Gopalrao Mairale – and Ahmedabad-Mangaldas
Karamchand, Hathosingh Kesarsingh and Nagrseth family
 They could not believe him as he belonged to Nagor family

Cont...
 Finally , British Cotton Planter, James London ,
showed interest in his project
 Joined with Ranchodlal with the promise of providing
half of the capital
 Landon’s offer led to two Bankers of Baroda-Samal Bechar
and Gopal Rao Mairale to provide half of capital
 Visiting of promoters to London for purchase of machinery
and equipments etc.
 Baroda Bankers ‘s demand for formal document for
transactions of money for purchasing machinery led to the
failure of the project
 It was famous as Broach Project as he wanted to establish
the mills in Broach
Cont...
 Landon on his own set up a spinning mill at Broach a
year later –in 1854
 Ranchodlal was suspended from his job in 1853 on the
charge of bribery, pushing his industrial dream into
state of uncertainty
Establishment of Cotton Mill in
Bombay
 Cowasjjee Nanabhoy Dhavor, a Parsee merchant of the city,
established Spinning and weaving company in Bombay-
first industrial venture in India
 Belonged to Business Family
 His father had good connections with prominent British
houses in the city
 Had worked as a broker with some of the houses and in
china opium trade
 He also set up the First modern Bank in city , set up by
Indians- Commercial Bank of India
 Also established the Steam Navigation Company ,
organised a firm to import machinery and established the
first Steam Powered cotton press in Bombay
Cont...
 The profits of the first Indian Textile Industry
exceeded all expectations of businessmen who had
suspicious of this project
 It became a source of inspiration to many other Parsee
merchants to emulate Dhavar’s example
 A prominent China trader and broker Manekji
Nasserwanji founded the second Mill in Bombay
 Within a short span of six years (by 1860)- 10 textiles
mills in Bombay with 6600 employees
Success of Ranchodlal’s dream
 Continued his effort to set up textile mill in Gujarat
 Had a reputation as an bright , able and responsible person
 Got employment in the firm of Karamchand and Premchand of
Ahmedabad
 Maganbhai was the head of this banking firm of Ahmedabad
 Direct contact with Nagarseth and Hathising families - who
appreciated the seriousness and competence of Ranchodlal and
his plan
 Success of Bombay Mills and Landon’s venture at Broach
convinced some of the merchants of Ahmedabad to join hands
with Chotalal to fulfil his dream
 Finally Ahmedabad Spinning and Weaving Company was
registered in 1858- 10 years after his effort to achieve his dream
Cont....
 Faced a lot of troubles in achieving his dream
 Machines for the mill were purchased in England through the
agency of Dadabhai Naroji
 One set of machines never arrived and second set of machines
took months to reach Ahmedabad
 Ship bringing the machinery from England fell victim to stormy
weather
 English Engineer who was to erect the machinery died of cholera
 When it reached the Cambay , it had to travel through a distance
of over 100 km. through bullock carts to Ahmedabad
 Took much longer to operate and started production in 1861
 Had also faced problems to get mechanics to run the mills
Cont...
 By the help of two British Engineers – Edington and
Whittle, the mill started to run successfully
 By 1870, it had grown about four times from the
original scale
 He was called as” Merchant Prince of Gujarat”
 Being inspired by him, many others also established
textile mills in Ahmedabad
 By 1916, Ahmadabad had 62 mills
Comparison b/wTextiles Mills of
Bombay and Ahmedabad
 Had he supported by Mercantile community of Gujarat ,
Ahmadabad could have been the first city to establish first
modern textile industry but not Bombay
 Ahmedabad company was much smaller than mills in
Bombay
 Ahmedabad had a share capital at Rs. 300.000 only ,
divided into 60 shares of Rs. 5000 each
 Started operations with only 2500 spindles in comparison
to 17,000 spindles that Dhaval’s mill had
 He had to face many problems than his Bombay
counterparts
Role of Ranchodlal in City
administration
 First industrialist to take interest in the development of city and
civic life
 Appointed as chairperson of City Municipality by Bombay
government
 Gave importance on cleaning of streets, modern water supply
and underground drainage schemes in Ahmadabad municipality
 Faced opposition from merchants
 Wit the help of his personal wealth and political connection with
Britishers became successful in foundation of modern drainage
system in the city and water supply
 Established first Girls’ High School and women’s hospital in city
 Neither a free trader nor a protectionist but advocated free trade
with those countries which provide free trade to Indian goods
Conclusion
 However, Both Bombay and Ahmedabad developed
into two major centres of textile production in India
 Then it was spread to other parts of India
 Machine production of Industrial goods marked the
beginning of industrial transition almost everywhere
in the world
 India, a part of British empire after 1858 , entered into
a new age of business environment and industrial
development
 Most industrialists in 19th century emerged from
cotton textile trade and industry
Rise of Agency Houses
Introduction
 The industrial Revolution in England coincided with the
emergence of EEC as an unrivalled political force in India caused
a complete transformation in the character of Indian business
 India’s superiority in the International commerce became a thing
of the past
 The export of Indian textiles fell drastically and India became a
market of textile products of Britain as well as large variety of
other products
 The large Urban Indian merchants who used to help European
companies to procure Indian goods for export to their countries
and other markets, now became distributors of imported
products brought in India by the British traders
 There was decline of Indian merchants who could no longer
dictate terms to the European companies
Cont..
 The rise of factory system gave rise to the new class of
entrepreneurs in England
 The charter act of 1813 abolished EEC’s monopoly of trade in
India and led to rise of more free British merchants in India
 They explored new and less competitive areas and new methods
of doing business
 The most popular form of organisation that the free merchants
adopted for their business was the Agency houses
 Within few years of new Charter, the agency houses and private
merchants displaced the East India Company from its position of
supremacy in the commercial sphere
Agency Houses
 Agency house was acting as business agents of others from
whom they charged fee for its service
 Every agency house was an agent of a ‘firm’ in London
 It was something akin to the Hundi system in international
market
 They played an important role in business as there were no
exchange facilities between India and Britain then
 Bombay, Calcutta and Madras were the headquarters of most
of the Agency houses
Cont...
 Agency houses were partnership firms
 Though primarily trading houses, they also acted as bankers,
bill brokers, ship-owners, insurance agents, surveyors,
importers and exporters
 Experimentation with relatively unexplored lines of
business was the most important feature of the
strategy of agency houses
Cont...
 Maintained very close relations with the Company
government
 Advanced funds to the company in its hour of need, and on
many occasions exported goods on its behalf and also
financed the movement of troops to far-off places
 The company in turn assisted loans to agency houses during
the time of their financial crisis
 Great Interdependence between the agency houses and
British colonial government
Role of Banian in Agency Houses
 Indian Agents assisting European promoters of Agency houses in
business dealings were known as Banian
 Agency houses had to depend on Indian agents to assist them in
business dealings as they are not familiar with the land, languages
and customs
 It was a professional connotation and nothing to do with Bania caste
 Anyone involved in this activities was called as Banian
 In many ways, he was the lynchpin of the entire operation
 Without him , no sales and purchase of goods could be made and no
shipments could be organised
 Responsible for the quality and quantity of goods purchased or shipped
through him
 He was also the link between European and Indian bankers
 In most cases, they also carried their own trading operations as well
Important Agency Houses
 Some of the important agency houses developed during that
time were:
 Alexander & Co.- founder of Hindustan Bank and explored
the coal mining of Raniganj area of Jharkhand
 Forbes & Co. of Bombay
 Parry & Co. of Madras
 Palmer &Co. of Calcutta
Forbes &Co.
 Forbes & Co . of Bombay was the oldest of all the agency houses
 Founder was John Forbes who came to India as a Civil servant in
1764
 Set up in 1767 as the only European mercantile firm in western
India until 1790
 In 1790 Bruce Fawcett &Co. (another agency house)was
established
 They worked very closely with each other and even joined hands
occasionally to monopolize the trade in certain commodities
 These two companies appeared as a single enterprise
Cont..
 Main areas of operations of Forbes & Co:
1. Agency Business
2. Shipping
3. Money lending
4. General trading
Cont...
 Shipping was its main business and owned a number of ships
 Carried raw cotton from India and China to Britain for use in
the mills at Lancashire and Manchester and brought textile
goods to be sold in Indian Market
 It entered into shipbuilding during Napoleonic wars(1806-
1815)
 Also exported tobacco , ivory , and spices from India
 Charles Forbes was against the opium trade in principle
 Sometimes it could not restrain from this business
 Opium export was not a major part of Forbes operations
Cont....
 Many Parsee brokers helped the firm in its transactions with
Indian and foreign merchants
 Forbes & Co had good cordial relations with the government and
supplied jointly with Bruce Fawcett & co . huge sums of money to
the government at low rates of interest during the Anglo-Maratha
wars(1799-1806)
 The Forbes loans was considered as the forerunner of Government
Public loan systems launched in 1813
 Still exist in India at Bombay under Shaporji Palonji Group and
involved in three main areas:
 Engineering
 Shipping & logistics
 Business automation
Agency Houses in Madras
 Chase and Parry was founded in 1789 by Thomas Parry in
partnership with the agent of a London based company
 Acted as a real estate agent, bought and sold navy bills, and
traded in Madeira wines
 They also acted as agents for ships, lotteries,booksellers, and
insurance firms
 Its main business was banking
 Deposits were taken in and utilized in firm’s transactions
 During the time of Anglo-Mysore wars made handsome
profits by supplying provisions to huge British army
assembled against the Tipu Sultan
Cont..
 Parry kept on changing partnership
 Experimentation with unexplored lines was his approach of
business
 Continuing his traditional business , he started the business of
tannery on his own in 1805
 Imported hides from Colombo, Penang,and the cape of Good
Hope and supplied leather goods to the company troops, and
also exported such goods to many countries
Cont...
 The depression caused by Napoleonic wars also could not
affect his business .
 Improvement of business environment after Napoleonic wars
also flourished his business
 By the second decade of 19th century, he was considered as
most Influential and prosperous person of the city of Madras
 Retired from business by entrusting all managerial
responsibility to his partners
 Died in cholera in 1824
 The Parry’s Corner in Madras is still a mute reminder of his
business endeavours
Other Agency Houses in Madras
 Grow of dozen of agency houses in Madras
 Binny & Co. founded by John Binny in 1799 ,a Scotsman
who was far less colourful and adventurous
 It had similar business interests like Parry & Co.
 Another firm was Arbuthnut & Co.establsihed by a Scottish
named George Arbuthnut in 1809 with general trading and
banking as the mainstay of business
 Besides these major firms, there were also many private
traders belonging to different nationalities like Indian,
Chinese,Armenian, Arbian, Persian and Portuguese and
natives of many European countries etc...
Agency Houses of Calcutta
 Palmer & Co. was the first agency house of Calcutta
(founded in 1810)
 Developed into most largest and powerful enterprise of its times
 Founder of this firm was John Palmer
 Shipping, Insurance, and general trading besides agency business
were its major interests
 Established a European –type bank called Calcutta Bank
 The Publication of Calcutta Journal was another unconventional
venture promoted by Palmer & Co.
 Cruttenden & Co. was the only agency house which preceded
Palmer&Co in the Publishing business
Cont...
 Palmer and co. also took the responsibility of carrying opium to
China which had a great demand in China in country ships and
was popularly known as the “Opium King”
 It also exported grains and saltpetre to China on few occasions
 The company was importing bullion of tea and Chinese goods in
return of opium
 Palmer & Co. had also a great hold on the export of indigo to
European countries and for which called as the ‘Indigo King of
Bengal’
 Coastal trade was also another major source of profit for the
house
Cont...
 British free merchants and agency houses had displaced the Indians
and the Arabs(who held dominant position in Indian Ocean till
mid 18th century) by the end of this century
 Palmer & Co. Was a major instrument as well as beneficiary of this
change
 British control over Cylon, Malaya, New South Wales, Cape of
Good Hope and Mauritius in Indian Ocean and involvement of
other agency houses in those territories
 All the major agency houses of Calcutta were involved in financing
Indigo production
 The period between 1819-1825 saw the boom of indigo trade
Cont....
 After 1825-26, condition became unfavourable for agency
houses
 Trading conditions continued to remain depressed both in
India and England for a decade
 That led to several agency houses to be bankrupted
 Palmer & co. held its position for some time , but when the
price of indigo fallen a lot due to abundant of production in
1829,the firm found it to be difficult to face the storm
 Finally on 4th January 1830, it was declined
Cont....
 Agency houses dominated the business scene in eastern India
for three decades before they met their doom
 The failure of the largest agency houses generated strong
wave that affected most of the others and by 1834, almost all
the agency houses in Bengal were disappeared.
 Commerce of Bengal then went into the hands of minor
firms
 Only a few like Gillanders Arbuthnot managed to survive
and prosper till the end of colonial rule
Cont....
Causes for the failure of Calcutta agency houses:-
 Overdependence on the savings of the company servants and
wealthy Indians
 They had small and uncertain capital base
 Involvement in indigo production and trade crossed the
bounds of all business formality
 Only source of help of government also could not get as
govt. had its own limit of financing
Indian Merchants
 While British agency houses dominated business
environment of Eastern India, some of the Indian merchants
also very much active with their limited scale and scope
 Sheikh Gulam Hussain- sent rice and gruff goods to England
 Ram Dual Dey- a variety of goods to Malta
 Both used their own ships for trade
 Ram Dulal Dey died in 1825
 His two sons Ashutosh and Promothanath continued to be
active in the Calcutta business for another two decades
 Other prominent business persons were Udit Narain Pal,
Komul lochan Basak, and Gopal Manohardas
Contributions of Agency Houses
 Agency houses were the messengers of change
 They broadened the horizon of Indian business
 They opened up new vistas for business, pointing to new avenues
of enterprise and new ways of exploiting them
 Their Indian Banian was a very critical resource, deeply involved at
every functional level of business from procurement to shipping of
goods
 Getting opportunity to watch the operations of his foreign clients
from close quarters, they imbibed some of their business methods
and attitudes
 In he process, the agency houses and free merchants became the
role model for an influential section of Indian Business community
in Calcutta
 Cont...
 A host of firms emerged to fill up the vacuum created after the
fall of major agency houses in the business life of eastern India
 They had business lines similar to those of the old agency houses
 They were mainly interested in export business, and were
involved directly or indirectly in the production of export
commodities such as indigo,sugar and silk
 The most prominent of these new firms were promoted jointly by
Indian and English businessmen and became most influential
enterprises in Bengal during the 1930’s and 1940’s
 Some of these are Carr, Tagore & co., Oswald, Seal& Co,
Rustomji, Turner&Co.
 Indian partners in these three firms, -Motilal Seal, Rustomji
Cowasji and Dwarkanath Tagore – had close prior business
contacts with Englishmen
Carr, Tagore & Co
 Dwarkanath Tagore was most influential businessman of his
times in eastern India
 Most influential citizens of Calcutta
 Impressed by the business endeavours of the agency houses,
he developed close relations with many of them –
Mackintosh& Co. and Palmer& Co.
 He was in high post of government service when agency
houses were passing through turbulent times in 1820s
 Developed an influential position in the Calcutta Business by
1829
Cont...
 As commercial crisis deepened in Calcutta in late 1920s, Tagore
started to fulfil his business dreams
 Came in contact with William Carr who came to India as early as
1924 and joined as Palmer & co. as a partner
 Through his association with John Palmer, Tagore came in contact
with William Carr
 Impressed by his talents, business experience and mercantile
knowledge,Tagore started business with him by launching Carr,
Tagore & Co.in 1834
 That became a largest firm in Calcutta and first biracial
enterprise in India
 Dwarkanath was the moving spirit of this venture, principal
provider of capital and most dominant figure in its management,
Carr was a mere sleeping partner in this venture
Cont...
 Export trade was the mainstay of Tagore’s business
 Exported goods were- indigo, sugar,
silk,saltpetre,hides,rice,timber and rum
 Britain and Europe were the main destination of his exports
 Had their own correspondents in London
 It also controlled the production and processing of the
commodities
 Besides these activities, it also promoted a number of joint
stock concerns and managed them in the name of the
shareholders
Cont...
 Purchased largest coal mine in the country, Raniganj Colliery
in Burdwan , from Alexander& Co.in 1836
 After entry into coal mining, promoted four joint stock
enterprises- Calcutta Stream Tug Association,Bengal Salt
Company,Stream Ferry Bridge Co. and India General Steam
Navigation Company
 Avoided to take the tea gardens in Assam and building a
railway line in West Bengal, when British or London bases
merchants proposed for them
Cont...
 Founder of Union Bank (1828) and became powerful voice in
the management of Union Bank, the largest business
institution of its time
 Increased its share capital form Rs.15 lakh to 1 crore, enter
the exchange business and advanced loans to indigo
producers against the properties, equipment , and produce of
the factories as well as against the personal security of the
borrowers
 Mercantile crisis in Britain in 1847 also affected mercantile
houses of India
Cont..
 Dwarkanath Tagore died about two years ago before the
commercial crisis of 1847
 Carr, Tagore and Co. developed into the most dominant enterprise
in eastern India, far ahead of Contemporary European companies
in Calcutta
 Never before or since colonial India no other businessman has
such a greater sense of equality with his European counterparts as
he had in Bengal in 1830s and 1840s
 It was largely due to his conduct and action
 Tagore can be called as father of modern Indian business
 Though the nerve and optimism of 1840s disappeared , but the
Bengalis continued to dominate the business – through some of
the agency houses of Calcutta like Ashutosh Dey & co. and Ram
Gopal Ghosh & Co. During 1850s
Summary
 Agency houses were new ventures in business in early 19th
century
 While Palmer and co. and other European business agencies
in Calcutta were gradually lost their business by 1834, agency
houses of Bombay and Madras continued to survive their
business and grew into respectable industrial firms in due
course of time
 Not only Europeans but also Indians like Dwarkanath Tagore
played an important role in Indian business during this time
Introduction
 The Brain child of Jamsetji Nusserwanji Tata was Tata steel
 Registered in 1907 and operated in 1911, Tata was at the top
of India’s business company after the first world war
 First steel firm in India
 Now it is one among the top steel producing companies in
the world with an annual crude steel capacity of 13 million
metric tonnes per annum.
 Its net worth is over 775 billion Indian rupees by 2021
 The company is based in Jamshedpur in Jharkhand and is
headquartered in Mumbai.
 It is a subsidiary of the Tata group
Jamsetji Nuserwanji Tata
 Tatas were in the backbencher in the Bombay business
in 1860’s
 Jamsetji Tata was regarded as father of Indian industry
joined his father’s business in 1850s
 Engaged in trade between India, China and Britain,
travelled to and lived in Hongkong and Sanghai
 Visited to England and developed good understanding
of Cotton Textile Manufacturing by studying British
textile industry
Cont...
 After coming back to India , wanted to be a small Industrialist
 Purchasing of an old and crumbling oil- pressing factory in
Bombay in 1869 and converting it into an textile unit called
Alexandra Mill
 Sold this renovated mill for handsome profit later
 Went to England to have more first hand knowledge on Cotton
manufacturing
 Coming Back to India , set up the Central India Spinning,
Weaving and manufacturing Company in Nagpur in 1874
 Famous as Empress Mill when it came into operate in 1st January
1877
Cont...
 First factory to use ring-spindles , ventilation and
dehumidification suited to Indian Conditions
 Introduced labour welfare measures and incentive
schemes far ahead of times
 He started to pay the remuneration of commission
agents not on the basis of sales or production but on
the basis of profits which became common in Indian
industry much later
 Established two more mills – Swadeshi Mills in
Bombay and Advance Mills in Ahmadabad in 1886
Other Business
 Involved in other minor business like export of
mangoes, the frozen food business and Sericulture
 Most successful minor venture was Taj Mahal Hotel
in Bombay , providing world class facility
Tata Steel
 Before the rise of Swadeshi movement in India, he thought
of promoting indigenous steel manufacturing in India in
1882
 Informed about the large coal and iron deposit in the
British Central provinces
 Obtained prospecting license for the most promising areas
in 1900
 Visited America to meet steel manufacturers
 Visit of Geologist C.M. Weld to India to prospect in these
regions
 Result was not satisfied in this region and was asked to
inquire more territories in other parts of India
Cont...
 1903-1904- a series of discoveries in other areas for iron
and coal deposits
 One among them was in Princely State of Myurbhanj
of Orissa
 Another rich deposits of iron found in Durg district of
the present Chhatisgarh state
 A team of Weld, P.N.Bose and American Charles Perin
involved in this exploration
 Before the plan being materialised, Jamsedji died in
1904 in Germany
Cont....
 His son Dorabji and Ratanji Tata carried forward the dream of
his father
 Decided to launch the steel company near a village in Bihar,
named Sakchi
 No help from foreign investors
 Tata team appealed to Indians for funds
 Investment by Indian Capitalists and Princely States
 Engineering consultancy provided by American Firm-Kennedy,
Sahin and Co.
 Tata steel or Tata Iron and Steel Company
(TISCO)registered in 1907 and operated in Jamshedpur in
1911
 First it started production of pig iron in 1911 and then steel
in 1912
Challenges
 Initially faced a number of Challenges
 Limited financial means
 Expensive to hire foreign engineers for the company
 Repeated problems with machinery and quality of
material
 Lack of proper Coordination between the different
divisions of the company
Tata Steel after World War I
 Steel was in worldwide shortage during world war
 Sympathetic policy of government towards domestic
firms
 Major user of Tata steel was railways
 Received Tariff protection and a railway contract from
government
 Supplied most of the government requirements while
imports were disrupted
 Developed as an national enterprise and Tatas were
looked upon as ‘national house’.
Cont....
 In 1920s, steel was in excess supply world wide and tariff
was raised by Government
 Japan ,a former buyer of Indian pig iron, stared to import
from Korea and Manchuria
 Produced more steel but sold less of it
 Profits of the company plummeted and cash balance
touched the rock bottom
 To save it, Company borrowed two million pounds from the
London Market
 Obtained loan of Rs. 100 lakh from Imperial Bank of India
 Rs. 100 lakh from the princely State f Gwalior
 Started to secure protection for the steel industry
Cont...
 That led Tata to change its management model
 Reduced number of workers, raised its productivity
and became less dependent on foreign engineers
 Tata produced more pig iron than finished steel
 Because of its cooperation with Government, the
entire requirements of railways was supplied by Tata
 Captured large market for steel in India and for pig
iron in abroad
Cont...
 Criticised for the negotiation with government and heavy relied
on foreign technicians
 In spite of criticism, did not loose government support
 Between 1925-1932- reduced workforce from 32,500 to 25,000-
used more modern machinery- reduced high paid foreigners-
used greater efficiency of Indian workmen
 By 1935, it was well established even if its second generation
leadership came to an end with the death of Dorabji in 1932
 Nephew of Jamsetji- Narowji B. Saklatwala , succeeded
Dorabji as the head of Tata Empire
 After his death in 1938, Jahangir Ratanji Dadabhoy (J.R.D.
Tata) was elected as the chairman of Tata Group by his fellow
directors
 By 1940, it was more stabilised in its position
Other Tata Group of Industries
 Tata Hydroelectricity Power supply company(Brain
child of Jamsetji)-1910 and came into operation in 1915-
in Lonavella of Western Ghats
 Establishment of Cement company at Porbandar in
Kathiawar( first factory to produce cement in the
country) and another unit in Bihar
 Tata Chemicals Factory in Mithapur(city of Salt) of
Gujarat-founded in 1939
 Tata Motors(Tata Engineering and Locomotive Co.
Ltd)- 1945
Cont...
 Development of Civil Aviation in 1932 – Air transport
between Bombay and Karachi- Air India started as division
of Tata and Sons
 14 major companies under its control with combined sales
of Rs.280 crore by the end of world war II
 Diversified its business with a variety of enterprises like
engineering, construction, sugar,and soap and toiletries
 Promoted first Industrial bank and a new India Insurance
company
 Tata was the “first family” of Indian business by end of
1930’s
Conclusion
 Tata entered into many other enterprises like watch,
consultancy services, beverages, jewellery, cosmetics,
electronics etc. in later period of time
 It also established Tata Institute of Social Science and Tata
Memorial Hospital
 Significant affiliates of Tata group include Air India, Tata
Chemicals, Tata Communications, Tata Consultancy
Services, Tata Consumer Products, Tata Elxsi, Tata
Motors, Tata Power, Tata Steel, Jamshedpur
FC, Tanishq, Voltas, Tata Cliq, Tata Projects Limited, Tata
Capital, Titan, Trent, Indian Hotels Company
Limited, TajAir , Cromā, and Tata Starbucks, etc.
 It is one of the biggest and oldest business group in India
Business Organisation
 Any organisation engaged in business activities
 Business organization is an organisation formed for
the purpose of carrying on business enterprise. This
organization is based on systems of law governing contract
and exchange, property rights, and incorporation
 Business could be - consumption, production and
distribution – goods and services
 Forms of business organisation:
 Sole firm
 Partnership
 Joint stock
Company
 East India company was a joint stock company
 Formed for the exploitation of trade with East and
South East Asia and India
 Its owners were London based Businessmen
Cont...
 Till 1850, partnership in company was a general form
of ownership and management-
 Limited liability was formally recognised in first
Companies act of 1850
 1850-65- a boom in company formation and
management
 Organisational weakness of the companies exposed
 In 1870’s-Revival of Company formation
 New and reformed company laws increased stability
 Bombay Stock exchange was organised in 1875
European and Indian companies...
 In 19th Century-Both Europeans and Indians used family ties to
run business
 Indians operated in the home market
 Raised investments from existing business , friends and family
 The family was also merged with community –caste or religion
 Recruited managers from family , extended family and
community networks- Indian Companies
 Practice of strong ritual communities and marriage rules were
strictly followed
 Succession rules among Hindus that empowered joint family
and weakened testamentary rights
 ‘Undivided Joint family’ in which partnership was by birth
Cont...
 Europeans relied more on knowledge of foreign
markets and agency networks in these markets
 Recruited managers and partners from abroad
 Non-Family Managers in most European Companies
but recruited family members to a limited extent and
used the legal contact of managing agency more often
 Europeans used corporate form for their firms
 Indians used a hybrid between a family and corporate,
depending on their access to capital markets
 Bothe recruited technical people from abroad
Cont...
 Stock markets were not so much developed in India
 Banks financed trade not industrial investment
 After 1858, development of capitalism and industry
due to faster transportation links, uniform legal
framework and one official language within the empire
 Decline of traditional industry and handicrafts in
1870s
 Increase in the scope of Public- Private partnership
Managing Agency
 Managing agency-one firm- established with a partnership
and managed a set of companies
 It was a peculiar corporate structure that have few partners
who set it up to control a number of public limited and
joint stock companies
 In many cases- the Promoter started a company with
management contract between the company and itself
 Management contract originated in the insurance business
in early 19th century
 Typically, the partner (or at least the dominant partner) of
the managing agency was also the promoter of the
corporation being managed, though the amount of capital
he would risk would be limited.
Cont.....
 In 1870s- It changed to some extent- established in Large
scale industry, mining and plantations
 The Promoter and the manager were often same firms or
families
 With agency contract, the owners ensured two types of
earning for themselves- dividend and commission
 Reputation of an established management firm, the
promoters ensured interest from the wide public in start-
ups
 Reputation also allowed the managed company to raise
money from the share market without fear of loosing
control
Cont...
 In the case of Joint-stock company, the managing agency
contract was practiced in two different ways.
----If the agent was a majority shareholder in the managed
company, it could write the contract in such a way that
minority shareholders had little chance to influence the
managers
---If the agent was a minority shareholder in the managed
company, the owners had a better chance to observe and
influence the behaviour of minor shareholders
 Both types used company law to access equity and debt
Cont....
 During colonial period, Indian owned companies belonged to
first set of contract(major share holder in the managedcompany)
 European owned companies belonged to the second one(minor
share holder in managed company)
 Indian managing agents managed a small number of firms and
effectively owned them. They were keeping equity small and
owning most of it
 In the European owned companies-the agency firm had a small
holding in the managed companies , sometimes none at all
 But managed firms whose equity was sold mainly to British
expatriates and their family in India
 They commanded greater trust of public shareholders
Examples
 When the British Empire took direct control of the
governance of India after 1857, the big managing agencies
were born.
 By the end of World War I, they practically controlled
three-fourths of all industry in India.
 The managing agencies were true conglomerates,
controlling tea, coffee, rubber and jute plantations, textile
and jute mills, coal mines, shipping companies, and many
others.
 The English, Scottish and Indian agencies jostled to
dominate entire industries.
 Andrew Yule, Macneill and Barry, Mackenzie & Co, were
some of the British managing agencies of that era
Cont...
 The first Indian entrepreneur to set up his own managing
agency was Dwarkanath Tagore who promoted Carr, Tagore
& Company in Calcutta with his English partner. Tagore
even started a bank. He had amassed great wealth through
his estates and money lending by the time he set up his
managing agency, and was one of the biggest in India
 The Tatas, the Birlas, the Walchand Hirachands, and many
others set up their own agencies.
 The agencies, in turn, controlled companies these
entrepreneurs had set up as well as businesses they
managed to take over
 Agencies promoted by Parsi and Marwari entrepreneurs
more than held their own.
Management
 History of European firms in India –history of managers
than families ( late 18th century and early 19th century)
 Managers are of different kind than today’s managers
 Professional managers were rare among top managers
 Some were like traders heading one firm- joined with
others to form a partnership
 Some were salaried employees who are partners in
business
 Ethnical identity mattered somewhat in the recruitment of
Junior workers
 In recruitment of managers, capital and experience
mattered more than ethnical identity
Cont...
 The history of some large Indo-British
Conglomerates provide excellent information about
accounts of companies and biographies of the
managers who headed them
- The Bird
- Andrew Yule
-Parrys
- The Assam and Jorehat companies
-J.Thomas and Williamson Magor
Cont..
 Thomas Parry – Parry & Co. –agency house in Madras
 Parry changed from being a trading firm to
manufacturing firm
 Acquired sugar factories on the South-eastern coast
and by 1855 added more sugar plants
 Joined an emigration agency and began gold mining
 1890 the firm merged with East India Distilleries
registered in London to form EID Parry
 Focussed on sugar and insurance
 In 1948, this company shifted its registration to India
Cont...
 Andrew Yule(1834-1902) a merchant and industrialist
 Started jute, coals and tea companies in India
 Its London Associates were - George Yule and later
Yule, Catto, main shareholders of Morgan Grenfell
Cont..
 Jamsetji Tata , joined his father’s trading firm in 1850’s
 Engaged in trade between India, China and Britain
 Developed good understanding of cotton textile
manufacturing
 1969- Buying an oil mill in Bombay and turning it into
cotton mill- second factory to introduce ring spindles,
ventilation etc..
Cont...
 After the death of Jamsetji in 1904, his sons Dorabji
and Ratanji Tata became the inner circle of Tata Firms
 With the money invested by Indian Capitalists and
Princely states , and the Engineering Consultancy
provided by Ameriacan Firm- Kennedy, Sahlin and Co.
-Tata steel started in 1908
Conclusion
 Interdependence between commodity trade, banking and industry
 Mass transportation led to growth of agricultural trade
 Traders and bankers started factories
 Few among the trading and banking communities entered industry
 Community networking was there in business but in certain respect
community was of no big help
 More than community , cosmopolitanism played a positive role behind
start-ups( exposure of Indian business to foreign merchants and
foreign markets), British technologies, engineers and artisans
 There were many pioneering firms of Bombay and Calcutta , formed of
partnership of Europeans and Indians
 Partnership between Europeans and Indigenous bankers and overland
traders like the Marwaris
Introduction
 Indian subcontinent has long enjoyed a pivotal role in
world economy.
 India is estimated to have largest economy of the
ancient and medieval world, controlling about one –
third and one-fourth of the world’s wealth between 1st
and 7th century CE. (Angus Maddison (2001 and 2003)
 The country was referred to as “Swarnabhumi” and “
Swarnadeep” in the writings of many foreign travellers
, such as Huen Tsang, Meghasthenes,Fahien, Al
Beruni, Ibn Batuta,Frenchman Francois and
others.They repeatedly refer to the prosperity of India
Cont.....
 Trade and commerce was the main stay of ancient India carried
out by land and water
 According to Prof. Max Weber the skill of the Indians in the
production of delicate woven fabrics, in the mixing of colours,
the working of metals and precious stones, the preparation of
essences and in all manner of technical art, has from early times
enjoyed a world-wide celebrity
 The Indian mercantile community was very enterprising and
known for their entrepreneurship, trustworthiness and
resilience. Indian goods were known for its excellence
 Indians were far ahead of others in the art of building huge ships
for internal and external trade.
 Had good knowledge of sea routes, monsoon winds and other
navigational aspects that led them to establish trade with other
countries
Elements of trade and commerce
 Banking system
 Use of currency
 Manufacturing products
 Major Trade Centres
 Exports and Imports
 Trading communities
 Major Routes for Trade and transport
Banking system of India
 Metallic money used as the medium of exchange and
accelerated economic activities
 Documents such as Hundi and Chitti were used for
carrying out transactions
 Hundi is an unconditional order in writing made by a
person directing another to pay a certain sum of
money to a person named in the order.
 The indigenous banking system financed the domestic
and foreign trade with currency and letter of credit
 People used to deposit precious metals with lending
persons functioning as bankers or Seths, and money
became an instrument for supplying the manufactures with
a means of producing more goods
Coins
 During the early period (Vedic age) the currency in circulation was a
gold coin called Nishka.
 Later we have reference to another gold coin, Suvarna . There was also
a silver coin called Purana
 Karshapana mentioned by Panini was the name of a coin which was
minted in gold, silver and copper
 During the Mauryan period , there are punch marked coins. These
coins were small pieces of flat silver and copper which were punched
with symbols.
 Proper coinage was introduced during Kushanas
 Gold coins(Dinaras) were used in Gupta period
 In South India we come across gold coins like Varaha circulated during
the Badami Chalukyan period, Kasu circulated during the Chola rule
and Pagoda of the Vijayanagar period.
Karshapana
Niska, Punchmarked coins and
coins during Kushana period
Gupta coins
Manufacturing products
 Agriculture and domestication of animals were important
components of economic life of ancient people
 Other important economic activities of the people were:
 Weaving, Dying Fabrics, making clay pots, utensils and
handicrafts
 Sculpting, cottage industries
 Manufacturing transports like Carts, boats and ships
 Workshops(karkhanas) established for production of
goods from raw materials
Trading Communities
 The traditional trading class in India was the Vaisyas.
 The Vaisya community was the richest being of the
business class
 Punjabi and Multanis in Northern India
 Bhats and Jains in Gujarat
 Mahajan in Western India
 Chatt in South India
 Nagarseth of Ahmedbad
Trading Centres
 Pataliputra
 Peshawar
 Taxila
 Indraprastha
 Mathura
 Varanasi
 Mithila
 Ujjain
 Surat
 Kanchi
 Madurai
 Broach
 Tamralipti
 Kaveripatta
Major Imports and Exports
Exports-
 Spices,wheat,sugar,indigo,opium,sesame oil,cotton,
live animals and animal products –hides,
skin,furs,horns,tortoise shells,pearls and crystal etc ...
Imports-
 Horses, animal products, chinese silk,flax and
linen,wine, gold,silver,tin,copper,lead,rubies,coral,
glass and amber etc...
Cont....
 Through almost for two thousand years, ships brought
gold and horses into India and took away textiles and
spices. Other goods figuring as imports and exports
had, by comparison, shorter and more fluctuating
careers.
 Pepper was high demand in Roman empire and called
as “Black Gold’’
Merchant Corporations(Guilds)
 Merchant community used to form their autonomous
corporations called Guilds or Shreni to protect the
interests of the traders. They had their own rules for the
membership and professional code of conduct, which even
kings were supposed to accept and respect.
 They were like modern Chamber of Commerce
 The head of Guild called Shrenimukhya possessed
executive and judiciary authority over the members of the
Guild
 Trade and industry taxes were sources of State’s revenue
 Traders had to pay duties levied on most of the imported
articles at varying rates
Cont....
 Guild Chief ‘s deal with king or tax collectors to settle
the market toll on behalf of its fellow merchants at a
fixed sum of money
 Guild merchants also acted as custodians of religious
activities like building of temples, donating poor and
temple authorities and Brahmins etc...
 They had a prestigious status in the society
Routes and transport
 Land and water transport used for trade
 Road played a key role in the entire process of trade and
business
 Northern roadway route-from Bengal to Taxila
 Trade routes in South spreading east and west
 The major arteries of commerce, external and internal,
developed along the rivers and at the points where the
rivers met the ocean
Cont...
 Overland transportation at this time can be divided into
three classes: wheeled carriages, caravans of pack
animals, and boats plying rivers. The wheeled carriage
was of marginal use in the uplands of Central and south
India
 Caravans of bullocks and camels traversed the east-west
and north-south roads
 From the beginning of the Common Era, trans-Himalayan
caravans carried valuable goods such as horses and silk
along the six major trade routes that connected the plains
of India with Tibet, China, and Central Asia.
 In volume, then, trans-Himalayan trade was small
compared with maritime trade
Cont....
 The ancient trading zones in India formed around two
resources: a navigable river, and a port located on the
estuary of the river or near it.
 The physical link between the sea and the land was
achieved by means of the rivers more than by the roads.
Some of the inland waterways are:
 Cambay/Khambat on the river Mahi, Surat on the Tapi,
 Broach/Bharuch/Bharukacchha/Barigaza on the Narmada,
 Arikamedu on the Ponnaiyar
 Tamralipti/Tamluk on the Rupnarayan
 Saptagram on the Saraswati
 Masulipatnam in the Krishna delta
Cont....
 Hooghly on the Bhagirathi
 Balasore/Baleshwar with easy access to Budhabalang
andSubarnarekha
 Sonargaon on the Shitalakhya,
 Old Goa on the Mandovi
 All of these sites were simultaneously within easy
reach from the sea and from inland via the rivers on
which they were situated
Cont...
 In the Ganges and the Indus plains, maritime trade
was well connected with river-borne trade deep into
the plains because these rivers were navigable with
boats for hundreds of miles
 The river valleys supplied easy access to the interior by
land
 River-borne trade was seasonal, and so was trade at the
seaports
-
Six regional Systems for long distance trade. First three
of them accessed to Indian Ocean
1. Trade with West Asia and Mediterranean from Malabar
coast
2. Trade with Srilanka and Cambodia from Coromondel
Coast
3. Trade with Burma and Thailand from Bengal
4. River Gangas and Indus formed the fourth and fifth
systems carried long distance trade along the fertile
plains of South Asia
5. Both rivers fed into sixth system had overland trade with
central Asia, China and eastern Europe from the Upper
Indus plains
 ALL of these systems had particular advantage in
conducting trade to having at least two of three
localized geographical resources: location near
a navigable river, the prospect of a safe port at an
estuary or a transition zone between a river system and
an ocean, and access to mountain passes.
Cont.....
 Trans -Himalayan routes were important for commercial and political
point of view as South Asia was encircled by Himalayan mountain ranges
 The Plains of the Indus and the Ganges were linked with Persia, Central
Asia, Tibet, and China via a cluster of mountain passes. The six most
critical clusters were
 (1) in the west, a road that started at the shores of the Indus (Dera Ghazi Khan),
reached Quetta, and proceeded through the Bolan Pass to Kandahar and
Persia;-(a corridor between the plains of Indus, Afganistan and Persia) and
also connected to Mediteranean sea
 (2) in the north, a road that entered Afghanistan through the Khyber Pass,
and turning northeast, went via Gilgit to Central Asia; ( a passes between
Pakistan and Afganistan- connects Qabul with Peshawar)then to central
Asia
 (3) a road that proceeded from the Punjab plains via Ladakh through the
Karakoram Pass to Central Asia;(connected India and china to Central Asia)

Cont.....
 (4) in the Kumaon-Garhwal region, a road that went from the
plains along the valley of the Kali River that demarcates the
present border between India and Nepal, and reaches Tibet,
Mansarovar, and the Sutlej Valley through the Lipu Lekh
Pass( connects between India, Nepal and Tibet ( china)
 (5) in the eastern Himalayas, a road that connected Tibet and
India via the Nathu La in Sikkim; (trading border between
India and Tibet ( China)
 (6) in north eastern Assam, a road that went along the river
Brahmaputra to the Zayul Valley and bifurcated to reach Tibet
to the north, China to the east, and Burma to the south.
 These roads, and especially the western Himalayan ones, were
used for conquest and trade for centuries
Cont.....
 Indus Valley civilization had been connected to the
Mediterranean not only by sea but also via the Bolan
Pass.
 The Karakorum Pass and Khyber Pass routes were used by
traders and pilgrims from China; both led to the Silk Road,
joining it in Khotan( one of the silk producing centre in
China)
 All of these roads were unsuitable for wheeled traffic,
except, to a limited extent, for the Khyber Pass route
 Cargo was carried by sheep, ponies, and camels. Some of
the mountain passes were so high as to cause severe stress
to the animals
Cont.....
 Semi nomadic breeders of horse and sheep
dominated the trans-Himalayan trade, cattle breeders
occupied the Deccan pathways, and boatmen and
their sponsors controlled the river traffic in the plains
 Another trade route was a desert in western India , that
connected Gujarat with the Makran coast in Sind
 Coastal trade, also called by archaeologists “looping,” or
port-to-port, trade, added another way to combine
maritime trade and overland caravan traffic.
 Example- one of the overland routes from China to India
started at Yunnan and reached the river Irrawaddy
(Burma)and then followed the river to Pegu(Burma), with
which Bengal had an ancient maritime link.
 Boats actually used in the Arabian Sea , constructed
either in India or in West Asia .
 The ships plying between the Red Sea ports and
western coastal India were mainly of Indian
construction.
Indo-Roman trade
 During the early historical period (300 BCE–300 CE), South India’s
cities were usually port cities and were closely connected with
Indo-Roman trade
 The Indian Ocean trade network linking the Roman Empire with
India, East Africa,Iran, and Sri Lanka via the Red Sea
 According to “Periplus of Erythraean Sea”,Roman, Arabian, and
Persian ships crossing the Arabian Sea reached three
destinations in India: Broach on theGujarat coast (Barygaza),
Muziris (Pattanam) and Nelkynda on the Malabar coast, and a
cluster of ports on the Coromandel coast, of which the principal
one was Arikamedu.
 Along these routes, Roman coins, ceramics, especially red
polished ware, and bronzes, and Indian cotton textiles have been
found traded
 The items of export from Arikamedu were- beads,gemstones, shell
bangles, ivory articles, textiles, spices, incense, and leather articles.
History of Trade in Ancient India or
Early India(From the Origins to
1200 CE)
 Indus Valley Civilization ( 3000 BCE)- trade with
Mesopatamia (Sumerians)
 Port Town Lothal, a settlement of Indus Civilization –
trade with West Asia and Gujarat
 Lothal had easy access to sea via river
 Sixteen Mahajanapadas(500 BCE-1 CE)- (city states or
great settlements )developed in middle Gangetic
plains- competition for control over land and livestock
 Rise of Buddhism and Jainism(500 BCE) as protest
against the Brahminical Hinduism
Cont...
 Merchants were great followers and sponsored the growth of
both the religions
 Peasants, Pastoralists and landlords were followers of
Brahminism
 Mauryan Empire(320-185 CE)- Extensive inland trade during
Mauryan period
 Main centre of trade was Pataliputra on the Gangas-opening
access to two maritime trading zones- one was Avanti
connecting to Broach in south west and Tamralipti in Bengal
accessing to Bay of Bengal
 Had also External trade with Syria, Egypt, Greece etc. in the west
and also with South East Asia and China, Srilanka etc.
 Mauryans carried on their trade mainly with the east through the
Kalinga ports
Cont.....
 Satavahanas (230 BCE-2nd Century CE)– Aamaravati in the Krishna
Valley and Pratisthan (paithan near Aurangabad on Godavari
river), had both internal and external trade with west
 During Kushana period I(50-400CE) India had trade with foreign
countries -mostly with Roman empire through land routes from the
north-west and sea-routes from the west coast
 Guptas(250-550 CE) had not only increased their eastern trade
effectively but , opened up the western sea borne trade and this led to
unprecedented economic prosperity.
 In Tamilnadu, Kaveripattanam and Tondai were the principal
ports. Arikamedu was also another port in Southern India
 In Bengal, Tamralipti was the principal port
 Tamralipti carried on trade with China,Cylon,Java and Sumatra
 In the Malbar coast Kottayam and Muziris (modern Crangnore)
were the main ports through which brisk trade was carried with
the Eastern Archipelago and China.
Cont....
 The acquisition of the maritime province of
Saurashtra by Chandragupta II opened up the western
trade and the wealth of the Roman Empire began to
pour in India through the ports of western coasts like
Broach, Sopara, Cambay and Kalyan in western India
 Alexandria was a meeting place for Indians and Romans
 Development of Urbanisation on the Gangas, Yamuna,
Narmada , Godavari and Krishna
 Along these rivers highways or corridors developed
integrating land to the sea and the Deccan uplands with
the Gangetic plains
Impact on society and culture
 This period is noted for three important changes.
 The rise of religions that advocated nonviolence, thereby
reduced sacrifices and expensive rituals. (Buddhism and
jainism)
 The emphasis on a frugal lifestyle and peaceful neighbourly
relations suited the mercantile temperament.
 Merchants were the principal sponsors of these religions.
 A second change was the introduction of coinage in the
sixth century BCE, which promoted regional monetary
integration.

Cont....
 The third change was the increasing use of writing,
which may have indirectly helped in long-distance and
complex economic transactions.
 This process of change was centred in the eastern
Gangetic plains, where settled agriculture had given
rise to powerful landed communities
 Access to the sea and to river-borne trade remained
the principal means of procuring precious metals and
consumption goods in this area
 States sponsored merchants and the religions of the
merchants- Buddhism and Jainism
Cont....
 The Mauryan Empire had the development of commerce,
religion, agriculture, and coinage.
 The connection between religion and commerce was found
in the northern part of the Deccan plateau
 A cluster of rockcut Buddhist caves received the patronage
of not only kings but also of merchant guilds, and families.
 Pilgrims, caravans, and soldiers all used the same roads in
the plateau.
 The great marvels of Buddhist art, such as the cave
paintings of Ajanta, believed to be sponsored by a Saivite
Vakataka king in the fifth century CE.
Cont....
 Exchange of merchandise led to exchange of ideas
 Chaturang , a game named after the four traditional
wings of the Indian army and played by four players
became popular in west Asia and evolved into chess
 Emergence of Gandhara school of art in India
 Spread of Buddhism to East Asia and other Asian
countries ..
A Case Study on Bengal
 Served sub-continental trade in four distinct ways-
1. as a point for the re-export of northern imports (such
as horses) via the Bay of Bengal
2. as a source for fine cotton textiles exported to
western and northern India
3. as a point of contact with trade across the eastern
Himalayas, and
4. as a link between South Asia and East Asia by sea.
Cont...
 From the early centuries CE, lower Bengal traded with
Burma, selling textiles for gold and silver.
 The small hoards of gold coins found near Chittagong
indicate the conversion of the metal into regional
coins.
 The important trading post in Bengal was Tamralipti,
located on the main channel of the Ganges(early in the
Common Era).
 The port had contacts with the major inland river
ports like Varanasi and Pataliputra on the one side,
and with Southeast Asia and Sri Lanka on the other.
Cont....
 According to H. G. Rawlinson, “ exported good were
various kinds of birds and beasts, including . . . the
valuable Sind horses,ivory, cotton goods, jewels, gold,
and silver”
 It was through the Ganges-Bengal corridor that
Buddhism was exported from India to Sri Lanka.
 Decline of Tamralipti early in the second half of the
millennium
 The shifting of the river was one of the cause
Cont...
 V. K. Thakur says that “the foreign trade of Bengal
which was prospering up to the beginning of the 7th
century A.D began to shrink considerably by the
middle of this century; and all commercial activities
declined towards its end.”
 Urbanization along the banks of the river Bhagirathi.
 The urban flourish from the tenth century onward
that served as a foundation for the revival of maritime
trade and its growth in later centuries in Tamralipti
Cont....
 Following on the decline of the Gupta Empire in north India,Bengal
was ruled by three powerful states – the Shashanka, thePala, and the
Sena dynasties
 Importance of horse trade during Pala empire
 Pala inscriptions point to the systematic participation of royal agents in
the fairs and markets of present Haryana, where horses had been
available for purchase for a very long time
 After the tenth century and the advent of the Senas that the horse trade
and horse traders moved into Bengal.
 This inference is known from the fact that MuhammadBakhtiyar Khilji,
whose small cavalry occupied Nadia, the abode of the Sena king, in
1205 CE
 The only chronicle of the invasion (Tabaqat-i-nasiri, by the Indo-
Persian judge and historian Minhaj-i-Siraj) also mentions an
unidentifiable market where horses were brought for sale from across
the eastern Himalayas
Cont....
 Limited contact between Bengal and China via the export
of Persian horses and the exchange of religious missions
continued in the first millennium
 Two overland trade routes- One of these started from
Yunnan, went west towards Assam andManipur, and ended
in Chittagong or the Arakan coast on the Bay ofBengal.
 The other started from Yunnan and took a long southward
detour through the Pagan Empire in medieval Burma
before joining the Bay of Bengal ports
 Both routes made use of the valleys of major rivers – the
Salween and the Irrawaddy
Cont....
 The India-Burma link was more visible than the India-
China one.
 The Pyu city-states in lower Burma in the ninth
century consolidated the India-Burma connection
 Although disrupted by the Nanchao conquest, the link
was re-established during the rule of Anawrahta
Minsaw (1014–77) in the Irrawaddy delta.
 The visit of Cheng Ho’s fleet to Bengal in the
fourteenth century seemed to confirm the Chinese
trade with Bengal
 Trade with China was intermittent
Introduction
 Consolidation of empire during Sultanate and Mughal
period in India
 Integration of the ports of Deccan and Bengal and revival
of channels of communication with Central Asia
 The movement of armies on the long distance routes led to
development of roads- arteries of empire
 The consolidation of the empires led to urbanization in the
two great plains of India
 The cities along the Ganges and the Indus were home to
garrisons, courts,traders, artisans, intellectuals, and artists,
and maintained commercial links with cities in West and
Central Asia
 The main income of the state was land tax
Cont...
 Expansion of Cultivation due to Urbanization and increase
in consumption needs
 In the words of D.D.Kosambi, “The inevitable counterpart
of the caravan merchant . . . was the new armed feudal
landlord who squeezed a greater surplus from the land by
force.”
 The conquest of the ports were usually driven by military
and political motives rather than by commercial ones.
 The coasts and the ports continued to have a relatively
autonomous character and populated by migrant
merchants and were governed by a regional state.
 The developed urban centres near ports were small as
compared to the capital cities
Feudal Period
 Feudal Period- 700- 1200(From late antiquity to Sultanate Period)
 Post-Feudal Period- Sultanate and Mughal Period- 1200- 1700
 Rise of many regional kingdoms in different parts of India
 States in North India were poor and weak
 Trade was not the mainstay of economy
 More importance to agricultural resources
 Less importance to long distance trade
 Control of Arab Caliphate on Mediterranean land
 That led to withdrawal of Europe from overseas trade
 Decline of trade in cities of Roman Empire
 Gave rise to agrarian self-sufficient economic structure that led to
development of Feudalism
Cont...
 Arab world stimulated alternative trading worlds and
trade routes in the eastern part of the continent
indirectly turning Europe into a productive
periphery that had incentives to expand the
supply of resource-based goods, including grain
and slaves, in exchange for manufactures.
 Weakening of Islamic resurgence by Mongol invasion
in 13th century
 Venice emerged as a centre of trade and a point of
contact between Europe, Islamic world and
distant China
Post Feudal period
 Delhi Sultanate
 Mughal Empire
Impact of Islamic resurgence on
South Asia- Delhi Sultanate
 Establishment of Islamic Rule in India
 From 14th century, Western and eastern Indian
oceanic trade became more closely connected
 Overland trade between central Asia and India
developed
 Population movement and Diaspora settlements
 The trans-Himalayan connection existed in the Indo-
Islamic states
Cont...
 Northern Overland and river-borne trade
recovered in 14th century which was declined in
late antiquity
 State formation in Deccan led to development of
maritime trade for the demand of horses brought
in by sea route
Merchant Communities
 Marwaris and Gujuratis – monopoly over coastal trade
and trade between ports and hinterlands
 Muslim Bohra Merchants, Multanis and Khorasanis-
controlled long distance trade
 Rise of Dalals or middlemen with increased
urbanisation and commercial expansion
Coinage
 Coins were cruder copies of classical coins in the early
medieval period
 Coinage was centralised from 13th century
 Fast growing and lucrative economy led to stability of
precious metals like gold and silver
 Development of coinage system , both in terms of
quality and volume
 Dirham during Khiljis
Urban Trading Centres and Trade
routes
 Delhi,Agra, Multan, Anhilwara Patan, Kara (on he
bank of river Gangas(UP )and Khambhat(Cambay in
Gujarat)-textile and horse trade
 Bengal and Gujarat- production centres of coarse
cloth and fine fabrics
 Kambath- textiles, gold and silver work
 Sonargaon- raw silk and Muslin
 AnhilwaraPatan -Saris
Cont...
 Central Asian traders brought horses to the fairs and
markets that developed near Delhi after the
establishment of Delhi sultanate
 Consolidation of the fiscal strength of the
sultanates by means of the establishment of a
number of administrative garrison-market towns
in the Indus-Ganges Doab during the reign of
Firozeshah Tughlak.
Cont...
 Progressive development of trade routes through
the central Indian countryside (known from the
travel accounts of Muslim nobles travelling form Delhi
towards Gujarat and Deccan)
 The north-south spread of Islamic state power led to
development of trade routes and revival of traffic
between the Indus River valley and the Ganges
plains via Nagaur in Rajasthan and Bayana in
central India.
Mughal Empire
 Ruled for 300 years
 The core economic region of the Mughal Empire was located
at the meeting point of the upper Indus and the western
Gangetic plains
 Rapid growth of towns in this region were due to its fertile land,
large rivers, and, especially, proximity to roads going to Central
Asia, Persia, and Kabul
 Development of Delhi, Hisar, Lahore, and Firozabad as
trading towns with the older set of trading towns in the eastern
and southern reaches of the plains like
 Bayana(Rajasthan), Ahmedabad, Badaun,
Sambhal,Kalpi,Mathura,Kanauj, Etawah, Bahraich, and
Lucknow(UP), Benares and Patna
Cont...
 In the eastern Gangetic plains ,the major trade
centres were Benares and Patna
 Mughal conquest of Bengal in 17th century and
became one of trading centre
 Establishment of Agra city by Sikander Lodi and its
development into commercial transit and market
during Mughal period
Cont...
 In the 17th century, the river Yamuna connected
Hindustan with Benares, Bihar, and Bengal. The river
brought grain, silk, and cotton from Bengal and Bihar;
indigo and sugar from Awadh; and cotton from
Punjab.
 Agra also became a centre of banking and finance, and
housed firms that discounted and issued bills.
 Inside northern India, the mobility of capital and
enterprise was encouraged
 Dhaka was developed as another city due to the newly
established residence and capital of the provincial
governor Murshid Quli Khan
Cont...
 Revenue transactions and grain dealing led to
proliferation of market towns and home to
merchants, traders, brokers
 Commercial traffic of capital occurred mainly along the
major rivers, where the principal business centres and
transit ports were located
 Merchants maintained warehouses in a variety of
locations, including Gujarat
 Overland trade not only served the urban markets and fairs
in the plains but also in the hilly areas
 The frequency of travel and the scale of business increased
in the seventeenth century
Cont...
 External Trade-the Persia-India maritime trade, and the
India-Transoxania (lower central Asia)overland trade.
 Ships went by sea from Gujarat and Goa to Persia and met
caravan traffic coming overland across Khorasan(Iranian
province).
 The simultaneous existence of Mughal empire in India and
Safavid empire in Iran integrated them culturally and politically
through an exchange of administrators, artists, and artisans but
also created a shared interest in trade.
 Cambay and Surat, developed as ports in Mughal-
controlled Gujarat
 The Persian port Hormuz supported large caravans in Persia
and in India
 Samarkand used as a meeting place for trade
from Turkish territories and trade from India .
 Use of these routes by merchants mentioned in Arabic
and Persian travellers of Central Asia
 Indians who settled in Central Asia were described
sometimes as merchants and sometimes as
bankers, and nearly all were agents of family
businesses based in India, mainly in Multan.
Cont...
 Land routes – were dangerous
 Piracy on the sea route
 Trading centres and trade routes are State sponsored
 Increase in overland trade and maritime route to
Persia during Mughal period
 Growth of manufacturing in port towns
 Development of Sind as a commercial significance in
17th century
Export and Import
 Exports- Textiles
 Imports- Horse and semi luxury goods
 Horses came into India from Central Asia via the
overland routes
 Once in India, the horses were sold at the major fairs.
 Horses also came by sea from West Asia into the
Indian port cities.
 The regional states, not least the East India Company
after becoming the ruler of Bengal, tried both to
breed horses and to control the horse
A case study on Gujarat and
Konkan in transition
 Emergence of an early world system in western Indian
Ocean from 13th century
 Mamluk Sultans of Egypt played a mediating role in trade
between Asia and Europe.
 Led to volume of traffic on Red sea
 Venetians and Genoese merchants of Italy used another
route via black sea and land route across Persia
 Ports of Konkan and Malabar coast , notably, Cambay,
connected Red sea on western side with sub-regional
networks, east Afria, South Arabia,Persian Gulf, and South
East Asia
 Trading of variety of goods- textiles, spices,minerals and
agricultural goods
Cont..
 Bigger ships carrying 300-400 tons used for Red sea
trade from India
 Smaller size ships used for eastern Indian ocean and
Bay of Bengal
 Teak from Malabar forest used for ship building
 Peak period of the Cambay port in trade – 14th to
16th century
 Surat emerged as a an important port of Gujarat
in 17th century
 Broach was in ancient period
Cont...
 Significance of Cambay port was – it was a connecting
point or station of land routes from north and a
trading post where caravans meet ships
 Political patronisation and social importance of some
merchants in 17th century
 One great example was Ali Akbar – an Iranian horse and
jewel merchant who received patronage from Shah
jahan
 Given office of ports administrator, with dual charge of
Surat and Cambay
 That helped Ali Akbar for his private ventures in India
 Shah Jahan got access to horse market of Busra city of Syria
Cont...
 Diu was another port during this time under the
control of regional ruler of Gujarat
 Occupied by Portuguese in 16th century(1535CE) and
came under their control afterwards
 After the conquest of Gujarat by Akbar in 1570 AD ,
Surat emerged as an important port for the empire to
western sea coast
 Surat connected overland trade to the heart of the
empire in 17th century
 Connected to Red sea and South east Asian countries
Transactions ofknowledge
 The “tripartite Muslim Asia” consisting of Iran, Turan
(Central Asia), and Hindustan was bound together by a
shared elite culture.
 The sultanate and Mughal courts of India received scholars
from Persia, Egypt, Central Asia, and, more rarely, the
Maghreb in Africa.
 That led to flow of a great deal of scientific and
technological knowledge in India
 The Ghorian conquests of around 1200 were associated
with the introduction of the Persian wheel, the
spinning wheel, paper manufacture, and sericulture
Cont...
 The use of cannons and muskets through a series of
exchanges and experiments during the fifteenth and 16th century.
 Through pensions and gifts, the aristocracy in
Mughal India sponsored accountants, “scholars, poets,
theologians, physicians, painters, musicians, and dancers
 Babar, founder of Mughal Empire, was interested in cross-
cultural exchange
 Akbar was a great patron of the practical arts and culture
 Akbar’s court was adorned with Navratna Pandit or nine
gems
 The predominant group among his court scholars were “masters
of the spirit,” or theologians
Cont...
 The Mughal court and nobles consumed a very large
quantity of craft goods.
 The mansions of princes and nobles, modelled
after the imperial palace fortress, “dominated
social, economic, and political activity” in the
cities of Mughal India.
 The aristocracy maintained manufactories, or
“karkhanas,” for the production of both consumer
goods and military supplies.
Cont...
 The migration of experts and master artisans was
variously induced by famine, trade, military
campaigns, the attraction of protected urban
settlements, and the spread of religion.
 The direct or indirect patronage by rulers and nobles
led skilled artisans to settle in the cities.
 The master artisans who were at top of the skill ladder
in the cities of Mughal India were either employed by
the political elite or received special privileges from
the rulers.
Cont...
 In South India, artisans were sponsored by the great
temple along with rulers though temple power and
state power were usually indistinguishable.
 Almost all of the highly skilled groups were outsiders
who settled in the capital cities.
 The South Indian groups moved between
northern and southern parts of the Deccan,
whereas many of the North Indian groups came
from Kashmir and Central Asia.
Cont...
 The Mughal imperial channel of knowledge exchange
took on a new meaning between 1600 and 1650 with the
growth of the Indian Ocean trade and the introduction of
Jesuit missionaries to the court.
 These new channels brought into India cartography and
navigational techniques.
 By way of the Europeans, two new world crops, tobacco
and maize, were introduced from the Americas
 Growth of Sericulture in Bengal.
 Development of Map making from the contact
between indigenous and Western practices.
Cont....
 Introduction of a wide range of manufactured
consumer goods to India in the seventeenth century
by the Europeans - glassware such as telescopes and
spectacles, mechanical clocks, and swords.
 Western artillery, seamanship, and naval warfare
techniques
 Western goods were purchased by officials and
governors of port cities such as Surat and then sent on
to Agra and Lahore; in some cases, their local
manufacture was sponsored.
Conclusion
 The basic character of Indian business was Commercial
rather than industrial during Medieval period
 During the 500 years of political integration led to market
integration between the north and the east, north and
south, and between the uplands and the coasts in the
south.
 Its effects were hardly revolutionary, however,
the composition of trade did not change much
 The migration and resettlement of artisans and merchants
contributed indirectly to the diffusion of innovations
 But little change can be seen in the organization of Commerce.
 By the mid-seventeenth century, however, the European
factor had begun to alter the institution a basis of long
distance trade
Introduction
 India was predominantly an agrarian society
 Agricultural sector generated the bulk of output and
employment
 The manufacturing sector confined largely to textile goods
and handicrafts, occupied very limited space in the total
economy
 Trade and commerce ( carried out by land and water) also
played an important role in making India to evolve as a
major actor in the economic world since very ancient
times
 Commercial cities of Harappa and Mohenjodaro were best
examples of it
Cont..
 It was also developed during the period of Mauryas,
Kushanas , Guptas and Kingdoms of South India like
Cholas, Satavahanas and Vijanagar Kingdoms
 During Medieval Period it was also flourished with
certain changes in its functions and characters-during
Sultanate and Mughal Period upto 18th Century
Features of Traditional economy
 State of Market-Long Distance trade and fragmented
markets
 Appropriate Technology and family Unit
 Military Feudalism ,Urbanisation and Monetisation
 Silver Stream and State finance
State of Market
 Congeries of Scattered markets, instead of single
integrated theatre of transactions
 No unified code of conduct.
 Plethora of currencies- circulating in different parts of
the country
 Time consuming and unsafe trade.
 Means of communication inadequate and insufficient-No
proper roads and highways for moving of goods and
services
 Existence of intricate web of custom barriers , called
Chowkies in popular parlance due to political
fragmentation (Regional rulers, local chieftains and even
Zamindars)
Cont...
 Indian economy became well monetised during the
reign of Akbar and continued during his successors
but some old currencies continued to circulate
 Metal Value-No fixed rate governed the exchange
between the various currencies in circulation. Their
relative value was determined by their metal content
and the prevailing price of the metal in a given market
 Standards also varied between region and region ,
province and province and sometimes between two
Villages
Fragmented markets and Long
Distance trade.
 No integrated Market economy in spite of political
unification of India but scattered or fragmented
markets
 Many regional and local markets due to high cost
of transportation
 Only expensive goods with little weight such as textiles
or precious raw materials such as indigo were traded
over long distances and also entered the international
market via maritime trade.
Cont...
 Pack animals as means of transportation but rare use of
bullock carts
 Merchants preferred to move in caravans but also
subjected to blackmail, extortion and physical assault
 River transport by Ships for long distance trade
 Bengal rice being sent to Sri Lanka or up the Ganges to
North Indian markets
 Rice from Gujarat sent to ports in East Africa or in the
Persian Gulf
 Grain rarely ever reached the next regional market
 Long-distance trade routes for certain commodities
 Regionally fragmented markets for most other goods.
Cont.....
 The lucrative and risky long-distance trade and maritime trade
were well financed by rich merchants as well as high officers and
princes
 Large scale transactions were facilitated by the circulation of
promissory notes (hundi), which were sometimes handed on like
bank notes before they were encased .
 Existence of a well-developed trade and a great deal of
sophistication in dealing with money and credit, but all this was
never institutionalised or guaranteed by any authority.
 Credit was based on personal relations and not on an
impersonal legal system.
Promissory note
Appropriate technology and family
unit
 Appropriate technology available during this time-
Simple tools and implements
 Small scale production of family units of peasants and
artisans
 Abundant land and labour as factors of production
and capital was the substituting factor which was
scarce
 No capital accumulation –no ownership of means of
production
 Some capital formation in trade and also in terms of
the construction of wells and tanks for local irrigation
Cont..
 Manufacture of weapons or luxurious goods-
sponsored by some rulers(was very rare)
 Wealth was with merchants or victorious warlords but
such wealth lost as quickly as it gained
 Prevalence of Decentralisation of administration and
economy
 Predominance of Family farm
 Land was not a commodity like today- not freely
bought and sold
Cont....
 Peasant Family was in greater demand than land,
which belonged to him who first cleared it
 Landlords were not landowners; they only had the
right or privilege to collect taxes from the peasants.
 Urbanisation and monetisation were limited
 Money circulated only in the centres of trade and
pilgrimage.
Military Feudalism, Urbanisation
and Monetisation
 Establishment of Muslim rule and rise of new style of
warfare and military organisation
 Development of Cavalry led to Horse trading
 Rise of new Urban centres in the countryside
 They housed the garrison of the cavalry, the treasury of the
tax collector and served as market places
 Increase of international trade brought precious metals to
India and contributed to the spread of monetisation,
which enabled the tax collectors to get their revenue in
cash.
 The military commander and tax collector, who ruled the
countryside from his garrison town
Cont....
 The type of urbanisation bred by this system of
military feudalism was a strange one. There were no
patricians, no municipal autonomy in these towns.
 The military elite was in complete control and civil
administration was already subject to the control of
military officers.
Flow of Silver stream and State
finance
 Monetisation of the land revenue was very
important for the rulers of a great agrarian state
because only cash could be easily transferred from the
local to the central level so as to support a powerful
government and a large army
 India had no silver mines and paper money was not yet
in circulation (except for the private promissory notes)
 The Great Mughals had standardised and
improved the minting of coins in their empire
Cont....
 Their silver rupee was of good quality and was
universally accepted. Anybody could go to the mint
and could get silver converted into rupees at a small
charge of 5.6 per cent
 Constant circulation of silver coins and steady flow of
money
 Increase of Government expenditure due to growth of
population
 Increase of in use of silver stream flowing from the
west to India was so more that led to Price inflation
Cont....
 Impact of price inflation in Spain noticed on India
 Circulation of Silver coins trebled in India (1591-1639)
 Conduct of expenditure by Mughal rulers or use of Public
finance was high during Jahangir, Shahjahan and
Aurangjeb
 Import of silver was also farely high
 Inflation affected Akbar’s land revenue system
 Burden on peasants who became rebellious
 Impact on Mansabdars and other officers
 Coming of the Servants of European East India Company