Chapter – 1

BUSINESS, TRADE & COMMERCE

Introduction

All human beings require different types of goods and services to satisfy their needs. The
necessity of supplying goods and services has led to certain activities being undertaken by
people to produce and sell what is needed by others. Business is a major economic activity in
all modern societies as it is concerned with the production and sale of goods and services to the
needy people.
SECTION 1

History of Trade and Commerce

Trade and commerce have played a vital role in making India to evolve as a major actor in the
economic word in ancient times. Commercial cities like Harappa and Mohenjodaro were some
examples for the business development of ancient India. These civilizations had established
commercial connections with Mesopotamia and traded in gold, silver, copper, gemstones,
beads, pearls, sea shells etc. There were different types of coins and weighing practices during
that time.

Indigenous Banking System

As economic life progress, metallic money had been introduced which in turn accelerated the
economic activities. Documents such as Hundi and Chitti were in use for carrying out
transactions in which money passed from hand to hand.

Hundi as an instrument of exchange, it involved a contract which warrant the payment of

money, the promise or order which is unconditional and capable of change through transfer by
valid negotiation.

Indigenous banking system played a prominent role in lending money and financing domestic
and foreign trade with currency and letter of credit. With the development of banking, people
began to deposit precious metals with lending individuals functioning as Bankers or Seths.

Hundies practiced by Indian Merchant Communities

Name of Hundi Category Function
Payable to any persons – no liability over who received the
Dhani-jog
payment
Darshani Payable to a specific person (someone respectable). Liability
Sah-jog
over who received the payment.
Firman-jog Payable to order
Dekhan-har Payable to the presented or bearer.
Payable to any person – no liability over who received the
Dhani-jog
payment, but payment over a fixed term.
Firman-jog Muddati Payable to order following a fixed term.
Drawn against dispatched goods. If goods lost in transit, the
Jokhmi drawer or holder bears the costs and the drawee carries no
liability.

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Rise of Intermediaries

Intermediaries played an important role n the promotion of trade. They helped the producers
especially in foreign trade. They consist of commission agents, brokers and distributors for
wholesale and retail of goods.

Transport

Transport by land and water was popular in the ancient times. Roads as a means of
transportation had assumed key importance in the process of growth especially in inland trade.
The northern trade route from Bengal to Taxila was an example for the same.

Maritime trade was another important branch of global trade network. Muziris (ancient harbor) in
Malabar Coast (near to the present-day Cochin) has a long history of international maritime
trade.

Calicut was also an important market for Chinese to acquire items like frankincense, pepper
(black gold), pearls, cotton etc.

Pulicat on Coromandel Coast (Tamil Nadu) was a major port in the 17th century. Textiles were
the principal export item from Pulicat to Southeast Asia.

Trading Communities

Different trading communities strengthened in ancient India and they dominated trade in different
parts of the country. Some of them are as follows:

Punjabi and Multani - Merchants in northern region

Bhats - Gujarat and Rajastan
Mahajan - Western India
Chatt - South India

Merchant Corporations

They were autonomous corporations (guilds) formed to protect the interests of the traders.
These corporations were organised on formal basis, framed their own rules and code of
conduct, which even kings were supposed to accept and respect. The guild chief directly dealt
with the king or tax collectors and settled the market toll (tax) on behalf of its fellow merchants at
a fixed sum of money.

Major Trade Centres

1. Pataliputra – Patna in Bihar today. Commercial town and major centre for export of
stones.
2. Peshawar – City in Pakistan. Very popular for export of wool and for the import of horses.
Major transactions between India, China and Rome in the first century.
3. Taxila – City in Pakistan, also called Thakshashila. Popularly known as the city of
financial and commercial banks.
4. Indraprastha – Located in the region of present-day New Delhi. It was a commercial
junction where most routes leading the east, west, south and north converged (joined).

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 5. Mathura – City in UP. It was an emporium of trade and people here subsisted (lived) on
commerce. Many routes from South India touched Mathura and Broach (Bharuch in
Gujarat).
6. Varanasi – City in UP. Well known centre for textile industries and became famous for
gold silk cloth and sandalwood workmanship. It had links with Taxila and Bharuch.
7. Mithila – City in Bihar. The traders in this city crossed the seas by boats, through Bay of
Bangal to the South China. They established trading colonies in South China.
8. Ujjain – City in MP. Different verities of clothes were exported to different centres. It had
trade connections with Taxila and Peshawar.
9. Surat – City in Gujarat. It was an emporium of western trade during Mughal period.
They were also famous for gold boarder sarees.
10. Kanchi – Present day Kanchipuram in Tamil Nadu. Chinese came here to purchase
pearls, glass and rare stones and in return they sold gold and silk.
11. Madura – City in Tamil Nadu. It was the capital city of Pandya dynasty who controlled
the trade of pearl and fisheries of the Gulf of Mannar (shallow in between India and Sri
Lanka).
12. Broach – Present day Bharuch in Gujarat. It was a major trade centre in Western India.
13. Kaveripatta – Present day Kaveripattanam in Tamil Nadu. It was scientific in its
construction as a city and provided loading, unloading and strong facilities of
merchandise. It was also famous for perfumes, cosmetics, scents, silk, wool, cotton and
also for ship building.
14. Tamralipti – City in West Bengal (Kolkata). It was one of the greatest ports connected
both by sea and land. It was linked by road to Banaras (UP) and Taxila.

Major Exports and Imports

Spices, wheat, sugar, indigo, opium, sesame oil, cotton, parrot, live animals and animal products
were the major export items, whereas import items include horses, animal products, Chinese
silks, linen, wine, gold, silver, copper, etc.

Position of Indian Subcontinent in World Economy (1AD to 1991)

From 1st to 7th centuries, India was estimated to have the largest economy in the world. The
country was often referred as ‘Swarnabhumi’ and ‘Swarnadweep’ by many writers and travelers
like Megasthenes, Faxian (Fa Hien), Xuanzang (Huen Tsang) etc. because of its prosperity.

During 18th century, the British empire began to take roots in India, thereby the Indian economic
condition was slowly changed from being an exporter of processed goods to the exporter of raw
materials and buyer of manufactured goods.

India begins to Reindustrialise

After independence, the process of rebuilding the Indian economy have been started. As a part
of this the first five year plan was implemented in 1952. Due importance was given to the
establishment of modern industries, modern technological and scientific institutes, space and
nuclear programs.

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