The Marwaris Page 2
Those who are overly enthusiastic about regulating the market, and even before they think about a new law and a new regulator, ought to remember that there are self-regulating mechanisms within the market, such as sakh, that keep bad behaviour in check. The market itself is neither moral nor immoral but it does tend to reward good actions and punish bad ones. A businessman who treats his customers, suppliers and employees fairly will be trusted by the market, and this in turn will build reputation and market share.
At the heart of the market system is the trust between self-interested strangers who come together to exchange in the marketplace. The reason that buyers and sellers are able to trust each other in the market is, in part, due to the underlying belief that the average person acts honestly—that he or she wants to do the right thing—and this gives people a sense of safety when they transact. This is why a seller readily accepts a cheque from a buyer. Millions of transactions in the global economy are conducted daily based on trust, without resorting to contracts. The market depends ultimately not on laws but on the self-restraint of individuals. However, the market also fails, and it is often unable to discipline the dishonest. Hence the need for laws and regulations, and the enforcement machinery. However, a good state rules with a light touch that causes the least discomfort to the honest everyday person.
The Footprint of the Owner is the Best Fertilizer
Timberg has highlighted the reasons for the success of Marwari firms. However, it is important to understand why some of the Great Firms declined and fell, including perhaps the greatest of the Great Firms, Tarachand Ghanshyam Das, which closed in 1957. Timberg has written much about this firm, and rightly so, with enthusiasm. It enjoyed such prestige and credibility that its Hundi was negotiable through multiple offices and accepted by moneylenders and traders across the country. The great Birla family got its start in Calcutta as subagents to this firm.
Why did this firm die? I posed this question to my friend Suresh Neotia, whose nana (maternal grandfather), Janki Prasad Poddar, was one of the last generation of six brothers who owned the company. Neotia replied that none of the brothers did an honest day’s work. They felt that it would diminish their status if they were seen sitting on the gaddi in Calcutta’s Burra Bazaar, home to the Marwari businessman. A gaddi is literally a large mattress covered with chandni,‘white cloth’, where the seth, or merchant, parked himself in the morning after his daily puja. Beside him sat his munim, bookkeeper and trusted adviser. Gaddi in time came to mean a firm’s office and even the firm itself.
When you have money for more than a hundred years in the family, the appetite to make more diminishes. When experienced and trustworthy munims carry on the business independently and successfully, the sensible thing is to delegate and leave them alone. The Poddar seths thus left the running of the business to munims, who had over generations also accumulated shares in the firm and had become junior partners. When the munims tell you that the esteem of the firm will be diminished if the seth sits daily on the gaddi at Mullick Street, you believe them and you go away on a perpetual holiday to Mussoorie.
Sensible, one would think. This is how corporate capitalism has evolved around the world, as owners in the countries where capitalism has matured have gradually left the running of day-to-day business to professional CEOs, who like the munims of old have become millionaires in their own right. The catch, however, is corporate governance. Even the best-managed companies have vigilant boards on which owners often sit, and to which the CEO and the professional managers are accountable. It was different in the case of the Poddar seths, however. As they bought grand bungalows and began to behave like Bengali zamindars, they forgot that the ‘footprint of the owner is the best fertilizer’. They ignored their function of governance and not surprisingly the business died slowly.
The Story of Indian Business
The reasons for the success and failure of business enterprise are the sort of issues which engage the authors of our unique multi-volume history of Indian business. The Marwaris is the sixth volume in Penguin’s The Story of Indian Business series, which mines great ideas in business and economics that have shaped commerce in the Indian subcontinent, while entertaining us with the romance of the high seas and the adventure in the bazaar. Leading contemporary scholars closely examine historical texts, inscriptions and records, and interpret them in a lively, sharp and authoritative manner for the intelligent reader who may not have prior knowledge in these areas. Each slender volume offers an enduring perspective on business enterprise in the past, avoiding the pitfall of simplistically cataloguing a set of lessons for today. The value of the exercise, if we are successful, will be in promoting a longer-term sensitivity in the reader, which can help to understand the material bases for our present human condition and to think sensibly about our economic future. Taken together, the series as a whole celebrates the ideal captured in the Sanskrit word ‘artha’.
The series began with Tom Trautmann’s interpretation for our times of the renowned treatise on the science of wealth, Arthashastra, which was authored over two thousand years ago and is considered the world’s first manual on political economy. Kanakalatha Mukund took us to south India in the next volume, Merchants of Tamilakam, to a beguiling world when a ship from Rome would touch one of the ports in south India daily and the Roman senator and writer, Pliny the Elder, called India ‘the sink of the world’s precious metal’ in 77 ce. Mukund has reconstructed this world by drawing on the epics Silappadikaram and Manimekalai and other historical materials to the end of the Chola Empire. Next, we jumped centuries to Tirthankar Roy’s radiant account of the East India Company, which taught us, among other things, how much the modern multinational corporation is a child of a company that is reviled even today in India. Our fourth volume hopped again to the late eighteenth century during the decline of Surat and the rise of Bombay, where Lakshmi Subramanian set the stage for the ups and downs in the adventurous lives of Three Merchants of Bombay: Trawadi Arjunji Nathji, Jamsetjee Jeejeebhoy and Premchand Roychand. Arshia Sattar recounts in the fifth volume the brilliant adventures of The Mouse Merchant and other tales based on the Kathasaritsagara, Panchatantra and other mythological sources.
In the future lies a veritable feast. Three more books will cover the ancient and early medieval periods: Gregory Schopen will present the Business Model of Early Buddhist Monasticism based on the Mulasarvastivada Vinaya; Donald Davis will raise contemporary issues in the area of commercial and business law based on medieval commentaries by authors such as Vachaspati Mishra and Chandeshvara on the voluminous Dharmashastras. Scott Levi will take us from the early modern period to the modern one with the over five-hundred-year-old saga of Multani traders in caravans through central Asia, rooted in the works of Zia al-Din Barani (Tarikh-i-Firuz Shahi) and Jean-Baptiste Tavernier. The celebrated Sanjay Subrahmanyam and Muzaffar Alam will next transport us into the world of sultans, shopkeepers and portfolio capitalists in Mughal India. Raman Mahadevan will describe the Nattukottai Chettiars’ search for fortune. Finally, Medha Kudaisiya will round off the series by breathing life into the debates surrounding the ‘Bombay Plan’, a fifteen-year economic plan for India, drawn up by eminent industrialists in 1944–45, who wrestled with the idea of proper roles for the public and private sectors.
The privilege of reading these rich and diverse volumes as they come from the pens of our scholars has left me with a sense of wonder at the vivid, dynamic and illustrious role played by trade and economic enterprise in advancing Indian civilization.
Gurcharan Das
1. Preface
Business Communities: Who Are the Marwaris and What Is Their Historical Legacy?
Many of the large family business groups that are prominent in India today come from traditional business families belonging to communities such as the Marwaris, Parsees and Gujaratis. These ‘communities’ do not comprise Hindu castes precisely, just as their Muslim, Christian or Zoroastrian counterpar
ts too do not. Rather, business communities are groups of castes with a common regional origin and a traditional involvement in trade. Their names typically indicate geographical or in some cases linguistic origin (for example, Gujarati, Punjabi, Marwari, Sindhi).
As K.K. Birla, an erstwhile leading member of the G.D. Birla business family had put it, ‘We were born into a family of businessmen, and finance was in our blood, just as chivalry is in the blood of a Rajput, Maratha, Gurkha, Sikh or Jat.’1 In common parlance, business communities are counterpoised by ‘service communities’, which typically entered the civil service, professions and academia under the Mughals, the British and in independent India, and are now prominent in the professional executive class. Among the Sindhis, this division is marked by the difference between ‘Amils’ (civil servants) and ‘Bhaibands’ (merchants).2 Most Hindu Sindhis today, whether Amil or Bhaiband, belong to the same caste, the Lohana, but the key distinguishing factor is their ‘vocational orientation’. There are certain other Sindhi castes but they are not very significant as a proportion of the community. The differentiation between Amil and Bhaiband emerged quite late within the Lohana caste, and in fact the two groups intermarry and are themselves highly stratified in terms of wealth and social position. Among most non-Sindhi Hindus and for that matter among Muslims too, these business communities are jatis or caste-like groups of one sort or another, or sometimes congeries of castes that come from a specific region.
The difference between business and service communities exists in many regions of India. There is both a cultural juxtaposition and sometimes an ethnic one. Children from the business class in Kolkata usually attend St Xavier’s College on Park Street in the old European south Kolkata, while those from the service class favour Presidency College on College Street in the Bengali north Kolkata. Similar sets of schools with service- and business-community orientation exist in several major Indian cities. In Mumbai, for instance, there is a divide between those who go to Elphinstone and those who go to St Xavier’s, though it is not as marked as it is in Kolkata. In Ahmedabad, the businessmen often send their children to Shreyas while service-class families might patronize institutions which are more Anglo-Indian in orientation.
However, just because some family business groups are owned by families from business communities it does not mean that all of them are. In recent years the net of business entrepreneurship has widened. The descendants of senior civil servants are more likely to be vigorous MBA businessmen than be in the civil service. Harish Damodaran demarcates three paths to successful entrepreneurship in India: the first, from ‘markets’ for traditional traders; the second, from the ‘office’ for traditional service classes; and the third, from the ‘fields’ for traditional farming communities. But he concedes that in north India and for north Indian groups it is the first path, from markets to modern entrepreneurship, that has predominated.3
If we are to look up ‘Marwari’ on Wikipedia we will find a number of references to Marwari horses (a breed), the Marwari language, and Marudesh, the dry and desert areas of western Rajasthan. However, it is generally the traditional merchants from these areas that are designated as ‘Marwari’. James Tod, the iconic early-nineteenth-century English historian of Rajasthan, identifies 128 merchant castes with members in Rajasthan—most of these have branches in regions outside Rajasthan as well. In Rajasthan, it is especially the members of the Aggarwal, Maheshwari and Oswal Hindu castes who are prominent.4 James Tod goes on to say, ‘Nine-tenths of the bankers and commercial men of India are natives of Maroo des [Marwar] and these chiefly of the Jain faith.’ Though this may have been an exaggeration, the prominence of the Marwaris was apparent even in the early nineteenth century. It has also been seen that the Aggarwals are the more prominent community than the Maheshwaris. There are also other prominent non-Marwari business communities, such as the Gujaratis and Punjabis.
The geographic designation ‘Marwari’ is often applied to those who come from the broader north Indian area, even if they are not from Marwar precisely. Leading Marwari entrepreneurs today actually come from Shekhawati, a region loosely connected with the old princely state of Jaipur, situated between Delhi and Jaipur, rather than from Jodhpur, Bikaner or Jaisalmer, the classic Marwar. It has been noticed that the numerous Hindi-speaking business-community members from Haryana and Uttar Pradesh are often referred to as ‘Marwaris’, though the Marwaris from Rajasthan reject this identification and the said members are not welcomed in Marwari organizations.
Though the Marwaris as a community and Marwari firms have dominated the ‘bazaar’ economy of north India for centuries, their activities were originally focused in their Rajasthan homeland. Later, one group of Marwaris moved east with the Mughals and established business headquarters along the Ganga–Jamuna valley as also in Bengal, which is epitomized by the Jagat Seths and the Varanasi Aggarwals, whom we shall discuss a little later. The Marwari business community established a huge commercial presence especially in eastern and central India, where it displaced various competing trading groups in the nineteenth century—in particular, the Bengali traders in Bengal and, to a lesser extent, the Punjabi Khatris. Not only did the Marwaris achieve considerable standing in commerce in these regions, being Hindi speaking they played a leading role in the revival of Hindi as a language, Hinduism as a modern religion, and the Indian nationalist movement. With their economic resources, they could not but create an impact in all these areas. Even today a large number of Marwaris are prominent in national politics and cultural patronage.5
Business communities constitute a small portion of India’s population. They are estimated to constitute less than 6 per cent of India’s population, and the ones which are particularly successful, far lesser.6 There are perhaps 3 lakh Marwaris from the Hindu trading castes scattered around India.7
With a homeland that is dry and the locus of traditional overland caravan routes, it is not surprising that the Marwaris had spread throughout the country to areas that experienced more rapid commercial growth in the nineteenth century, especially to those regions where competing trading groups were less organized and capital scarce. But it is in Calcutta and the hinterlands of eastern and central India that they were the most prominent.
Each of the subregions of Rajasthan has a different history and its migrants followed somewhat different trajectories in their dispersion. The Shekhawati towns of Fatehpur, Jhunjhunu and Singhana were ruled until the eighteenth century by the Muslim Qaimkhani Nawabs, Rajputs who had been converted to Islam. It is for this reason that many Marwaris bear the names ‘Jhunjhunwala’ and ‘Singhania’ though some hail more recently from other Shekhawati towns. Banking business families like the Aggarwal Choudhris of Fatehpur and the Poddars of Ramgarh were associated with these Muslim rulers. In the early eighteenth century, the Qaimkhanis were conquered by various Hindu Shekhawati Rajputs, especially those who made their headquarters in Sikar and Jhunjhunu. The Jhunjhunu rulers followed the normal Rajput practice of dividing their estates amongst their sons, which resulted in a large number of small states and in Jhunjhunu quickly ceasing to be an important destination, except for the popular Rani Sati temple. The fragmentation of estates drove many estate holders to banditry, and the lawlessness of the area was a major factor that led to the migration of merchants. But the numerous small and often financially strapped Shekhawati rulers were also in need of financial services, which only the Marwaris could provide, and this was a pull factor which drew Marwari businessmen. Each small ruler, ‘thakur’, tried to attract businessmen and needed the financial services of an estate banker—or perhaps more than one. Unusually, the Sikar estate was not partitioned but inherited as a whole by a single heir and thus its rulers were able to promote several towns such as Churu and Ramgarh, which attracted businessmen.
Shekhawati Region
Not to scale
Jhunjhunu District
Not to scale
Despite their occasional oppression
of merchants, the various Shekhawati rulers competed to get merchants to move to their territories. This competition often took the form of tax exemptions, including the exemption of octroi, a duty on the intercity transport of goods. Anand Yang in his study of markets in northern Bihar details the extent to which the big Bihari zamindars bid for prosperous merchants, including the Marwaris, to strengthen the market centres under their jurisdiction.8 This process is similar to how European rulers competed to get rich businessmen to settle in their realms throughout the feudal period.
S.N. Tewari in his book Business Communities and the Freedom Struggle, focusing on the political role of Marwari businessmen, cites the decline in opportunities available to the rulers of the small princely states of Rajasthan as they started to serve as financiers after they joined the British in establishing peace and order, which thereby lessened the need for them to finance military ventures. This became an impelling factor for the Marwaris to migrate in the eighteenth and nineteenth centuries.9
However, Marwari merchants spread across India were sources of revenue for these thakurs. One Shekhawati thakur reported that his father, during his annual trips to Bombay and Calcutta, would collect donations or ‘nazarana’ from merchants who were originally from his estate or thikana. In reverse, migrant merchants sometimes financed the nationalist movement in their home thikanas, in opposition to local rulers. The Birlas took this practice to its logical conclusion by purchasing the estate of their home village, Pilani, from its thakurs. In contemporary Rajasthan politics as well, migrant merchants contribute funds and run for office, both for and against political groups supported by various former feudal rulers and their opponents.