The Marwaris Read online

  David McClelland, a currently fashionable theorist, in the 1960s stated:

  Probably the most widely accepted general notion that theorists have as to why some nations have developed more rapidly than others is that . . . they are more willing to break with industrial survivals of an earlier period and to accept the social and industrial innovations which are part of the new industrial society.23

  McClelland, the author of this summary statement, did recognize that entrepreneurs are sometimes the most traditional members of their societies, but he concludes his book with injunctions to increase female emancipation and dissolve family structures in order to increase the amount of entrepreneurship and thus growth in a society.

  Traditional traders did become industrial entrepreneurs. They did so as part of the general process of making use of the new, reconciling and combining it with commercial tradition, and sometimes even using the tradition itself to produce a new and more effective synthesis. The process was explained at some length in Milton Singer’s When a Great Tradition Modernizes, where he described how orthodox Brahmin households in Madras reconciled their traditional social practices with modern economic roles, by processes such as differetiating their lives into Western and traditional segments. The Modernity of Tradition, a key book from the 1960s about India, emphasized this aspect.

  Traditional institutions like family firms, business groups and business communities are among the leading drivers of entrepreneurship in Indian and many non-Western societies. These institutions and traditional business orientations may be an advantage in many modern circumstances. It is true that traditional institutions can constrain innovation but in business-community contexts they may enable it. Further, as Khanna and Palepu argue, the family, business-group and business-community networks may substitute for the absence of capital markets or modern business technologies. Edward Banfield, deliberating on south Italy, argues that the lack of a joint family system is a key retarder to south Italy’s economic progress.24 The family network was able to overcome the distrust of others (outsiders) which otherwise foreclosed much-needed commercial collaboration.

  The use of traditional business tools is not necessarily in contradiction to a paradigm of success in which business schools and MBAs, sometimes combined with a technocratic orientation, provide the basis for support networks, specific techniques and even business legacies, which are required for success. But traditional businessmen are often chary about these. Aditya Birla is quoted as having said:

  I have nothing against MBAs. They are brilliant boys, extremely bright and enterprising. There is nothing wrong with the man, but the training that is given is better suited to multinationals . . . Business institutes unfortunately have a bias for sales and also their whole culture is westernized so they do not really fit in with Indian culture.25

  As we will see, his heirs are no longer certain on such matters.

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  Why were the Marwaris successful in business and by extension how can everyone else be? I repeated the question to a Marwari friend before a Lions Club meeting I was addressing on the subject of my earlier book, and he said, ‘That’s simple: marry a wealthy Marwari’s daughter’, dating the remark to more sexist times.

  There is obviously still much general interest in why the Marwaris have been disproportionately successful in business in India.

  4. The Marwaris in Independent India: in Traditional Industries and Sunrise Sectors

  Speculative killings enabled the accumulation of large amounts of funds which were the basis for new and important enterprises. The Marwaris and other Indians who invested in new industrial initiatives after the two World Wars were businessmen such as the Birlas, the Dalmias and Keshoram Poddar, who had made their money through wartime speculation. The Parsee Tatas’ initial wealth and that of many earlier entrepreneurs came from nineteenth-century speculation on opium and cotton. In the debate on the merits and demerits of business groups, their access to pools of capital is taken as a key merit (as it is in the case of venture and angel capital funds).

  Of the successful speculators, aside from the Birla and Poddar mills, Harduttrai Chamaria’s children set up two jute mills in the 1930s. Hukumchand set up another. Hukumchand also started an insurance company, a steel rolling mill, and added to his chain of textile mills after the First World War. His first two cotton textile mills from 1909 and 1913 were both in Indore. In 1916, he added yet another in Indore and took management control of another mill in Ujjain soon after. Ram Krishna Dalmia went into sugar, cement and newspapers.

  Of course, the most dramatic case was that of the Birlas. Kudaisya emphasized that profits from jute and hessian trading, and silver and stock market speculation enabled the rapid rise of the Birla firms. By the end of the First World War, Birla stood second only to Ralli Brothers as a raw-jute and hessian exporter. By 1922, even though most of the jute mills were still under foreign management, Birla, Hukumchand and Halwasiya had their own mills. In 1911, only one significant jute mill had an Indian director, even though Marwaris were reported to already own 60 per cent of the shares in them. And more than half were managed by five European managing agencies.1

  The first Marwari-owned Indian jute mill faced hurdles in getting land, was charged more for transport and barred from membership by the Indian Jute Mill Association which forced them to use European brokers. The original Birla Jute Mill had Scottish members on its board and Scottish management, which was gradually replaced as Indians learned the trade.

  The Marwaris and Social Change

  The emergence of the Marwaris into prominence in the new economy, culture and polity of India in the nineteenth and twentieth centuries posed challenges for the members of the community. They were also identified with efforts to bring about a change in the Hindi language, Hinduism as a religion, and politics. In addressing these issues, there were often conflicts between tradition and modernity that confronted the community, conflicts that the Marwaris continue to face to this day. Again, if one is to surf the Internet to find where the term ‘Marwari’ appears—beyond horses and languages (Marwari is one of a number of languages which have now been effectively subsumed under modern Hindi)—one finds discussion of the role of the Marwaris in promoting social reform and also, contrarily, resisting it. Recently, in the 1980s, a lot of attention has been paid to the Rani Sati temple in Jhunjhunu, Shekhawati, which is devoted to the memory of a widow who immolated herself on her husband’s funeral pyre several hundred years ago. The trustees and others connected with the temple are explicit that they do not propose that modern widows should do likewise. Nonetheless, the temple and the cult connected with it have been the target of considerable protest from social reformers. The temple has been popular as a locus for Marwari children’s first haircuts and other rituals for decades. For most Marwaris, the fact that the temple is connected with someone who immolated herself is not a salient feature. In fact, self-immolation was not particularly popular among traders but was more a Rajput custom, even when it was occasionally practised2

  The Marwari entry into modern markets and industry in the 1920s and 1930s was naturally accompanied by social change and clashes between reformers and orthodoxy. In the Maheshwari community, the Birlas spearheaded the reform movement on issues such as foreign travel, Western education, especially for women, and the relaxation of restrictions on marriage with members of certain groups that some of the more orthodox wanted to exclude. The caste was divided between their supporters and opponents. But broadly, similar issues divided each caste.

  Ghanshyamdas Birla and Jamnalal Bajaj were early and major donors and fundraisers for the Indian National Congress party, though in varying degrees they were opposed by a number of the established banian families. But when a court case threatened to reveal major secret donations to the Congress by Calcutta banians in 1930, one of the banians committed suicide.3 The banian approach to this issue was convoluted. G.D. Birla resented racial dis
crimination in British business houses in India which led him to join the ‘terrorist’ nationalists, and only family influence eventually enabled him to come out of hiding. On the other hand, many Marwari grandees were, at the very least publically, the epitome of loyalty to the British.

  The Marwaris and Literature: Revival of the Hindi Language

  The second or third item which pops up while surfing the Web for Marwaris and Hindi literature is the site of the Marwari Library in Delhi which, we are informed, has been striving for the last century, ‘towards the cause of promoting Hindi . . . worldwide’. Not surprisingly, there are similar libraries in other major cities, including the Rajasthan Club in Calcutta which is a centre for Hindi and Sanskrit activity. In general, throughout the last 150 years, Marwari patrons and writers have been key figures in Hindi literature. Anne Hardgrove in an article focused on younger women Hindi-language writers in Calcutta who document the social transition experienced by their generation.4 But the role of the Marwaris in Hindi literature has been noticeable throughout its modern history.

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  Generally speaking, there is a change among young Marwaris who have been educated at leading international institutions and manage enterprises based on new-age technology. Often, marriages today defy the traditional caste strictures; quite a few prominent Marwari heirs in recent times have married non-Marwaris. Young people are marrying those they work or study with, things that their elders considered unorthodox and avoided. Also, divorces have become common as the youth is more frequently taking its own decisions regarding marriage and is not tied down by social restrictions. At the same time, many young Marwaris are effecting social and intellectual changes in their traditions and traditional approaches to business. Anne Hardgrave has documented at some length the transformations and challenges faced by the younger Marwari women of Calcutta.5 An interesting book, Stages of Capitalism: Law, Culture, and Market Governance in Late Colonial India, by Ritu Birla, a professor of anthropology in Canada, focuses on issues that the Marwari community has been confronted with. The cover of the paperback edition of her book depicts the G.D. Birla family tree, though this fact may not be apparent to most readers. Obviously, Dr Birla herself is an example of the variety of paths pursued by the present generation of Marwaris.

  One aspect of this change is young Marwaris deserting business. It is noted with interest that the ex–railway minister Lalu Prasad’s key IAS adviser in his reorganization of the Indian Railways was a Marwari, who chose a career in the Indian civil service rather than entering one in business. Two of the leading politicians of independent India, Ram Manohar Lohia and Kamal Nath, are both Marwaris. No one could say that the rabble-rousing Lohia conformed to any particular Marwari stereotype. Today, there are Marwari doctors, lawyers and professors in large numbers. Not surprisingly, in traditional circles they tend to marry into Marwari business families; in less traditional families, these professional Marwaris often marry people from other communities.

  More recently, the process of modernization in the Marwari community has clearly accelerated. It is perhaps notable in the work of Gita Piramal, very much a Marwari lady of the educated generation (a PhD and scion of a leading Marwari family, and on whom I have relied extensively for the purpose of this book), in that she on the one hand notes the emergence of Marwari women in business as in the case of the daughters of K.K. Birla, and at the same time underlines in her writing the residual conservatism of Marwaris families in introducing their women to business.

  5. Do the Marwaris and the Bazaar Economy Still Shine After 1991?

  That the Marwaris played a prominent role in Indian business and industry in the 1960s is not in doubt. At that time there was a flurry of studies describing the continued dominance of large business groups after a decade of ‘socialism’, or what can be termed as ‘industrial licensing’. Both the Kothari and the Monopoly Commission reports attempted to explain the success of big ‘business groups’ and proposed measures to increase the role of people, who did not come from traditional business communities, in entrepreneurship. In fact, starting from the earliest days of Indian independence there has been a series of extensive government-supported programmes to promote entrepreneurship among communities without a business tradition.

  Have the Marwaris been similarly successful in the last thirty years, since the beginning of liberalization? Medha Kudaisya, in her academic biography of G.D. Birla, has a chapter titled ‘Business Fortunes in Nehru’s India’ in which she concludes:

  In retrospect, the Nehru years had seen a major business expansion for the Birlas. Notwithstanding the socialist rhetoric of planned economic development, the Birla business empire continued to flourish. This was due to Birla’s strategic vision in which he was fully supported by his brothers and the younger generation. Before independence, the Birla group’s share capital stood at Rs 24.8 crore; in 1958 it stood at Rs 68.6 crore. The book value of gross capital stock of public companies more than doubled in these years . . . Together with the Tatas, the Birlas accounted for approximately one-fifth of the physical assets of the corporate private sector.1

  The Birlas are now represented by a group of different firms, all descendants of Raja Baldevdas Birla. According to India Today, they include the following separate business groups:

  All Marwaris are not equal to the Birlas, and the experience of the ‘Licence-Permit Raj’, a term coined by the Indian statesman C. Rajagopalachari, may not be the ‘shining’ and reformed India of the post-1980s. As Gurcharan Das points out in his India Unbound, the Birlas have remained India’s largest business group over five generations. This itself probably speaks volumes about what leads to business success.

  There are many who are concerned that Marwari and other established Indian business groups were crippled by the several decades of dirigiste government policies and lessened competition in the period between the 1950s and the ushering in of liberalization in the 1980s. Some business leaders, a group epitomized by the Bombay Club, certainly concurred and tried to oppose the liberalization.

  The Bombay Club was organized in 1993 in the Belvedere, a ‘private’ club in the Oberoi Hotel in Bombay, and included leading industrialists. While several of them were Marwaris such as Rahul Bajaj and Hari Shankar Singhania, there were non-Marwaris as well who included Lalit Mohan Thapar, M.V. Arunachalam and Bharat Ram. These proponents of anti-liberalization were opposed by Marwaris like R.P. Goenka, and Shashi and Ravi Ruia of the Essar Group. According to various sources other industrialists too sympathized with them. But who those sympathizers were is not on record.

  The members of the club complained that they were unduly handicapped in the process of opening the Indian economy and asked that concessions were to be extended to them. It seemed that a number of the members of the Bombay Club had varying difficulties adjusting to the new Indian economy, lacking access to funds and cash-cow enterprises, and in reorienting their business positions. But others, incidentally, seemed to have done just fine. Some of them felt threatened by the wave of foreign acquisitions; others felt that foreigners were getting Indian enterprises too cheaply. Their key demand was for access to more and cheaper funds.

  Unfortunately, the line between giving Indian industry a fair chance and protectionism was a dangerous tightrope. How much time should the Indian industry be given? In India, the cost of money is higher than in the West and the gaps in infrastructure so wide that the playing field can never be truly equal. There were no easy answers and the Club was criticized as ‘a group of inefficient producers fearing competition’. Frightened by the backlash over the next few weeks, several founders backed out discreetly . . . By the close of 1994, ‘it was a club of one’, says Bajaj ruefully.2

  The role of business communities is considered at greater length in Dwijendra Tripathi’s The Concise Oxford History of Indian Business.3 He and his co-author, Jyoti Jumani, conclude that Marwaris and commercial communities still play a prominent role, though
we will see later that the subject is the focus of some controversy. Even Harish Damodaran in a book devoted to chronicling the emergence of new Indian entrepreneurs from new non-business communities in recent years concedes that, especially in north India, business communities including the Marwaris continue to play a dominant role.4

  A recent article by Khanna and Palepu of Harvard Business School demonstrates the continuing importance of Marwari and other family-controlled business groups in Indian business. Khanna and Palepu are able to show that the share of family business groups in India as a whole in the ownership of large-scale Indian business is not so different from what it was in 1939, 1969 and 1997.5 Khanna and Palepu further make evident the fact that such business-group family firms are important in the burgeoning world of information technology also and use this as an argument to support the idea that the mobilization of capital and human resources by business groups is the dominant reason for their continuing importance.