Abstract and Keywords
“Marwari” stands for people hailing from a region in western India known as Marwar. In common parlance, the term refers to merchants and bankers from this region speaking the language spoken there and living elsewhere. Marwaris left this region and resettled in other parts of India and abroad from at least the eighteenth century. The article explores the Marwari diaspora. Although many Marwaris engaged in trade, banking, and occasionally manufacture, the group was socially and occupationally diverse. After liberalization of the Indian economy in the 1990s, some Marwari individuals have made successful use of new investment opportunities from a business base that had been created before the economy opened up, but, overall, the group has experienced the same pattern of “creative destruction” as have other business communities. In small towns, Marwaris have almost seamlessly assimilated with local society. In big business, the companies they own define the character of the business more than ethnic identity.
Marwar stands for the Jodhpur region (a district and a former princely state of the same name, see Map) located in southwestern Rajasthan, western India. Marwari refers to a language spoken in Jodhpur and surrounding areas and, in turn, to the people who speak the language. In recent centuries, traders and bankers from this region migrated in large numbers and resettled within and outside India. The scale of the migration increased in the nineteenth century. Although a range of migrant occupational groups, including many artisans and laborers, were referred to as Marwari in the past, increasingly the use of the word fixed on merchants and bankers.
In Indian business history, Marwari migration is of considerable significance. In the nineteenth century, the migration led to a diffusion of small-scale and informal banking, especially in the financing of agricultural commodity trades. In the twentieth century, some Marwari traders located in the port cities, especially Calcutta, and set up industrial firms. They made use of their considerable experience as traders of agricultural commodities, which also placed them in a strong position to control supplies of industrial raw materials, such as raw jute. Leading members of this group provided moral and material support to the nationalist movement in interwar India. Several additional Marwari firms emerged after Indian independence in 1947.
Although to define a Marwari merchant with reference to caste or region remains difficult, outside Rajasthan “Marwari” acquired a precise meaning in the twentieth century. This was so because, by 1900, in nearly every business town of northern India, a Marwari settlement had appeared. The members spoke a different language from that of their clients, were relatively wealthy, and interacted with the town population in a variety of ways. Thus they formed a visible minority. The drive to assimilate with the local society was also quite strong, especially in the small towns. The history of the Marwaris in the twentieth century displayed these opposite pulls.
Historical scholarship on Marwari society and economy has tried to explain, in part, their business practices and commercial success with reference to features of the group’s own social history, such as migration and mobility, minority status, reinvention of Marwari identity and tradition, attempts to consciously re-create a community, and control of trade secrets and business information by using ethnic loyalties. Such concerns are also evident in the context of the business history of a number of other commercial groups in South Asia. This discourse on community, which has revealed the “strengths” of the social tradition of Indian business groups, was originally inspired by a need to challenge another discourse on the community that derived from Max Weber’s generally negative views about Hindu business culture. More recently, a branch of new institutional economic history as well as studies on “social capital,” “networks,” and the origin of commercial law have stressed the importance of informal norms among business communities, drawing attention to the strength of group traditions.
These issues are important, but they are of limited value in reading Marwari history. For one thing, it remains difficult to understand the Marwaris as one cohesive community. In terms of social status and wealth-holding, Marwaris have always been diverse, and they became more so in the course of the migrations. Thus any attempt to identify a caste or a community that includes all Marwaris is likely to fail. For another, historical narratives that stress the social capital of business communities risk underestimating changes in the environment that brought these groups unique opportunities to deploy social capital profitably. In the case of merchant communities, social capital refers to a feeling of mutual trust that works as a useful business resource and that originates in bonds of caste, region, religion, or language. But these bonds are rarely, if ever, primordial, and they are frequently re-created to deal with changes in the political and economic environments.
Four large-scale political changes were particularly important in shaping Marwari history in recent centuries. They include the consolidation of the Mughal Empire in the seventeenth century; the disintegration of the empire into a cluster of “successor states” in the eighteenth century; the consolidation of the British Empire in South Asia in the mid-1800s, leading the way for what some economic historians call the first globalization; and, last, the formation of a protectionist and nationalist development regime in India after 1947. Migration and the formation of diaspora, the move into new enterprises, the joining of business and politics, and what I call in the conclusion to this article the “creative destruction” of the Marwari as a diaspora group were induced by these changes in milieu.
To keep the general economic history backdrop in clear view, the narrative in this article is arranged somewhat differently from the conventional manner of writing the history of business communities. Most accounts today accept that the “Marwari” was a fluid concept that was formed and re-formed by the environment. Nevertheless, most accounts still proceed as if the Marwari represented a relatively homogenous social group. This article departs from this practice. It sees Marwari history through the lens of South Asian politics and places more emphasis on politics than on the features that characterize the group.
The next two sections discuss the geographical origin of the group and early long-distance migrations with reference to the Mughal Empire and the collapse of the Mughal imperial order. The subsequent three sections deal with the transformation of the group during British colonial rule, followed by a section each on the closed economic regime that followed (1947–1992), and the contemporary period after the economy opened up again (1992–).
The Age of Empires
“It is singular that the wealth of India should centre in this region of comparative sterility,” wrote James Tod in his history of the Rajput states (Tod, 1873: 211). An army officer in the service of the East India Company, Tod studied the princely states located near the western desert of Rajasthan, or Rajputana, around 1820. Capitalists were prominent in these courts, and Tod’s narrative noticed that fact. By then, the Oswal bankers, a prominent endogamous commercial caste (jati) of this area, had been dispersed throughout northern India, being “known under one denomination, Marwari.” In fact, outside the region, the term included more than a dozen (Tod identified eighty odd) such endogamous groups, most prominent among them being Agarwal (or of Agra), Khandelwal, Srimali, Maheshwari, Jaiswal, and Oswal.
It is not surprising that a number of merchant lineages concentrated in the arid desert fringe that directly produced few goods of value to commerce. In the seventeenth century, when two powerful empires, the Mughals and the Safavids, ruled southern Asia, Jodhpur town stood at the intersection of two overland trade routes of great importance. These routes were the road between Agra, the Mughal capital, and Kandahar, a crucial border town that was occupied by the Mughals and the Safavids at different times and that was situated between Ahmedabad and Agra. These roads, in turn, connected with trade traffic along the Indus River and its tributaries.
The trading communities from the desert fringes rose to prominence in conjunction with the prosperity of these territorial empires. In turn, individual Marwaris were occasionally known to join the Mughal court. One example was Todar Mal, the emperor Akbar’s minister and the supervisor of the first large-scale cadastral survey. These courtier-merchants also owned landed estates, and a few even participated in battles, but such cases were exceptional.
Marwaris were much closer to the regional Rajput states in the seventeenth century, most of which were vassals of the Mughals. Merchants and bankers were frequently recruited into high offices by the Rajput states, according to officers-cum-chroniclers Tod and Alexander Forbes. In Phalodi, on the western border of Jodhpur, a seventeenth-century merchant built a city-state (Timberg, 2014). Even outside Rajasthan, the major polities of northern India seemed to offer the traders legal autonomy and immunity, so that they could circulate over a large region. In this respect, the Pax Mughaliana served as an impetus to go farther afield in search of custom.
Few cases of relocation and resettlement outside northern India in these centuries are identified. Still, like the other major mercantile group of northern India, the Khatris, a few Marwari firms followed Mughal territorial expansion eastward around 1600 and resettled in eastern India. We do not know enough about the nature of the businesses that they did establish. Silk textiles and banking were very likely included among them for Marwari firms were prominent in both these fields in the eighteenth century.
The Eighteenth-Century Displacement
The insecurity that stemmed from the warfare that broke out in northern India in the wake of the collapse of the Mughal Empire (c. 1720) drove many merchant firms outside Rajasthan and Agra toward the capital cities of the successor states. The Rajput states were caught up in a series of debilitating succession disputes in the 1700s. They suffered repeated incursion of the Maratha forces of central India, and the trade routes under their protection were in disarray. Two central Indian states that rose from the ashes of the empire, Indore and Hyderabad, received Marwari firms in the eighteenth century. But the successor states themselves were too weak to protect trade and trade routes. Their guarantee of security was evidently not enough or business opportunities appeared to have dried up by 1800, for at about the turn of the nineteenth century, these firms displayed a preference for moving inside British territories. Even with Indore, Marwari merchants, who were involved in the inland trade in central Indian opium, formed a link between the British East India Company port of Bombay, one of the points of transit, and central India.
When the company acquired Bengal in 1765, the banker of the indigenous state was a Jain Oswal firm called Jagat Seth, and one of the principal agents of the company was the Khatri Amirchand. Both played a prominent role in the conspiracy that helped the British take over Bengal. Marwaris remained rare in the description of trading communities of contemporary Calcutta, the company’s seat, but they were present in substantial numbers in Cossimbazar, the prominent trading town in the interior of Bengal where the company concentrated its operations in the seventeenth century. In this part of Bengal, a number of Jain temples and shrines bear witness to the sponsorship of Marwari merchants in the Mughal era.
For Marwari history, the transformation of the company into a political power marked an important moment of change. From middle Bengal, the axis of their operation moved toward Calcutta. By 1820 Cossimbazar was as good as abandoned after the river changed course and the former port was no longer functional. Some of the prominent Oswal firms of Cossimbazar had by then become moneylenders and landholders, and they shifted their base to other towns in central Bengal (Bhattacharya, 1896).
From early in the nineteenth century Marwari entry into Calcutta grew in size and diversified in terms of business interest. In Bombay, Marwaris shared economic space with the more prominent Parsis and Gujarati Jain merchants. In Calcutta their position strengthened.
The First Globalization and Marwari Enterprise: General Features
In 1813 the British East India Company lost the monopoly to trade in India, enabling a number of Indo-European commercial ventures with interests in the opium, indigo, cotton, and grain trades to expand their businesses. Some indigenous trading firms joined these ventures as partners, and many more served them as bankers or suppliers. Information on specific Marwari firms in the early nineteenth century remains scarce. Unlike some of the local Bengalis, Marwaris rarely joined Indo-European firms as partners or agents. But they carried on banking, and money was in high demand in the agricultural seasons. It is plausible to speculate that the launch of a large textile import trade from the 1820s attracted indigenous trading capital to the port city of Calcutta. Some of the families that became prominent in trade and banking in the late nineteenth century, including the founders of what Timberg (1978) calls “great firms,” migrated from Rajasthan to eastern India before 1850.
A little over half of the land mass of India became a colony of the British Crown after the Indian Mutiny ended in 1858. The British Industrial Revolution was entering its mature stage at this time, manifested in India by the arrival of the railway and the telegraph, both of which were within reach of the Indian trader. Internal peace, railway expansion, and an explosive demand for food and cotton in industrializing Britain led to a major growth in agricultural commodity exports from India between 1860 and 1930. Foreign trade as a proportion of estimated income of the region increased from well below 3 percent around 1830 to above 20 percent on the eve of World War I. Shipping tonnage handled at Bombay, Madras, and Calcutta increased from 100,000 tons to more than 6 million tons between 1798 and 1914. Between 1860 and 1914 the railways cheapened the cost of cargo movement from inland areas to the seaports, leading to dramatic growth in tonnage carried overland.
A commercialization of such magnitude would have appeared to the Marwaris as an opportunity as well as a challenge. And it is true that many Marwari capitalists became wealthy in the nineteenth century making use of these opportunities. It is a paradox then that knowledgeable observers still believed that the Marwari had been too conservative in their economic activities. “With all their wealth … they have done nothing to introduce new industries,” being too used to working “in old grooves, in lines presented to them ready-made” (Bhattacharya, 1896: 208–209). The contrast with the Gujarati and Parsi capitalists of Bombay, who entered overseas trade and by 1860 had set up factories, drew special attention. The apparent conservatism stemmed from the fact that far more than these other urban groups, the Marwaris engaged in agricultural trades. They came to the cities as did these other groups but a significant number of them moved into the small towns that served as hubs of the grain, cotton, and jute trades. These trades required different skills, a different type of knowledge, and, above all, a great deal more liquid capital compared to the businesses into which, for example, the Parsis had moved. Liquidity was the key because agriculture under tropical monsoon conditions was marked by high risk and extreme seasonal fluctuations. Combine that condition with undeveloped capital markets and high interest rates and a clearer picture of Marwari entrepreneurship begins to emerge.
Their hold on banking and practices of intracommunity lending meant that the Marwaris collectively had easier access to liquid wealth, “cash” for short. Preference for cash would have militated against putting money in long-gestation projects such as factories. Numerous other groups in addition to the Marwaris engaged in agriculture and moneylending. Not surprisingly, few of them took to large-scale industry, which remained a preserve of the city capitalist. The Marwaris and others valued liquidity more than the prospect of a high long-term return because they worked in a high risk geographical and economic environment. Historiography on the Marwari has generally underestimated their involvement in rural credit. The usual focus of business historians upon “great” men and “great” firms and the penchant for working with broad categories, such as Europeans and Indians, divert attention away from the sphere of the small town. Marxist historians have tended to classify most Indian trading groups as subordinate agents of European capitalists—or “comprador,” which did not contribute to the effort to understand the Indians operating deep in the countryside. One historian offers a more flexible concept of indigenous trade in calling it the “bazaar” (Ray, 1995). The bazaar suggests that informal trading and moneylending formed an independent sphere and possessed identifiable strengths. The bazaar does come closer to capturing the spirit of Marwari entrepreneurship than either great firms or comprador capital, but it is not defined precisely enough to explain the Marwari dominance in agricultural finance.
Two representatives of the Marwari Trades Association of Calcutta confirmed in 1922 that banking constituted “the chief business of the Marwari community” (Commission on Indian Finance and Currency, 1926: 425). That general statement was largely true. And yet, banking was practiced in a wide variety of forms, dividing the community into many professionally distinct fragments. At one end stood the moneylender and shopkeeper operating as one, who was located in an agricultural village. At another end was the jute trader, textile importer, stock broker, bullion dealer, and banker located in the big cities of Calcutta and Bombay. Both these images are slightly stylized, for small moneylenders could be found in the metropolitan cities and big players operated in the commodity trading interior zone. Among the big players around 1900, the Khandelwal banking houses of Mathura, Oswal bankers in middle Bengal, Srimali and Porwal bankers in Ahmedabad, Maheswari bankers in Jabalpore, as well as warehouse owners, transporters, jute balers, and cotton ginners in market towns can be mentioned.
Trading in the interior required that banking firms be knowledgeable about the negotiable instruments (such as the bill of exchange or draft known as hundi) issued by bankers elsewhere. European banks had limited access to such information. Indigenous bankers knew many more bankers personally. In exchanging information on who was trustworthy and who was not, social networks mattered. Banking and bullion became connected because gold ornaments were often mortgaged in large consumption loan deals. Gold was the next best thing to cash in financing of agricultural trades, which required large quantities of loan capital to be injected for short periods of time. Bankers needed to be experts on the purity of the metal, a knowledge that made some of them successful players in the bullion exchange. Through the hundi, a great deal of money circulated between the interior and the port cities. If the Parsis, Gujaratis, or Europeans dominated the markets of the port cities, the Marwaris supplied liquidity “upcountry.”
Despite the existence of players that straddled the two worlds, it is useful to think of the Marwari engagement in the money market in terms of two spheres, one rural and one metropolitan.
The shift to cash crops involved greater circulation of cash in the countryside than before. Rural credit business was not confined to any one community, but the Marwaris were the prominent players almost everywhere in India except in the South. From descriptions of indigenous credit compiled in the 1920s, it would seem that the circulation of money occurred along distinct tiers. In the major railway towns, where bulk trading and transportation took place and where the warehouses were located, the traders tended to operate on a large scale. But they lent money to known clients and agents. These agents, in turn, lent money to traders located closer to the cultivated tract. Through these concentric circles of credit, money flowed down to the peasants themselves. In this fashion, every moneylender made sure to lend to clients who were intimately known to him or her. Some of the small-town trader-cum-bankers combined agricultural lending with off-season consumption credit business. That is, they accepted deposits and held a part of their capital ready to meet the needs of depositors. Several of these firms in the 1920s operated more or less as would any commercial bank. A number of these town bankers were Marwari about 1930, and they were interviewed as part of a large-scale survey of banking around the time (the firm of Debi Prashad, dating from 1840, was an example; see United Provinces Provincial Banking Enquiry Committee, Agra and Oudh, 1930: 89).
A series of reports on Indian castes and tribes compiled at the turn of the twentieth century explored the secret of Marwari success in agricultural lending. According to one of these reports (Russell, 1916: 128–129), a long apprenticeship in keeping accounts in the traditional house style together with training in mental arithmetic and interest rate tables made them more formidable lenders than the numerous amateurs who performed moneylending on the side. That advantage, together with the mutual support of local Marwaris, helped newcomers establish themselves quickly in a relatively remote agricultural village. In the village, the moneylender would diversify into retail trade and pawnbroking by accepting collaterals for loans that no bank ordinarily would take.
The rural credit market was stimulated partly by the colonial property reform in land, which saw strong forms of ownership emerge around 1840, aided by adequate documentation, legislation, and judicial and police support. Much rural lending continued to be unsecured; still, a greater proportion of lenders used land as mortgage. It is likely that demand for loans also increased because land mortgage had become easier. In any case, it was well known that ownership rights rather than poverty served as the marker of the level of debt.
In the Bombay-Deccan region, the proprietors of land were the peasant cultivators, who operated under an arrangement known as ryotwari. Ryotwari was a contract between the state and the peasant-proprietor of land stating that the latter would pay taxes to the state at agreed rates and in return would enjoy property rights on the land. Among other effects, the contract made land a more suitable mortgage than before and increased loans taken on land mortgage. Between 1840 and 1865, parts of this region experienced a large expansion of cotton production for export. In the summer of 1875, in Poona and Ahmendnagar districts of the Deccan, indebted peasants attacked moneylender property and burnt account books. The administrators reacted quickly with legislation restricting the transfer of mortgaged land, fearing that the riots had been a response to the moneylenders taking possession of land. These fears were exaggerated. Even at the height of the Deccan disputes, the actual extent of land transfer was never large. From early in the twentieth century the official policy of intervention in rural institutions was centered on credit in aiming to cut out the private lender.
The Deccan Riots Commission that followed these disturbances, and subsequent reports and inquiries, referred to the moneylender simply as the “Marwari” and sometimes as the “rapacious Marwari” (India, 1897: 98), even though the Marwaris were not the only capitalists in the countryside. The anti-Marwari and anti-outsider sentiment had been building up for at least three decades prior to the riots. A book published by a professor of Poona College in 1852 delivered the first of many diatribes against the “race of foreign moneylenders—the Marwarries” (Green, 1852: 7). The date of this work permits us to place the migration of Marwari bankers in the cotton cultivation regions more or less to the 1840s. The administrative view was powered by an anxiety about possible peasant unrest, and specifically the fear that British rule had empowered the Marwari banker and transformed him into an exploitative character. “The introduction of the English law of contract and transfer of property, and the increase in the habit of litigation,” it was alleged, had caused indebted peasants to lose their land to foreign capitalists (Russell, 1916: 131). The Marwaris were said to encourage overborrowing against land titles, and, on several occasions, they obtained decrees to possess land, even though they rarely started cultivating land. The Riots Commission described the “Marwaris as aliens and indifferent to public opinion; as landlords, they follow the instincts of the usurer, and make the hardest terms possible with the tenant” (India, 1894: 70).
The impression the colonial officers created of the Marwaris as exploitative and opportunistic players ready to take advantage of the weakness and illiteracy of their peasant-clients proved deep and lasting. Despite one officer expressing the view that the anti-Marwari rhetoric had “dealt a blow at the capital of the thrifty shopkeeper” (India, 1897: 462), the general policy remained biased in favor of the borrower. Only rarely in the official proceedings was an attempt made to investigate the risks and returns in the credit business itself. The rural lender became a villain of the countryside. The Marwari had to bear a large part of the opprobrium heaped upon the moneylender by generations of government officers. Later, left-leaning economists reinforced the bias, as the anti-lender ideology became an article of faith in independent India.
The long-term impact of debt legislation is an open question. In the aftermath of the riots, private and informal arbitration in which the moneylenders readily took part settled more disputes than top-down laws. Little evidence has emerged that the credit business as such was hurt by state intervention. Nevertheless, it is possible that the anti-lender legislation in western India, soon followed by similar actions in northern India, had indirectly aided a preference among the Marwaris for the big city, though there is little evidence to prove this. In any case, the other part of the banking business was located in the metropolitan towns.
Marwaris in the Metropolis
Around 1900 the Marwaris were concentrated increasingly in the bigger cities. The rate of Marwari migration into Calcutta was probably higher than the population growth rate between 1881 and 1931 (Timberg, 1978: 88). The population of Jains was concentrated in Bombay, Ahmedabad, and Calcutta, in that order. By 1900 every substantial town outside of South India had a settlement of Marwari bankers and traders in it. Amd by that date a geographical pattern had emerged. Marwari migration to eastern India was larger than all other flows, slowly giving rise to “a zone of Marwari dominance” in Bengal, Assam, Orissa, and Bihar (Markovits, 2003: 150).
In Calcutta the Marwaris were engaged in the raw jute trade. They owned a number of jute presses and baling units in the jute-growing regions of Bengal. They exported jute to a limited extent, and they supplied raw material to the several dozen jute mills around Calcutta operating under mainly Scottish ownership and management. Before World War I, the Marwaris entered the gunny export business. They did not do so as regular export firms but as speculative sellers. That is, they would buy small lots from the mills and hold stocks or sell forward to the shippers. The significant feature of the business was their willingness “to furnish ample cash security for any business contracted; consequently, the mills had no hesitation in dealing with them” (Indian Central Jute Committee, 1940: 89). Liquidity, again, was the key resource.
The business might have remained an opportunistic one but for World War I, when huge profits were to be had from the existing stocks. The rise of forward market rates encouraged some export firms to join in the forward trade, and fears arose among non-Marwari firms that the Marwari firms would corner the entire jute trade. Although the trade stabilized after the war, the balance of financial power did shift. During the Great Depression, one or two jute mills were started with Marwari capital, and European mills borrowed money from Marwari merchant-bankers. The relationship opened doors to Marwari merchants for the management of jute mills (Goswami, 1985). This was a significant concession for the Marwaris resented the often rude treatment they received from the European mill managers (Misra, 1999: 132–136). Nevertheless, the move did not signify a fundamental change in the character of the urban Marwari enterprise. Most firms remained tied to trading and banking. Between the few who set up factories, there was considerable difference and randomness in the manner in which they did so (Oonk, 2014).
Through the nineteenth century the Calcutta Marwaris had also become diverse and hierarchical. The early migrants into Calcutta had set up a caste council (panchayat). Like other such caste councils, this one was expected to settle disputes of a social nature and organize poor relief. Although initially powerful, the council’s diktats were less effective at the turn of the twentieth century, among other reasons because each subcaste asserted its own writ on its members (Kochanek, 1974: 134). None of these associations served economic aims. But around 1900 Marwaris also set up chambers of commerce in Bombay and Calcutta, and individual members started associations to promote literacy and modern education. None of these organizations could rely on much community sentiment. Occupational diversity had grown too much. The individuals who dominated the jute trade in Calcutta and the cotton piece-goods traders had little in common, and the urban bankers were far removed from the moneylender in the small town.
Although the caste association did not usually interest itself in economic issues, early chambers of commerce often formed along ethnic ties and devised a community-based dispute settlement mechanism. Indeed, formal associational activity was becoming a more important way that trading groups reinforced cooperation with reference to ethnicity. It allowed ethnicity to take a more guild-like aspect, which was not evident earlier. Little detailed information is available on how effective these rules were and how often they were used. One example was a rule-book issued in 1916 by the Marwari Chamber of Commerce of Bombay setting out rules on hundi, for sale of goods, and for settlement of dispute around sale of goods. The chamber set up special committees for appeal, quotation, and arbitration for this purpose. The rules dealt with breach of sale contracts and drew distinctions among cotton, grain, and oilseeds. Few details are available on the actual process of settlement or cases (Marwari Chamber of Commerce, 1916).
Growing divisions had far-reaching consequences for the history of the group. Differences emerged between conservatives and reformers, between those whose interests were tied to external trade and those who had a growing interest in domestic trade, and between the trader and the industrialist. These divisions cast a long shadow upon Marwari history stretching well into the late twentieth century. In the 1930s young, educated, articulate, and reformist business leaders displayed a drive to shape the course of national politics, and in turn, the future economic policy of independent India (Kochanek, 1974: 139). After 1930 members of this club controlled the chamber of commerce in Calcutta.
The most important and well-studied example of leadership was the industrialist G. D. Birla (1894–1983). Although relatively young when he joined Mohandas K. Gandhi in 1932, Birla then headed an established and large business house with an extensive trading interest and two factories producing jute and cotton textiles. His presence in the Congress exerted a modifying influence on the anti-business leftist lobby in the party, enabled the party to raise large sums of money when it needed it most, and contributed to the often contentious negotiations on key policy issues such as the partition of India. G. D. Birla was also instrumental in the establishment of a national chamber of commerce (Federation of Indian Chambers of Commerce and Industry) in 1927. The early history of the chamber reflected a growing tension between the business lobby of Bombay, dominated by Gujarati interests, and that of Calcutta, dominated by Marwari nationalists. Birla played a role in containing these disputes. His long-lasting impact on economic policy as well as the industrial empire he built was more visible after 1947 (Kudaisya, 2003).
Notwithstanding Birla, few Marwari houses of Calcutta had become either full-fledged industrial enterprises or showed an inclination to move decisively in that direction before independence in 1947. Birla’s jute textile mill in Calcutta was an exception. Elsewhere too, a few Marwari industrialists could be found. In Ahmedabad, a number of cotton textile mills were owned by Marwari industrialists. A Kanpur mill owned by Baijnath Juggilal, one of the founders of what was to become the Singhania group, a textile mill part-owned by Anandilal Poddar in Bombay, two cotton mills acquired in Bombay by Ramnivas Ruia and Chaturbhuj Piramal, the acquisition of the Jewish group E. D. Sassoon’s textile interest by a Marwari trader, and a few sugar mills in northern India would exhaust the list. These firms were exceptional in the industrial landscape of India, and they were even more exceptional in the context of the Marwari world. It is doubtful if they represented the decisive break in Marwari enterprise that some business historians read in them (Goswami, 1985). Few of these firms were based in Calcutta.
In 1965, by contrast, four of the ten largest business groups of India were Marware-owned firms based in Calcutta. The Marwaris by then owned the majority of industrial firms in Calcutta. The move of the Calcutta Marwari capitalist toward modern industry, thus, reached a completely new and unforeseen level only after 1947. How did that dramatic change come about? It was neither an endogenous nor an inevitable progression by any means. It happened under circumstances that were anything but ordinary.
The Developmental State
The transformation of the Marwaris from traders to industrialists was a phenomenon more or less restricted to Calcutta. Elsewhere, it was too gradual and individualistic a process to be noticed. In Calcutta the transformation was made possible by a series of hostile takeovers of European industrial firms. The transfer of ownership occurred in a relatively short period of time (1955–1965) by stock market manipulations, which, in the nationalistic as well as imperfect regulatory environment, could be carried out without too much regard for the law. In Indian business history, this story tends to be told in a somewhat sanitized fashion. In one account, the European firms were too conservative in their managerial outlook in comparison with the Indians, implying that it was inevitable that their businesses would be sold off eventually to the more dynamic Indians (Misra, 1999). In fact, the firms taken over had been profitable at the time of takeover, and, with few exceptions, they declined rapidly after their transfer to Indian ownership.
The sordid nature of the Marwari move into industry was revealed, not very successfully, in angry pamphlet-type works. One of these, written by a retired tax officer, targeted corporate governance in the house of Soorajmal-Nagarmal, which had taken over some of the assets of the Scottish company McLeod (Roy, 1972). A second book written by a Marxist teacher-cum-activist showed how politicians in Delhi sheltered Marwari businesses in Calcutta (Burman, 1950). More relevant evidence is now accessible in the proceedings of contemporary High Court cases published online. Court cases showed that the new owners were stock-market insiders who had considerable liquid wealth amassed through speculation on real estate and commodities during World War II. Marwari involvement in share broking from the early days of organized stock trading in the late nineteenth century is well known in Indian business history (Rungta, 1970). The significance of that fact for the industrial world was limited until 1950.
Thereafter, insider trading took on an insidious form. Cash was poured in to inflate the value and induce a sale of the shares of the European managing agency firms, which were then purchased by individuals loyal to the group. The managing agency contract was notoriously one-sided. The agency could gain almost complete and near-perpetual control (some contracts were valid for sixty years) over a cluster of companies with which it had management contract. It was also a poorly legislated contract. Company law did not intervene in managing agency as much as it needed to, and the broad outlines of an agency contract tended to be governed by the generic contract act. The upshot was that the capture of one agency firm effectively transferred control of an entire cluster of firms in one sweep, and the shareholders of these other firms could do little to stop this. When the share value of the agent firm fell again, the losses were set off against the dividend income earned by these individuals, which move was challenged by the tax office. This was the context of several of these suits. These suits were filed not by the shareholders but by the commissioner of taxes.
Marwaris were not the only people doing this. Others were also engaged. And in some cases, the transfer of ownership happened by mutual agreement. But the majority of the takeovers were done by Marwari individuals through insider trading in the stock market, and, with few exceptions, it led industrial firms that were among the largest and most profitable in India in 1950 to recede into obscurity and bankruptcy in less than a quarter century. The legal record on Marwari takeovers includes, among others, the acquisition of India Jute by C. L. Bajoria, that of Kettlewell Bullen by Mugneeram Bangur, of Richardson Cruddas by Haridas Mundhra, and, from Bombay, the takeover of Bennett Coleman by Ramkrishna Dalmia. Among the other large firms that lost control to Indians, and went into oblivion soon after, were Bird and F. W. Heilgers (Pran Prasad), Jessop and Company (Mahadeo Ram Kumar), and New Central Jute (Sahu). Subsequent to the transfer of control, two tea-producing Marwari groups in Calcutta, B. M. Khaitan (which acquired Williamson and Magor, and Macneill and Barry interests) and Bangur, retained their prominence in the Indian industrial scene, though their relative position fell continuously. Nearly every other firm declined, and some allegedly suffered a plunder of their assets by their Indian owners. A similar example of mass decline of corporate culture and waste of entrepreneurial resources will be hard to find anywhere else in the world.
Although largely a story of entrepreneurial incompetence and corruption, the decline was not entirely a matter of the domestic Indian economy. Both the national and the international economic environment was hostile to the businesses in which these firms engaged. The European firms lived on the export of jute and tea, procured capital and technology from abroad, and recruited top management internationally. The nationalist state sharply raised tariffs and capital controls, which made taking any of these steps more difficult than before. A xenophobic investment policy raised investment costs sharply in businesses that had long relied on imported capital, know-how, and expertise. Exports suffered in jute and tea. The ratio of trade in national income fell in 1970 to a third of what it was in 1920. Commodity trade was partially nationalized and commodity export in the private sector was practically banned. The firms were squeezed from two ends; they lost their foothold in the export trade—giving ground in tea to Kenya and Sri Lanka and in jute to Bangladesh—whereas they never had a foothold in the domestic trade. By 1960 the old trading order had withered away. The takeovers compromised the quality of management of these companies precisely when they needed innovation to survive.
On a more positive note, selectively with a few firms or families, the protectionist regime and the developmental state encouraged existing industrial groups to diversify from commodities and textiles into engineering, chemicals, infrastructure, and consumer durables. Marwari industrial ventures that began around 1947 and which survived the liberalization of the economy in the 1990s include those dealing in cars (Birla, recently closed), aluminum (Birla), tires (Goenka, Singhania), cement (Singhania, Bangur, Birla), heavy chemicals (Birla), and steel, light vehicles, and appliances (Bajaj). Singhania was operated by two families from Kanpur and Calcutta, which turned into an industrial enterprise shortly before independence. Goenka was operated by a Marwari family from Calcutta. And Jamnalal Bajaj, the founder of the Bajaj house, was a Marwari trader based in central India who was also known for his influential role as a Congress leader in the 1930s.
Large industrial houses in the 1960s and the 1970s needed to engage with politics to obtain the industrial licenses and foreign collaboration licenses without which no ambitious investment project was possible. From the late 1960s, they needed to avoid increasingly stringent anti-monopoly regulation. The impressive diversification that these groups, especially Birla, experienced, revealed not only a willingness to take risks, but also a shrewd understanding of the politics practiced in New Delhi. The political factor created an element of competition and rivalry between the larger groups that had nothing to do with market competition. It made the proceedings of the chambers of commerce intense at times (Kochanek, 1995–1996). Individually, the pioneer Marwari industrialists of Calcutta were prominent in the Federation of Indian Chambers of Commerce and Industry, which had played a large role in negotiating with the state before independence. But in the 1960s tensions and personality clashes developed between Marwari leaders in this body, leading to the emergence of rival chambers and a reduction in the public role of the Calcutta Marwaris in national political affairs.
At the same time, the business world of Calcutta was collapsing under pressures from regional politics. From around 1968, a leftist political movement in West Bengal began to acquire governing power. The leftist trade union movement was led by Bengali intellectuals, many of them migrants from rural eastern Bengal (now Bangladesh). They had little touch with and little interest in preserving Calcutta’s heritage as a global and industrial city. Being anti-capitalist in Calcutta necessarily meant being anti-Marwari. The left-right battlefront, therefore, was drawn along Marwari versus non-Marwari lines. The main aim of leftist economic policy was to reform property right in agricultural land. By contrast, urban and industrial policy was largely left to the devices of the communist trade unions. The first communist-led government in 1968 saw an outburst of violent trade union action in Calcutta. The record was only marginally better after the main leftist party formed a government again in 1977. In the 1970s and the 1980s prominent Calcutta Marwaris shifted base elsewhere, fresh industrial projects undertaken by them came up in the other states, and a number of middle-sized and small Marwari firms closed doors.
While offering a handful of capitalists great opportunities, the developmental state hurt the interests of a large number of Marwari moneylenders who had earlier run the machine of grain trade and rural credit. While restricting, practically banning, private agricultural trade, the government of post-independence India nationalized banks (1969) and introduced an array of measures pushing private moneylending close to illegality. Moneylending did not become either obsolete or illegal but it became far less visible than it was before 1947. One of the long-term implications of the move was that some Marwari moneylending firms in the interior towns that had been large enough in the 1930s to match the scale of private banks operating in the port cities disappeared from the scene after 1950. Marwari banking houses in Mathura, Ahmedabad, Patna, Jabalpore, and Jaunpur were among several examples of mid-sized family firms that had the capacity to cross the threshold into corporate banking, yet they vanished. If in Calcutta’s industrial scene the developmental state led to the progression of Marwaris from good traders to bad industrialists, in the small towns the state cut short the progression of the moneylender into corporate bankers.
By 1990 the statist and autarkic setup was collapsing under its own weight.
The Second Globalization
In the 1990s the Indian economy liberalized, first by removing restrictions on foreign trade and investment policy and later though a limited disengagement of the state from industrial development and an even more limited concession to foreign investment. The impact upon the business houses nurtured by protectionism, as the major Marwari houses had been, was mixed. Initially the reforms invited resistance from these lobbies. On the positive side, accessing technology from abroad was much easier now than before. Private consumption was stimulated by the openness, and this was good news to the textile and durable goods industry. On the negative side, trade competition also exposed weaknesses acquired during the closed-economy era. Big business had undertaken no serious lobbying before to redirect public effort toward urban infrastructure and institutional reform, especially the reform of laws protecting employment. Now as competition grew intense, demand for intervention emerged in these neglected fields. These circumstances induced restructuring among the older business groups at many levels, and they changed the nature of their engagement with politics.
Between 1990 and 2010 the Marwari industrial houses mentioned above without exception divided up assets between members of the family, became less diversified and more focused than before, and turned toward exports. Today’s big Marwari houses, like those of any other ethnic group, are typically led by one main company and are engaged in one product line. About half the names in a list of such enterprises now consist of firms that experienced in recent decades a large expansion by drawing on global connections. Examples include the firm of Laxmi Narayan Mittal, owned by an individual who built a global steel complex from his family’s ownership of a steel company in Calcutta; the Sun Group of Nand Khemka, who built a private equity business from trading; the firm of Amit Jatia, who owns India’s McDonald’s chain with a family history in a paper mill; the firms of Rakesh Jhunjhunwala, the stock investor, the firms of Venugopal Dhoot, who owns one of the world’s largest television equipment firms with a family history in sugar and textiles; the firms of Harshvardhan Neotia in real estate; and that of the Goenkas in tires, technologies, and pharmaceuticals. A number of these names figure in a Forbes list of the richest Marwaris. The common thread between these people is not so much the Marwari stamp as the successful use of opportunities created by economic liberalization from a business base that had been created before the economy opened up.
Indeed, it is questionable if a distinct and identifiable Marwari presence exists in Indian business anymore. In small firms and in local trade Marwaris have almost seamlessly assimilated with local society. In big business the companies they own are defined more by the character of the business than ethnic identity. The discourses that render meaning to such terms as “network,” “community,” “business group,” or “merchant diaspora” would not easily apply to today’s business world in India. That is not to say that networks are obsolete; however, they do not seem to run along traditional lines. It is safer nonetheless to be somewhat tentative about these assertions because ethnic loyalty can live on in invisible ways.
A set of distinct features can nevertheless be found with the pattern of diaspora formation among the Marwaris when we compare the long-range histories of business communities in India.
Conclusion: The Marwari Diaspora
The Marwaris experienced two significant displacements. In the eighteenth and nineteenth centuries, when the northern Indian economy collapsed, they moved from northern and northwestern India to the east. And a second time, in the 1980s, big business interests shifted away from their main hub in Calcutta. Neither was a purely forced migration and yet, without a “push” factor, neither would have assumed the scale that it did. Still, there were differences between these movements. The origin, ethnic identity, and identity-based diaspora networks were more important in the first episode than in the second one. Cooperation and mutual support, sharing of information and resources, and an effort to re-create a community were all in evidence until the 1930s, but they were obscure at the end of the century. The moves in the 1980s and 1990s were supported more by the resources of the firms that moved.
Another difference between the two episodes is found at the level of historical scholarship. Whereas the movements in the eighteenth and nineteenth centuries have been well researched by a number of scholars, so that a great deal of historiographical discourse on the Marwaris focuses on these earlier periods, comparatively little material is available on the Marwaris in the second half of the twentieth century. Somehow, mobility is no longer a part of the Marwari modernization story in contemporary India. Two recently published anthologies on diaspora barely mention the group (Chatterji and Washbrook 2013; Oonk, 2007).
The apparent oversight reflects two distinct features of Marwari movement and resettlement. First, unusually for a business group, the Marwaris seemed to join the international South Asian diaspora late and on a limited scale, especially when compared with the Parsis, Sindhis, and Gujaratis. Their business profile remained traditional in that sense. Furthermore, for some of the communities (notably Parsis), the move to become international was linked with a diversification away from business toward other activities, including in the arts. Some of the most famous Parsis today are academics, writers, and musicians living outside India rather than owners of family firms. A similar diversification has characterized all ethnic business groups of India, but the scale and timing differed. The Marwari counterpart movement was late in coming and it still goes on.
A second reason for the growing obscurity of the Marwari diaspora in the literature can be traced to the fact that many Marwaris who had migrated around 1900 did not go to the metropolitan cities or overseas; rather, they went to the small towns and hubs of agricultural trade. They were predominantly moneylenders and shopkeepers rather than industrialists or export merchants. These people do not figure in the diaspora scholarship; indeed, they are not recognized by the historian of mobile capital in South Asia as even existing. In part, the neglect comes from the preoccupation of business historians with biographies of magnates and, in part, from the more or less smooth assimilation of small-town capitalists into local societies. At this level, the Marwari diaspora has experienced a “creative destruction.”
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