Roots of capital

Here is an important contribution to the still limited corpus of work on the evolution of Indias capitalist class.

INDIAN industrialisation or the emergence and growth of factory production has a long history, with its origins normally dated to 1854. Include large-scale trade and commercial services and the history of Indian business is even longer. Yet, Harish Damodaran argues, in his book (perhaps not too accurately) titled Indias New Capitalists, that Indian entrepreneurship has often been presented as being restricted to a few communities/castes traditiona lly linked with commerce and geographically concentrated in a few States and regions. This book takes a long-period, cross-country perspective to challenge this view.

Factually, it suggests, the evidence is to the contrary. To start with, during the colonial period, the post-Independence years and, perhaps, in heightened fashion over the past three decades, there was a more diverse set of entrepreneurs who made a mark in modern business than has been captured in extant business history. Quite a few of those entrepreneurs built empires that have sustained themselves and grown. They came from varied origins along very different trajectories, placed by Harish Damodaran in these major categories: those who followed the traditional bazaar-to-factory route; and those whose experience reflects the not-so-traditional office-to-factory and farm-to-factory trajectories that democratised Indian capitalism and brought into business castes that were believed to abjure or were considered to be shut out of such activity.

The richness of the book lies in the multi-level structure it adopts to support this perspective. From secondary sources, primary material and interviews the author has garnered a wealth of material in the form of case studies that identify Indias diverse capitalists, their origins, their, often unusual, traverse to industry, the factors that influenced their success and the role of community links and organisations in ensuring the success of those who did succeed. Much of this material is woven into a narrative that can be taxing to absorb because of the detail, but is rich with information and insight. Some of it is in the form of case studies that highlight features that the author wants to draw attention to.

At various points this detailed micro-level narrative is broken to raise issues that belong to a second plane in the argument. Thus, Damodaran examines the role of Arthur Cottons irrigation works in improving the living standards and advancing the educational attainments of the monsoon-dependent and flood-prone Kamma peasantry of coastal Andhra, which in turn facilitated their movement into industry. He captures the role of Cambodia cotton, introduced in Kongunad in 1904, in triggering a process that resulted in the Gounders and Naidus, who were not the traditional mercantile communities of Tamil Nadu, playing a role in the conversion of the landlocked region around Coimbatore into the Manchester of the South and the location for a large number of foundries and engineering units. He analyses the factors that enabled the so-called lower toddy-tapping castes and communities such as the Nadars and the Ezhavas to take to commercial activity that varied from match and cracker production, through printing, to the manufacture of coir products and the hotel business.

This micro-narrative and meso-level discussion then forms the basis for investigating a number of macro issues. Why did the Brahmins of the North not display the same degree of entrepreneurial dynamism as those in the South and the West of the country? Why did the agricultural communities of the North demonstrate a similar failing when compared with their Southern and Western counterparts? And how has the solidarity ensured by caste and community relationships, which facilitated the emergence of a bourgeoisie among groups that were not traditionally commercial, been affected by the penetration of the capitalist ethic?

In answer to the first of these questions Damodaran refers to a host of intertwined cultural, historical as well as economic factors. The fact that the Brahmins of the West and the South were affected by the inroads of colonialism and those of the northern hinterland were insulated from the winds of change blowing right through the late colonial era shaped their entrepreneurial potential. The former took to modern education early and, therefore, could make up for what they lacked in capital with their knowledge of English and technical education important ingredients for establishing contacts and starting complex industries, often through foreign collaborations and licensing arrangements.

When moving to his analysis of a similar difference between North Indian farming communities and their Western and Southern counterparts, the argument turns more structural. The environment in the West and the South is seen as having been conducive for the traverse from the field to the boardroom since the traditional mercantile communities, such as the Chettiars and the Komatis, exercised no decisive stranglehold over business. On the other hand, in the North the Banias, Marwaris and Khatris have been ubiquitous in commodity and money markets, which, according to Damodaran, made the entry point for affluent capitalist farmers not terribly inviting even in areas such as agro-processing. This could have played a role in the differential regional success of Brahmins as entrepreneurs as well.

The book concludes with the suggestion that the argument about the democratisation of Indian capitalism should not be pushed too far. As has been often noted, while there have been many instances of the emergence of a capitalist class among minorities such as Christians and Muslims, it has been, especially in the case of Muslims, much less than warranted by their share in the population and distribution across the country. And the democratisation of capitalism has stopped at the Dalit frontier: there is yet no clear sign of the emergence of a Dalit bourgeoisie.

The terrain covered and the arguments advanced make Damodarans well-researched book an important contribution to the still limited corpus of work on the evolution of Indias capitalist class. It also serves as a much-needed corrective to the many biases that have characterised business history scholarship relating to India. But as any good book does, it leaves the reader thirsting for more. The book offers the reader a lavish diet of micro detail. Combining this with some more discussion of the fascinating meso- and macro-level questions that the author raises would have (perhaps) been a legitimate reward for a reader who has invested the effort to follow the rich (but unavoidably tedious) detail relating to the experiences of individual capitalists, their families and their communities. But then, one cannot ask for everything in a single book.

Finally, given the authors project, it may have been useful to link the discussion to the rich post-Independence literature analysing the nature and evolution of the representative unit of capital in India, the business group. While there are references to the work of R.K. Hazari (but unfortunately not Aurobindo Ghose) and to the reports of the Monopolies Inquiry Commission and the Industrial Licensing Policy Enquiry Committee, these works are most often used to identify the rank of a particular group among the top business groups of the country. But there was a larger question which these studies explicitly or implicitly addressed: why was there a tendency for a few business groups to recur among the top few producers in a wide range of rudimentary industrial groups, and for them to account for a disproportionate share of assets and sales in the private corporate sector?

The answer to that question had many aspects, but one that was of particular significance was the ability of these traditionally dominant business groups to use state intervention, especially in the form of licensing, as an instrument to create barriers to the entry of new entrepreneurs. As a result, while new groups and entrepreneurs did emerge, theirs numbers were limited and they were very often restricted to new areas that were by definition not the bases of the traditional monopolies. This changed only when licensing was diluted or dismantled in particular industries or when certain new capitalists were able to influence or manipulate state policy. The implications of the complex relationship between the state and Indian capitalists (old and new) is an aspect that is substantially missing in the discussion in the book. But, as noted earlier, it would be wrong to look for everything in one place.