The managing-agency system dates back to the 1830s, when the East India Company lost its monopoly, and individual private trading was permitted. Former East India Company personnel formed partnerships and created agency houses, trading in indigo, sugar, cotton, silks, spices and opium. Many of these partnerships then fell on hard times, especially when the partners began to pull out their funds and return home. A number of markets were swamped by too much traffic, such as indigo, in which production rapidly exceeded demand. These early partnerships suffered a cash crunch when their founders denuded them of funds and disappeared from the scene.
The period from the origins of the major managing-agency houses to the eve of the Second World War saw their emergence, expansion, and the beginning of their decline. They established their businesses in trading and agency work, handling such imports as piece-goods and such exports as indigo, and grew to prominence on the back of the major commodities of tea, jute and coal, supplying goods and services to the producing and manufacturing companies concerned. In this way, they helped to stimulate the creation of much of India’s economic infrastructure, managing shipping, railways and electricity companies. Many of the managing-agency houses developed branches outside Calcutta, in other outposts of the mercantile Raj.
By the mid-1940s, the impact upon the British Managing Agency Houses of the impending political changes in India was clearly visible, in the form of lack of motivation, confidence and no fresh investment. In certain cases there was even a tendency to fold up completely, and pass on the business for maximum immediate benefit. In other cases, such as Jardine Henderson, new companies were formed to take over existing businesses on a revalued basis, and the expatriate promoters then offloaded the shares in the new companies at a high premium. This period was traumatic for most of the managing-agency houses, in which they reacted to the changes going on around them, rather than proactively seeking to pre-empt developments. Arguably, their heyday had already passed, although most did enjoy a resurgence with wartime demand for products and services. Some houses had started recruiting Indian covenanted staff before the War, but this was still rare. Few were anticipating the rising tide of nationalism.
At first, Independence and Partition seemed to make little difference to the operation of the managing agencies, even those whose assets were split between India and what became Pakistan and East Pakistan — and finally Bangladesh. But when the full implications of Partition were revealed, particularly in the case of jute, the existing element of uncertainty shrouding the plans and ambitions of the British ‘Merchants of the Raj’ intensified. This was felt by those who returned after the war, or who came out to avoid the austerity of post-war Britain. Meanwhile, those who were to become their Indian successors were beginning to make inroads into the UK-owned businesses, especially because the British houses had clearly passed through their pioneering stage.
The 1950s were a period of slow but determined change for the managing agencies. Although much of the government legislation directed against the managing agencies which was enacted in this period failed really to bite, all the houses undertook a fundamental re-evaluation of their raison d’être. Concern about the future became so great that their outlook was increasingly cautious, and although there were a few new commercial initiatives, these did not materialise sufficiently to counteract the effects of the rise of Indian business houses, which gathered apace in this decade.
After a decade of India’s political independence, and after a wide-ranging series of changes in Indian company law, the pressures upon the British merchant groups of Calcutta to seek closer links with Indian entrepreneurs were clearly intensifying. In many cases, it was not an unwelcome pressure, and was seen as a means for future survival, when most groups had experienced worrying fluctuations in performance and profitability since 1947. Those making a firm commitment to maintaining their commercial presence in the subcontinent already saw their future in terms of developing relationships with Indian businessmen, who could share capital-raising, management and profits.
Since the Foreign Exchange Regulations Act (FERA), all the managing agencies have undergone almost total change, but to a surprising extent, much evidence of the past remains. This is still apparent in the retention of the old names – such as Shaw Wallace, Jardine’s, McLeod, Gillanders, Balmer Lawrie, Warren, and Octavius Steel — by companies who now have few links with the founders who bore these names. The only relics of the old managing-agency houses which still have a degree of sterling ownership are Macneill & Magor, Warren’s and the Goodricke Group, and in two cases out of three these owners have substantially changed. The Assam Company, through its ownership by Inchcape, would have been a fourth example, until its sale to the Methas of Bermuda in mid-1991.
Two questions keep cropping up again and again in the context of the ex-managing agencies and their continuing role in India, and especially in Calcutta:
concern over the future prospects for British business there;
the nature of the regulatory environment and the continued tolerance of extensive foreign holdings (especially in the tea industry).
How do the ‘Merchants of the Raj’ — of yesterday and today — sum up what the managing-agency system achieved? There is an overall feeling that the success and value of the system depends on the context of the time-period concerned. Most feel that in their heyday, the managing agents played an important role, but few regret their passing, especially by the fourth quarter of the twentieth century.
