India’s New Capitalists

There is a substantial literature analysing the evolution of business enterprise in India with reference to particular communities and castes. Organized research in this direction is traceable to Dhananjaya Ramchandra Gadgil’s two oft-cited mimeographs of the 1950s and an article by Helen B. Lamb during the same decade.¹ These preliminary inquiries led to more comprehensive studies, including Dwijendra Tripathi’s edited volume emanating from a business history seminar at the Indian Institute of Management, Ahmedabad, in 1982, and Thomas Timberg’s treatise on the industrial transition of the Marwaris.²

Mandi House in Lutyens’ Delhi is a converging point for dilettante artists, amorous poets, budding musicians, and radical playwrights: understandable, as the area is home to institutions like the National School of Drama, Kathak Kendra, Shri Ram Centre for Art and Culture, Sahitya Akademi, Sangeet Natak Akademi, and Triveni Kala Sangam. In this very high culture zone, standing out like clear soup in a grand Mughal banquet, is Federation House. Headquarters of the Federation of Indian Chambers of Commerce and Industry (FICCI), this sombre and stolid four-storeyed building epitomizes the country’s old business establishment. As one ascends its narrow, neatly-tiled stairs leading to its offices and conference halls, there are black-and-white pictures of FICCI’s presidents from 1927 onwards, down to the most recent incumbent. Their profile says it all: four out of every five are from traditional merchant communities.

In Premchand’s classic, Godaan, the sugar mill owner, who also runs a bank and speculates in stocks, silver, cotton, and wheat, is called Mr Khanna.¹ Like all great writers, Premchand had a tactile sense of the ground beneath his feet as well as a capacity to transcend the immediate and the obvious. Khanna happens to be a Khatri surname; in 1936, when Godaan was published, there were hardly any big industrialists from this community. The only two famous Khatri names then were Karamchand Thapar (who had just about floated his first colliery and a couple of paper mills) and the sugar baron Gokul Chand Narang. The fact that Premchand consciously chose Mr Khanna as his mill owner, rather than a Mr Jhunjhunwala, a Mr Dalmia or a Mr Kanoria, only shows that the Khatris were an emergent force in Indian industry by the 1930s.

‘Manchester of the South; Light Engineering Powerhouse of India’—these are the usual catchphrases used for Coimbatore, a district in Tamil Nadu (TN) that produces roughly 15 per cent of the country’s cotton yarn, generates 45 per cent of its knitwear exports, and meets half of the domestic pumpsets requirement.¹

Our survey of business communities till now has focused on castes within the ambit of the classical Hindu chaturvarna social hierarchy comprising Brahmins, Kshatriyas, Vaishyas, and Shudras. We started with the traditional mercantile communities clubbed under the Vaishya order (Banias, Marwaris, Jains, Parsis, Chettiars, etc.), followed by Brahmins and other ‘white collar’ professional classes. The latter included Kayasthas, Khatris, and the Bengali bhadralok—communities whose entry into business was predicated upon their strong educational base and a secure presence in the civilian and political establishment. From these we moved to the intermediate castes, covering landowning peasant communities such as Kammas, Reddys, Naidus, and Gounders who have made a successful transition from the field to the boardroom over the last century. In the conventional varna scheme these communities, along with other ‘dominant castes’ like Patidars, Marathas, and Jats (whom we shall examine in later chapters), were categorized as Shudras.¹

There is in Gujarat a dairy conglomerate belonging to some 2.5 million farmers. Like any other business undertaking, it operates on strictly commercial principles. With an annual turn-over of Rs 4,000 crore, the Gujarat Cooperative Milk Marketing Federation Limited (GCMMF), along with its affiliated district unions, is India’s largest food company and owns one of its most adored consumer brands: Amul.^l But its way of doing business and servicing shareholders does not conform to the regular schoolboy rules of companies. To start with, its shareholders are not based in Mumbai or Delhi, let alone Geneva or New York. Most of them live in Gujarat’s hinterlands, owning one or two, sometimes more, milch animals. Secondly, they are not bothered about the value of their shares; since these are not traded in the first place, the issue of capital appreciation or booking losses does not arise. For them, earnings per share, dividend yields, and price-earning ratios are of no consequence. What matters is how much money the company is able to pay for every litre of milk that it procures from them. The company’s job is not to maximize the return on capital invested by its shareholders (which is only incidental), but to maximize the return on the raw material they supply to its dairies. And that is in turn a function of how efficiently the milk is processed and marketed.

In terms of sheer quantum of physical purchases and scale of commodity movement and storage, the operations of the Food Corporation of India (FCI) are perhaps without parallel anywhere in the world. The public sector behemoth organizes procurement of about 40 million tonnes (mt) of wheat and rice every year, or close to a fifth of the country’s aggregate foodgrain output.¹ Much of this is concentrated over short time spans, calling for an enormous deployment of financial and logistical resources. The bulk of wheat, for instance, is bought between mid April and the first week of May. At its peak, daily purchases touch 1 mt or more, the equivalent of 1 lakh trucks or 435 rail rakes of 2,300 tonnes each. Payments are made within 72 hours and the grain that is procured and loaded into 50 kg jute bags travels an average distance of 1,500 km. Financing these operations is in itself big business, involving an annual working capital outlay of Rs 30,000 crore, met through a consortium of 61 banks.²

This chapter, as the title indicates, does not attempt comprehensiveness. Our objective is to trace certain general historical patterns of business entrepreneurship amongst the country’s two major religious minorities—Muslims and Christians—while bringing into light developments in the more recent period.

On 25 November 1949, at the penultimate sitting of the Constituent Assembly which drafted Independent India’s constitution, Bhimrao Ramji Ambedkar noted:

we are going to enter into a life of contradictions. In politics we will have equality and in social and economic life we will have inequality. In politics we will be recognizing the principle of one man one vote and one vote one value. In our social and economic life, we shall, by reason of our social and economic structure, continue to deny the principle of one man one value. How long shall we continue to live this life of contradictions? How long shall we continue to deny equality in our social and economic life? If we continue to deny it for long, we will do so only by putting our political democracy in peril. We must remove this contradiction at the earliest possible moment or else those who suffer from inequality will blow up the structure of political democracy which this Assembly has so laboriously built up.¹

Ambedkar is known by many as the man who chaired the Drafting Committee elected by the Assembly; and by all as someone who gave voice and articulate expression to the country’s vast Dalit populace, unprivileged and unlettered by custom and circumstances.