This is a series based on The Stories of Indian Business Series: 10 Extraordinary Tales of Trade, published by Penguin Random House and edited by Gurcharan Das.

Three Merchants of Bombay: Business Pioneers of the Nineteenth Century

- By Lakshmi Subramanian

Until the post-Mughal regional kingdoms stabilized the wandering life of a merchant entailed risks of every kind. Pillage was not an unusual means of existence. Hence the merchant sought the protection of a city. But the island city offered much more. It had an open and trusting environment which welcomed all types of business people. It protected private property and confiscated it only in the rarest circumstances. It did not suffer from the Mughal landed gentry’s disdain of the merchant nor from the contemptuous attitude of British Calcutta’s ‘burra sahib’.

Hence Banias from commercial centres all over western India began to stream into the island, bringing with them an abundance of entrepreneurial dynamism. Soon Bombay was making room for Parsi ship-and-dock-builders, legendary Gujarati men of trade, Jain shroffs, Marwari bankers, Konkani Muslim traders, Baghdadi Jews and European free-traders. As a result it acquired its peculiarly cosmopolitan character early on.

The relatively smaller presence of the British official community made it less hierarchical and less racist than Calcutta.

Anyone could rise to the top as long as he had what it took. The stories of Jamsetjee Jeejeebhoy and Premchand Roychand are testament to this.

The Banias also brought with them their traditional institutions and networks, which proved useful when it came to brokering the cotton business between the fields in south Gujarat and Kathiawar and the port of Bombay. The hundi, the legendary financial instrument in particular was indispensable in financing the business between the port and mofussil cotton areas, which had their own currencies and byzantine exchange rates. The hundi became the common currency, and shroffs, such as the renowned Motishaw, Bansilal Abhirchand, Kaka Shah and others in Bazaar Gate, became powerful bankers. To the hundi they added other financial instruments such as ‘respondentia’, a risk-sharing mechanism in maritime trade which helped to reduce the hazard in ‘consignment trade’.

Because the early merchant princes went on to become generous philanthropists who made a visible impact on public culture, the island city acquired a modern atmosphere.

Public philanthropy brought respectability to commerce and dignity to the bourgeoisie, as our author explains in some detail. All these qualities go a long way in explaining Bombay’s success. But the big stimulus which lifted the island city on to the world stage came from the outside. Bombay became part of a global trading network in the late eighteenth and early nineteenth centuries.

In writing about the commercial capitalism of eighteenth and nineteenth-century India, Lakshmi Subramanian has brought in a fresh perspective. She has torn down the old, nationalist and Marxist ways of writing business history in which all events were viewed through the lens of colonial and imperial power and through such models as ‘dependent’ or ‘comprador’ capitalism. While not denying that it was an age of European domination, she is concerned with how well Indian entrepreneurs adapted to the new opportunities and capitalized on their indigenous ways of doing business. There are many lessons to be learned from her book. The main one, as I have pointed out, is the organic and self-reinforcing relationship that tied trade, cities, and governance together, and Governor Aungier’s advice in 1772 to a new judge which is still one of the best statements on the importance of the ‘rule of law’.

Another lesson is that free trade holds immense potential for creating the wealth of a nation. Adam Smith and others in eighteenth-century England understood this and hence they fought to break the monopoly of the Company. Once that monopoly was broken, as we saw in Tirthankar Roy’s book on the Company in this series, barriers to entry were removed, and this opened up the way for an explosion in private enterprise by Indians and Europeans alike. The enemy of the market and of prosperity is monopoly and lack of competition.

A third lesson is the potential power of private capital to create public good.

Sir Bartle Frere showed in Bombay that surplus capital from private speculation in cotton could be diverted to reclaim land from the sea. He believed that private companies would do a better job than the public sector and thus he set the stage for the reclamation of the Backbay. This leads to a fourth and related lesson: in a private–public partnership for the building of infrastructure, there is an ever-present danger of ‘crony capitalism’ as our author has vividly illustrated in the story of Premchand Roychand and the Bank of Bombay.

A fifth and final lesson is that when trade and free markets make some men hugely wealthy they tend to alleviate the conditions of others as well. There is no evidence in this book that the rise to riches in the three stories recounted here was at the expense of the majority. Trade, in other words, is not a zero-sum game. As we see here the rise of cities accompanies the rise in wealth of the bourgeoisie. This in turn creates its own dynamic. Cities become a magnet of employment opportunities and attract people of all kinds from smaller towns and rural areas. Certainly wealth for a few is not created by impoverishing others.

- Edited excerpt from Gurcharan Das’ introduction to the book.