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The Oxford History of Indian Business

Author(s):Tripathi, Dwijendra
Reviewer(s):Jones, Geoffrey

Published by EH.NET (September 2005)

Dwijendra Tripathi, The Oxford History of Indian Business. New Delhi: Oxford University Press, 2004. xi +371 pp. $99.50/2400 rupees (cloth), ISBN: 0-19-565968-6.

Reviewed for EH.NET by Geoffrey Jones, Harvard Business School.

In this book, Dwijendra Tripathi, formerly Kastarbhai Lalbhai Professor of Business History at the Indian Institute of Management, Ahmedabad, provides the first substantive scholarly survey of Indian business history from the eighteenth century until the present day. The book is a pioneering achievement.

Business history has been, until quite recently, a rich person’s preserve. Enthusiasm and investment in the subject have been closely related to per capita income. The formative concepts of the field have been developed by scholars in North America, Western Europe, and Japan, and for the most part, they have researched the business history of their own country or other developed countries. Despite some excellent research on India (including by Tripathi himself), China, Latin America, and Africa, our knowledge of the business history of these vast countries, regions, and continents is fragmentary. This is a huge gap, and our knowledge of some favorite themes of business historians — such as family business and entrepreneurship — would be enormously advanced if we had more understanding of what has happened beyond Western and Japanese contexts.

Indian business history is in better shape than that of many emerging countries. There have been several decades of good scholarship by Indian business and other historians. The imperial heritage, and the widespread use of English, has meant that there is also a substantial literature on the country written by British and American historians. As a major recipient of foreign direct investment before the 1960s, there are also multiple studies of the histories of foreign firms in India. Yet, as Tripathi makes evident, there remain huge gaps in knowledge concerning the business history of India. Moreover, most of the literature at the moment focuses on individual firms or entrepreneurs rather than wider thematic issues. This situation makes Tripathi’s effort to present an overview heroic.

The central theme of the book is the evolution of Indian business from mercantile to industrial capitalism. India and China were the world’s largest manufacturing economies in the eighteenth century before the Industrial Revolution. However, India’s manufacturing was entirely in the hands of small artisans. Tripathi maintains that the powerful merchants found all over India showed no interest in manufacturing. This was not because of a cultural or religious aversion to capitalism — the “Indian spirit” as Weber described it — but because there was little inducement given the fragmented markets, inadequate transport infrastructure, lawlessness and disregard for property rights which characterized Mughal India. As the English East India Company slowly encroached on Indian affairs, Indian merchants usually regarded them as an improvement on the previous situation. The large “merchant princes” switched their services from the ailing Mughal Empire to the rising British one, only to find their roles as intermediaries as the East India Company introduced currency and banking reforms.

More by accident than design, Tripathi argues, the new British rulers provided a far better climate for modern entrepreneurship to flourish than their predecessors. For him, there was no possibility of a Japanese-style success story cut short by imperialism. Indian business remained primarily focused on trading and money lending until the middle of the nineteenth century, although there was a modest demonstration effect as Indians observed a new style of entrepreneurship practiced by Europeans in India. However, things changed as the British built transport infrastructure, abolished internal customs tariffs, and established a legal system which enforced property rights and eliminated the power of government to act in an arbitrary fashion. In Bengal, ethnic British entrepreneurs seized the opportunity to build new jute and coal industries. In Western India, Parsees such as the Tatas created a new cotton textile industry. Indian entrepreneurs developed the distinctive “managing agency” system, in response to shortages of capital and managerial skills, whereby families controlled through management contracts numerous independent joint-stock industries in diversified activities with outside shareholders. The British expatriate houses, such as the Birds and Andrew Yule, adapted this Indian management system. Although the outlines of this story are familiar, Tripathi breaks new ground by assembling the existing empirical evidence on both the Indian and British entrepreneurs and firms active in nineteenth century India.

Tripathi’s treatment of the British imperial regime is interesting. Although the book is replete with references to “colonial exploitation” (p. 247) and the “imperialist noose” (p. 330), the central argument is that British rule, whatever its defects, was on the whole good for Indian business. The most negative consequences of colonialism, in Tripathi’s view, was that it maintained the long-standing disinclination of the Indian business elite to invest in technological innovation because of “their easy access to foreign technology, thanks to the imperial connection” (p. 256). It was particularly unfortunate that the British technology to which Indians had such easy access turned out, especially in textiles, to be less than world-class. Indian entrepreneurs, Tripathi concludes, suffered from a bad case of “colonial syndrome,” or “an instinctive inclination of a subject people to emulate the practices, behaviors, and institutions of the ruling race, resentment against political subjugation not withstanding” (p. 252). This view is a long way from the literature of several decades ago, when the British were blamed for the “deindustrialization” of India.

Tripathi describes a remarkable growth of Indian-owned business from the First World War. Modern industrialization spread from the small confines of parts of western and eastern India to many other regions of India. A major turning point was the entry of the Marwaris into industry. The Marwaris were ?migr?s from Rajasthan who had built extensive trading, money lending and brokerage businesses, especially in Bengal, and by the end of the nineteenth century already dominated the domestic trade in raw jute. During the War, Ghanshyam Das Birla led the Marwari community into its first sustained manufacturing investments. He was offended by the racism he sometimes encountered from the British, but he also wanted to learn from them about modern business methods. During the interwar years the Marwaris and others greatly expanded their manufacturing investments, sometimes by buying the shares of British companies. Indian entrepreneurs invested in new industries such as sugar, paper, shipping and chemicals, and challenged the British incumbents in jute and coal. Despite the growth of the Birlas and other Marwaris, the Tatas remained preeminent, building a giant diversified business empire, and even launching an airline in the mid-1930s.

In contrast, the long-established British expatriate business houses grew at a slower pace than the Indian firms during the interwar years, although Tripathi is good at highlighting the diversity of experience between firms. Tripathi dismisses the view that the growth of Indian nationalism and growing political risk deterred the established British managing agencies from investing in new industries, and instead suggests they were crowded out by a new wave of Western multinational investors such as Dunlop, Philips, Imperial Tobacco, Unilever and ICI who held stronger competitive advantages in high technology and branded consumer goods. However, even after Independence in 1947, British expatriate firms did not suddenly divest from India. Long-established firms such as the Parrys and Binnys became Indian registered companies. Many made new investments. However, in time all of the former British business houses were either acquired by Indian investors or the government. The process was a long one. The long-established Assam Company was not “Indianised” until 1991.

Indian capitalism managed to flourish after 1947, despite the formidable battery of government controls and restrictions, and despite a considerable number of firms experiencing problems because of family succession issues. The highly protected domestic market itself created profitable opportunities for incumbents, although Tripathi also notes — somewhat circumspectly — that one serious-trade off was a widespread spread of corruption, which resulted in India being “consistently rated as a highly corrupt society” (p. 333). Many new business groups were created, including by new Marwari families such as the Goenkas and Khaitans, who rapidly built empires acquiring former British assets. There were striking entrepreneurial success stories, such as Karsanblai Patel’s Nirma Industries which challenged the long-established hold on the Indian market by Unilever by introducing a game-changing low-priced detergent. Policy liberalization after 1991 created new opportunities, especially in information technologies, in which firms such as Infosys and locations such as Bangalore finally revealed the potential of Indian business to the world’s attention.

The book contains an exemplary coverage of the available secondary literature on Indian business history. However given that each scrap of data is valuable in building the picture of how Indian business evolved, it is a pity that the literature on the history of foreign multinationals in India is not adequately covered. Among the most serious gaps are Hans Modig’s monograph on Swedish Match Interests in British India during the Interwar Years(LiberForlag, 1979); Forbes Munro’s Maritime Enterprise and Empire (Boydell, 2003), which contains wonderful information on Sir William Mackinnon’s large nineteenth century Indian shipping and other businesses; Howard Cox’s The Global Cigarette (Oxford University Press, 2000), which includes a chapter on BAT’s business in interwar India; and Stuart Muirhead’s Crisis Banking in the East (Scolar 1996), which is a fine study of the business of a leading nineteenth-century British overseas bank in India. Tripathi also does not cast his net widely into literatures on the fringes of business history. For example, there is no mention of new research by “world” historians such as Gijsbert Oonk on ethnic factors in the emergence of Indian entrepreneurship and Indian diaspora, or by “economic” historians such as Bishnupriya Gupta on collusion in the interwar Indian jute and coal industries.

This book is not the last word on Indian business history. There is an enormous amount to be discovered, about particular firms, entrepreneurs and industries. However, Tripathi has done a great service by providing the first overview of the field, without ever losing sight of the regional and ethnic complexities which make Indian history challenging and fascinating in equal measure. Hopefully teachers of comparative business history will now begin to include Indian material in their courses. And students of the rapid growth of contemporary Indian business now have the opportunity to understand how the leading business groups originated.

Geoffrey Jones is Joseph C. Wilson Professor of Business Administration at the Harvard Business School. His recent publications include Multinationals and Global Capitalism: From the Nineteenth to the Twenty-First Century (Oxford University Press, 2005) and Renewing Unilever: Transformation and Tradition (Oxford University Press, forthcoming, Fall 2005). He is now writing a book on the globalization of the beauty industry over the last century.

Subject(s):Business History
Geographic Area(s):Asia
Time Period(s):20th Century: WWII and post-WWII