Gijsbert - Oonk Indian Economic and Political History

Gijsbert Oonk
The Emergence of Indigenous Industrialists

in Calcutta, Bombay, and Ahmedabad,
1850–1947
This article describes and explains three patterns in the entry of
Indian entrepreneurs in large-scale industries in South Asia,
1850–1947. It begins with Marwari businessmen in the jute
industry in Calcutta. Then I discuss the success of the Parsi
community in the Bombay cotton industries, and, finally,
Gujarati (mainly Hindu) industrialists in Ahmedabad. I focus
on three variables that might explain the timing, degree, and
social and cultural variations in the emergence of indigenous
industrialists in these cities. These variables concern: first,
the colonial attitude towards indigenous industrialists in this
field; second, whether or not these men belonged to a (reli-
gious) middleman minority; and, finally, their social and, in
particular, occupational background.
F rançois Crouzet described early industrialists in Europe as the emer-

gence of “new men” on the economic scene. In his view, industrialists
differed from traders, financiers, and protocapitalists in that they needed
a long-term perspective, found new ways of financing their business, and
This article is based on research in various archives and libraries in Bombay, Ahmedabad,
New Delhi, and London between 1993 and 1994. The research was made possible by a grant
from WOTRO Science for Global Development of NWO (Netherlands Organization for Scien-
tific Research), the Dutch foundation for tropical research. I would like to thank my colleagues
in the history department of Erasmus University for creating the environment to write and
develop new ideas, especially H. W. van Schendel for supervising my Ph.D. project. Ferry de
Goey has become a fine and critical colleague over the years, and I would also like to thank
Ellen Bal for her support. In India I wish to thank Dwijendra Tripathi and M. M. Mehta for
their detailed comments. I am also grateful to the editors for encouraging me to rewrite this
earlier published paper and make it accessible to a wider Western academic audience. See
Vipin Gupta (and others), “Culturally-Sensitive Models of Family Business in Southern Asia:
A Compendium using the GLOBE Paradigm,” Hyderabad, 2008; and Nasreen Taher and
Swapna Gopalan, eds., Business Communities of India (Hyderabad, 2006). I have entirely
revised and updated this article for this publication.
Business History Review 88 (Spring 2014): 43–71. doi:10.1017/S0007680513001414

© 2014 The President and Fellows of Harvard College. ISSN 0007-6805; 2044-768X (Web).
Gijsbert Oonk / 44
supervised large numbers of workers.1 These new men were by no means

unique to Europe. Indeed, in other parts of the world, indigenous inves-
tors paved the way for local industrialization. I compare the emergence
of three different local business communities in the field of large-scale
industries in India from 1850 to 1947: the jute industry in Calcutta,
and the cotton textile industries in Bombay and Ahmedabad. These
dominant sectors in India’s industry eventually started to compete
with the heart of the British Empire.2
Calcutta, Bombay, and Ahmedabad were, by far, the three biggest
industrial centers in India between 1850 and 1947. In Calcutta, British
businessmen started the local jute industry, but Marwaris took over on
the eve of independence in the 1930s. In contrast, right from the start,
non-Europeans took the lead in developing cotton textile industries in
Bombay and Ahmedabad. As a result, the imperial economic center of
the world, Manchester, faced its toughest competition from local
business communities based in the so-called periphery, namely
Bombay and Ahmedabad.
In this article, I assess two major characteristics of research on the
emergence of Indian industrialists. The first concerns the extent to
which British colonial rule hindered or promoted industrial develop-
ment, particularly the emergence of indigenous industrialists. In this
context, researchers have questioned whether successful local business
groups should be seen as “compradors” or “collaborators.” In the
South Asian context in particular, Nationalist and Marxist historians
both emphasize the role of the colonial state as an important barrier to
emerging local business elites.3 Secondly, much research focuses on
one particular business community or caste in a narrowly defined geo-
graphical area. These studies tend to overemphasize some specific
group particularity, such as religious background, the role of “unique”
ethnic minority background, and the importance of a family business.4
1
François Crouzet, The First Industrialists: The Problems of Origins (Cambridge, U.K.,
1985).
2
A. K. Bagchi, Private Investment in India, 1900–1939 (Cambridge, U.K., 1972); Bipan
Chandra, Nationalism and Colonialism in Modern India (New Delhi, 1979), 144–71;
Debdas Banerjee, Colonialism in Action: Trade, Development and Dependence in Late Colo-
nial India (Hyderabad, 1999); Dharma Kumar, The Cambridge Economic History of India
(Cambridge, U.K., 1982); Rajat Kanta Ray, Growth and Conflict in the Private Corporate
Sector, 1914–1947 (Oxford, 1979); B. R. Tomlinson, The New Cambridge History of India:
The Economy of Modern India, 1860–1970 (New Delhi, 1993); and Dwijendra Tripathi, The
Oxford History of Indian Business (New Delhi, 2004).
3
Among others, see Bagchi, Private Investment in India, esp. 163–69; Chandra, National-
ism and Colonialism in Modern India, 144–71; Banerjee, Colonialism in Action; and Ulbe
Bosma and Gijsbert Oonk, “Bombay Batavia: Parsi and Eurasian Variations in the Middlemen
Theme,” in Mediators between State and Society, ed. N. Randeraad (Hilversum, 1998), 17–41.
4
Among others: D. R. Gadgil, Business Communities in India (New York, 1951); T. A.
Timberg, The Marwaris: From Traders to Industrialists (New Delhi, 1978); Robert E.
The Emergence of Indigenous Industrialists / 45
This work tends to overlook the social/occupational background of

protoindustrialists.
These two characteristics have formed the empirical and political
backbone of the debate for the last four decades. This article aims to
take a comparative perspective and to explore the distinctions and simi-
larities between Calcutta, Bombay, and Ahmedabad from a bird’s-eye
view. This approach will transform individual case studies into a com-
parative piece of research. Its strength lies in comparing three cities,
while also focusing on the backgrounds of the early industrialists in
India and the colonial attitude towards indigenous industrialization.
The article explores the distinctions among the three cities and the
historiographical debate to which each has contributed. I realize that
making comparisons between Calcutta, Bombay, and Ahmedabad is,
like most comparisons, an ambitious task. Indeed, as far as I know, it
has never been done systematically before.5 Therefore, this article is a
first attempt based on primary as well as secondary sources. I emphasize
three variables that are mentioned in the literature, which may have hin-
dered or encouraged the emergence of Indian businessmen in large-scale
industries: colonial attitudes towards indigenous industrialization,
being a member of a (religious community, caste-based) middleman
minority, and the social/occupational backgrounds of the entrepreneurs.
In my view, there is some sketchy evidence that supports the notion that
there were differences in colonial attitudes between Calcutta and
Bombay. Ahmedabad, however, is a special case, because the colonial
influence there was limited. Nevertheless, this city makes an excellent
counterpoint.
The evidence is much stronger if I examine the differences in com-
munity backgrounds in the three cities. In each we see that minorities
played an important role, with Ahmedabad again being the exception.
In Calcutta, the Marwari minority played a dominant role, whereas in
Bombay the Parsis became important. Both groups often acted as mid-
dleman minorities. However, in the case of Ahmedabad, Hindu and
Jain Gujaratis entered the cotton textile industry sector, with these
industrialists belonging to the majority community. These similarities
and differences need explanation. The most striking similarity in each
Kennedy, “The Protestant Ethic and the Parsees,” American Journal of Sociology 68 (1962):
11–20; Makrand Mehta, The Ahmedabad Cotton Textile Industry: Genesis and Growth
(Ahmedabad, 1982); Eckhard Kulke, The Parsees: A Minority as Agents of Social Change
(Munich, 1974); and Dwijendra Tripathi, ed., Business Communities of India: A Historical
Perspective (New Delhi, 1984).
5
Claude Markovits makes a useful comparison between Bombay and Ahmedabad:
“Bombay as a Business Centre in the Colonial Period: A Comparison with Calcutta,” in
Bombay: Metaphor for Modern India, ed. Sujata Patel and Alice Thorner (New Delhi,
1995), 26–46.
Gijsbert Oonk / 46
of the cities is that most protoindustrialists had a background in trade,

finance, and speculation. This may not come as a surprise, because
early industrialists in the heart of the empire had similar backgrounds.
Nevertheless, there is a strong Asian notion that these industrialists
should come from a middle class of engineers and artificers.6 This
article aims to revise this perspective.
The colonial attitude. A central issue in the Indian historiography is
the question of to what extent British colonial rule hindered or promoted
industrial development. This article will focus on the attitude of the colo-
nial government as well as on the approach of British entrepreneurs to
local businessmen. John Gallagher and Ronald Robinson argue that
because of their minority status, some local business communities
were suitable middlemen when it came to supporting colonial empires
abroad. As these businessmen belonged to nonmajority groups—and
were not therefore an important military or demographic factor—many
colonial governments supported them as local suppliers, translators, or
informants. In this way, these groups are seen as collaborators and
exploiters in both Marxist and Nationalist historiographies. This is
because they supposedly would not reinvest their profits in the host
society, but in the region from which they came.7
Middleman minority. Sociologist Georg Simmel argues that the
migrant traders who decided to settle in their host societies were stran-
gers, which might have helped them to develop their business. On the
one hand, they were able to fill economic niches that local business com-
munities were not allowed to, like selling alcohol. On the other hand, they
developed a more detached attitude towards local markets, which may
have helped them to set prices with a view to greater profits. The
famous sociologist Max Weber argued that there is a strong relationship
between the religious background of entrepreneurs and their capitalistic,
entrepreneurial ethic. He hypothesizes that particularly in the Protestant
religion, people developed an ethic where hard work, (re)investment,
long-term perspectives, and rational risk calculation became primary
aims of the business community. For India, Weber stresses the anticapi-
talist attitude of Indian (especially Hindu) entrepreneurs. Indeed,
because of their otherworldly outlook, Hindus do not focus on success
in this life, but in the next. Consequently, according to Weber, they
6
For an excellent overview of this debate, see Mario Rutten, Asian Capitalists in the Euro-
pean Mirror (Amsterdam, 1994). In this article, I follow his lead.
7
See William Roger Louis, ed., Imperialism: The Robinson and Gallagher Controversy
(New York, 1976); D. R. Gadgil, The Origins of the Indian Business Class (New York, 1959);
A. D. D. Gordon, Businessmen and Politics: Rising Nationalism and a Modernising
Economy in Bombay, 1918–1933 (New Delhi, 1978); and Claude Markovits, Indian Business
and Nationalist Politics, 1931–1939 (Cambridge, U.K., 1985).
would not develop a “hard working and saving money” ethic comparable
to that displayed by Protestants.8 As a result, he did not foresee long-
term investment in large-scale industries in India. Social historians
from the 1960s to the 1980s seriously questioned Weber’s theory.9
The most important economic historians on the Indian economy
have largely ignored Weber’s explanations. D. R. Gadgil, Amiya Kumar
Bagchi, Rajat Kanta Ray, and Amartya Sen have argued that the for-
mation of the European cartel and social ethos led to the Indian business
community refraining from investing long-term in large-scale industries.
They show that, when the rates of return were favorable for Indian
business, Indian entrepreneurs would stand up and enter large-scale
industry, rather than question ethics.10
Sociologist Edna Bonacich and social historian Christine Dobbin
built on Simmel’s and Weber’s work by arguing that minorities in par-
ticular became successful entrepreneurs; because of their minority
status (and, as a consequence, having confronted all kinds of discrimi-
nation, such as not being allowed to own land or to undertake certain
jobs), they developed a stronger desire to become successful.11
Social background. Within the predominant Marxist literature, the
transition from mercantile to industrial capital is of primary importance.
Here we find that Asian assumptions about the European transition to
industrialization (especially in the British cotton textile industry)
greatly influenced the Indian historiography on indigenous industrializ-
ation.12 Central to the Asian notion of the background of early European
industrialists is the fact that they did not belong to the trading or
merchant-manufacturer community. This view is a consequence of
dated European literature on the industrial transformation in Europe.
Here, economic historian Maurice Dobb, for example, argues that mer-
chant capital could not, ultimately, be responsible for the Industrial
8
See Max Weber, Die Wirstschaftsethic der Welreligionen II: Hinduismus und Buddhis-
mus (Tübingen, 1922). For a fair summary of Weber’s work, see Reinhard Bendix, Max Weber:
An Intellectual Portrait (London, 1966). For a fundamental critique, see Morris D. Morris,
“Values as an Obstacle to Economic Growth in South Asia: A Historical Survey,” Journal of
Economic History 27, no. 4 (1976): 588–91.
9
Among others: Timberg, The Marwaris; Kennedy, “The Protestant Ethic and the
Parsees,” 11–20; Mehta, The Ahmedabad Cotton Textile Industry.
10
Bagchi, Private Investment in India, 1900–1939; Ray, Growth and Conflict in the
Private Corporate Sector, 1914–1947; Gadgil, Business Communities in India; Amartya K.
Sen, “The Pattern of British Enterprise in India, 1854–1914: A Causal Analysis,” in Social
and Economic Change, ed. B. Singh and V. B. Singh (Bombay, 1967).
11
Edna Bonacich, “A Theory of Middleman Minorities,” American Sociological Review 38
(1973): 583–94; Christine Dobbin, Asian Entrepreneurial Minorities (Richmond, U.K., 1996).
Georg Simmel, “The Stranger,” in The Sociology of George Simmel, ed. K. H. Wolf (New York,
1950).
12
“Asian assumptions” refers to assumptions made by Asian historians as well as by Euro-
pean historians concerned with the industrialization debate on South Asia.
Gijsbert Oonk / 48
Revolution because short-term trading and financing goals were more

important than long-term industrial investments. Dobb adopts Marx’s
description that the “second road to capitalism,” where the merchant
classes take possession of production, eventually became “an obstacle
to a real capitalistic mode of production.”13
However, I argue that the trading and banking classes in India played
a vital role in the emergence of indigenous industrialists. Accordingly, I
emphasize the importance of the social (occupational) background of
future industrialists. Indeed, despite their varying backgrounds in
terms of religion, caste, and minority status, they all had a history in
trading (including finance and some speculation) in cotton or jute. This
similarity may not come as a surprise. Some background in trade and
knowledge of the different qualities of yarn and cloth and markets were
important assets in starting large-scale industries. The surprise, then,
should be the amount of research and literature devoted to caste, religion,
and being part of a minority.14
The story of Marwari businessmen in the jute industry in Calcutta
fits almost perfectly within the Indian Nationalist and Marxist historio-
graphy, which argued that colonialism hindered the emergence of local
business communities while, at the same time, Indian cultural factors,
like religion, could not explain the slow rise of local business commu-
nities. In the success of the Parsi community in the cotton industries
of Bombay, colonialism promoted the emergence of local business com-
munities, even when they started to compete with the major industries in
the United Kingdom. Finally, the story of the Hindu industrialists in
Ahmedabad demonstrates that not only may minority groups become
industrialists, but the majority group of Hindus as well. In the final
section, I compare the three patterns of industrialization. While the cir-
cumstances in Calcutta, Bombay, and Ahmedabad all led to the success-
ful emergence of Indian businessmen in large-scale industries, they
differ in the importance to be attributed to the different variables and,
as a consequence, to the importance of the various theories.
Calcutta’s Industrial Transformation: Marwari Competitors
At the end of World War I, the imperial sun was probably at its
highest in Calcutta. The most important buildings of the British
managing-agency houses of Andrew Yule, Bird and Heilgers, and the
13
Karl Marx, Capital, vol. 3, 388–96, as quoted in Maurice Dobb, Studies in the Develop-
ment of Capitalism (New York, 1976 [1st ed. 1947, rev. ed. 1963]). For an excellent overview of
how a selection of the European historiography influenced notions on the Asian transform-
ation to industrialization, see Rutten, Asian Capitalists in the European Mirror.
14
Rutten, Asian Capitalists in the European Mirror.
Duncan Brothers literally dominated the area around Dalhousie Square,

which was the economic and political center of the city. At that time, no
respected Indian trader would have believed that he could challenge
British supremacy in the Calcutta jute industry. However, this is pre-
cisely what happened. Slowly and subtly, the Marwaris increased their
influence in the jute industry, finally opening their own jute mills and
becoming competitors to British jute industrialists in Calcutta and, even-
tually, Dundee.15
Colonial Attitude toward the Marwaris in Calcutta
Calcutta served as the capital city of British India until 1911, after
which this role shifted to Delhi. The city had the largest concentration
of Europeans and capital in India. The Indian government, and therefore
the city of Calcutta, played an important role in the allocation of resources
between regions, particularly in the development of railway companies
and railway lines. The European business community in Calcutta used
its influence and networks to serve European (mainly Scottish) business
interests in the jute trade and tea production. In this context, less dis-
crimination and shared resentment marked the business relationship
between Indian and European businessmen.16 Claude Markovits argues
that historians have put forward the main explanation for this difference:
Firstly, . . . Western India was conquered by the British at a later stage

than Eastern India, thus escaping the period of unabashed exploitation
which cost so dearly to indigenous merchants from Bengal, and sec-
ondly the exceptional role played in Bombay by the Parsi community
which was Indian but had a special relationship with the British.17
This special relationship was barely seen in Calcutta. The British

there did not welcome the Marwaris, although the British did deal
with them because of their knowledge of the inland market and their
financial capabilities, and to secure the supply of raw jute for British-
owned jute factories. However, the British viewed the Marwaris not as
friends or even formal collaborators, but as competitors. Their strength
was that they were not formally organized and were, therefore, not
obliged to follow formal rules.18 This exemption from organization
15
I derive the image of the imperial sun, which I also use in the other sections of this article,
from Omkar Goswami, “Then Came the Marwaris: Some Aspects of the Changes in the Pattern
of Industrial Growth in Eastern India,” Indian Economic and Social History Review 22, no. 3
(1985): 225–49.
16
Markovits, “Bombay as a Business Centre in the Colonial Period,” 31.
17
Ibid., 41.
18
Anne Hardgrove makes an interesting observation that the “contests between the gov-
ernment and the Marwaris over legislation concerning gambling, speculation, and commodity
Gijsbert Oonk / 50
made them unpopular with the more formally organized British. Take,
for example, the attitude of British jute mill owners in the early 1920s.
One of them, M. P. Thomas of Bird, singled out G. D. Birla, the
Marwari business spokesman at that time, as the main villain: “He has
done more to encourage new mills than anyone. If he can’t get us out
by kicking us out, he will try to get us out by unfair competition.”19
During the 1930s depression, when there were internal problems in
the Indian Jute Mill Association, the British frequently referred to the
Marwaris as “short-sighted industrialists,” “mugs with money,” and
“pirates.”20 Whenever a Marwari attempted to enter the industry, he
was “up to do some dirty work.”21 Claude Markovits even argues that
the “racial arrogance of the Scots, signaled by their refusal to seek a com-
promise with the Marwaris, was partly responsible for the long-term
decline of the industry in the post-1947 period.”22 So, which Marwaris
eventually emerged in the industry that the British had dominated
from its very beginnings in the 1850s?
Middleman Minority?
In Calcutta what kind of outsider minority group did the Marwaris

represent? They were certainly culturally different from the Bengalis,
who had their own language and culture. In addition, there were very
few intermarriages between Bengalis and Marwaris.23 Nevertheless,
they were all still Indians who, generally speaking, followed the same
Hindu religion. The British entrepreneurs in Calcutta often regarded
Marwari men as local, indigenous Indian or Hindu businessmen. This
raises questions about the background of the outsider minority status.
Are Hindus and Jains from Marwar outsider enough to fit within the
Simmel thesis? Or, are they to be seen as insiders and locals? The
reality is that we do not know. On the one hand, Simmel did not give
adulteration proved to be a rallying point for the emergence of Marwari political solidarity.”
Hardgrove, Community and Public Culture: The Marwaris in Calcutta, c. 1897–1997
(New York, 2004), 127.
19
Thomas Benthall, 12 Dec. 1928, Benthall papers, Center for South Asians Studies, Cam-
bridge, U.K., cited in Goswami, “Then Came the Marwaris,” 150.
20
Morton Benthall, 16 Sept. 1935, Benthall papers, Centre for South Asian Studies, Cam-
bridge, U.K.; Indian Jute Mill Association, Report of the Committee (1934), 12; as cited in
Goswami, “Then Came the Marwaris.”
21
Thomas Benthall, 12 Dec. 1928, Benthall papers, cited in Goswami, “Then Came the
Marwaris.”
22
Markovits, “Bombay as a Business Centre in the Colonial Period,” 43.
23
Bengali businessmen burnt their fingers in Indo-British partnerships in the 1830s and
1840s, and remained too cautious to become involved with further initiatives. Blair B. Kling,
Partner in Empire: Dwarkarnath Tagore and the Age of Enterprise in Eastern India (Berke-
ley, 1976); Bagchi, Private Investment in India, 203–6.
any clues about these kinds of questions, as his primary examples mainly
related to the Jews in Europe. Other Europeans in the nineteenth
century viewed Jews in racial terms, as well as being members of a differ-
ent religion. The Marwaris, however, have the same religion, but have a
different regional background and culture. On the other hand, the
sources do indicate that Marwaris were also seen as an outsider minority
group, as they were, for example, counted separately in the census.
Nevertheless, there is no real evidence that Marwaris were, because
of their minority status, more motivated to become successful
entrepreneurs.24
In addition, the negative qualifications of Max Weber towards the
economic potential of Indian entrepreneurs raised enormous counterar-
guments and inspired empirical research to prove that Hindu business-
men could become successful. In one well-known example on Calcutta,
The Marwaris: From Traders to Industrialists (Delhi, 1978), Thomas
A. Timberg revealed how a small part of the Marwari community in Cal-
cutta became competitors of the British jute mill owners. Timberg argues
that Hindus could very well become great entrepreneurs. At the same
time, as we can see from the book’s title, he emphasizes that religious
background is not important, but occupational background is.
The Social Background
The Marwaris originally came from Marwar, a region in Rajasthan in

Northwest India.25 They were known as keen businessmen, traders,
speculators, and bankers. During the nineteenth century, they migrated
from Marwar to various parts of India. According to Timberg, this was a
consequence of colonial rule. Initially, some of them lost their principal
position as financiers to the Princess of Rajasthan. Others shifted in
accordance with their trade interests to the main ports of India, i.e., Cal-
cutta, Bombay, and Madras. The growing emergence of British traders in
the nineteenth century opened up new opportunities for Marwaris as the
financiers of British trade and as middlemen between the British (inter-
national) and local markets. In 1881, there were no fewer than nine
24
David McClelland developed a psychological test (Need for Achievement, or N-Ach test)
to demonstrate the relationship between being a member of a minority and the need for
achievement. This test did apply to the Parsis in Bombay, but no test was conducted on the
Marwaris in Calcutta. See David McClelland, The Achieving Society (New York, 1961).
25
The Marwaris belong to various Hindu and Jain castes. During the second half of the
nineteenth century, they migrated from Marwar to East India and settled as petty traders
and small businessmen. Within Marwar they were known by their specific caste name, while
outside Marwar they are referred to as Marwaris. Sometimes even businessmen from
Rajasthan or West India are referred to as Marwaris. For a general introduction, see
Timberg, The Marwaris.
Gijsbert Oonk / 52
thousand Marwaris in Bengal, and because of their growing business

interests, this number grew rapidly. Indeed, between 1891 and 1931,
the number of Marwaris in Bengal grew from 33,000 to 51,000.26
The transformation of a few Marwari families from traders to indus-
trialists was gradual. This pattern followed these steps: first, they slowly
increased their importance in the trade of raw jute and jute manufactur-
ing; second, some of the Marwari traders became members of formal jute
trade organizations, while others became brokers to British managing-
agency houses or got a place on the board of directors thereof by
buying shares. Finally, in the early 1920s, a few Marwaris entered the
jute industry by setting up their own jute mills or buying them from
other people.
Importance in jute trade and finance. In Calcutta, the Marwaris
built on their traditional occupations as traders and bankers. They had
settled as small traders, financiers, and brokers to mainly British
trading firms. They were often mediators between the international
market, which was dominated by the British, and the Indian market.
From an 1864 directory, it appears that more than 50 percent of the
Indian bankers in Calcutta were Marwari. The British-dominated
Bengal Chamber of Commerce confirmed the importance of these
bankers: “The indigenous banking system favoured their own Marwari
friends and they did not put their money in bank stocks, where it
could serve the general trading interest.”27
However, the Marwaris not only favored their own Marwari friends;
they were also simply cheaper than their British competitors. In 1904,
British shipowners informed the Calcutta Jute Mill Association (an
organization set up by British jute mill owners) that it was cheaper to
buy manufactured jute goods through native traders than through Euro-
pean brokers:
Business in jute manufactured goods can be transacted on more

favourable terms through native brokers than it is possible to
obtain when business is done through European brokers . . . . They
return 0.5 per cent of their commission to buyers, which is in
direct contravention of the rules of the Jute Fabric Brokers
Association.28
26
Timberg, Marwaris, 88; and Haraprasad Chattopadhyaya, Internal Migration in India:
A Case Study of Bengal (Calcutta, 1987), 336–43. Fluctuations in the number of Marwaris can
be partly explained by the fact that counting procedures varied in the period between 1881 and
1931. For example, in the more recent censuses, traveling merchants were counted as living in
the place where they were counted, not where they actually lived. Another limitation in the
census data is the change in regional borders. However, it seems fair to state that there were
between 30,000 and 55,000 Marwaris in Calcutta.
27
Bengal Chamber of Commerce, Annual Report (1894), 33.
28
Indian Jute Mill Association, Report of the Committee (1904), 103.
Initially, European traders dominated the Jute Balers Association,

founded in 1892, but by the beginning of the twentieth century the
number of Indians, especially Marwaris, was growing. In 1903–04, 133
members were listed, seventy of whom were Indian and sixty-three
were European (mainly from Scotland). Out of seventy Indian
members, the majority, forty-four, were Marwaris. Therefore, Marwaris
were overrepresented in Bengal. Fifteen years later, 137 members were
Indian, amounting to 63 percent of the overall membership.29 Among
these members were Marwari future industrialists G. D. Birla, Sir Onkar-
mull Jatia, and brothers Isswari Prasad, Devi Prasad, and Keshav Prasad
Goenka.
These examples demonstrate the growing importance of the Mar-
waris, despite the negative British attitude towards them. It is also
clear that the colonial market economy could not have functioned
without indigenous credit and knowledge.30 It seems fair to state that
the Marwaris and the British business communities constantly nego-
tiated their interests between conflict and collaboration.
Shareholders, brokers, and directorships. Starting in the late nine-
teenth century, a few Marwari families had developed close commercial
links with British managing agencies. These agencies were privately held
joint-stock companies or, more frequently, partnership firms. On the
strength of past managerial performances, they floated shares to build
new jute mills or other companies. Owing to oversubscription and
stock exchange regulations, it was possible for entrepreneurs to
control a mill even if they owned less than 10 percent of the shares.
The Marwari firms initially offered raw jute to these British agencies.
In addition, they sometimes offered short-term credit to finance the
supply of jute. Furthermore, they eventually financed new jute mills by
buying shares or giving long-term loans to the British agents. In return
for their growing financial share in these managing agencies, the Mar-
waris finally secured seats on the boards and, jointly with the British
managers, were responsible for the floating of jute mills.31
29
Omkar Goswami, “Sahibs, Babus, and Banias: Changes in Industrial Control in Eastern
India, 1918–50,” Journal of Asian Studies 48, no. 2 (1989): 292. Goswami estimates that the
trading profits of the Marwaris were around Rs. 440 million per year in this period. This esti-
mate excludes their profits from different future markets and from trade in jute bags and cloth;
see Goswami, “Sahibs, Babus, and Banias,” 293.
30
L. C. Jain, Indigenous Banking in India (London, 1929); Rajat Kanta Ray, “The Bazaar:
Changing Structural Characteristics in the Indigenous Section of the Indian Economy before
and after the Great Depression,” Indian Economic Social History Review 25, no. 3 (1988):
263–318; Rajat Kanta Ray, “Pedhis and Mills: The Historical Integration of the Formal and
the Informal Sectors in the Economy of Ahmedabad,” Indian Economic and Social History
Review 19, nos. 3–4 (1982): 387–96.
31
Goswami described this process well in “Sahibs, Babus, and Banias.”
Gijsbert Oonk / 54
During the inflationary years of the early 1920s, many European-

managed companies found themselves undercapitalized, strapped for
cash, and needing funds to expand capacity in their jute mills. Marwaris
provided these funds in exchange for positions on various boards. In this
way, they could secure the purchase of raw jute. Despite the earlier unfa-
vorable political and economic climate, some Marwaris were now
allowed to build close relationships with the European traders and mill
owners.32 During the process of this growing collaboration, the Marwaris
were able to learn the ins and outs of jute-mill management.
Historian Omkar Goswami describes the increasing influence of Mar-
waris in the jute-mill industries. In 1918, of 114 seats on the boards of
British managing agencies in the Calcutta jute industry, the British occu-
pied 111 of them (97.4 percent). This percentage clearly reflected their
managerial control over the industry. However, this situation changed
rapidly and, in 1930, 57 percent of the jute mill companies managed by
European managing agencies had Marwaris on their board of directors.
In a quarter of the European managing agencies, the Marwaris had equal-
ity on the board. In one case, they even outnumbered the European direc-
tors.33 The growing shortage of capital experienced by these companies
due to the losses experienced by British mills explains this sudden
influx of Marwaris to the boards of British managing agencies.
Industrialists. The transition from trade to industry is not necess-
arily a linear process, whereby having accumulated sufficient capital,
the merchant capitalist decides one day to move into industry. Some
form of prior association with the industry, either as a middleman sup-
plying inputs or as someone dealing with finished products, is a critical
factor, provided, of course, that there are no major entry barriers such
as those that existed in a typical early colonial environment. This
process does not imply, however, that having realized the advantages
of industrial investment, and having plowed a certain amount of
capital into industry, the merchant capitalist would progressively
increase his association with industry; this may or may not have been
the consequence. In the colonial context, it is more likely that the entre-
preneur would be inclined to play it safe by maintaining a diversified
investment portfolio combining investment in industry with trade and
indigenous banking.34 Family histories show that Marwaris from
various occupational backgrounds entered the jute industry.
32
The Jatia family, for example, developed close ties to the Andrew Yule Company. David
Yule was a close friend of Onkarmull Jatia. The Goenka family had a close connection to Bird
and Heilgers, and the Kanorias were connected to McLeod.
33
Goswami, “Then Came the Marwaris,” 228–36.
34
However obvious this may be, this observation developed after intensive discussions and
correspondence with Dr. Raman Mahadevan, whom I thank for his time and insights.
Nevertheless, Table 1 shows that the transformation from trader to

industrialist was not as systematic as Timberg suggested. At first
glance, the patterns of the Birlas, Goenkas, and Bangurs are similar;
these three families had a background in trade, finance, and/or specu-
lation. They had also all worked as brokers for British managing
agents and were active on the board of directors in their agencies.
Then, ultimately, they set up their own jute mills. Nevertheless, the
differences are important. The Birlas established their first jute mill in
1919, whereas the Goenkas and Bangurs did so after the Second World
War when an independent India was on the horizon. Neither the
Goenkas nor the Bangurs built their own mills, instead taking over the
loss-making mills of the British agents for whom they were working.
They thus became industrialists serendipitously, whereas G. D. Birla
had built his own mills.35
Furthermore, there were important differences in the backgrounds
of Marwaris in terms of being brokers or occupying board seats of
British managing agencies. On the one hand, a British shortage of
capital was an important variable in explaining the Marwari emergence
in industry. As well, there was more variation in the path from being a
trader to an industrialist than Timberg had suggested. In addition, for
most families, industrialization was a matter of diversification and not
their primary aim. From a list of 510 Marwari firms, only about one
hundred held more than 50 percent of their assets in industrial invest-
ments.36 Indeed, almost all Marwari families remained faithful to their
traditional occupations of trade, finance, and speculation.37
Concluding observations. In the Calcutta pattern, the Marwari
business community competed with British jute industrialists and
finally dominated the industry in a slow and subtle process. The Mar-
waris provided the British with raw jute, short-term credit, and long-
term loans. The British did need mediators in trade and finance, but
did not welcome the Marwaris. They could not conceive of a mutually
profitable relationship and saw the Marwaris only as a necessary evil.
This negative colonial attitude could have hampered the Marwaris’
35
G. D. Birla, In the Shadow of the Mahatma (Calcutta, 1953), xv.
36
D. K. Taknet, Industrial Entrepreneurship of the Shekhawati Marwaris (Columbia,
Mo., 1986), 179–228.
37
Sarupchand Hukumchand made his money in banking and speculating on the opium
market. In the early twentieth century he settled in Calcutta, where he was very lucky in his
speculative business. In 1910, he used borrowed money to buy Rs. 200,000 worth of opium,
which within a month yielded him ten times that amount. In 1915, he opened a very profitable
trading office in Calcutta. By then, he already owned a cotton mill in Indore. However, without
much knowledge of jute industries, he became a partner in Birla’s first jute venture. Neverthe-
less, speculation and the opium trade remained his most important sources of income.
Gijsbert Oonk / 56
Table 1
The Transformation from Traders to Industrialists of Some
Marwari Families
Board of Director of
Family Name of Trader/ British Managing
Industrialist Banker Broker Speculator Agency
Birla Yes Yes Yes Yes
Goenka Yes Yes Yes Yes*
Bangur Yes - Yes Yes**
Hukumchand Yes No No Yes
Jalan Yes No No Yes
Jatia Yes No Yes No
Singhania Yes No Yes Yes
- No information available.
* Due to the failure of two British managing agencies, McLeod and Octavius Steel; not by
setting up a mill themselves.
** By buying the British managing agency Kettlewell Bullen & Co.
Sources: See Gijsbert Oonk, “Het geheim van de Marwaris: Een onderzoek naar Indiaas onder-
nemerschap, 1900–1939” [Secrets of the Marwaris: A Study of Indian Entrepreneurship,
1900–1939], unpublished MA thesis, Erasmus University Rotterdam, 1991, 61.
emergence in the jute mill industry, but did not. They simply had to
choose the right moment to emerge.
The Marwaris can be seen as an example of a migrant Hindu/Jain
minority that was able to follow the British example of jute industrialists
and flourish economically within a politically and economically unfavor-
able colonial context. However, their status as outsider minority could
not explain their success. In this section, we have raised questions
about what an outsider is. According to the Bengalis, Marwaris were out-
siders, although according to many British businessmen they were just
seen as locals or Indian. Simmel and Dobbin do not provide us with
the tools to distinguish between types of outsiders. Yet, outsider or
not, Timberg and others agree that the Hindu/Jain religion of the Mar-
waris did not hinder their economic development. One commonsense
explanation for the success of the Marwaris as a community is that
those who did not succeed in Calcutta generally returned to their prop-
erties in Marwar and Shekawati. Only those who were successful
remained in the city.38 Accordingly, it is fair to describe the Marwaris
in Calcutta as successful traders or bankers from Marwar, Rajasthan.
38
For more details on success and failure stories of migrant businessmen see: Gijsbert
Oonk, Settled Strangers: Asian Business Elites in East Africa, 1800–2000 (Delhi, 2013).
In this explanation, neither a cultural factor nor a colonial attitude is of

prime importance.
In my view, Timberg and others were right to highlight the impor-
tance of the trading, banking, and speculating backgrounds of the Cal-
cutta protoindustrialists. Colonial attitudes and religious community
background may be important to a certain extent. However, occu-
pational background has its own logic. It is unsurprising that successful
traders and bankers would eventually diversify their investments into
production. In the two examples that follow, we will see that colonial atti-
tudes and community backgrounds in Bombay and Ahmedabad differed
from the Calcutta case, although the occupational backgrounds of the
future industrialists were remarkably similar.
Bombay’s Industrial Transformation: A Symbiosis of Parsis

and Britons
The imperial sun in Bombay never shone with the same intensity as
it did in Calcutta. Up to 1750, Surat—not Bombay—was the economic
center of West India. The establishment of the headquarters of the
English East India Company (EIC) in Bombay in 1672 was not enough
to secure its prosperity. The socioeconomic development of the city
was due to a symbiotic relationship between Parsis and Britons. The Vic-
toria railway station currently symbolizes this relationship; across the
main road in front of the station is a statue of Daoroji Naoroji, an impor-
tant Parsi spokesman and founder of the Indian National Congress.
Colonial Attitude towards Parsis
The positive relationship between Parsis and the English in West

India sharply contrasted with the hostility between the Marwaris and
the British in Calcutta.39 In the latter city, the EIC had a monopoly on
foreign trade, whereas in Surat it competed with French and Dutch com-
panies. Accordingly, it was more important to attract local traders as col-
laborators. The English were not allowed to build a fort in Surat to
protect their trades. Therefore, in 1672, the English decided to shift
the EIC headquarters in West India from Surat to Bombay. There they
had to attract local businessmen because at that time, Bombay was no
more than an “inhospitable fishing hamlet, where Englishmen did not
expect to survive two monsoons.”40
39
The term “English” is used here for the period prior to the 1707 Act of Union that created
Great Britain and “British” for the time after 1707.
40
Rajnarayan Chandavarkar, The Origins of Industrial Capitalism in India: Business
Strategies and the Working Classes in Bombay, 1900–1940 (Cambridge, U.K., 1994), 21.
Gijsbert Oonk / 58
Gerald Aungier, the EIC governor in West India, realized that

Bombay’s prosperity depended as much on indigenous traders, money-
lenders, and artisans as on English businessmen. He and his followers
succeeded in persuading local Indian businessmen to put themselves
and their capital under EIC protection.41 Moreover, the EIC offered
these local traders a minimum price for the products they sold and
exempted them from levies on imports and exports.42 In other words,
the English invited them to settle in Bombay and made it profitable for
them to do so.
Despite the endeavors of Aungier and the first English governor of
the Bombay Presidency, Humphrey Cook, and other Englishmen, the
Parsis and other Indian traders were initially not interested in settling
in Bombay. Indeed, not until the eighteenth century did the Indians
migrate to the city in considerable numbers. After thorough analysis, his-
torian Ashin Dasgupta concludes: “The core of the matter was that Surat
did not decline because Bombay grew; Bombay grew because Surat
declined. The history of Bombay did not begin properly until about the
middle of the eighteenth century.”43
The relationship between the Parsis and the British in Bombay
was a continuation of their positive relationship in Surat. As the
Parsis in Surat were economically independent and prosperous, the
British had to create an attractive economic environment to persuade
them to migrate to Bombay. Secondly, the Parsis had proven their
loyalty towards the British; they partly financed the military defense
of Bombay Fort and financed the British military apparatus
during the 1857 mutiny. Thirdly, a section of the Parsi community
quickly recognized that it was useful to learn English, adopt British
customs, and intensify the relationship with the British in order to
improve the socioeconomic position of the community in West
India.44
From the seventeenth century on, the British viewed the Parsis as
hard workers, keen and reliable traders, and loyal:
They are an industrious people and indigenous in trade, wherein they

totally employ themselves. There are at the present but few of them
but we expect a greater number, haveing [sic] gratified them in
41
Holden Furber in Ashok V. Desai, “The Origins of Parsi Enterprise,” Indian Economic
and Social History Review 5, no. 4 (1968): 307–17.
42
Bombay Public Proceedings, 8 Feb., 13 Aug., 27 Sept. 1723; 18 Oct. 1728; 3 Sept. and 3
Dec. 1731. Maharasthra State Archives, Mumbai.
43
Ashin Das Gupta, Indian Merchants and the Decline of Surat, 1700–1750 (Wiesbaden,
1979), 8.
44
This is explained by their “minority status” in Kulke, Parsees, or by their supposed “Pro-
testant Ethic,” in Kennedy, “The Protestant Ethic and the Parsees,” 11–20.
their desire to build a bureing [sic] place for their dead on the
Island.45
Throughout the Rebellion [1857] in the East, the Parsees have main-
tained an unshaken loyalty to the British whom they are proud to call
their fellow subjects, and while preserving their own independence of
religion and customs, their chief desire is that British rule in India
should be consolidated upon a basis of strict justice and mutual
interest.46
The British actively preferred to collaborate with Parsi businessmen, but

also cooperated with Hindus, Jains, and Muslims. In return, the Parsis
demonstrated their loyalty when needed. Indigenous loyalty did not
happen to the same extent in Calcutta.
In the early nineteenth century, five thousand Parsis lived within
Bombay Fort, whereas only one Hindu trader owned a house there at
that time.47 Around 1850, the Parsis accounted for up to 20 percent of
the Bombay population; this fell to 7 percent in 1881. This sudden
reduction in the relative number of Parsis was due to the huge
numbers of Hindu and Muslim migrants who settled in the city in that
period.48 From being a majority community in Bombay Fort, the
Parsis became a minority group in Bombay proper. Their economic
importance remained strong as their relative number declined. The
Parsis were overrepresented in occupations such as translators,
traders, moneylenders, bankers, and artisans. The British directly
employed a small group of Parsis, but most of them were self-employed.
They also occupied half of Bombay Island and owned the Indian mer-
chant navy.49
The most remarkable aspect of the Bombay pattern is that many
Indian, mainly Parsi, business families sent their sons to work in
British trading firms. Thus, Dinshaw Petit worked as a clerk and transla-
tor for the British firm Dirom Richmond; the Wadia family traded for
various British firms and even built ships for them; and the Thackersey
45
Gerald Aungier, Governor of Bombay, in a letter dated 1673, printed in Somerset Playne,
compiler, Arnold Wright, editor, and J. W. Bond, assistant, Bombay Presidency, the United
Provinces, the Punjab, Kashmir, Sindh, Rajputana and Central India: Their History,
People, Commerce and Industrial Resources (Bombay, 1917–1920), 26–27.
46
Dosabhoy Framjee, The Parsees: Their History, Manners, Customs and Religion
(London, 1858), x.
47
The name of the Hindu trader was Motichand. See D. E. Wacha, Shells from the Sands of
Bombay (Bombay, 1902), 102.
48
My discussion of numbers can be found in Gijsbert Oonk, Ondernemers in Ontwikkel-
ing: Fabrieken en fabrikanten in de Indiase katoenindustrie, 1850–1930 [Entrepreneurs in
Development: Mills and Mill Owners in the Indian Cotton Textile Industry] (Hilversum,
1998), 75–76.
49
Wacha, Shells from the Sands of Bombay, 84, 85; H. G. Briggs, The Parsis, or Modern
Zerdusthians: A Sketch (Bombay, 1852), 85, Oonk, Ondernemers in Ontwikkeling, 76.
Gijsbert Oonk / 60
family worked for several European firms, such as the traders Goddam
Bythel & Co. and Soloman Betch & Co.50 With the exception of the
Birla and Jatia families, this work pattern did not occur in Calcutta.
Accordingly, this evidence supports Markovits’s thesis that Bombay
benefited from a “more dynamic atmosphere of emulation and compe-
tition” and “less racial and communal strife,” with the consequence
being the more rational use of capital resources and knowledge.51
Middleman minority? The minority and Protestant ethic theses
seem to apply in the Bombay case.52 However, in spite of apparent evi-
dence, I have some serious doubts about these viewpoints. The minority
thesis certainly has its drawbacks in the Bombay case. First of all, the
Parsis were a minority in Western India and in Surat, where they
started their trading careers in the eighteenth and nineteenth centuries.
The Parsi migration to Bombay had drawbacks. Initially, they were not a
minority, but a majority group within Bombay Fort. However, owing to
the accelerated urban growth that took place, mainly due to Hindu
migrants, the Parsis became a minority group in Bombay proper from
the 1850s onwards. However, by then, they had already developed
their trading firms and their transition to industry was only a matter
of time.
The question remains as to why, more than other communities, the
Parsis decided to settle in Bombay. Most of the regulations that encour-
aged local businessmen to remain in the city did not apply just to the
Parsis, but to the entire Indian business community. Sometimes,
however, there is evidence that the English invited the Parsis in particu-
lar to move to Bombay. This favor was certainly the case when Aungier
allowed Parsis to build a Tower of Silence (a resting place for the Parsi
dead) in Bombay, and when the EIC sent George Dudley to Surat to
invite well-known Parsi shipbuilders to settle in the city.53
The Weber thesis confronts us with more complex issues. I am
inclined to accept historian Robert Kennedy’s comparison of the Protes-
tant and the Parsi ethic. In addition, he demonstrates how this ethic of
hard work and saving money is part of Parsi daily experience.54 Never-
theless, unlike Kennedy, we cannot ignore the fact that the Parsis were
invited to settle in Bombay. Indeed, the English offered them all kinds
of economic and social benefits, which, at the very least, helped them
50
Bombay Dyeing: The First Hundred Years, 1879–1979 (Bombay, 1979).
51
Markovits, “Bombay as a Business Centre in the Colonial Period,” 44–45.
52
Kennedy, “The Protestant Ethic and the Parsees,” 11–20; Kulke, The Parsis in India;
David L. White, Competition and Collaboration: Parsi Merchants and the English East
India Company in Eighteenth-Century India (New Delhi, 1995).
53
H. D. Darukhanawala, Parsi Lustre on Indian Soil (Bombay, 1939).
54
Kennedy, “The Protestant Ethic and the Parsees.”
to improve their economic position. Here, we face a chicken-and-egg

scenario; we could argue that it was simply the case that the Parsis
were offered these benefits; alternatively, it may be that they were just
more likely than others to accept them because of their Parsi ethic.
Social background. The Parsis were among the first to build the
Indian cotton textile industry in Bombay. Indeed, they owned nine of
ten mills built in the city between 1854 and 1863. These included two
mills belonging to the Petit family. In the period between 1878 and
1915, the Parsis owned between 30 and 41 percent of the mills in the
city.55 Given that the Parsis never exceeded 7 percent of the population
of Bombay in the period 1881–1915, it is clear that they were over-
represented as mill owners. Yet, other communities—like the Gujaratis,
Bhatias (both mainly Hindus), Muslims, and Jains—also became
increasingly important in this period.56
The transformation of a few Parsi families from traders to industri-
alists was gradual. This pattern followed two steps. First, the Parsis
settled in Bombay and made money in the cotton and opium trade,
earning huge profits by trading in raw cotton (designed for the Manche-
ster cotton factories) and opium with China. Second, the Parsis used
these profits at times to expand the Indian cotton industry in Bombay.
Most Parsi families followed a common path to entering the cotton
textile industries. They started their careers as traders (in opium and
raw cotton). Then, some became formal brokers to British trading
houses and, finally, diversified into the cotton industry. As mentioned
previously, an interesting aspect of this transformation is the Parsi tra-
dition of sending their sons to work in the British firms, where they
could learn on the job. Then, after working for other families for some
years, a Parsi son could start his career in his father’s businesses,
taking the British management experience with him. The European
businesses in Bombay warmly welcomed these trainees. This was
almost impossible in the more hostile economic context of Calcutta, as
we have seen earlier.
For Bombay, having selected a list of ninety-two mills, I was able to
acquire reliable information about the occupational background of their
promoters for nearly half of them (forty-five).57 It appeared that more
than 80 percent of the early industrialists had initially worked for a
managing agency (mostly British, sometimes French, and, in a few
55
S. M. Rutnagur, Bombay Industries: The Cotton Mills (Bombay, 1927), 54; Bombay Mill
Owners’ Association, The Annual Report of the Bombay Mill-Owners’ Association (1878).
56
According to Markovits, the more “cosmopolitan character” of the Bombay business
community (as compared with Calcutta) is a key factor in explaining its success. Markovits,
“Bombay as a Business Centre in the Colonial Period,” 26–46.
57
Rutnagur, Bombay Industries.
Gijsbert Oonk / 62
cases, Parsi).58 In addition, 90 percent of the cotton industrialists had

been traders in cotton and/or opium.59 In many cases, they continued
to trade on their own account while also working for Europeans. In
this way, Parsis became quite familiar with European management
styles, business correspondence, and culture. This enculturation may
have helped them with their transformation to industrialists.
British firms formed a direct link between Parsi traders and inter-
national markets. Naturally, these trading links had existed even
before the British entered India, but their involvement strengthened
these networks. While working for British trading firms, Parsis gathered
more than information about foreign markets, also experiencing the
practice of international business. They then started to trade on their
own account and accumulated huge amounts of money, especially in
the opium trade with China. In the meantime, these Indian businessmen
learned about the Industrial Revolution in Lancashire. The famous
J. N. Tata, for example, was known for his detailed knowledge of the
cotton industry in Manchester, including its management, financing,
and production potential.60
Parsi cotton industrialists were rarely ever just mill owners.61 Their
family-based businesses included (international) trade (and often ship-
owning), banking, land ownership, and various other activities. My
major interest is the management of the mills. In some cases, the mill
owners had used their mills as a trading or even speculative unit
rather than a unit of production. In particular, they speculated in land
belonging to the mills’ premises. They would buy and sell raw cotton
without ever producing cloth during periods of rapid changes in the
cotton price. Moreover, they slowly included wholesale cotton products
in their spheres of interest: “It should, however, be pointed out that
these results [huge profits of the Bombay cotton mills in 1912] were
due in many cases to the extraordinary profits made by the mill agents
on the sale of cotton and not on the sale of yarn and cloth.”62 Their
58
See Appendix A in Oonk, Ondernemers in Ontwikkeling.
59
Ibid.
60
G. N. Natesan, ed., Famous Parsis (Madras, 1930), 217–21; F. R. Harris, J. N. Tata
(Bombay, 1958); Dwijendra Tripathi and Makrand Mehta, Business Houses in Western
India: A Study in Entrepreneurial Response, 1850–1956 (New Delhi, 1990).
61
That the Bombay mill industry was merely a matter of the diversification of cotton and
opium traders can be found in Chandavarkar, The Origins of Industrial Capitalism in
India, ch. 6. However, Chandavarkar does not include its consequences for the industry.
62
A summary of annual reports of cotton textile mills can be found in the Indian Textile
Journal 23, no. 267 (1913): 290. Similar examples can be found in various places in
the Indian Textile Journal: “Annual Meeting of the Swam Mills and the Finlay mills were
held. . . . Both have shown good profits thanks to adventurous variations in the price of
cotton as the supplies have been bought greatly in advance of requirements and this proved
profitable.” Indian Textile Journal 38, no. 449 (1928): 160. The Colaba Land and Mill
trading background greatly influenced the way in which the Parsis

managed their mills and the role that these played in their family
business activities.63
Concluding observations. In Bombay, the Parsis did not experience
a hostile colonial attitude. On the contrary, the English invited them to
settle in the city. Despite this encouragement, the Parsis only shifted
their economic interests from Surat to Bombay gradually. This delay
indicates that they—and not the British—had a strong negotiating pos-
ition. A mutual interest between the British and the Parsis developed
in Bombay. The Parsi traders acted as intermediaries for British
traders in the Indian market. They also worked as employees for
British trading houses, where they learned the ins and outs of inter-
national trade.64 This cooperative learning would have been almost
impossible in Calcutta (and did not exist there, as far as I know). The
British encouraged the Parsis to invest in Bombay, to become junior
partners, and to trade with them. In the nineteenth century, the Parsis
discovered the mechanization process in Britain and started to diversify
their trading activities by establishing their own cotton industry in the
city. Accordingly, the transition from trade industries can be described
in four steps: first, the Parsis gained trading experience in cotton and
opium; second, a symbiosis developed between Parsi and British inter-
ests; third, Parsis formally collaborated with the British and learned
lessons from them; and, finally, Parsis set up their own cotton mills.
Ahmedabad’s Industrial Transformation:

From Bankers to Industrialists
There was no imperial sun in Ahmedabad. After 1818, when the

British officially started to rule there, there may have been a few rays
of imperial sunshine, but the old city preserved its traditional structure
of guilds and castes as well as its commercial outlook. The British created
a stable, reliable bureaucratic system and a less exploitative tax system
(compared to that of the Mughal and Marathi rulers) and, therefore, a
larger potential for economic growth. They did not, however, shape the
skyline of the economic center as they did in Calcutta and Bombay.
The Indians built Ahmedabad, and its transition to industry was an
Company was accused of speculating in land and raw cotton. The profits of these mills were not
made by spinning and weaving, but by trading and speculating: Indian Textile Journal 10, no.
109 (1899): 2; 22, no. 253 (1911): 25.
63
I deal more thoroughly with this in Gijsbert Oonk, “Motor or Millstones? The Managing
Agency System in Bombay and Ahmedabad, 1850–1930,” Indian Economic and Social History
Review 4 (2001): 419–52.
64
Desai, “Origins of Parsi Enterprise,” 307–17.
Gijsbert Oonk / 64
indigenous affair, in which British businessmen only played a back-

ground role.65
No Colonial Attitude
Ahmedabad transformed from an administrative city into a more

commercial city in the seventeenth and eighteenth centuries. Although
generally known for wealth, trade, and commerce, Ahmedabad’s
history reveals remarkable economic growth as well as decline. In the
early eighteenth century, many weavers, traders, and artisans fled the
city because of the war between the Mughals and Marathis. However,
thanks to the active policies of the British, indigenous traders and
weavers settled there again in the nineteenth century. Accordingly, in
1818, Ahmedabad had 80,000 inhabitants, a number that gradually
grew to 181,000 by 1901.66
The British played no role in the commercial life of Ahmedabad.
They were mainly government officials and rarely acted as traders or
bankers. They also had no role as intermediaries for Ahmedabad busi-
nessmen. Moreover, there was neither a positive colonial attitude (as
in Bombay), nor a negative attitude (as in Calcutta). Initially, the
Indian colonial civil servant Ranchhodlal Chhotalal approached British
administrators and businessmen to ask for help with his plan to build
a cotton textile factory. When this mill proved to be successful, others
(mainly bankers/financers) followed his example. What is important to
note here is that Ranchhodlal came from a very traditional Hindu
caste.67 This example shows that someone with a traditional Hindu
background could become a mill owner. Only after Ranchhodlal’s
success did other Hindu and Jain bankers in Ahmedabad decide to
build cotton mills on their own account.
From bankers to industrialists. The occupational background of the
textile industrialists in Ahmedabad differed from that of their counter-
parts in Bombay. None of them had any experience in a British trading
firm or had ever worked as a broker for a European trading company,
65
K. L. Gillion, Ahmedabad: A Study of Urban History (Berkeley, 1968). Howard Spodek,
“The ‘Manchesterization’ of Ahmedabad as an American Research Worker Sees It,” Indian
Textile Journal 4 (1965): 303–9. See also Salim Lakha, Capitalism and Class in Colonial
India: The Case of Ahmedabad (New Delhi, 1988); and S. R. B. Leadbeater, The Politics of Tex-
tiles: The Indian Cotton Mill Industry and the Legacy of Swadeshi, 1900–1985 (New Delhi,
1993).
66
Office of the Registrar General and Census Commissioner, Census of India 9 (1921), 26.
67
Ranchhodlal was married at the age of seven. His sister became a widow when still a child
and was never allowed to marry again. His grandmother performed sati, i.e., she immolated
herself with the body of her dead husband. See Mehta, The Ahmedabad Cotton Textile Indus-
try, 58n4. See also M. J. Mehta, “Ranchhodlal Chhotalal and the Ahmedabad Textile Industry:
A Study in Entrepreneurial History,” PhD thesis, Gujarat University, Ahmedabad, 1976.
as was often the case in Bombay. Three short biographies will confirm
this. Lalbhai Dalpathi (1863–1912) inherited the family business in
1885. His family had made its fortune as bankers and cotton traders
between 1861 and 1864. During the American Civil War, the price of
raw cotton increased spectacularly, and those involved in the trade prof-
ited. Some of this money was invested in the cotton textile industry. After
his death in 1912, Dalpathi’s son, Kasturbhai Lalbhai, made his name in
the Ahmedabad cotton textile industry.68 In a second example, the young
entrepreneur Manganbhai Sarabhai started the Ahmedabad Manufac-
turing and Calico Printing Co. in 1881. His father was a banker/financier
who died at an early age, but had asked Ranchhodlal Chhotalal and Bho-
lanath Sarabhai to take care of his son. Accordingly, it was foreseeable that
some of the banking profits would be invested in the cotton textile indus-
try.69 Lastly, Jamnabhai Bagubhai (1859–1924) started the Gujarat Spin-
ning and Weaving Co. in 1877. His family had made its fortune by
speculating during the American Civil War. However, they did not have
any prior experience with cotton trade or finance.70 (See Table 2.)
Of the thirty-five mill owners whose initial occupational background
I traced, twenty (63 percent) were originally bankers. Eight mill owners
(23 percent) in Ahmedabad were initially traders, but they were not
guaranteed brokers to British trading houses. Some of the mill owners
were known as speculators, but these cases were exceptional. We do
not know the occupational background of the others, but in some cases
this was a combination of banker, trader, and/or speculator.
The banking background of Ahmedabad’s cotton industrialists influ-
enced the way in which the cotton mills were financed. Banks and share-
holders financed Bombay’s mills to a greater extent than in Ahmedabad.
This was mainly because a formal (Western) banking system was more
developed in Bombay than it was in Ahmedabad. However, the Ahmeda-
bad mill owners accumulated capital in the form of deposits made by
individuals for a fixed interest rate. Normally, these deposits were
made for a period of three to twelve months. Up to the First World
War, the public in Ahmedabad believed that it was more secure to
deposit their money with one of the Ahmedabadi bankers or mill
owners than with a “modern” bank.71 Most of the deposits were fairly
68
A. D. Shroff, Kasturbhai Lalbhai: A Biography (Bombay, 1978); Tripathi and Mehta,
Business Houses, 88–105; and Dwijendra Tripathi, Dynamics of a Tradition: Kasturbhai
Lalbhai and his Entrepreneurship (New Delhi, 1981).
69
A. K. Rice, Productivity and Social Organisation: The Ahmedabad Experiment
(London, 1958), 23; Mehta, The Ahmedabad Cotton Textile Industry, 87–89; Leadbeater,
The Politics of Textiles, 66–71.
70
Mehta, The Ahmedabad Cotton Textile Industry, 87.
71
This changed after the First World War, when the Indian government sold government
securities against a relatively high interest rate. The Ahmedabad Mill Owners’ Association
Gijsbert Oonk / 66
Table 2
Typical Examples of the Ahmedabad Path from Financier to
Industrialist
Social/ Occupational Background
Family Name of Trade Finance in Cotton
Industrialist Banking (Cotton) Textile Industries Industry
Sarabhai Yes Yes Yes Yes
Lalbhai Yes Yes No Yes
Bhagubai Yes No No Yes
Source: Gijsbert Oonk, Ondernemers in Ontwikkeling: Fabrieken en fabrikanten in de
Indiase katoenindustrie, 1850–1930 [Entrepreneurs in Development: Mills and Mill
Owners in the Indian Cotton Industry, 1850–1930] (Hilversum, 1998), 117.
small; building an average cotton mill cost about Rs. 30,000 in Ahmeda-
bad, and most deposits were between Rs. 500 and Rs. 2000.
Table 3 reveals three striking differences between Bombay and
Ahmedabad in the financing of cotton mills. First, the banks in
Bombay supported the mills to a greater extent than their counterparts
in Ahmedabad. In the former, banks lent an average of 9 percent of
capital, whereas in the latter this figure did not exceed 4 percent. Sec-
ondly, shareholders in Bombay invested 49 percent of capital, whereas
in Ahmedabad they only put up 32 percent.72 Thirdly, cotton manufac-
turers in Ahmedabad depended more on deposits from small investors
than the cotton manufacturers in Bombay; in the latter, depositors
raised only 11 percent of capital, whereas in Ahmedabad this figure
was 39 percent.
It was well known that banks in India were not inclined to issue sub-
stantial loans to cotton mills.73 It was also known that cotton manufac-
turers in Bombay could expect slightly more support from banks than
manufacturers in Ahmedabad. The reluctance of banks to back industrial
enterprises may have been due to a lack of capacity to estimate the value
of such undertakings.74 Moreover, Indian banks had not yet developed
complained about the loss of deposit holders. See, Report of the Indian Tariff Board, 1927, vol.
3 (Calcutta, 1927), 396.
72
I found hardly any supplementary information in the sources about the role played by
letters of credit in financing, so do not discuss this question.
73
Report of the Indian Industrial Commission, 1916–1918, vol. 2 (Calcutta, 1919), 178.
Basu also confirmed this, Industrial Finance, 99–142. For a detailed discussion on the role
attributed to the Managing Agency System, see Oonk, “Motor or Millstones,” 419–52.
74
Indian Central Banking Enquiry Committee, Cotton Textile Industry, vol. 1 (Calcutta,
1927), 270, 271, 776.
Table 3
Sources of Capital of the Cotton Mills in Bombay and
Ahmedabad in 1930
Bombay Ahmedabad
Sources of Capital Rs. (1000s) % Rs. (1000s) %
Borrowed by Managing 53.2 21.4 26.4 24.4
Agents
Bank Loan 22.6 9.1 4.2 3.9
Deposits 27.3 11.0 42.6 39.4
Shares 121.4 48.9 34.0 31.5
Debentures 23.8 9.5 0.8 0.7
Total 248.3 100* 108.0 100*
Number of Factories 64 56
* rounded
Source: The Indian Central Banking Enquiry Commission, vol. 1 (Calcutta, 1931), 278.
the habit of issuing loans with buildings and machinery as collateral.

Indeed, the banks long retained the system of issuing loans (especially
short-term loans) on the basis of supplies. Indian bankers rightly ridic-
uled this tradition in the 1940s.
One of the consequences of the banks’ reticence was that managing
agents looked for other sources of financing. Those in Ahmedabad
proved true to their money-lending origins and found creative ways of
financing cotton mills. They enjoyed the confidence of a large group of
small investors who preferred to put their money in a mill run by a
well-known and reliable Indian banker or moneylender than in some
newfangled (institutional) bank. Deposits were made for a period
ranging from several months to seven years, and the interest rate was
around 5 to 7 percent per annum. These small investors thought it
safer to entrust their capital to a managing agent with a good reputation
than to an unknown bank.75 Due to the strong ties between cotton man-
ufacturers and financiers in Ahmedabad (often one and the same
person), many small investors were able to place deposits with one
mill.76 Not for nothing did Kasturbhai Lalbhai claim that small investors
75
Meetings of the Boards of Directors of the Saraspur Mills, Calico Mills, Raipur Mills, and
New Shorrock Mills over various years. Private Company archives of the respective mills,
Ahmedabad. After the First World War, the pace of change slowed because the Indian govern-
ment issued loans with high security and interest. The Ahmedabad Mill Owners’ Association
accordingly complained about this. Indian Tariff Board vol. 3, 396.
76
Bombay Provincial Banking Enquiry Committee, vol. 3, 408–16. Rajat Kanta Ray has
written an interesting but speculative article on this topic, in which he shows how formal
and informal relationships were integrated in Ahmedabad. Ray, “Pedhis and Mills,” 387–96.
Gijsbert Oonk / 68
in Ahmedabad formed the backbone of the cotton industry in the town.77

Indeed, as Ahmedabad’s main newspaper, the Prajabandu, wrote in
1909, the depositors of Ahmedabad stood surety for more than 50
percent of capital.78
The close relationship between the Ahmedabad mill owners and
their small investors is confirmed by the fact that these investors
shared the commissions of the managing agents in prosperous days.
Indeed, the mills did so even though they were not compelled to for-
mally: “The Company will . . . in addition to the interest payable to the
depositor on the said loan, pay each year to the depositor a share of
the total commission calculated at the rate of 3% on the sale proceeds
of all goods manufactured and sold by the company.”79 Furthermore,
the Ahmedabad mill owners developed a system in which they not
only accepted deposits for three to twelve months, but for several years
as well.80 I found no case in which Bombay managing agents shared
commissions with their deposit holders or where deposit holders depos-
ited their money for longer than one year.
Some general observations. The Ahmedabad traders and bankers
faced neither a hostile nor an encouraging colonial attitude. Indeed,
there were very few British administrators and businessmen in the
city. In spite of this, the British were responsible for introducing a
more stable economic climate than people were used to under the
Mughals and Marathis. This British influence did not, however, shape
the commercial center of Ahmedabad, with the city preserving its orig-
inal structure of guilds and business castes.
No minority thesis. The Ahmedabad industrialists did not emerge
from a minority group. They were Hindus belonging to the majority in
Ahmedabad. M. M. Mehta’s biography of the pioneer of the Ahmedabad
cotton textile industries, Ranchhodlal Chhotalal, reveals that he was a
very conservative Hindu. This means that he was among the last
people whom Weber and others would have expected to become an
industrial pioneer.81 Despite this, the Ranchhodlal cotton mills did
emerge, and he was no exception. After his mills had proved successful,
others, mainly Hindus and Jains, were quick to follow in his footsteps.
One striking factor in Ahmedabad was the fact that many future
industrialists had a background in banking rather than trading. This
meant that they had no experience with cotton at all. In particular,
77
Indian Central Banking Enquiry Committee, Cotton Textile Industry, vol. 3, 480.
78
Prajabandhu, 4 Feb. 1909, 2.
79
Members of the Board of Directors, New Shorrock Mill, Company Archive, Ahmedabad,
1905.
80
P. S. Lokanathan, Industrial Organisation in India (London, 1935), 182.
81
Mehta, The Ahmedabad Cotton Textile Industry.
they had no practical knowledge of the quality of cotton, no trading

experience, and hardly any knowledge of machinery. Despite this, and
because of their banking background, they were able to raise capital
from the general public in Ahmedabad to build cotton mills. Ample
capital meant that these mills were less dependent on shares and
formal banks than those in Bombay.
Conclusion
In this article, I compared the emergence of indigenous industrial-

ists in Calcutta, Bombay, and Ahmedabad in three ways: first, the colo-
nial attitude towards indigenous industrialists; second, the importance
of an economic (religious, community, caste-based) middleman min-
ority; and, finally, the social/occupational background of future industri-
alists. I concluded that the three cities differed with respect to the
colonial attitude towards the emergence of indigenous industrialists.
However, it is difficult to measure this in terms of scale. In addition,
the importance attributed to the religious and community-based middle-
man minority thesis differs from city to city. Finally, there is a striking
similarity and explainable value in the occupational backgrounds of
the would-be industrialists.
Calcutta served as the capital city of British India until 1911, with the
majority of the European population and businessmen in the country
living there. British jute mill owners used harsh language when they
wrote about the Marwaris in Calcutta; they were seen as competitors,
not collaborators, and as exploiters. This was not an environment that
encouraged partnerships. The Calcutta-based pioneer G. D. Birla was a
respected board member of various mills under the Yule agents. Yet,
even at the Yule offices, he was not allowed to ride the elevator, but
was instead obliged to climb the stairs.
In Bombay, the relationships between Indian and European busi-
nessmen were marked by less discrimination and less mutual antagon-
ism than in Calcutta. Perhaps an explanation is that the British
conquered West India at a later stage than East India. Accordingly,
Indian businessmen in Bombay (as well as in Ahmedabad) escaped the
early period of unabashed exploitation described by Bagchi and others.
Furthermore, the British in Bombay realized that they could develop
the fishing hamlet only by enticing local businessmen and implementing
an active policy to attract Parsis to settle there. In Bombay, a symbiotic
relationship evolved in that many sons of Parsi businessmen worked for
British managing agents. With the exception of Andrew Yule’s agency,
this was hardly ever possible in Calcutta.
Gijsbert Oonk / 70
In Ahmedabad, there were virtually no relationships between Indian

and British and European businessmen, although the civil servant
Ranchhodlal Chhotalal’s relationship with the British was important
for his industrial outlook. In Ahmedabad, local businessmen were
oriented toward the local markets, and there was little commercial inter-
est in what happened in Bombay.
By the end of the nineteenth century, the contrasts between Bombay,
Calcutta, and Ahmedabad were clear to see. In Calcutta, Indian business-
men were excluded from the upper ranks of the business hierarchy and
operated as brokers, but not as partners, while in Bombay partnerships
between Europeans and Parsis were a common feature. In Ahmedabad,
partnerships were rare, but British civil servants promoted rather than
hindered industrial development, as we have seen in the case of Ranch-
hodlal Chhotalal.
The religious, community, and caste-based backgrounds of minority
middlemen can be an important factor in explaining the emergence of
entrepreneurial capacity. Current economic historians do not follow
Weberian arguments that the Indian (especially the Hindu) culture
was averse to risk taking and making long-term investments because
of their supposedly otherworldly values. Nevertheless, it is important
to highlight that a significant part of historiography has dealt with
these issues and has therefore endorsed different types of explanations
related to the cultural or community background of entrepreneurs. In
the case of Parsis in Bombay, historians like Robert E. Kennedy and
Eckhard Kulke found some elements of “Protestant” ethic in their
cases. However, these scholars conveniently forget the mutual relation-
ship between the Parsis and the British in Bombay; the British offered
the Parsis all kinds of economic and social benefits that at least helped
them to improve their economic position.
Here we come to a chicken-or-egg issue. Perhaps it was simply the
case that the British actually offered Parsis these benefits; alternatively,
were they just more likely to accept them because of their Parsi ethic?
Moreover, the Weberian thesis cannot really explain the emergence of
the Marwaris in Calcutta. However, the stranger minority thesis does
help explain the commercial outlook of the Parsis and the Marwaris.
Being strangers meant that they had a more objective attitude towards
the market, while according to the minority thesis, being a minority
meant that they both could develop a positive attitude towards commer-
cial improvement and even success. In both cities, historians and con-
temporaries alike often compared these business communities with
the Jews in Europe. However, the example of the Marwaris in Calcutta
raises the question of whether we have to define them as insiders or out-
siders. They were Hindus and Jains from Marwar; the British considered
them insiders but the Bengalis considered them outsiders. In the case of
the Parsis of Bombay, it may be argued that they were a minority from
the 1850s onwards, but were a majority group before that, as I have
shown. Last, but not least, the example of the Hindus in Ahmedabad
demonstrates that the Hindu majority in Gujarat was well able to
develop indigenous industries at the right time and in the right place.
The Weber thesis cannot explain the emergence of industrialists in
Ahmedabad (who had a Hindu-majority background), which Weber
and others would not have anticipated.
In all of these debates it is striking that the research on India under-
estimates the occupational background of the industrialists. In all three
cities, most future industrialists had a background in finance and trade.
They were by no means people of humble origins or self-made men, as
the classic rags-to-riches stories go. Indeed, they were not craftsmen, tech-
nicians, or mechanics who had owned small workshops and then
expanded. Most of them had virtually no idea how to build factories,
use mechanized (steam) power, and manage large-scale production units.
Despite their backgrounds, an indigenously owned and managed
large-scale industry emerged. Indigenous industrialists were new men
in the history of India, but they had experience in finance and trade.
Despite differences in financing cotton textile mills, small-scale investors
in Ahmedabad seemed to be more important than in Bombay. Neverthe-
less, whatever the colonial attitude and the community background of
indigenous industrialists (Marwaris in Calcutta, Parsis in Bombay, and
Hindu Gujaratis in Ahmedabad), creative indigenous traders and inves-
tors found room to step into profitable large-scale industries. At the
beginning of the second half of the nineteenth century, Indians built
the first indigenous cotton mills in Bombay and Ahmedabad. Not until
1919 was the first Indian mill (jute) built in Calcutta. In all cases, these
industrialists, the new men in history in India, were traders and bankers.
. . .
GIJSBERT OONK is associate professor of African and South Asian

history and head of the Department of History at the Erasmus School of
History, Culture, and Communication (ESHCC), Rotterdam, the Netherlands.
He specializes in business, migration, and economic history with a particular
interest in the role of South Asian (Indian) migrants and settlers in East
Africa. He recently published Settled Strangers: Asian Business Elites in
East Africa, 1800–2000 (2013).

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Gijsbert Oonk

The Emergence of Indigenous Industrialists

F rançois Crouzet described early industrialists in Europe as the emer-

Business History Review 88 (Spring 2014): 43–71. doi:10.1017/S0007680513001414

supervised large numbers of workers.1 These new men were by no means

This work tends to overlook the social/occupational background of

of the cities is that most protoindustrialists had a background in trade,

Revolution because short-term trading and ﬁnancing goals were more

Calcutta’s Industrial Transformation: Marwari Competitors

Duncan Brothers literally dominated the area around Dalhousie Square,

Colonial Attitude toward the Marwaris in Calcutta

Firstly, . . . Western India was conquered by the British at a later stage

This special relationship was barely seen in Calcutta. The British

In Calcutta what kind of outsider minority group did the Marwaris

The Social Background

The Marwaris originally came from Marwar, a region in Rajasthan in

thousand Marwaris in Bengal, and because of their growing business

Business in jute manufactured goods can be transacted on more

Initially, European traders dominated the Jute Balers Association,

During the inﬂationary years of the early 1920s, many European-

Nevertheless, Table 1 shows that the transformation from trader to

In this explanation, neither a cultural factor nor a colonial attitude is of

Bombay’s Industrial Transformation: A Symbiosis of Parsis

Colonial Attitude towards Parsis

The positive relationship between Parsis and the English in West

Gerald Aungier, the EIC governor in West India, realized that

They are an industrious people and indigenous in trade, wherein they

The British actively preferred to collaborate with Parsi businessmen, but

to improve their economic position. Here, we face a chicken-and-egg

cases, Parsi).58 In addition, 90 percent of the cotton industrialists had

trading background greatly inﬂuenced the way in which the Parsis

Ahmedabad’s Industrial Transformation:

There was no imperial sun in Ahmedabad. After 1818, when the

indigenous affair, in which British businessmen only played a back-

Ahmedabad transformed from an administrative city into a more

the habit of issuing loans with buildings and machinery as collateral.

in Ahmedabad formed the backbone of the cotton industry in the town.77

they had no practical knowledge of the quality of cotton, no trading

In this article, I compared the emergence of indigenous industrial-

In Ahmedabad, there were virtually no relationships between Indian

GIJSBERT OONK is associate professor of African and South Asian

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