Book Reviews For Indias New Capitalists Harish Damodaran

The "Protestant ethic", claimed Max Weber, promoted the

"spirit of capitalism" and wrought change in feudal Europe.
It is "animal spirits" that induce "a spontaneous urge to
action rather than inaction" and thereby fuel enterprise,
said John Maynard Keynes. For 200 years, social scientists
have tried hard to explain why and how agrarian societies
transform into industrial nations.
When, how and why do merchants, traders, moneylenders
and landlords become industrial capitalists?

We hear of
Indian politics
stuck in the
caste groove.
Indian
business was
there before;
relying on
trust, a castebred
lubricant.

There has been much theorising and even more empirical

recording. The study of capitalist industrialisation in India
is, however, still in its infancy. You get hagiographical
accounts of the "captains" of business, you get dull
historical detailing or sociological hypothesising, but very little hard facts about the
social origins of business enterprise in India.
So, full marks to Harish Damodaran for a book that those interested in the dynamics
of capitalist development in India must read. It's not just good journalism but the
work of a profoundly talented observer of social change in India.
Everyone complains about Indian politics getting stuck in the caste groove. Indian
business was there before. Caste networks helped create trust, an essential
lubricant of business. Damodaran doesn't discuss the whys and wherefores of caste
in business. He has stuck to digging out facts and showing us how different castes
across the country made the transition from traditional economic activity to trade
and industry.
Interestingly, vegetarian Indiansthe Jains, Marwaris and Brahminsexhibited
"animal spirits" before the other castes caught up. They and the Parsis dominated
pre-Independence business enterprise. After Independence came the Chettiars,
Khatris, Kammas, Reddys, Rajus, Jats and Marathas, to name some of the other
entrepreneurial castes.
Damodaran doesn't waste time trying to justify the caste lens. Nor does he get
diverted by the question "Is caste class?" He believes capitalism in India has
developed through what he calls "business communities" in which ethnic and other
networks facilitate commercial activity. In elaborating the caste dynamics of
capitalist development, Damodaran's taken scholarship in the area several steps
forward. It would have been fascinating to see how Damodaran's grandfather, the

Communist leader and Marxist theoretician E.M.S. Namboodiripad, would have

viewed young Harish's work!
Damodaran identifies three sources of industrial capitalism in Indiamercantile
capital ("bazaar-to-factory"); professionals ("office-to-factory") and agrarian capital
("farm-to-factory"). My own work on the development of capitalism in Andhra
Pradesh, dating back to the early '80s, showed a fourth routepublic works-tofactory, the so-called "contractor class" who accumulate capital from public works.
There are many prominent examples of businessmen who have milked the public
exchequer, with help from politicians in office, to become "dynamic entrepreneurs".
Damodaran's book corrects one imbalance in existing literature on business
enterprise in Indiathe regional one. Most of existing work focuses mainly on
Marwari, Jain, Parsi and Punjabi enterprise. There is very little published work on
South Indian business, apart from the work of economic historians. Damodaran's
chapters on South Indian castes in business, and his brief 'Note on Minorities' fill this
gap.
The most important challenge Damodaran poses to his distinguished grandfather's
intellectual and political legacy is not his focus on caste as a factor in the growth of
new enterprise. Rather, it is his unequivocal demonstration that so many of the firstgeneration business groups across the country find their origin in the post-Green
Revolution agrarian transformation of rural India.
The old theoretical formulations regarding India's inability to make the transition
from feudalism to capitalism because of the semi-feudal nature of agrarian relations
and the constraints imposed by backwardness fly out of the window. That may be
true for parts of eastern and northern India, but, as Damodaran shows, in much of
southern, western and northwestern India, farmers have become industrialists. The
dynamics of Indian agriculture facilitated that transition, with help from the
government.
I am particularly delighted to see Damodaran's rich detailing of this process
because some of us had in fact argued even in the '80s that a new dynamism was
visible in the countryside in places like coastal Andhra, southern Tamil Nadu,
western Maharashtra and so on, where a new business class was in the making. It is
not often that one reads a book you wish you had written. I certainly wish I had
Damodaran's skill, energy and intellect to produce such a well-researched and
readable book.

Book Review: India's New Capitalists: Caste, Business and Industry in a

Modern Nation

YOGESH JOSHI 2 July 2010

Subjects:
Economics

Culture

India

Historical and cultural detail provides a rich understanding of India's powerful new business houses

How has capital thrived in India? The question seems to be pertinent in the backdrop of the
meteoric rise of India as an economic powerhouse. With the number of millionaires in the
country crossing a figure of one lakh (100,000), the Indian capitalist class has left a unique
imprint on the global economic scene. Indian companies are today buying out global brands and
creating globally recognized products of their own. However, the rise of capital and the
capitalists cannot be separated from the larger social and political milieu. The Indian capitalist
class, therefore, was not insulated from the culture, society, polity and geography in which it
operated. All these factors contributed to the rise of Indian capital in their own unique way.
In this backdrop, Harish Damodarans effort in providing a thick description of the rise of the
Indian capital and its new capitalists is a welcome contribution. The narrative tries to delve into
the history of Indian entrepreneurship, from the times of the British Raj to the domination of the
countrys closed economy by ubiquitous quota systems and further linking it up to the
liberalization of the economy in early 1990s. It traces out the rise and fall of different merchant
communities or in modern parlance - the business houses. The depth of the narrative is its major
strength. The author picks up the history of each of these communities and links up with the
context in which they operated. This contextualization allows the readers to understand the social
and political forces which helped or impeded the growth of these entrepreneurs. The narrative is
full of details and there is where the author develops an interest in the reader. The treatment of
individual entrepreneurs and their struggles is captivating. However, the main strength of the
book is that this detailed narration does not deflect the readers attention from broad threads
which underlie the history of the Indian capitalist class.
First is the role of agriculture and geography in the development of Indian Capitalism. The
growth of hybrid varieties of cotton and tobacco and the breakthrough in irrigation techniques in
coastal Andhra Pradesh helped the Kammas to venture into the textiles industry and tobacco
processing. On the other hand, the Reddys, though in possession of more land compared to the
Kammas, made mining their preserve since they inhabited the drier lands of the state were
irrigation was a major problem. Similarly the coming of Cambodia breed of cotton helped the
Naidus of Coimbatore to make the city the Manchester of the east. In Marxian terminology,
these were the agriculturists with surplus capital. However, one other major factor which allowed
the consolidation of these communities was the absence of the traditional Indian merchant class
better known as the Bania or the Marwari. The absence of capitalist entrepreneurs in the Bengali
Bhadralok and the Jats of northern India is an example of the pervasiveness and depth of these
traditional merchant classes. It was also one of the reasons for the Patidars of Gujarat and
Marathas in Maharashtra to develop co-operatives methods of industrial development.
The second broad argument which clearly manifests itself in the book is the role of society,
traditions and culture in the growth of Indian capitalist classes and vice versa. The sense of
community has played a significant role whether it is the case of the rise of Parsis in the preindependence period or the Gounders of Tirupur in Tamilnadu in the post-Independence era. The

case of Tirupur Export Association is unique. Similar is the case of the Nadars in Kerala. The
Nadar Mahajana Sangam and the Nadar Bank limited, later renamed Tamilnadu Mercantile
Bank, were instrumental in the business success of the Nadar Community. The story of Sakthi
Sugars, a Gounder enterprise, were community shareholding comprised 40 percent of the total
shares is a case in point. These community links are also evident in the Patidar and Maratha
communities. Though, societal trust and bonding has been crucial for business, the Indian Caste
system had its own impact on the business scene. For example, the Patidars and the Marathas
were the dominant castes in the rural settings of their respective states and controlled most of the
land. What Brahmins lacked in land, they made up in education. However, again this
essentialisation is problematic since the Brahmins in north India remain insulated from the
affects of the Capital. The author explains this variance by the logic of flexibility and openness
of the southern Brahmins because of their early exposure to the winds of imperial globalization.
However, most fascinating is the dialectic between success in business and social mobility. The
Marathas, having tasted the success of co-operatives, increasingly started asserting their
Khastriya lineages. The success of Nadars and Ezhavas in Industry and Business in Kerala also
resulted in a vehement opposition to Brahmin dominance in society and religion. In this sense,
the rise of capital has acted as enabling factor for the socially excluded. The book also makes the
affects of culture and identity conspicuous. These are most observable in case of the Bengali
Bhadralok and the Jats. Whereas the former was accultured by the presence of the British as a
typical westernized babu, the Jat identifies itself vis--vis the dishonest and shrewd Bania and
therefore loathes business. However, these essentialisations have their own limitations and the
author is careful enough not to solidify these constructions by elaborating on the successful
business ventures undertaken by these communities.
The third element which the author seems to bring out is the crucial role which globalization
played in the growth of the new capitalist class. The impacts of a global economy are visible in
the fallout of the Great Depression on the British business and the opportunities it provided for
the local. We also saw how changes in agriculture and irrigation techniques allowed the surplus
capital to grow which was later channeled in to industrial development. Moreover, increasing
foreign collaborations helped the indigenous industries. The export led growth of the Tirupur
knitwear industry is one such example. Today, the knitwear from Tirupur contributes to world
brands such as Marks and Spencers, Tommy Hilfiger, Wal-Mart and many others. Moreover, the
role of foreign education and the experience which Indian entrepreneurs gathered while working
abroad cannot be ignored. Also, Indian Diasporas, especially the Patels of Gujarat and the Sikh
Jats of Punjab, had their own impact both in economic and political terms. However, the effects
of globalization have been mixed. There appears to be strain between modern individualism and
traditional community based approaches to capitalism. Again the authors elucidation of the case
of Tamil Mercantile Bank makes the point crystal clear. Initially an endeavor of the Nadars of
Thoothukooti, the bank was devised to cater to the financial interests of the community. However
the furor which accompanied the sale of 15 percent of the Pioneer Asia (A Nadar enterprise)
shares in the bank to the Essar group (Marwari) reveals this growing rift. The same is visible in
the new initiatives among the Patidar community in Gujarat who are now leaving the cooperatives for more individualistic pursuits of capital. The underside of the process also reveals
itself in the new challenges which settled business communities are facing, manifest in the new
environmental and labor norms affecting the cost of production (Fireworks in Shivakasi and
Textile industry in Tirupur) and the coming of new technology forcing traditional practices to

extinction ( the hand-printing industry in Shivakasi). However, this has also opened avenues for
new entrepreneurs, Suzlon being an example.
The last point which I think clearly comes out of the book is the nexus between politics and
capital. The coming to the foray of Gujarati Business and Industry by the Patidars community
was linked to their participation in the Indian independence movement and close association with
Indian National Congress. The unsuccessful yet bold attempts by the Bengali Bhadralok in
business were themselves motivated by the swadeshi movement. The post independence period
saw the rise of a number of business communities and the interesting point is that most of these
high capitalists saw political power as the consummation of their financial endeavors. The
coming to power of the Telugu Desam Party in Andhra Pradesh and the increase in Kamma
wealth was not coincidental, nor is, in hindsight, the issue of the separate state of Telangana. The
profile of leaders active in Maharashtra state politics eventually tells the story of co-operatives
and their link with local politics. The lack of opportunities in Business and Industry explains the
active support provided by the Sikh Diaspora to the cause of Khalistan.
The book however has its own deficiencies. A preliminary reading would give a hint of
portraying communities with fixed identities mainly the chapters on Bengali bhadralok and
Jats. Similarly, by restricting the cutoff for the new capitalists to a 100 crore (1000 million)
rupees turnover threshold, the book may appear to unnecessarily celebrate the big business
leaving out more interesting tales of small but more creative entrepreneurship. Another deficit of
this work is the tangential treatment of the minority business classes. However, no work is
supposed to cover every possible detail it can. The most important contribution of the book is
that it situates this capitalism firmly in Indian polity and society and therefore, illuminates the
reader on how capitalism takes different avatars under different circumstances. It allows us to
understand the specificities of capital in the Indian case yet gives an impression of its
transcending and flexible nature.