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Emergence of New Business Classes

India's New Capitalists: Caste, Business, and Industry in a Modern Nation by Harish Damodaran (Ranikhet: Permanent Black/New India Foundation), 2008;

Economic & Political Weekly EPW may 2, 2009 vol xliv no 1821book reviewEmergence of New Business ClassesCarol UpadhyaIndia’s New Capitalists: Caste, Business, and Industry in a Modern Nationby Harish Damodaran (Ranikhet: Permanent Black/New India Foundation), 2008; pp xxiii + 341, Rs 695.India’s New Capitalistsby Harish Damo-daran, a business journalist withThe Hindu Business Line, is a comprehen-sive and engaging account of the emer-gence of new business classes from com-munities whose traditional occupation was not commerce. In India, industry, trade, finance, and big and small business alike have been dominated historically by a few “traditional” mercantile communities – vaishya groups like Banias in north India and Chettiars in the south, the Marwaris, and communities like the Parsis which be-gan to specialise in business activities un-der colonial rule. This monopoly has been slowly whittled away, beginning in the late colonial period and accelerating after independence, as members of a range of dominant agricultural castes like the Kammas of Andhra Pradesh, Patidars in Gujarat, and Gounders in Tamil Nadu, upper caste groups like the Khatris, and even low caste communities like the Nadars, have become prominent in different sectors of business and industry. This book brings together a wealth of information on this transformation, tracing the emergence of these “new capitalists” in their respec-tive regions and providing detailed de-scriptions of the business activities of key actors and companies in each community. Beginning with the history and post-independence fate of the old merchant communities, the book gives an account ofthe new entrepreneurs categorised as: (1) brahmins, Khatris and Babus, (2) Kam-mas, Reddys and Rajus (Andhra), (3) Kon-gunad Naidus and Gounders (Tamil Nadu), (4) Nadars and Ezhavas (Tamil Nadu and Kerala), (5) Patidars and Marathas (Guja-rat and Maharashtra), (6) agricultural communities of north India, and (7) “mino-rities” (Muslims and Syrian Christians). The book thus covers most of the impor-tant bases in relation to India’s modern business history and will be an essential reference work for anyone conducting research on this subject.India’s New Capitalists is also a good read, and pro-vides a number of surprises to readers who are not familiar with the social back-ground of many of today’s prominent busi-nessmen (I use this term deliberately, be-cause hardly any women entrepreneurs appear in this story) or the history of these business houses and industrial clusters. Short on AnalysisHaving said this, I would like to raise some issues that remain unaddressed, more as pointers to further research than as criti-cism. Although the book contains interest-ing and well documented information about a range of business communities, it falls short on analysis. One would have wished for a deeper engagement with the material from a theoretical perspective that would draw together these diverse case studies within a comparative frame-work in order to lead to more general con-clusions about the nature and trajectory of capitalism, and of the capitalist classes, in contemporary India. The author starts with a brief review of the extant literature on business commu-nities, noting that it has focused on the pre-independence period and on the “tra-ditional business communities” – lacunae that the book seeks to address. He writes: “…there is no single work that systemati-cally classifies India’s leading companies and conglomerates according to their community/caste origins…” (p 3). While such information on social background is indeed useful, we need to be wary of ac-cepting the assumptions of the earlier lite-rature. Damodaran builds on the “business communities” literature but does not ques-tion the concept of “business community” itself, or whether it provides an adequate framework for understanding business networks and the organisation of corpo-rate capitalism in India today. The wide variation in historical trajectories through which these “business communities” evolved – well documented in the book – suggests that a unique model is hardly ade-quate. For instance, can we talk of Mar-waris, Kammas, Parsis, and Gounders as equivalent kinds of social formations in relation to capital (they are not even equivalent sociologically, but that is a different matter)? If not, then, what do we gain by analysing the activities of these entrepreneurs and business groups through the lens of “community” or “ethnic group” (the latter being a highly suspect category in the first place)? Indeed, it is not the au-thor’s contention that all these communi-ties are structured or operate in the same way in business – but it is precisely be-cause he does not have a clear theoretical framework through which to interpret the data that he falls back on the concept of “business community”. Is the aim only to show that business opportunities are available to a wider spectrum of social groups today than they were 60 years ago? Or is there a deeper argument about the nature of capitalism in India that one can develop from this story?Nature of DiversificationDamodaran’s main argument is that the social bases of the capitalist class have di-versified over the years, but for all the di-versity represented here, these few busi-ness groups – which presumably have con-trol over the majority of capital – still rep-resent only a small slice of Indian society in terms of numbers as well as social ori-gins. Indeed, the book concludes with an acknowledgement of this situation, noting that in the course of his research he “did not come across a single dalit industrialist even in the South” (where there has been relatively more “social churning” due to reservations and the deeper spread of edu-cation; pp 314-15). Apart from the absence of most lower castes, Muslims, and many other social groups from the ranks of “capitalists”, the wider point of course is that capital (by definition), or at least big
BOOK REVIEWEconomic & Political Weekly EPW may 2, 2009 vol xliv no 1823they have not, by and large, made a transi-tion to industrial entrepreneurship. His answer in part has to do with the “vaishya vacuum” in the south – he hypothesises that such a transition was prevented in much of north India because of the domi-nance of traditional merchant communi-ties in trade and finance, in contrast to their less ubiquitous presence in the south-ern (and western) regions. Where there was space for entry into trade in agri-cultural commodities or agro-industry, wealthy peasants found an outlet for their agrarian surplus. Similarly, greater access to education for middle caste groups in the south enabled them to enter urban profes-sions and occupations and then turn to business. However, this type of explanation has its limits, for the specific circumstances that are invoked to understand the “transi-tion” in some cases do not necessarily lead to the same shift in similar groups else-where – for instance, how do we explain the difference in entrepreneurial inclina-tion between “Tam Brahms” and Karnataka brahmins (apart from the Goud Saraswat brahmins of the coastal region), or, for that matter, between Kammas and Reddys?Welcome InterjectionWith its focus on concrete and detailed stories of the “transition”,India’s New Capitalists represents a welcome interjec-tion into the study of capitalism in the post-colonial period, which has been dominated by abstract theorising based on categories derived from different historical experiences (as in the mode of production in Indian agriculture debate). Significant work by historians on the late pre-colonial and colonial periods has stimulated a rethinking of the develop-ment of capitalism in India, questioning its “derivative” character (as an import via colonialism), and has drawn our attention to the complexity of the Indian economy and its commercial classes in the 18th cen-tury (Bayly 2002) and earlier. In contrast, the social organisation of the economy in contemporary India has not been suffi-ciently investigated, apart from the rather thin literature on “business communities” mentioned above. Significant exceptions that may indicate a new trend in ethno-graphic and sociological research include Sharad Chari’s book on the Tirupur knitwear cluster and Barbara Harriss-White’s series of studies on commercial capital and agricultural trade in Tamil Nadu and elsewhere (1996, 2003). This work points to new understandings of the linkages between “community” or “social structures of accumulation” and economic activity and therefore to the need for fresh theorising on the character of Indian capi-talism itself (cf Gidwani 2008). Through-out the book there are references to “re-gional capital”, “bhadralok capital”, “Mar-wari capital”, etc, – does this imply that the capital that is controlled by different com-munities is different in some way? There are serious questions to be asked about the culture of capitalism, or capitalisms, in India – about the character of the capitalist classes and their relation to other social structures of caste, region, or religion, or the function-ing of business networks through these structures in the context of an expanding and globalising economy – questions that the book provokes but does not answer.Lacuna on Informal EconomyAnother lacuna concerns India’s vast “infor-mal economy” and its connection to the new corporate modes of organisation: although many of the family-owned busi-ness conglomerates described here have their roots in “traditional” trade, these link-ages are not explored. As these case studies show, a single business empire may include a range of activities from chit funds, real estate development, and banking to smoke-stack industries, agro-processing and info-tech, with capital flowing back and forth between different “sectors” of industry, trade, services, and agriculture. How do we understand the deep and fast-changing linkages between the “formal” and the “in-formal”, services and industry, trade and production in the Indian economy? The simple “transition” model proposed by Damodaran is not satisfactory. He identifies “three general trajectories of industrial transition by communities” – the “conven-tional Bazaar to Factory” route (Banias and vaishyas), the “Office to Factory route” tak-en by middle class professionals such as brahmins, Khatris, Kayasths and Bengali bhadralok, and the “Field to Factory” path exemplified by Kammas, Gounders and Patidars (p 315). This analysis reflects the rather outdated theory that assumes that industrial capitalism is the “highest” form, which develops when agrarian and mer-cantile capital move into industry. In an era of increasing dominance of services, the emergence of complex production net-works, and the informalisation of labour, this model is no longer tenable, just as the distinctions between “trader/moneylender capital” and “industrial capital” are unable to capture these contemporary complexi-ties. Along with a rethinking on the nature of capitalism, there seems to be a need to redraw the categories of “capital” itself. A smaller quarrel that I have with the author, from a sociological perspective, is the relegation of Muslim business commu-nities such as the Khojas and Bohras, as well as Syrian Christians, to a short penul-timate chapter on “minorities” (defined by religion), in contrast to all the other com-munities (largely Hindu castes or caste groups, but also including Jains, Lingayats, Sikhs, and even Parsis) that are categorised by their social and economic characteris-tics. It would have been more reasonable to include Muslim trading groups in the chapter on “Old Merchant Communities” and Syrian Christians either with merchant communities or agrarian castes – especially given that nowhere in the argument is reli-gion brought forward as a relevant factor.State and Aspiring CapitalistsA key issue that is only hinted at concerns the relationship of aspiring capitalists to the state. The role of politicians in promot-ing the rise of certain industrialists is well known, but can we generalise about the nexus between political power and busi-ness success at different levels? Spokesper-sons for new industries like software out-sourcing often claim that they have suc-ceeded without help from (and thanks to lack of interference by) the government or the political class – yet in Karnataka and Andhra Pradesh the close relation between the Information Technology industry and certain state governments reminds one more of “crony capitalism” than free mar-ket enterprise. The role of state or political support in the rise of new capitalists in the cases presented here needs to be examined more closely, although it is fairly clear in some – the sugar cooperatives of Mahar-ashtra, or the Kammas and the Telugu De-sam Party (not to mention the revelations
BOOK REVIEWmay 2, 2009 vol xliv no 18 EPW Economic & Political Weekly24flowing out of the Satyam scandal). The fact that several powerful politicians have emerged from the new capitalist classes underscores the need to contextualise this transformation within a wider political economic framework.Another interesting theme that emerges from the case studies and that deserves fur-ther exploration is the link between regional capitalist classes and the growth of private educational institutions. In many of the cases presented, education was a key sector for investment by these new business classes, while the flowering of private engineering, medical and other such colleges was also an important factor behind the emergence and consolidation of these classes. From coastal Andhra to central Gujarat to western Maha-rashtra and coastal Karnataka, the rise of private educational empires has gone hand in hand with the appearance of “new capi-talists”, yet the significance of this phenom-enon has hardly been noted by sociologists. In conclusion, while Damodaran’s survey shows that business activity and capital tend to concentrate in particular social groups, he does not really explain why this is so. The observation itself may be an artefact of the analytical frame that takes caste to be the basic unit of business organisation. But if, as he argues, business is becoming an occupa-tion of many groups outside the traditional merchant communities, or more accurately, if some individuals/families from non-mer-chant communities have become capitalists, what does this tell us about caste as a mode of business organisation? Do we need to re-vert to the old argument about the “loosen-ing” of the connection between caste and occupation as an outflow of modernity, along with its corollary – frequently articu-lated by the educated middle classes – that “caste no longer matters”? (But the author must be credited for foregrounding the ques-tion of caste in this arena in the face of con-sistent denial by many public intellectuals.) Conversely, have certain caste groups been well placed to accumulate capital for rea-sons that have little to do with caste as such? Or, do we need to reinvent the category of “caste”, along with “capital”, in order to make sense of these developments? The book provides only potential parts of an argument that would answer such questions – but it does contain a wealth of empirical detail that could be profitably mined by other scholars. Email: carol.upadhya@gmail.comReferencesBayly, C A (2002): Rulers, Townsmen and Bazaars: North Indian Society in the Age of British Expansion 1770-1870 (New Delhi: Oxford University Press).Chari, Sharad (2004):Fraternal Capital: Peasant-Workers, Self-Made Men and Globalisation in Pro-vincial India (New Delhi: Permanent Black).Gidwani, Vinay (2008): Capital, Interrupted: Agrarian Development and the Politics of Work in India (Minneapolis: University of Minnesota Press).Hardgrave, Robert (1969):The Nadars of Tamilnad: The Political Culture of a Community in Change (Berkeley: University of California Press).Hardgrove, Anne (2004):Community and Public Culture: The Marwaris in Calcutta (New Delhi: Oxford University Press).Harriss-White, Barbara (1996):The Political Economy of Agricultural Markets in South India: Masters of the Countryside (New Delhi: Sage Publications). – (2003): India Working – Essays on Society and Econ-omy (Cambridge: Cambridge University Press).Rudner, David West (1994):Caste and Capitalism in Colonial India: The Nattukottai Chettiars (Berkeley: University of California Press).Timberg, Thomas A (1978):The Marwaris: From Trad-ers to Industrialists(New Delhi: Vikas).Upadhya, Carol (1997): “Social and Cultural Strate-gies of Class Formation in Coastal Andhra Pradesh”,Contributions to Indian Sociology(N S), 31(2): 169-93.

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