3
The Study of Commerce in Indian Society

Giants on Our Shoulders

A major difficulty standing in the way of adequate historical understandings of Indian commerce is that we labor under the burden of past misunderstandings.^[1] For example, despite contemporaneous and near-contemporaneous accounts to the contrary (Buchanan 1870; Crawfurd 1971[1837]), most studies of India's precolonial economy have, until recently, simply assumed an agrarian and noncommercial system. Historians who were concerned with economic issues at all directed their efforts to a debate about India's economic development (or underdevelopment) during the nineteenth and twentieth centuries. On the one hand, nationalist historians of India argued that colonialism stifled Indian development through unfair taxation and trade regulations. On the other hand, proponents of Western modernization theories argued that colonialism fostered development by providing a peaceful environment and by promulgating the growth of efficient transportation, communication, education, and government. But both sides shared the standard social science models of precolonial Indian economy developed by Marx and Weber. These classic models divide India into autonomous peasant villages and oriental despots who siphon off agricultural surplus. They characterize India as lacking a commercial life worthy of study, except insofar as she provides an example of a "premodern" society incompatible with commerce. They deny the existence of commerce and hence of institutional involvement in commercial activities.^[2]

More recent scholars place India's nineteenth-century economy into perspective by examining seventeenth- and eighteenth-century docu-

ments connected with mercantile and "protocapitalist" systems of the period (Bayly 1983; Das Gupta 1967, 1970; Habib 1969, 1980; Leonard 1979; Mendels 1972; Pearson 1976; Perlin 1983; Subrahmanyam 1990). The result is a developing revisionist view of India's precolonial economy. It envisions a significant manufacturing power, producing perhaps a third of the world's manufactured goods—principally textiles (Washbrook 1984). In this view, the colonial transformation had two major effects. It destroyed India's textile and other manufacturing industries, and it subverted her "traditional," noncommercial systems of agricultural production by forcing agriculturalists to produce exportable crops at the expense of food crops and subsistence agriculture (Habib and Raychaudhuri 1982; Neale 1957; Thorner 1960). In other words, some scholars now see colonialism as having destroyed India's precolonial industrial capabilities and created a colonial economy whose narrow basis in agricultural production was, ironically, to become the model for mythical reconstructions of her precolonial past.

Despite considerable progress in demythologizing the concept of the traditional Indian economy, most of the revisionist work directs its attention toward aggregate measures—of trade volume, terms of trade, or quantity of money. (Deyell 1970; Habib 1982; Hasan 1969; Moosvi 1980; Prakash 1976; Prakash and Krishnamurty 1970). Excepting only some of the most recent studies, such as those by Baker (1984), Bayly (1983), and Subrahmanyam (1990), almost no one addresses the specific institutions that were agents of Indian commercial activity in the colonial or precolonial periods.^[3] For the most part, our understanding of India's precolonial social formations retains many traditional assumptions about India's noncommercial character. This conservative perspective is particularly noticeable in work influenced by formulations of neo-Marxist and substantivist economic anthropologists. By and large, proponents of these schools of historical interpretation arrive at their conclusions deductively, through evolutionary or dialectical theories about the rise of capitalism. From their perspectives, only evolutionarily advanced societies whose economic activities are organized by contract law, commodities markets, stock markets, central banking systems, and other institutions characteristic of Western commerce are capable of conducting commercial activities. Conversely, the absence of Western institutions is seen as the hallmark of a precapitalist society and as logically equivalent to—or at least providing prima facie evidence for—incompatibility with activities oriented around private property, market production, capital investment, and credit extension for long-distance trade.

None of these revisionist perspectives diverge from the basic premise that India lacked indigenous commercial systems. Excepting the subversive intrusion of the capitalist system into commodity production, no other remotely commercial activity figures in neo-Marxist and substantivist accounts of the colonial period. Any precolonial evidence of commercial activity is interpreted by a Procrustean set of categories whose chief characteristic is that they are the opposite of commerce. If goods are produced, it is for purposes of "subsistence" rather than exchange. If goods are exchanged, it is a transaction of "prestations" rather than a buying and selling of commodities. If commodities are bought, it is for purposes of "consumption" rather than investment. If commodities are valued, they are said to have a "use value" rather than an exchange value. If profits from an exchange are saved, the savings constitute a "primitive hoard" rather than an accumulation or reserve of capital.

Neo-Marxist and substantivist analyses of Indian economy share an additional property besides their doctrinal similarity. They are remarkably ahistorical. Pitting their analyses of contemporary or colonial India against an idealized model of "traditional" India, proponents ignore evidence of extensive commercial activity extending back to the third or fourth century B.C. (Maloney 1970; Thapar 1966). Perhaps this is only to be expected. Only recently has there been any progress in addressing the powerful and complex non-Western commercial apparatus that underlay the Indian economy. Yet, despite growing recognition that India has long maintained itself as a formidable commercial society, we still understand very little about the people who engaged in commerce, the institutional structures by which they controlled credit and money, the ways they used these structures for investment, and the values that underlay these uses.

Three Stereotypes of the Indian Moneylender

The powerful influence of nineteenth-century sociological theory is most clearly seen in three widely occurring stereotypes about Indian money-lenders and their relationships with agricultural producers. Perhaps the most prominent of these stereotypes is illustrated by the wonderfully evocative descriptions in R. K. Narayan's The Financial Expert (1952), a novel about a twentieth-century moneylender who guides his actions more with an eye to the goddess Lakshmi than with any consideration of economic rationality. Margayya, the moneylender of Malgudi, begins his business life by assisting peasants in dealing with the town's Central Cooperative Land Mortgage Bank. He collects some fees for this service. More importantly, he actively creates money for his clients. If a peasant requires a loan for marriage expenses, Margayya persuades a better-off

peasant to borrow money from the bank and loan it to the first peasant. The better-off peasant pays the interest he owes the bank from the slightly higher interest paid him by the first peasant. Margayya receives a fee for his assistance in the transaction on the occasion of the initial bank loan, which is made at no risk to himself. Money is plentiful. Only the interest is repaid, never the principal. Everybody is happy.

Irrationality enters the picture when Margayya steps beyond the role of broker and begins to loan money that he himself has borrowed or has received on deposit. By loaning money on outrageously large margins, Margayya plants the seeds of his own downfall. For he has neither the reserves of the cooperative bank nor any guarantee of government intervention in a crisis. As the book reaches its climax, Margayya's clients start a run on his money-lending operation, and he is forced into insolvency. Mystical, befuddled, and irrational, Margayya never comprehends the potential for disaster until it is too late.

A second and even more prevalent stereotype portrays Indian money-lenders as all too rational: coldly preying upon their cultivator clients, luring them further and further into debt, and finally sucking them dry of surplus, savings, property, and liberty. A classic ethnographic depiction of the usurious moneylender may be found in Darling's (1947) account of Punjabi peasantry (for a literary illustration of the stereotype, see Raja Rao's Gandhian indictment of village moneylenders in his 1939 novel Kanthapura ).^[4] In this stereotype, it is peasant cultivators who take over the burden of irrationality, while moneylenders emerge as rational but immoral.

Some of the excesses in these stereotypes have been addressed in an article by Michie (1978), who explores the blend of rationality and morality that actually characterizes interaction between moneylenders and peasant farmers. Unfortunately, even such a welcome corrective essay perpetuates one further stereotype: the image of the moneylender as an independent, strictly small-scale entrepreneur whose business activities are confined to credit transactions with his client agriculturalists. For example, even though Michie mentions the ability of moneylenders to manipulate links between villages and wider market networks (1978: 50), he pays no attention to the kinds of organization these links presuppose. His focus is tightly confined to the moneylender/cultivator relationship, defined by an exchange of loans and repayments. His primary concern is the organization of production. Missing from Michie's account is any description of market networks and moneylender/moneylender relationships, defined by exchanges of deposits, letters of credit, bills of exchange, and other financial instruments. In other words, he does not address the organiza-

tion of finance and trade. By default, Michie assigns moneylenders to small-scale operations limited by the assets they can generate from their cultivator clients.

Legal Stereotypes and Historical Myopia

It is this final stereotype about the scale of Indian finance that invariably colors the writing of colonial administrators, of economists during the colonial period, and of historians today. In general—to the extent that Indian credit operations are recognized at all—Indian moneylenders are taken as unreliable and irrational, or rational to the point of usurious immorality, but in any case as strictly small scale in the size of their assets and the scope of their credit extension activities. For example, it is easy to find reports devoting large amounts of space to efforts to distinguish between petty moneylenders (representing the Indian stereotype) and large-scale bankers (operating in the fashion of Western banks).

Reflecting this distinction, the legal history of the period is replete with judicial efforts to define indigenous financial instruments such as the hundi (a kind of bill of exchange used by moneylenders but not by "true bankers"). Ultimately, the courts concluded that such instruments lacked explicit statements stipulating conditions for certain kinds of transactions between multiple trading partners. Accordingly, their negotiability could not be appealed to a court of law (Krishnan 1959; Weersooria 1973). The implication of such a finding is that instruments such as hundis , which lack legal standing, could not possibly function effectively outside of a specific local community's ability to apply customary sanctions; therefore, hundis must be ineffective instruments for any kind of large-scale or long-distance trade.

Such a conclusion might be appropriate for a jurist or administrator who looks only to the courts for sanctions on contracts or authoritative judgment of disputes. On the other hand, it is certainly inappropriate for any person dealing with the day-to-day operation of an Indian commercial enterprise. The difficulty is that it simply ignores customary sanctions on hundi transactions that are rigorously enforced by multilocale, multiregional, and even multinational communities of businessmen. Indeed, the considerable negotiability established by hundis is a testament to the adequacy of these customary sanctions (see discussion in Chapter 5). When jurists' failure to appreciate these important financial instruments is placed in the context of stereotypic views about Indian bankers as merely clever (and sometimes irrational or usurious) moneylenders, it is clear that British and British-trained jurists never really comprehended the systematic operation of Indian financial institutions.

Stereotypes of the Indian moneylender even affect scholars who explicitly recognize indigenous systems of trade and banking during the colonial period. A. K. Bagchi (1972), for example, cites the monopolistic access of British entrepreneurs to "organized" banking systems as one of their important advantages in preempting Indian investment in industrial opportunities well into the twentieth century. Apparently, Bagchi has in mind characterizations of the Indian banking system in which Madras Presidency and British exchange banks, which made credit available to the British, are compared with the developing Indian joint-stock banks of the early twentieth century, which made credit available to Indians. An example is provided by Vakil and Muranjan (1927: 532), whose analysis of capital within the "organized" banking system for the period from 1913 to 1917 indicates a ratio of British credit to Indian credit of approximately five to two.^[5]

Buried in Bagchi's own footnotes is evidence that he unconsciously discounts (perhaps "devalues" is the better term) indigenous credit markets—presumably the "unorganized" banking sector. Compare the following two passages quoted by Bagchi from official government reports about British investment credit and the Nakarattars or Nattukottai Chettiars, the focus of the present book. The passages were published in 1901 and 1930, on either side of the period characterized by Vakil and Muranjan; nevertheless, they illustrate the point.

It was established in 1901 by Sir Edward Law [the member in charge of finance in the Viceroy's Council] that [British] banking capital available in India for trade purposes was less than £10 million [approximately Rs. 80 million], after making allowances for the share of the capital of the exchange banks which was held outside India; the amount required was estimated as £12 million [Rs. 96 million].^[6]

By contrast:

According to [Chettiar evidence in the Report of the Madras Provincial Banking Enquiry Committee], the capital of the Chettiars had increased from Rs. 100 million in 1896 to Rs. 800 million in 1930, and the capital employed by them (including borrowed capital) at home and in Madras came to Rs. 750 million, which is equal to what Furnivall claimed to be the capital employed by them in Burma alone.^[7]

Notice that the Chettiars' own estimate of Chettiar capital in 1896—not to mention Furnivall's (1956) less conservative estimate originally made during the same period—are both far in excess of the amount that the colonial government claimed was available for British trade in 1901; an amount which, according to Bagchi, represented superior British access to

investment capital. And this estimate does not even begin to take into account the capital controlled by non-Chettiar banking castes such as Marwaris, Parsis, or Baniyas. Yet none of this capital enters into calculations about the credit available to Indians (or Europeans) in India's organized banking sector. Thus, even modern economic historians such as Bagchi continue to accept Western colonial views that India lacked an institutional system capable of providing the large-scale finance necessary for industrial investment.^[8]

Lacking in all such views of Indian credit resources is any appreciation for the complex network of financial debts, opportunities, and possibilities that indigenous moneylenders and bankers could activate outside of Western-style banks through relationships of kinship and caste or through common participation with potential investors and lenders in a variety of religious and secular institutions. It is scarcely surprising that the scale and scope of Indian financial operations have been denied, when the very mechanisms for their transaction have gone unrecognized.

What are we to make of colonial administrators who regularly denied the existence of large-scale Indian commerce while interacting with its institutions on a daily basis? How are we to account for the strange myopia of British administrators and the historians who study them? On one hand, I suspect that verbal denial constituted a device by British banking interests for attaining special treatment from the emerging government-regulated banking systems in South and Southeast Asia (e.g., Buchanan 1870; Crawfurd 1971[1837]). On the other hand, as we have seen, anticolonial historians may give too much credit to claims made by colonial administrators in pronouncements on commercial policy while failing to consider the massive capital controlled and invested by Indian financiers. But these provocative assertions are themes for another essay. The present book attempts to modify the existing stereotypes (whatever their basis) by examining aspects of a large-scale system for credit provision—a non-Western banking system—operated by a South Indian caste during the colonial period.

Village Studies of Indian Commerce

One reason for the longevity of nineteenth-century biases about Indian society is that there have been remarkably few studies of the operation of even contemporary Indian commercial and other economic systems. Anthropologically, the focus has tended to fall on operations of the so-called jajmani system, a putatively India-wide redistributive system that operates within strictly local village contexts. According to standard models of jajmani , members of occupationally specialized castes exchange

their services for shares of agricultural produce controlled by members of the dominant landed caste in a village.^[9]

But there is growing reason to believe that the entire anthropological orientation toward and emphasis on jajmani models of village economic life merely reflect an untenable presumption about the noncommercial autonomy of precapitalist peasant villages. Recent systematic and detailed studies of village economic transactions have begun to show that the jajmani does not represent a pan-Indian phenomenon and that where jajmani or jajmani -like systems do operate, they make up only part of the total village economy (Commander 1983; Fuller 1989; Good 1982, 1991). Perhaps the most frustrating aspect of anthropological emphasis on jajmani is the impression it gives of India's economy as consisting of nothing else. Against any such misapprehension, it must be remembered that throughout Indian history, 40 percent to 60 percent, and under extreme circumstances perhaps as much as 80 percent, of village produce has left the village (Habib 1969; MBPEC 1930 1:35–85; Nicholson 1895; Rajayyan 1964–65; Robert 1983; Thorner 1960).

A large part of this exported village surplus takes the form of taxes in kind or money levied by various governmental institutions. Although not studied by anthropologists, such expropriation of village surplus has received attention from historians attempting to understand the financial basis of the great Indian empires, Mughal and British (Chandra 1966; Chaudhuri 1971; Habib 1969; Ludden 1985; Marshall 1976; Stokes 1978). Other historians, strongly influenced by anthropological concerns with indigenous ethos and world view, have attempted to integrate values believed to underlie village jajmani transactions with values believed to underlie the interactions between regional kings and local peasants (Dirks 1988; Greenough 1983; Price 1979). This last set of important studies identifies hierarchical values of "royal generosity" and "indulgence" as structuring the behavior of two sets of roles, as Greenough puts it: "the first set comprising powerful, resource controlling 'parents,' the second set comprising helpless needy 'children.' The roles in each set are equivalent in the sense that those in the first (kings, gods, masters) are all destined providers of subsistence ... while those in the second (devotees, subjects, dependents) are all persons requiring nurture" (1983: 841).

Studies such as these break down the artificial boundaries that existed between village geography and Indian economy. But they still ignore a major sector of the Indian economy not governed by parent/child values of hierarchical indulgence and generosity. What they miss are the relatively egalitarian values governing commercial relationships. Role sets of persons engaged in a commercial transaction are not split into two asymmetrical

categories of "subsistence providers" and "nurture requirers." Instead, they involve elaborate chains of lenders and debtors who are often mutually lenders and debtors to each other. For example, on one occasion, an agriculturalist may borrow money to purchase land, seed, or fertilizer. On another occasion, he may deposit excess profits from his harvest with a banker for investment on his account.^[10] Moreover, a landholder or trader who borrows money from a moneylender may loan out that money himself. And the original moneylender may easily borrow up to 90 percent of the monies he loans out (Robert 1983). In such relationships, values taken to underlie behavior cannot be understood as any simple transformation of generosity and indulgence from holders of parental roles to holders of child roles. Rather, the operative values seem to entail nonhierarchical relationships of trust and trustworthiness, often created and symbolized by religious gifting on the part of those engaged in commerce.

In other words, anthropologists and historians have paid little attention to an entire range of significant economic activities occurring beyond the level of the village. This observation applies to trade at a variety of periodic markets and especially to money-lending and banking activities involved in sophisticated indigenous systems for providing credit to farmers, traders, and governments. Without institutions of credit extension, India could not have maintained either its notorious tax levies or its extensive system of medium- and long-distance trade in agricultural and nonagricultural commodities.

Beyond the Village Moneylender

Another explanation for the continuing influence of stereotypes about Indian moneylenders may lie simply in the failure to consider implications of financial transactions beyond the level of the village. This omission, in turn, may be due to a marked bifurcation between money-lending peasants in village contexts and merchant-banking firms in urban contexts.^[11] This is not to say that social scientists have totally ignored nonvillage India, but only to indicate that nonvillage studies have failed to have any impact on prevailing views about the organization of Indian finance.

To the extent that scholars have addressed Indian financial organization beyond the village, their studies seem to fall into two categories: (1) studies of bazaar economy, and (2) studies of major commercial centers, sometimes referred to as "burgher cities" (Bayly 1978, 1983), and of Indian "burghers," sometimes called "portfolio capitalists" (Subrahmanyam 1990). Analyses of Indian bazaars look explicitly at sources of capital for petty shopkeepers, retail traders, and moneylenders operating within regional markets.^[12] In contrast to studies of village-based credit

markets, these bazaar studies explicitly raise questions about the scale of moneylender resources and the kind and degree of financial cooperation between moneylenders acting as insurers for and investors in one another. But the change in venue does not alter the analytic bias. By and large, the focus of these studies is confined to small-scale activities of moneylenders oriented toward what Fox (1969: 302)—drawing a parallel with putatively risk-aversive peasants—calls "subsistence trade." In keeping with prevailing stereotypes, moneylenders and shopkeepers of the bazaar are portrayed as irrational, as requiring only small amounts of capital, as lacking permanence, as conservative or even stagnant, and so forth.^[13] Bazaar studies perform an important service in broadening our understanding beyond agrarian production in the village. But they scarcely scratch the surface of Indian commerce. The role, operation, and even existence of large-scale merchant-bankers remains, with few exceptions, unknown or unconsidered.

The major exception to this general indictment consists of studies focused on coastal entrepôts and port cities extending from Saurastra through Gujarat, down the Malabar Coast and up the Coromandel to Golconda.^[14] In addition, a relatively small amount of attention has been paid to the role of merchants in inland cities such as Allahabad or Benares (Bayly 1978, 1983). Subrahmanyam's (1990) work on late precolonial South India and Baker's (1984) work on "modern" South India (1984) provide two additional examples of a focus that extends to inland commerce. With the exception of the last three writers, however, the predominant concern of these studies remains the working of empires—or, more recently, the working of local or regional polities. Their strength lies in their focus on politics; their weakness, in their lack of attention to commerce. In effect, they constitute analyses of political power in cities which happen to have a marked mercantile orientation. But the implications of mercantile organization and values as opposed to royal, professional, or administrative organization and values are not seriously examined.^[15]

Indian Burghers and Portfolio Capitalists

The recent studies by Bayly and Subrahmanyam require additional comment, for, as I have already indicated, they represent a major turning point to the general trends I have just described, and at first glance their findings seem to stand in radical contradiction to the conclusions presented in the present study.^[16] I begin with Bayly, who explicitly joins the issue and, in this respect, provides the best opportunity to scout out potential differences and agreements in our views. In several places Bayly presents detailed historical data and interpretations about North Indian commercial

towns and cities that correct largely unfounded, Weberian stereotypes about Indian commerce (Gadgil 1959; Lamb 1959; Sjoberg 1970). In particular, he is concerned with the organization of commerce in so-called burgher cities, such as Allahabad or Benares, which exhibit long histories of financial, commercial, and industrial activity and an elite, multicaste commercial community. Among other topics, Bayly addresses Weberian ideas concerning the relationship between caste and commerce within these burgher cities. In a concluding section of one paper on the topic, he points out that

caste at the level of geographically extended kin groups had an important role in the organization of trading diasporas; at the level of the commensal jati group it was relevant to the social and economic organization of artisan groups; at the level of varna it had some implications for general mercantile status. Nevertheless, it is difficult to see how caste in any sense could have been the prime parameter of mercantile organization in complex cities. Forms of arbitration, market control, brokerage, neighborhood communities, and above all conceptions of mercantile honor and credit breached caste boundaries, however construed, and imposed wider solidarities on merchant people. (1978: 192)

In this passage, Bayly's primary argument is directed against the tendency to reduce all merchant organization to caste organization. Unfortunately, the argument is put so strongly that a casual reader might conclude that Bayly sees little or no commercial role for caste at all. The polemical issue of whether caste is a prime parameter of mercantile organization overshadows potentially interesting questions about its role as a nonprime but still significant parameter, not to mention questions about the systematic interaction of various parameters of mercantile organization. The trick is to avoid an all-or-nothing view of the significance of caste.^[17]

The positive contributions of Bayly's research are too rich for detailed comment in the present context. Along with work by a small number of fellow historians (e.g., Habib 1960, 1973; Leonard 1979; Pearson 1976; Perlin 1983; Subrahmanyam 1990), it represents an important correction to views limiting Indian financial operations to those of small-scale moneylenders. In particular Bayly identifies an upper stratum of powerful merchant-bankers who maintain interregional trade in various commodities and credit notes and who provide important treasury and remittance facilities for regional and imperial authorities. The point I wish to make about Bayly's studies, however, is that they are open to serious misinterpretation. Bayly's focus on complex organizational networks that crosscut ties of caste or neighborhood, combined with his historically specific

analyses of urban commercial groups who elevate ties of class over ties of caste, are designed (among other things) to counter the classic view that castes are uniformly specialized with respect to occupation. It does not follow from this observation, however, that no castes were ever specialized. In particular, it does not follow that no caste ever specialized in commercial activities. Moreover, any such conclusion flouts the spirit of Bayly's work, which emphasizes the diversity of principles operating in the organization of Indian commerce, including principles of caste (Bayly, personal communication).

It may indeed be the case that the commercial elites of Allahabad and Benares gave no special precedence to relationships of caste. But this was not the case for all commercial magnates, especially those belonging to the Marwari caste (Timberg 1978) or the Kaikkolar caste (Mines, 1984). Nor was it the case for the Nakarattars, whose caste organization constituted a corporate financial institution in Indian society. Nevertheless, given the potential for misunderstanding, it is worth emphasizing that my approach to these issues is resolutely anti-Weberian: it no more forecloses the possibility for caste-neutral studies of elite businessmen than caste-neutral studies foreclose studies of the commercial role of caste. On the contrary, both kinds of study are needed. Chapter 7 outlines one way of beginning such a larger project.

The Historiographic Gap

Before presenting my analysis of the collective character of the commercial practice and social organization of the Nakarattars, it is worth commenting about a peculiar historiographic blind spot concerning their important role in colonial Asian society. By 1870 (and, perhaps, for some time before this) the Nakarattars had no contemporary South Indian competitors within the region comprising South India and British Southeast Asia. They were the premier merchant-banking caste of the region. Moreover, individual Nakarattars were among the first Tamil businessmen to divert their assets from banking and trade to capital-intensive industry. Nakarattars also played major roles in providing financial support and management for temples and charitable institutions wherever they did business. Finally, prominent Nakarattars wielded considerable political influence in a variety of local arenas throughout the Madras Presidency and Southeast Asia and, from 1920 onward, held important political offices in the city of Madras and the provincial government.

Despite the important role the Nakarattars played in Indian society, despite the availability of relevant information, even despite the publication of a handful of books and papers about Nakarattars, most accounts of

Indian commerce scarcely acknowledge them. Part of this omission follows in the wake of Weberian pronouncements about the putative incompatibility of Hinduism and capitalism, noted above. Another part may be attributed to too narrow a focus on village economy, or to stereotypic views of Indian moneylenders, which have also been discussed. But part of the problem arises from two further sources of historiographic bias. On one hand, scholars who focus explicitly on the activities of merchants in the seventeenth and eighteenth centuries tend to focus only on Indian-European connections in the organization of the textile export trade, especially as these connections were established in Madras and other port cities. As a consequence, they tend to look only at specific groups who were prominent in these port cities, such as Telugu Chettis and Brahmans or Tamil Vellalas. They do not explore the inland "country trade" of internal South India during the sixteenth and seventeenth centuries.^[18]

Nor do they address the growth of new economic actors in commercial activities during the late eighteenth and early nineteenth centuries.^[19] Rather, the dominant historiographic emphasis on the rise of Indian nationalism in the nineteenth century raises another difficulty. In post-1850s Madras, mercantile political power seems to have given way to growing influence by administrative and professional elites. And scholars whose research focuses on political developments in the period after 1850 tend to give mercantile and commercial elites only passing attention (Appadurai 1981; Lewandowski 1976; Suntharalingam 1974). In fact, the literature barely touches on them except in their capacity to bankroll politicians and ideologues (both the anti-Brahmans and those in Congress). Moreover, even here little attention is given to the source of the funds expended by the bankrollers.

Apart from such disciplinary biases, the whole issue seems to be conditioned by early European interactions with and efforts to master the Indian economic system. From the seventeenth to the nineteenth century, much of the European trade depended on financing by Indian capital under the control of large-scale merchants (Appadurai 1974; Arasaratnam 1980; Basu 1982; Brennig 1977; Chaudhuri 1978; Furber 1951; Lewandowski 1976; Subrahmanyam 1990). Not surprisingly, the relationship was always strained on both sides.^[20]

From the European point of view, Indian brokers held entirely too much power and, moreover, often employed it in competition with the Europeans themselves. By 1680, European merchants were already attempting to alter the indigenous system by insisting on dealing with groups of merchants operating like their own joint stock companies rather than with individuals with privileged claims on their European patrons

and monopolistic power over native producers (Brennig 1977: 338–340; see also Arasaratnam 1979; Subrahmanyam 1990). But these efforts to circumvent the Indian mercantile elite were by and large unsuccessful in that even the joint stock companies continued to be dominated by a small number of highly powerful "chief merchants" (Arasaratnam 1980).

This is not to say that efforts to circumvent the power of chief merchants were totally ineffective. From the mid-eighteenth century onward, an increasingly large European private trade and a growing English bureaucracy increased the number of Englishmen desiring contact with a variety of Indian producers, traders, and local authorities. This in turn led to increased opportunities for Indian middlemen, until virtually every major officer of the East India Company and every private European trader had his own personal middleman (Arasaratnam 1980; Basu 1982). Such middlemen came to be known as dubashes . According to some historians, the appearance of these dubashes represents a significant institutional change from the seventeenth-century situation, in which "chief merchants" served these functions. Individual dubashes are said not to have had the power of chief merchants. But this argument fails to take account of differences in the wealth and influence of dubashes situated in various places in the colonial power structure. Although the number of eighteenth-century dubashes grew dramatically relative to the number of seventeenth-century chief merchants, there remained a small number of individuals who continued in or acquired the position of dubash for leaders in the European community. These "chief dubashes " maintained a preeminence in Indo-European trade comparable to that of chief merchants in the seventeenth century.

In other words, the overall function and position in society of important merchants and financiers did not change from the seventeenth to the nineteenth century. There was a growth in the absolute number of Indian middleman-merchants. And all such individuals, whatever their station in colonial society, were designated by the title dubash . But there continued to be a small circle of elite merchants who exercised a dominant role in the organization and financing of Indo-European trade.^[21]

If there was no important change in the power and institutional role of preeminent Indian merchants, there was, nevertheless, a significant impact on the ethnic make-up of merchants holding positions of power and there were also important changes in the organization of ethnicity itself. As with the early position of chief merchant, competition for dubash positions was at least initially factionalized between groups from right-hand castes (primarily Telugu Chettis) and left-hand castes (Telugu Brahmans and Tamil Vellalars). Over the course of the eighteenth century, individu-

als belonging to left-hand groups gradually gained positions of power in a hierarchy of dubashes that corresponded to the hierarchy of European traders whom they served (Appadurai 1974; Basu 1982; Lewandowski 1976). Thus, while the position of chief merchant/dubash continued to play an important role, the period was witness to a change of ethnic guard in the personnel who filled these positions.

The process, however, seems to have altered the nature of ethnic identity or at least the nature of social ties that connected members belonging to the same caste. Increasingly, during the seventeenth and eighteenth centuries, individual merchants who rose to positions of chief merchants or dubashes were recruited either from castes that lacked a tradition of mercantile organization (e.g., Brahmans or Vellalas) or else from mercantile castes whose organizational structure failed to adjust to the lure of European commerce. In both cases, the chief merchants and dubashes of the Coromandel seemed to operate with increasing independence from special ties to their caste groups. Multicaste left-hand and right-hand factions gradually lost their ability to mobilize for coordinated action. Historians are unable to discern any form of caste organization in the nineteenth century—even within a single mercantile caste group such as the Telugu Komati Chettis—in which caste members coordinated their actions to promote a common commercial goal. Of the earlier forms of multifunctional caste cooperation (Krishna Rao 1964), only shared ritual observances at caste shrines and prohibitions enforcing caste endogamy remain. And the relationship between these ties of caste and the conduct of business were apparently so attenuated as to play no role of any kind.^[22]

The Historiographic Rejection of Caste in Commerce

Sanjay Subrahmanyam (1990) denies any caste basis for commercial activity, not only in the eighteenth and nineteenth centuries, but in the sixteenth and seventeenth centuries as well. Writing less than a decade after Bayly, Subrahmanyam presumably finds the evidence for multicaste and intercaste commercial activity so strong, and Weber's orientalism so patent, that he sees no need even to criticize the thesis of incompatibility between Hinduism and capitalism.^[23] Like Bayly, he focuses on prominent merchants, among them the chief merchants and dubashes of the Coromandel. Unlike Bayly, he refers to them as "portfolio capitalists" rather than "burghers," perhaps to emphasize that their commercial activity was not confined to a single city but extended up and down the Coromandel, into the Tamil and Telugu kingdoms of inland South India and outward to Southeast Asia. In other important respects, however, Subrahmanyam depicts his portfolio capitalists in the same way as Bayly depicts his North

Indian burghers. Specifically, he describes them as more or less individualistic entrepreneurs who occupied "the middle ground between mercantile capitalism and political capitalism" (1990: 298), gaining and using political positions to further commercial interests, harnessing commercial operations to gain political influence, and in general operating at a scale unimaginable according to the orientalist conception of India as the land of jajmani and village moneylenders. In Subrahmanyam's words, they formed

a group of persons who, from the second half of the sixteenth century, emerge gradually into prominence, eventually assuming formidable proportions in the first half of the seventeenth century. These persons, whom we have termed "portfolio capitalists," occupied a shadowy middle ground between state and producing economy, and combined a role in the fiscal structure with participation in inland trade, currency dealing, movements of bills of exchange, and even seaborne trade on a quite considerable scale. (1990: 355)

Although Subrahmanyam does not deign to address Weberian stereotypes, he is careful to raise three questions about more recent historiographic interpretations. In the first instance, as indicated in the preceding quotation, he calls into question the assumption (and, at times, the explicit postulate) that the phenomenon of chief merchants' acting as portfolio capitalists in the seventeenth and eighteenth centuries represents an innovation in reaction to commercial demand from the newly arrived European companies. In contrast, Subrahmanyam forcefully argues a position with which the present study is entirely sympathetic: that the portfolio capitalists who mediated between Indian textile producers and European companies performed commercial roles that extend back before the arrival of the European companies to at least the intra-Asian trade of the sixteenth and seventeenth centuries. Subrahmanyam's second characterization of portfolio capitalists is also one with which I am entirely sympathetic: that there existed no sharp separation of roles between merchants and "a 'militarily oriented elite' whose culturally sanctioned activities were land activities."^[24]

It is only with a third feature of Subrahmanyam's picture of portfolio capitalists that I have reservations. Citing Washbrook's (1975, 1976, 1982) study of the nineteenth-century rise of mercantile caste associations (see Chapter 2, above), Subrahmanyam argues against close identification of any functionally defined role with any ethnographic category, by which he means caste: "We cannot believe axiomatically that southern Indian society in the sixteenth and seventeenth centuries comprised of a set of well-defined and watertight compartments, in one of which it is possible to site

the mercantile communities of the region" (1990: 340). Subrahmanyam thus differs from Washbrook in denying that the precolonial organization of mercantile castes may have possessed properties that were "preadaptive" for the late nineteenth-century formation of political associations. Yet, as with Washbrook's treatment of nineteenth-century Komati merchants, it is important to emphasize that Subrahmanyam provides no information about intracaste cooperation between portfolio capitalists and that this omission leaves the question of mercantile caste organization entirely open. Moreover, it is important to separate the two conceptions of caste and commerce that Subrahmanyam attacks. It is one thing to argue that merchants engaged in war and politics, while warriors and politicians engaged in commerce. It is another thing to argue that absence of an exclusive occupational calling for some individuals rules out the possibility of any occupational specialization in the kin and caste groups to which they belong.

In this context, it is worth noting that Subrahmanyam's brief treatment of a dynastic merchant family of Balija Chettis is tantalizingly suggestive that ties of kin and caste did play an important but unexplored role in South Indian commerce. It may have been the case, as Subrahmanyam suggests, that this extended family operated with no special ties to other, less prominent members of their caste. But this was surely not always the case. And, as I shall argue for the Nakarattars, equally prominent merchant-bankers maintained commercially crucial ties to castemates that are invisible in the standard historical records.

Subrahmanyam's understanding of pre-Western portfolio capitalists is important because it deprives Weberians—and, indeed, all modernization theorists—of the argument that only involvement with Western financial institutions and rational, bureaucratic forms of government can trigger the forces of capitalism. Like more Eurocentric historians, however, Subrahmanyam still finds confirmation that Indian businessmen participated in capitalism—albeit an Indian capitalism—to the exclusion of caste and kinship. Yet, as indicated earlier in this chapter, it is precisely at the point where the unfolding commercial history of South India seems to provide an irrefutable case in support of these views that historians have shifted their attention to other issues. Had they continued with the economic concerns that motivated their studies of periods before the middle of the nineteenth century, the verdict would surely be less secure. For it is just at this time that the Nakarattars emerge on the scene in a major way. And it is precisely the qualities of their caste organization that enable them to take advantage of the changing colonial economy and become the chief merchant-bankers of South India and Southeast Asia.