Cotton, Pearls, Rice, and Salt, 1800–1850

The Nakarattar caste responded to the hostile "push" of salt trade disruption and East India Company pricing policies as well as to the lucrative "pull" of opportunities for money lending. In a process that is still unclear, Nakarattars developed a sophisticated financial apparatus which included provisions for making forward loans to agrarian producers, for extending short-term and long-term loans to political and military leaders, and for transmitting hundis or teeps (bills of exchange) among themselves and their clients. Along the way, Nakarattars evolved from a geographically restricted community of salt traders to a powerful, long-distance merchant-banking caste. Details of this process are hard to come by. Historical records of Nakarattar business activities only really begin in the later part of the nineteenth century. But such information as is available provides a marked contrast with the picture of localized salt trading portrayed in traditional written and oral accounts of pre-European Nakarattar history (see Chapter 7).

Nakarattar oral traditions, chronicled in a caste history written by A. V. Ramanathan Chettiar (1953), provide some indication of the territory and the commodities in which Nakarattars were chiefly involved. According to Ramanathan Chettiar, Nakarattars were important actors in the grain and cotton trade in towns that, judging from their geographic distribution, were strategically located in the central productive regions of both these commodities. One set of towns formed a north-south string in Tirunelveli that still comprises major trading towns of the region today, providing markets for cotton and other cash crops produced in their hinterlands. Another set formed a double string of towns in Tanjavur—one strand located along the coast, the other roughly thirty miles inland. This double string served a similar function for rice produced in Tanjavur as the single string of cotton trading towns in Tirunelveli. Note that fifteen miles is the approximate median distance between coastal and inland Nakarattar

trading towns in Tanjavur and that this distance constitutes about one day's round trip journey carrying goods by bullock.

Besides information about the location and commodities in which Nakarattars were trading, Ramanathan Chettiar (1953) also provides information suggesting that religious and other forms of gifting provided a continuing mechanism by which cooperating groups of Nakarattar traders gained entrance into local communities (see Chapter 7 for description of the role of religious gifting and entrance to the seventeenth-century temple town of Palani).

Until 1815, all those who were engaged in cotton business left their homes and met at the house of Arjuna Perumal Ambalakarar at Narasingampatti (5 miles west of Melur and 13 miles east of Madurai) and from there they started as a group to various cotton centres. At the end of the trading season, they returned to the said Narasingampatti from where they branched off to return home. Deeds of Palmayrah leaves have been found in the said Ambalakar's residence. According to one of those deeds, the profit of 743 and 1/2 varahans accrued in one partnership was spent to dig a drinking water tank in Narasingampatti. From revenue records kept in Melur Taluk office, it is known that the tank is called Nagarattar Orani or Panchuppotti Orani ["the tank built out of profits in cotton bale transactions "].^[7]

Nakarattar commercial activities extended even beyond the Tamil mainland. By the end of the eighteenth century, they had gained control of pearl fisheries in the Ceylon Straits and the Gulf of Mannar, usurping this position from Muslim Maryakarar merchants who had previously been granted control of the fisheries by the Setupati (Raja) of Ramnad in the seventeenth century (Arasaratnam 1971a; Samaraweera 1972). Various factors seem to have been in play. For one thing, the setupati's influence in granting fishery rights had become considerably eroded. As early as the eighteenth century, administrative rights over the fishery were being strongly contested by the Dutch, by the Raja of Tanjavur, and by the Nawab of the Carnatic. The different claims of these parties were apparently withdrawn only in return for a financial settlement from the Nakarattars (Arasaratnam 1979; Samaraweera 1972). In addition, the Nakarattar takeover may reflect a close financial relationship that Nakarattars built with the setupati who was, perhaps, their largest client zamindar (see below). That is, Nakarattar merchants may have been in a position to influence the setupati to exercise whatever powers he still retained over the straits. In any case, the Nakarattars were ultimately able to exercise monopoly control over the fisheries until 1836, renting them out to Maravar and Paravar boating crews from Tuticorin.^[8]

Figure 1.
Simple hundi exchange system

From at least 1820,^[9] Nakarattars also dominated the major coastal trade in arrack and other coconut products from Ceylon to Madras, in rice and cloth from Madras to Ceylon and, arguably, in salt from Madras to Calcutta and rice from Calcutta to Madras and Ceylon. It is difficult to gauge the degree of their domination, but according to contemporary observers, they had cornered the Ceylon rice market, controlling all imports not only of Tanjavur rice but of Bengal rice as well.^[10]

The Nakarattars' position in the Ceylonese rice market allowed them to take advantage of a marked imbalance of trade strongly tilted in favor of rice exports from Madras to Ceylon. Ceylonese importers made up differences in the trade balance with British sterling, which was earned by trading in the European market for Ceylon cinnamon, spices, coconut products, and increasingly—until the coffee blight appeared in 1868—coffee (MacKenzie 1954: 90). But Nakarattar agents in Colombo—holding a monopoly on the import of rice—were unwilling to accept sterling as payment unless there were exceptional sterling shortages in India. Accordingly, Ceylonese rice traders appointed their own agents in Madras to whom they sent their sterling bills for sale. They then sold rupee drafts on those agents to the Nakarattar bankers in Ceylon, who discounted (i.e., cashed) the hundi in rupees or rupee credit at a standardized discount rate. The Nakarattar bankers, in turn, sent the hundis to Madras where they could be redeemed at face value (see Figure 1). British merchants and plantation owners in Ceylon met their rupee needs in a similar fashion. The Nakarattars "were thus in a position practically to hold the Colombo merchants [Ceylonese and British] to ransom, while the latter were at the same time dependent on the sterling exchange in India."^[11]

Reports of Nakarattars trading Bengali rice in Ceylon are also interesting in that they lend support to present-day oral traditions describing the northward expansion of Nakarattar trade and the establishment of Nakarattar firms in Calcutta as early as 1820 (Lakshmanan Chettiar 1954: 41). They are intriguing in view of family histories that describe the involvement of early nineteenth-century Nakarattars in salt farming for trade to Ceylon and other places.^[12] I also note the existence of considerable documentation of the trade in grains from Bengal for salt from Madras, attested in East India Company records for the eighteenth and nineteenth centuries.^[13] All of these scattered reports bear further research. But they are consistent both with traditions of Nakarattar salt trading and with a general Nakarattar shift away from small-scale trading activities and into the large-scale financing or ownership of productive resources throughout the Madras Presidency.

There remains scope for considerable research into the precise nature of Nakarattar credit networks and of the various commodities markets with which they were involved. Whatever findings eventually result from such research, it is clear that late eighteenth-and early nineteenth-century Nakarattar commodities trading was tied to some kind of exchange banking system. That is, Nakarattars combined their trade transactions with purely financial transactions such as money lending, the remittance of funds between geographically distant locations, and even quasi-governmental treasury functions to the extent that governing authorities made use of Nakarattar financial facilities. Like any other system of credit extension and financial intermediation, the system worked ultimately because of the mutual confidence (strongly qualified by the lack of any viable alternative) between Nakarattars and their clients. During the colonial period, for reasons that will be explored in subsequent chapters, the Nakarattar system worked more successfully than did most of its competitors. Overall, the record of Nakarattar enterprise remains extremely sketchy throughout the early nineteenth century, both in Ceylon and in Madras (and even more so in Calcutta). Yet, such as it is, the evidence suggests that by 1850 the Nakarattar had already enlarged their economic niche from domestic trade to international trade and had become a major force in the commercial world of Southeast Asia.