Books

Of Close Encounters Between the British Raj and Indian Entrepreneurs

In Goras and Desis, economist Omkar Goswami shows how from even as far back as the 18th century, Indians collaborated with the British, creating enterprises for fruitful mercantile activity.

Credit: Wikimedia Commons

Credit: Wikimedia Commons

Seventy years after the British packed up their bags and left, the Raj continues to exercise a hold over our imagination. And how can that not be so-the British, one way or the other, were year for three centuries and left behind visible imprints on our culture and physical landscape. The process of chipping away at many of these vestiges continues, but history cannot just be wished away.

The current consensus is that the Raj, both the Crown and the Company, was generally deleterious for India. Prime minister Narendra Modi has spoken of ‘1200 years of slavery’, which smoothly includes not just British but also Mughal rule and earlier. In Mumbai, a city that prospered under the British, old colonial names are being removed with alacrity. Shashi Tharoor, excited at the response his speech at the Oxford Union got, where he demanded an apology and reparations from the British government, has churned out a book on the subject. The Kohinoor is the subject of another recent book – how soon before we officially ask for its return?

But while the narrative of economic and social depredations caused by the Raj is largely true, there is much more complexity to the Indian encounter with the British (and for that matter with the Portuguese). There were many interactions that were mutually beneficial and whose effects are with us even today. In his new book Goras and Desis, economist Omkar Goswami shows how from even as far back as the 18th century, Indians collaborated with the British, creating enterprises for fruitful mercantile activity.

Omkar Goswami. Courtesy: Bangaloreliteraturefestival.org

Omkar Goswami. Courtesy: Bangaloreliteraturefestival.org

One such Indian was Dwarkananath Tagore, grandfather of the poet, who was instrumental in creating the first ever managing agency, a unique corporate structure that became all the rage through much of the 19th and 20th century. The polyglot Tagore, brimming with ideas but, as Goswami shows, poor in execution and management, set up Carr, Tagore and Company in 1834 which became the prototype of the managing agency.

Goswami explores this fascinating structure which no longer exists but was responsible for much economic activity in the British Raj and after. The agency was a controlling entity that first set up one enterprise with funds raised from friends and family as well as banks; once that became successful, it sold a vast number of shares and with those profits invested in another business and so on. The crucial element was that the original agents/promoters continued to exercise control over all these businesses with minimal shareholding. A commission on all sales (subsequently changed to on all profits) accrued to the original agency which made it very rich indeed.) It was a clever system, which worked well at a time when there was lack of venture capital and professional managements, but, as Gurcharan Das points out in his introduction, the managing agency came in for a lot of criticism for “its high commissions, its conflicts of interest and its furthering of Britain’s colonial project.” The agent’s interests superseded those of the shareholders but many agencies were professionally run and contributed to economic development.

The hub of the managing agency system was Calcutta, though many also were set up in Bombay, Ahmedabad and Kanpur. The Company’s policies in the 18th and 19th century in eastern India created a class of zamindars and made many people, like Dwarkanath Tagore enormously wealthy. “Progress for Dwarkanath was an equal combination of three parts: moneylending and commerce; pursuing Western social modernity; and simultaneously maintaining respect for all that was good in tradition.” By the time he was forty, he had interests in land, indigo, opium, money lending and, being landed, revenue collection. He was “recognized by the British as a Bengali babu worthy of respect” and they conveyed titles and honours of him.

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Omkar Goswami
Goras and Desis: Managing Agencies and the Making of Corporate India
Portfolio Penguin: 2016

Along with an indigo merchant William Carr, and flush with ideas and funds, he set up Carr, Tagore and Company which invested in a wide range of enterprises, from steam tugs to mines to, eventually, a nascent business that was emerging at the time-tea. Not all prospered and one of his biggest failures was Union Bank, which made poor investment decisions; a year before his death in 1846, Dwarkanath sold off his shares in the loss making company and invest the cash into his zamindaris. None of his sons, including Debendrenath, father of the poet Rabindranath, had any interest or skills to run a commercial enterprise. Carr, Tagore and Company wound up soon after.

But many other famous managing agents were spawned in Calcutta – Rainer Lawrie, Duncan Brothers, Martin Burn etc – whence emerged the famous Anglicised ‘boxwallah’, the covenanted officer class fond of long lunches and the club life, who ruled the corporate world of the city and the region. Many Indian entrepreneurs such as the Birlas too set up their own managing agencies and often beat the British at their own game.

In his Prologue, setting the stage for what is to come in the book, Goswami shows why Calcutta and Bombay, both economic powerhouses, developed in different ways. The Permanent Settlement, created in 1793 to ensure stable land revenues, led to the emergence of rich zamindars who were expected to collect and pass on revenue. The British believed enlightened self-interest would spur these landed gentry to increase production and therefore taxes. It did not happen. Many of whom lived off their landed property for generations till it all ran out. Kolkata today is replete with derelict mansions, a sad legacy of glorious days.

On the other hand, agricultural activity in western India was in the hands of peasant-owners and the British smartly introduced the ryotwari system which was a direct revenue-collecting relationship between the cultivator and the government. Bombay drew migrants from neighbouring states like Gujarat who came with little except a sharp mercantile instinct and pre-existing community networks . Other communities, such as the Marwaris, the Parsis and Bohra Muslims collectively created a genuinely cosmopolitan city and strong economy that boosted Bombay. This was altogether more sustainable and the results are plainly visible today.

By the early 20th century native businessmen had begun aggressively moving into British business territory. Post independence, some of the sheen of the managing agencies began to come off. The entry of multinationals and the growth of Indian-owned industry, along with the government’s hostility towards the older model meant that the jaded agencies would not last long; in 1970, legislation was passed that finished them off once and for all. They had contributed to growth but were now looking like anachronisms.

Goras and Desis is one of a series of popular business histories, and like most of them, Goswami’s work too is well researched and an easy read. It is not a dry book on business, but encapsulates economic and social history too. If there is one complaint, it is with the title-surely Goras is not a word to be casually used in this day and age, given that we would have been up in arms with any British book calling us “brownies”. Maybe a future edition can consider changing the title, however catchy it sounds to author and the publishers.