The businesses that moved have left a deep legacy on the economic and developmental policies in both India and Pakistan.
The Partition of British India was managed so badly that it lead to a colossal human tragedy. In the backdrop of this drama, several other dimensions of the exchange of people remain obscure, including the migration of business firms. A lot of businesses moved across borders, and the composition of the groups that did, left a deep legacy on economic policy and development in both Pakistan and India since 1950.
First, the identity of businesspersons who had a stake in Partition made a difference to the kind of states that emerged in these two territories. We know that leading business firms and families supported the independence movement by funding it. People like Kasturbhai Lalbhai, Ambalal Sarabhai, Jamnalal Bajaj and G.D. Birla were close to Mahatma Gandhi, were aspiring industrialists and Hindus or Jains. Although they did not accept Jawaharlal Nehru’s socialist ideals easily, they favoured an economic policy focused on industrialisation because they expected to gain from it.
The Muslim business elite, by contrast, had considerably less clout with Gandhi or the Congress. Most of them headed trading firms and did not expect to get much from an industrialisation strategy. Besides this difference, as Claude Markovits has shown, the politically connected Hindu business elite preferred a strong central government, whereas the Muslim elite preferred a strong federation and weak Centre. This is exactly how the two states evolved, the Indian government being more centralised both in administrative terms and in its economic policy choices. India created a state-led industrialisation regime, Pakistan, a less state-centric and more pro-trade regime.
The immediate impact of Partition was also the movement of business. At the time of independence, Karachi and Lahore were both large and populous business towns. Most of the businesses there were owned by Hindus (including Sindhi), Parsis and Sikhs. Most of them left Pakistan for India in 1947. Khatri businesses left western Punjab. So did factories and trading firms in Punjab.
Probably the most high profile businessperson to shift from Pakistan to India was Lala Shri Ram of the Delhi Cloth Mills. When Indian cotton and sugar received protection, Shri Ram had established the Lyallpur Cotton Mill (in Lyallpur, later Faisalabad, Pakistan’s leading textile hub) and a sugar mill near Delhi. During the Second World War, Lyallpur made large profits by selling tent and garments for the army but the mill was lost during Partition. Many employees of the mill migrated to Delhi and into the Swatantra Bharat Mill started in 1948.
Their counterparts who left India for Pakistan were without exception trading firms, with interest in tea, textile, leather, coastal shipping and financial services. They were mobile and had bases in the port cities of Asia. Some had their main offices in Calcutta. They were cosmopolitan as well as Muslim in their public profile. Some of the most prominent firms of Pakistan in the 1960s had been invited into the country by the leadership on generous terms such as land grant and were later helped with bank loans and import licenses.
All major communities of Muslim merchants responded to the open invitation from the other side to some extent but the biggest names were from Gujarat. Members of the Halai Memon community of Gujarat, a trading group, migrated to Karachi and took over the textile trade. Other migrant merchants included the Ismaili Khojas from Bombay and East Africa, the Khojas who followed the Ithnā Ashari sect of Shiism – to which the family of Muhammad Ali Jinnah had converted to from Hinduism – and the Dawoodi Bohras of western India. Chiniotis, a small group from Punjab (Chiniot) who had migrated to Calcutta and traded in leather, returned to their homelands and played a role in the textile industry.
Among Pakistan’s leading business families in the 1960s, the Monnoo and Crescent groups were Chiniotis, and Adamjee and Kassim Dada were Gujarati Memon firms, the Saigols were Punjabis based in Calcutta, Ahmed Dawood was from Kathiawar, and the textile house Bawany originated in a Gujarati trading firm. The trading firms eventually diversified into textile production and financial services. The Gujarati Ismaili Mohammed Ali Habib founded Pakistan’s largest private bank, Habib Bank, and was encouraged by Jinnah to shift base from Gujarat to Karachi. Saigols headed the United Bank from 1959.
These people, whose homes were in Bombay, Gujarat or Calcutta, influenced the economic policy of Pakistan after 1947, but the nature of the influence was very different from that in India. While the mainly Hindu business groups close to the Congress had begun to diversify into manufacturing, the Muslim groups who had some say in the movement for Pakistan or who migrated to the new country were almost without exception merchants. This distinction shaped policy. In Pakistan, business and politics held a benign outlook on trade, and did not try to regulate it too much except during a socialist interlude in the mid-1970s. The extreme form of protectionism that took hold in India was missing in Pakistan. In independent India, by contrast, trading was relegated to a low position and throttled by a whole range of instruments. The loss of many trading firms to Pakistan, therefore, did not worry Indian leaders. They wanted trade to be weak anyway.
We see the legacy of Partition in Kashmir, in divided communities, in memories of violence and displacement. The event also left a legacy on divergent pathways of development within South Asia, shaped by the identity of the businesspersons who moved.
Tirthankar Roy is a professor at the London School of Economics and Political Science.