Hostname: page-component-76fb5796d-9pm4c Total loading time: 0 Render date: 2024-04-27T04:35:01.926Z Has data issue: false hasContentIssue false
  • English
  • Français

Trade, Finance, and Industry in the Development of Indian Capitalism: The Case of Tata

Published online by Cambridge University Press:  04 September 2020

Mircea Raianu
Get access Rights & Permissions [Opens in a new window]

Abstract

This article rethinks the relationship between trade and industry in the development of Indian capitalism, focusing on Tata, pioneers in textile and steel production. It shows how two little-known affiliated trading companies, R.D. Tata & Co. in Shanghai, Hong Kong, and Kobe, and Tata Limited in London, played a crucial intermediary role in securing financing and market access for the parent firm in Bombay while simultaneously increasing its exposure to the effects of global crises. Tata's ultimately dominant position in a protected national economy was due to the contingent failure of these trading companies rather than a foregone conclusion.

Keywords

bankingcottonfamily firmsfinanceGreat DepressionIndiaindustrializationJapanMarwarisopiumParsisshippingsteelTatatrading companies
Type
Research Article
Information
Business History Review , Volume 94 , Issue 3 , Autumn 2020 , pp. 569 - 592
Copyright
Copyright © The President and Fellows of Harvard College 2020

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

My foremost thanks go to the anonymous referees, whose detailed comments and suggestions significantly improved the manuscript. Previous versions were presented at the World Economic History Congress in Kyoto in August 2015 and at the Business History Conference in Baltimore in April 2018. I am grateful to fellow panelists, discussants, and audience members, especially Tirthankar Roy, Douglas Haynes, Chinmay Tumbe, David Engerman, Michael Aldous, and Johan Mathew. Heidi Tworek advised me on the publication process and Kirsten Pontalti provided invaluable guidance in making the family tree. Lastly, I thank the staff of the Tata Central Archives in Pune, the Tata Steel Archives in Jamshedpur, and the Godrej Archives in Mumbai, for their assistance. All errors and omissions are my own.

References

1 Gras, N. S. B., “A Great Indian Industrialist: Jamsetji Nusserwanji Tata, 1839–1904,” Bulletin of the Business Historical Society 23, no. 3 (1949): 149–51CrossRefGoogle Scholar. I thank Christopher McKenna for this reference. On Gras's efforts to promote business history as a “distinct and circumscribed discipline” at Harvard, and his preference for case studies of individual entrepreneurs over more systematic approaches, see Fredona, Robert and Reinert, Sophus A., “The Harvard Research Center in Entrepreneurial History and the Daimonic Entrepreneur,” History of Political Economy 49, no. 2 (2017): 267–314CrossRefGoogle Scholar.

2 Tripathi, Dwijendra, The Oxford History of Indian Business (Delhi, 2004), 122–25Google Scholar.

3 Austin, Gareth, Dávila, Carlos, and Jones, Geoffrey, “The Alternative Business History: Business in Emerging Markets,” Business History Review 91, no. 3 (2017): 537–69CrossRefGoogle Scholar.

4 Markovits, Claude, “The Tata Paradox,” in Merchants, Traders, Entrepreneurs: Indian Business in the Colonial Era (Basingstoke, 2008), 152–57CrossRefGoogle Scholar; Bagchi, Amiya Kumar, “Multiculturalism, Governance, and the Indian Bourgeoisie,” in Capital and Labour Redefined: India and the Third World (London, 2002), 309–16Google Scholar; Roy, Tirthankar, Company of Kinsmen: Enterprise and Community in South Asian History, 1700–1940 (Delhi, 2010), 111–14CrossRefGoogle Scholar. For an opposing view, which emphasizes the “concentration of control in the hands of the members of the Tata family,” see Sen, Sunil Kumar, The House of Tata, 1839–1939 (Calcutta, 1975), 84–85Google Scholar.

5 Roy, Tirthankar, A Business History of India: Enterprise and the Emergence of Capitalism from 1700 (Cambridge, U.K., 2018), 12–14CrossRefGoogle Scholar.

6 Weber, Max, General Economic History, trans. Knight, Frank H. (New York, 1961), 260–64Google Scholar. See also the entry “pariah capitalism (Paria-Kapitalismus)” in The Max Weber Dictionary: Key Words and Central Concepts, ed. Swedberg, Richard and Agevall, Ola (Stanford, 2016), 245CrossRefGoogle Scholar.

7 Fox, Richard G., “Pariah Capitalism and Traditional Indian Merchants, Past and Present,” in Entrepreneurship and Modernization of Occupational Cultures in South Asia, ed. Singer, Milton, Duke University Program in Comparative Studies on Southern Asia Monograph and Occasional Papers Series (Durham, 1973), 17–20Google Scholar.

8 Chandavarkar, Rajnarayan, “Industrialization in India before 1947: Conventional Approaches and Alternative Perspectives,” Modern Asian Studies 19, no. 3 (1985): 623–68CrossRefGoogle Scholar.

9 Roy, Business History of India, 70, 124–25.

10 Tripathi, Oxford History, 166–69, 190–92.

11 Chandavarkar, “Industrialization in India,” 642–46.

12 Wray, William D., “Nodes in the Global Webs of Japanese Shipping,” Business History 47, no. 1 (2005): 1–22CrossRefGoogle Scholar.

13 Markovits, “Tata Paradox,” 157; Sen, House of Tata, 9.

14 I use the term “adjunct” in a different way than Tripathi, who notes that trading companies became mere “adjuncts to the industrial concerns” in the late nineteenth century, their role confined to “distributing the goods produced by the manufactories.” See Tripathi, Oxford History, 135–36.

15 Jones, Geoffrey, Merchants to Multinationals: British Trading Companies in the Nineteenth and Twentieth Centuries (Oxford, 2000), 3–6Google Scholar.

16 Ray, Rajat Kanta, “Asian Capital in the Age of European Domination: The Rise of the Bazaar, 1800–1914,” Modern Asian Studies 29, no. 3 (1995): 449–54CrossRefGoogle Scholar. For a critique of Ray's sharp distinction between the Asian bazaar and European capitalism, see Claude Markovits, “Structure and Agency in the World of Asian Commerce during the Era of European Colonial Domination (c. 1750–1950),” in “Spatial and Temporal Continuities of Merchant Networks in South Asia and the Indian Ocean,” special issue, Journal of the Economic and Social History of the Orient 50, no. 2/3 (2007): 106–23.

17 Tumbe, Chinmay, “Transnational Indian Business in the Twentieth Century,” Business History Review 91, no. 4 (2017): 651–79CrossRefGoogle Scholar. It is worth noting that diasporic “overseas intermediation” represented a narrowing and displacement of a more capacious “portfolio capitalism” in early modern South Asia, bringing together maritime commerce and political-military authority on land. Subrahmanyam, Sanjay and Bayly, C. A., “Portfolio Capitalists and the Political Economy of Early Modern India,” Indian Economic and Social History Review 25, no. 4 (1988): 401–24CrossRefGoogle Scholar.

18 Nomura, Chikayoshi, The House of Tata Meets the Second Industrial Revolution: An Institutional Analysis of Tata Iron and Steel Co. in Colonial India (Singapore, 2018), 41CrossRefGoogle Scholar.

19 Tripathi, Oxford History, 112–13. See also Goswami, Omkar, Goras and Desis: Managing Agencies and the Making of Corporate India, The Story of Indian Business Series (Gurgaon, 2016)Google Scholar; Kling, Blair, “The Origin of the Managing Agency System in India,” Journal of Asian Studies 26, no. 1 (1966): 37–47CrossRefGoogle Scholar; Oonk, Gijsbert, “Motor or Millstone? The Managing Agency System in Bombay and Ahmedabad, 1850–1930,” Indian Economic and Social History Review 38, no. 4 (2001): 419–52CrossRefGoogle Scholar.

20 Jones, Merchants to Multinationals, 187–88.

21 James, Harold, Family Capitalism: Wendels, Haniels, Falcks, and the Continental European Model (Cambridge, MA, 2016), 12Google Scholar; Landes, David, Dynasties: Fortunes and Misfortunes of the World's Great Family Businesses (New York, 2006), xi–xvGoogle Scholar.

22 Roy, Company of Kinsmen, 120.

23 On Tata as an example of the importance of reputation for overcoming institutional voids and transactional uncertainties in emerging markets, see Gao, Cheng, Zuzul, Tiona, Jones, Geoffrey, and Khanna, Tarun, “Overcoming Institutional Voids: A Reputation-Based View of Long-Run Survival,” Strategic Management Journal 38, no. 11 (2017): 2147–67CrossRefGoogle Scholar.

24 Bushire was the most important port city in the Persian Gulf at the time, connecting the long-distance maritime and overland caravan trades. The global cotton boom of the early 1860s brought Indian merchants into closer contact with the commercial world of the Gulf. See Floor, Willem, “Bushehr: Southern Gateway to Iran,” in The Persian Gulf in Modern Times: People, Ports, and History, ed. Potter, Lawrence G. (New York, 2014), 182–87Google Scholar.

25 Harris, F. R., Jamsetji Nusserwanji Tata: A Chronicle of His Life, 2nd ed. (London, 1958), 1–7Google Scholar.

26 Roy, Tirthankar, “Trading Firms in Colonial India,” Business History Review 88, no. 1 (2014): 9–42CrossRefGoogle Scholar.

27 Siddiqi, Asiya, “The Business World of Jamsetjee Jeejeebhoy,” Indian Economic and Social History Review 19, no. 3/4 (1982): 301–24CrossRefGoogle Scholar. In 1826, at the high point of Jeejeebhoy's partnership with Jardine Matheson, he drew £20,000 worth of bills on the East India Company Court of Directors. A decade later, with American commercial interests cornering the market in Canton, Jeejeebhoy reported being unable to purchase more than £1,000 in bills.

28 Roy, Company of Kinsmen, 113–14; Beckert, Sven, Empire of Cotton: A Global History (New York, 2014), 272–73Google Scholar; Wacha, D. E., A Financial Chapter in the History of Bombay City, 2nd ed. (Bombay, 1910)Google Scholar.

29 Wadia, Rusheed R., “Bombay Parsi Merchants in the Eighteenth and Nineteenth Centuries,” in Parsis in India and the Diaspora, ed. Hinnells, John R. and Williams, Alan (Abingdon, 2008), 124–28Google Scholar.

30 Siddiqi, “Business World of Jamsetjee Jeejeebhoy,” 323–24.

31 Claude Markovits, Indian Business and Nationalist Politics, 1931–1939: The Indigenous Capitalist Class and the Rise of the Congress Party (Cambridge, U.K., 1985), 2–3; A. D. D. Gordon, Businessmen and Politics: Rising Nationalism and a Modernising Economy in Bombay, 1918–1933, Australian National University Monographs on South Asia No. 3 (Delhi, 1978), 2–3.

32 Originally from the small town of Bisau in Rajasthan, Cheniram Jesraj started one of the few Marwari banian firms in Bombay in 1880. The majority settled in Calcutta. Timberg, Thomas A., “Three Types of the Marwari Firm,” Indian Economic and Social History Review 10, no. 1 (1973): 3–36CrossRefGoogle Scholar.

33 Birla, Ritu, Stages of Capital: Law, Culture, and Market Governance in Late Colonial India (Durham, 2009), 19–20, 166–76Google Scholar.

34 Roy, Company of Kinsmen, 117–20, 129.

35 Harris, Jamsetji Nusserwanji Tata, 11–13; Sen, House of Tata, 8–9.

36 Hong Kong Legislative Council No. 21, minutes, 25 Mar. 1887, accessed 16 Jan. 2019, https://www.legco.gov.hk/1886-87/h870325.pdf.

37 Roy, “Trading Firms in Colonial India,” 20–21; Wray, “Japanese Shipping,” 5–10.

38 Shimizu, Hiroshi, “The Indian Merchants of Kobe and Japan's Trade Expansion into Southeast Asia before the Asian-Pacific War,” Japan Forum 17, no. 1 (2005): 25–48CrossRefGoogle Scholar.

39 Harris, Jamsetji Nusserwanji Tata, 92–95.

40 Harris, 96–98; Sen, House of Tata, 24–25.

41 Tata & Sons to the editor of the Indian Textile Journal, 21 Feb. 1894, box 539, T53/PRD/Old Records/Misc/7, Tata Central Archives, Pune, India (hereafter TCA). The letter went on to point out that of the 15,700 bales of cotton shipped to Japan, only 5,300 belonged to Tata & Co.

42 B. J. Padshah to Bezonji Dadabhai, 20 Feb. 1905, T30/DES History Project 2, TCA.

43 Bagchi, Amiya Kumar, Private Investment in India 1900–1939 (Cambridge, U.K., 1972), 292–93CrossRefGoogle Scholar. On barriers between British and Indian business in this period, see also Misra, Maria, Business, Race, and Politics in British India (Oxford, 1999)Google Scholar; and Sen, Amartya, “The Pattern of British Enterprise in India, 1854–1914: A Causal Analysis,” in Entrepreneurship and Industry in India, 1800–1947, ed. Ray, Rajat Kanta (Delhi, 1992), 117–18, 123–26Google Scholar.

44 Gallagher, John and Robinson, Ronald, “The Imperialism of Free Trade,” Economic History Review, n.s., 6, no. 1 (1953): 1–15CrossRefGoogle Scholar. On the geographical preferences of city financiers in this period, see Cain, P. J. and Hopkins, A. G., “Gentlemanly Capitalism and British Expansion Overseas II: New Imperialism, 1850–1945,” Economic History Review, n.s., 40, no. 1 (1987): 1–26CrossRefGoogle Scholar.

45 B. J. Padshah to R. D. Tata, 15 Mar. 1907, box 539, T53/PRD/Old Records of Various Companies/8/Tata Limited London, TCA.

46 Padshah to Tata, 2 Oct. 1906, T30/DES History Project 2, TCA.

47 Mukherjee, Rudrangshu, A Century of Trust: The Story of Tata Steel (New Delhi, 2008), 18–20Google Scholar; cf. Bahl, Vinay, The Making of India's Working Class: A Case of the Tata Iron and Steel Company, 1880–1946 (New Delhi, 1995), 72–73Google Scholar.

48 Nomura, House of Tata, 75–78, 126–27.

49 “Minutes of Conference in London on 16th March 1905 between Mr. Robert Miller, Managing Director, and Messrs. Tata, Perin and Weld,” box 502–23, TCA; Sen, House of Tata, 46.

50 Nomura, House of Tata, 104–5. In 1912–13, TISCO and rival producer Bengal Iron and Steel Corporation (BISCO) together exported 80,109 tons of pig iron to Japan.

51 Tata Iron and Steel Company (TISCO) Board Meeting No. 87, 23 May 1912, box 502–23, T53-DES-T34-MINUTES-01, TCA.

52 TISCO Board Meeting, 27 Apr. 1916, box 502–23, T53-DES-T34-MINUTES-02, TCA.

53 D. J. Tata to B. J. Padshah, 11 Aug. 1905, fire-proof documents (FP), D.J. Tata Correspondence, TCA.

54 “TISCO's Brief Resume of Mr. Burjorji Padshah's Career,” n. d., box 502–23, T53-DES-TATA INDUSTRIAL BANK LTD-1, TCA.

55 Padshah to Tata, 21 June 1906, FP, B.J. Padshah Correspondence, TCA.

56 Padshah to Tata, 24 Aug. 1906, T30/DES History Project 2, TCA.

57 Padshah to Tata, 24 Aug. 1906, TCA.

58 Karanjia, B. K., Godrej: A Hundred Years, 1897–1997, vol. 1 (Delhi, 1997), 28–29Google Scholar.

59 Manchersha to Pirojsha Godrej, 8 Sept. 1927, MS06-01-94-23, doc. 22, Godrej Archives, Mumbai.

60 Padshah to Tata, 15 Mar. 1907, TCA.

61 Agents (Tata Sons), Bombay, to Tata Limited, London, 27 June 1907, file no. 93 (i), Tata Steel Archives, Jamshedpur, India (hereafter TSA).

62 Bagchi, Private Investment in India, 303–6; Markovits, Indian Business, 11–12.

63 C. A. Innes, Controller of Munitions, Madras, to R. D. Bell, Controller of Industrial Intelligence, 28 June 1918, Indian Munitions Board (Chemicals & Minerals), A Proceedings, nos. 1–86 (July 1919), file no. M.-375, National Archives of India, New Delhi.

64 Padshah to Tata, 23 July 1918, FP, B.J. Padshah Correspondence, TCA.

65 Padshah to Tata, 23 July 1918, TCA.

66 Minutes of the Meetings of the Board of Directors, Tata Limited, 11 Dec. 1917, box 502–23, T53-DES-T71-BO-1, TCA.

67 Padshah to R. Tilden Smith, 3 Sept. 1920, T30/DES History Project 1, TCA.

68 Notes on Tata Industrial Bank, n.d., box 502–23, T53-DES-TATA INDUSTRIAL BANK LTD-2, TCA.

69 Gordon, Businessmen and Politics, 85–86, 109.

70 R. D. Lam, speech at farewell function, Taj Mahal Hotel, 27 Mar. 1946, box 539, T53/PRD/Old Records/Mis.4, TCA.

71 Tripathi, Oxford History, 197–98.

72 Adam Tooze describes the global deflationary crisis of 1920–21 as “probably the most underrated event in twentieth-century world history.” See Tooze, The Deluge: The Great War, America and the Remaking of the Global Order, 1916–1931 (New York, 2014), 353–62. On the wider effects of this crisis on the Bombay share market, see Gordon, Businessmen and Politics, 176–77.

73 Minutes of the Meetings of the Board of Directors, Tata Limited, 15 Mar. 1916 and 31 Oct. 1919, box 502–23, T53-DES-T71-BO-1-038, TCA.

74 Tata Limited to Kleinworts Sons & Co., 18 Apr. 1921; R.D. Tata to National Bank of India, 24 Dec. 1920, both in CLC/B/140/KS04/02/02/020, Kleinwort Benson Group Papers, Client Correspondence, London Metropolitan Archives (hereafter LMA).

75 Tata Ltd. to Kleinworts Sons & Co., 1 Nov. 1921, CLC/B/140/KS04/02/02/020, LMA.

76 H. Treble to B. F. Madon, 29 Dec. 1921, box 502–23, T53-DES-T71-1, TCA.

77 N. M. Muzumdar to Nowroji Saklatvala, 17 Dec. 1924; “Cotton Transactions—Memorandum by Mr. Muzumdar,” 3 Jan. 1925, both in box 502–23, T53-DES-T71-1, TCA.

78 “Notes re. Tata Ltd. in London,” 14 Oct. 1924, box 91, file no. 1, TSA. Nomura uses this evidence as a proxy for the organization of Tata & Sons in Bombay, finding it similar to the “multi-divisional, decentralized” M-form or H-form characteristic of the modern industrial corporation. Nomura, House of Tata, 87–88.

79 Tata Sons & Co., Case for the Opinion of Counsel, 1 Jan. 1917, box 502–23, T53-DES-T71-1, TCA.

80 Proposed reconstruction of Tata Ltd., London (Shares), n.d., box 502–23, T53-DES-T71-1, file no. 374, TCA.

81 Jones, Merchants to Multinationals, 198–99, 215–17.

82 D. J. Tata to R. D. Tata, 26 Jan. 1924, FP, D.J. Tata Correspondence, TCA.

83 Nomura, House of Tata, 183–89.

84 Proposed reconstruction of Tata Ltd., London (Shares), n.d., box 502–23, T53-DES-T71-1, file no. 374, TCA.

85 R. D. Tata & Co., Ltd. (Liquidation), n.d., box 502–523, T53-DES-RDT-1, file no. 240, TCA. Both YSB and HSBC operated on the Chinese mainland, issuing their own notes and bills of exchange to finance trade between treaty ports up to the early 1930s. Tata & Co.'s dealings with both underscore the engagement of Indian intermediaries with multiple overlapping imperial networks in East Asia. Horesh, Niv, “Competing Imperial Banking: The Yokohama Specie Bank and HSBC in China—1919 as a Watershed?,” in Asian Imperial Banking History, ed. Bonin, Hubert, Valério, Nuno, and Yogo, Kazuhiko (London, 2015), 53–70Google Scholar.

86 R. D. Tata & Co., Ltd. (Liquidation), file No. 240, TCA. As table 1 shows, the amount of capital required to rescue Tata & Co. was small by the firm's historical standards but far from negligible in a post-crisis context. Around this time, TISCO was capitalized at a massive Rs 1,907 lakhs but had found it difficult to raise Rs 300 lakhs to fund plant extensions in the early 1920s. See Nomura, House of Tata, 189.

87 Facing intense competition from Russia in the pig iron trade, TISCO management was confident that the Japanese could not “afford to put themselves entirely in the hands of the Russians.” Japan's increasing reliance on its own blast furnace plant in Manchukuo also had to be guarded against. R. Mather to A. R. Dalal, 6 July 1935; J. C. Mahindra to A. R. Dalal, 19 Aug. 1936; both in box 502–23, T53-DES-T34-MINUTES-11, TCA.

88 R. D. Tata & Co., Ltd. (Liquidation), file no. 240, TCA.

89 Jones, Merchants to Multinationals, 237–39.

90 N. B. Saklatvala to D. J. Tata, 11 July 1930, file No. 46 (iii), TSA.

91 Tata Sons Ltd., re: R. D. Tata & Co., Ltd. (Liquidation), file no. 240, TCA.

92 Copy of a letter from Mr. Brijmohan Lakshminarayan, Bombay, to M/s. Tata Sons Ltd., 22 Feb. 1932, box 502–23, T53-DES-RDT-1, TCA.

93 Extract from the Minutes of the Meetings of the Board of Directors of the Central India Spinning Weaving & Manufacturing Co. Ltd., 14 Feb. 1933 and 20 Apr. 1933, box 502–23, T53-DES-T59C-BO-3-0042-46, TCA; Gordon, Businessmen and Politics, 111–12.

94 Goswami, Omkar, “Sahibs, Babus, and Banias: Changes in Industrial Control in Eastern India, 1918–50,” Journal of Asian Studies 48, no. 2 (1989): 289–309CrossRefGoogle Scholar.

95 Nomura, Chikayoshi, “Selling Steel in the 1920s: TISCO in a Period of Transition,” Indian Economic and Social History Review 48, no. 1 (2011): 83–116CrossRefGoogle Scholar.

96 Mr. A. D. Shroff's comments on the draft of “The House of Tata: A Study in Industrial Pioneering and Organization,” 8 Nov. 1956, T53/DES History Project 1, TCA.

97 Jones, Merchants to Multinationals, 100, 135; Roy, Business History of India, 127–33. B. Muthuraman, former chairman of Tata International (the group's reconstituted trading arm), has made an explicit comparison with the sogo shosha model. In a rapidly globalizing world, Muthuraman argued, Tata should follow Mitsubishi in becoming an intermediary that also “needs to add value to its offerings to make a meaningful contribution to customers.” Noronha, Cristabelle, “Value Is the Watchword,” Tata Review 51, no. 2 (2013): 42–43Google Scholar.

98 Tumbe, “Transnational Indian Business,” 667–70. After independence, Tata engaged with the world only through a few companies, including TELCO (Tata Motors), Tata Consultancy Services, and Tata Exports (established in 1962 and later renamed Tata International). Of its remaining overseas offices, New York eclipsed London in importance.

99 For example, the arrival of Tata Consultancy Services in Shanghai has been interpreted as a “return” of the Tatas to China as a “reliable intermediary for powerful foreigners,” but with little discussion of the circumstances of their departure in the 1930s. Ross, Andrew, Fast Boat to China: High-Tech Outsourcing and the Consequences of Free Trade (New York, 2007), 137–41Google Scholar. A more recent analysis emphasizing the Tatas’ “long-term familiarity with international trade” as key to their success also overlooks the challenges faced by the Tata trading companies at midcentury. See Lanthier, Pierre, “Tata Becoming Multinational: A Long-Term Process,” Entreprises et Histoire 90, no. 1 (2018): 87CrossRefGoogle Scholar.