RISE TO PROMINENCE - Access to Capital

Access to Capital

The genius of a trading community lies in its manipulation of credit. With this genius for credit acquisition, it is no wonder that trading communities managed to acquire the capital resources which have enabled them to play a dominant role in the industrial development of India.

—The port merchant disposed of his imports by supplying them on 3 or 6 month credit to his correspondent upcountry. The merchant acquired cotton and jute from the farmer by advancing him credit for the crop season.

—Traders of had access to capital or access to its surrogate, credit. Industrial entrepreneurs where thus people who had access to capital or credit.  

—After 1853, India became a net importer of capital for several decades. British firms no longer dependent on their Indian collaborator for working capital were thus less likely to offer them less honorable and lucrative terms. The older collaboration firms which were mostly Bengali were reluctant to take up these new terms. On the other hand Marwari firms whose bargaining position was not as goods, emerged to step into the collaborating role.

In a case of Marwari merchants in Banaras it is learnt that they had access to capital from fellow merchants who made capital available overnight without collateral. There were preferential interest rates for fellow Marwari, account for which was settled once in a year. 

During 1st World War India was completely cut-off from Europe, in 1920 the government of India undertook a series of programs to encourage selected Industries. It was encouraged by lack of competitive imported goods from abroad.

—Empowered with capital accumulated during the war through speculation in commodities and experience in supplying raw materials to the Industry a substantial number of Marwari’s entered manufacturing.

In the 2nd World War some businessmen made money supplying the troops and speculating on wartime markets. Others exploited the natural protection to setup a series of industries to meet domestic needs. Still others made money supplying war needs by exports to Far East and Europe which had turned into battle grounds.

Capital accumulated during this process was utilized to take over Industries and occupy enclaves left by the British post Independence.