INTRODUCTORY NOTE
Trade and merchants in Indian history
Trade can be imagined to have arisen when exchange of goods reached a high
level of frequency among prehistoric communities, so that intermediaries began
to act between sets of producers and consumers, thereby establishing more or
less stable levels of exchange-values between different goods. Such a stage
was reached with the Neolithic Revolution (of V. Gordon Childe’s perception),
when, with the coming of agriculture and pastoralism, sufficient surpluses were
generated so as to substantially expand the sphere of exchanged goods. When
new materials came to be used, as when bronze began to supplement stone as
tool material, requiring transport from more distant parts, trade and traders would
become a still more important component of economy and society.1
There is another aspect to be considered that affected the nature of trade. When
peasants and herders began to produce a surplus, this began not only to enter
trade, it also began to be forcibly appropriated by rulers and potentates by use of
armed power. In other words, concentration of wealth developed simultaneously
with commerce. To the demand for necessities by labourers and artisans was
added the demand for rarities and luxury products by the surplus appropriators.
The latter led inevitably to new specialised crafts catering to the requirements of
the dominant few: The practitioners of the crafts, and traders in their products,
along with the customers, their dependants and retainers concentrated in settle-
ments that grew into towns. To this new development Childe gave the designation
of ‘urban revolution’.2
The sketch given above is admittedly not an uncontested one. As to the archaeo-
logical evidence, G.H. Possehl has argued, on the basis of absence of ‘clear signs
of kingship in the form of sculpture or palaces’, that the Indus civilisation, the
most extensive of the bronze civilisations of the third millennium BC, was not
at all possessed of a ‘state’.3 Surely, however, the fortifications at Harappa, the
‘Great Bath’ and the ‘Great Warehouse’ at Mohenjo Daro cannot be interpreted
except as state buildings, nor can the uniform laws of town planning, system of
drainage, etc., at these cities be explicable without our presuming the authority of
a strong state.
What archaeology tells us of the commerce of the Indus civilisation also sug-
gests a pattern for it that could only have been shaped by the demand from a
1
The essentials of this argument are stated in V. Gordon Childe, Man Makes Himself, London,
1948, pp. 7–8.
2
Ibid., chapter VII, pp. 140–79.
3
Gregory L. Possehl, The Indus Civilization: A Contemporary Perspective, New Delhi, 2005, p. 6.
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Trade and merchants in Indian history / 3
wealthy ruling class. The isolated Indus settlement on the Oxus at Shortughai was
obviously established for facility of supply of lapis lazuli from mines nearby, for
the purpose of export to the main Indus cities: artisans at Chanhu Daro in Sindh
worked to make beads out of them. Nor could an egalitarian countryside have
supported trade with Sumer in Iraq. At Lothal in Gujarat, a ‘warehouse’ has been
excavated, where 65 terracotta sealings have been found with traces of reeds, sug-
gesting that packages bore seal impressions indicating ownership, presumably of
merchants.4 Clearly, profiting from such high-value commerce, a rich merchant
class flourished in the Indus cities.
While archaeology thus attests to towns and trade in respect of the Indus civili-
sation, it equally attests to a decline of both thereafter. All commercial contacts
with West Asia appear to have ceased. The Rigveda, datable to 1500–1000 BC,
has references to vaµij (trader) as also to ‘a wandering vaµij’, but another possible
mercantile community, the ‘Paµis’ (the name connected possibly to paµ, meaning
barter), are held to be a wealthy, niggardly people, who could be subjected to rapine
and slaughter.5 Clearly, early Vedic society was not without its class of merchants,
but they could also be tempting objects for plundering chiefs.
By the late sixth century BC the scene had changed much, at least over the
Gangetic basin. The Iron Age had dawned, and powerful kingdoms, like Magadha
and Kosala, had arisen, and towns appear once again in our record. These towns
had rich merchants like Anåthapiµæaka, who would buy a garden-retreat at ‹ravasti
(Kosala) for the Buddha’s stay there, allegedly by covering its entire ground with
money.6 D.D. Kosambi had noted that ‘early Buddhist scriptures’ also mention
‘debt and interest’, the latter not being found in the Vedic corpus.7 About 350 BC
Påµini (IV. 4.3) even refers to usury, which he takes to mean the charging of interest
(kusðda) at one-tenth of principal (presumably per month). Increased commercial
activity and use of credit created the need for a recognised common medium of
exchange, and this was provided by the punch-marked coins of coarse silver, unique
to India, whose origins are assigned to the period 650–400 BC. It is noteworthy
that the finds of the earliest issues are practically all located within the Gangetic
region.8 The Mauryan Empire, c. 322–185 BC, by uniting practically the whole of
India (excluding south India), was probably mainly responsible for the spread of
the use of punch-marked coins throughout the country.
4
S.R. Rao, Lothal: A Harappan Port Town (1955–62), Vol. I, New Delhi, 1979, pp. 113–14.
5
A.A. Macdonell and A.B. Keith, Vedic Index of Names and Subject, Vol. I, London, 1912,
pp. 237–38, 471–73.
6
See passage of Vinaya Pit[aka, translated in Krishna Mohan Shrimali, The Age of Iron and the
Religious Revolution, c. 700–c. 350 BC, New Delhi, 2007, pp. 20–21.
7
Damodar Dharmanand Kosambi, An Introduction to the Study of Indian History, Bombay, 1956,
pp. 139–40.
8
These find spots are marked in Irfan Habib and Faiz Habib, Atlas of Ancient Indian History,
New Delhi, 2012, map 6, text, p. 36, col. B. Outside the Gangetic basin, Taxila has yielded punch-
marked bent bars, which too must have served as coins.
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In the post-Mauryan centuries (second century BC to third century AD), there is
considerable evidence for the growth of both external trade and internal commer-
cial organisation. Externally, the ‘Silk Road’ connecting China with Iran through
Central Asia and North Afghanistan (Bactria) was established by the closing cen-
turies BC; and the monsoons began to be used, by the first century BC, by sailing
ships to carry on trade across the Arabian Sea between India’s western coast and
the Red Sea and the Mediterranean world.9 The discovery of a 23-metre long ves-
sel wrecked near the south Sri Lankan port of Godavaya suggests that sea-borne
trade with Southeast Asia across the Bay of Bengal could also be dated back to the
second or first century BC.10
Epigraphic evidence datable to the first–third centuries AD introduces us to
bodies (›reµis) of artisans or their employers, that accepted deposits with interest
to be paid monthly, the two rates quoted being 1 and 0.7 per cent, that is, 12 and
9 per cent per annum, if uncompounded. It is possible that the ›reµis lent these
sums to the actual artisans at still higher rates of interest.11 There is little doubt that
commerce greatly gained by the circulation of standard royal coinages introduced
by the Bactrian and Indo-Greek rulers, and then minted by their Iranic (‹aka and
Kushån) successors in the north-west and imitators in the rest of the country that
gradually supplanted the older punch-marked coins.12
It has been held, notably by R.S. Sharma, that commerce began to decline
during the time of the Guptas (fourth and fifth centuries AD), a notable piece of
evidence for this being seen in the contraction of coinage, especially of gold and
silver.13 Though the impression of the extreme scarcity of coinage gained from the
small number of type-coins preserved in museums may be modified somewhat by
the numbers found in ‘hoards,’ as Deyell urges,14 the fact remains that gold and
silver coins now became extremely scarce, if not non-existent during the period,
750–1200. The absence of silver coinage, despite it being necessary for the con-
duct of large transactions, is remarkable when one considers that there was active
silver mining carried on by some 10,000 miners at the head of the Panjshir valley
9
See Irfan Habib, Post-Mauryan India (200 BC–AD 300): A Political and Economic History, New
Delhi, 2012, pp. 121–27, for a summary of the main facts, and p. 139, for references to relevant literature.
10
See Andrew Lawler’s report on the Godavaya ship-wreck in Archaeology, 67(6), November–
December 2014, pp. 42–47.
11
Cf. Irfan Habib, Post-Mauryan India, pp. 115–18 and 120.
12
For the latest work on the Graceo-Bactrian and Indo-Greek coins, see Osmund Bopearachchi,
From Bactria to Taprobane, Vol. I, Central Asian and Indian Numismatics, Delhi, 2015, reviewed in
the present issue of this journal.
13
Ram Sharan Sharma, Indian Feudalism, c. AD 300–1200, 2nd ed., Delhi, 1980, pp. 52–55.
Apparently, the large size of the Gupta empire was by itself not to be regarded as a factor behind increase
in trade, contra Ranabir Chakravarti, Warfare for Wealth: Early Indian Perspective, Calcutta 1986, p. 137.
14
See John S. Deyell, Living without Silver: The Monetary History of Early Medieval North India,
New Delhi, 1990/1999, pp. 4–5.
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Trade and merchants in Indian history / 5
in Afghanistan, in the tenth century.15 Clearly, there must have been substantive
decline in commercial demand for silver money rather than an innate scarcity of
the metal. Sharma related such decline of commerce to the decay of towns during
the period.16 Trade in the north-west might also have suffered owing to insecurity
from salve-raiders.17
It is likely that, despite a long-term contraction in commercial activity during
the period before the thirteenth century, commerce must still have remained an
essential part of the economy, however ‘feudal’ the latter might have been. Its
organisation almost certainly had assumed the caste-configuration that has sur-
vived into modern times. The Banya septs of Dhøsars, Rohatgis (‘Rohitaka’) and
Agrawals (‘Agrotaka’) are recorded in inscriptions of East Rajasthan and Delhi,
in 807, 1291 and 1328 respectively. The ‘Multanis’, so prominent as merchants
in the narration of the historian Baranð (c. 1356), were presumably Khatrðs. Ibn
Battuta’s ‘Solis’ of South India encountered by him in 1340s, apparently repre-
sent the Chettis (the earlier name derived from ‘Chola’), the ‘Che-ti’ of Mahuan
(1433).18 In Andhra, the Komatis, forming a separate caste, were described in
1618–22, as ‘Banians transplanted and grown up in the country by another name’.19
At a level lower than the Banyas were the nomadic semi-pastoral communities of
Banjåras, who engaged in local and long-distance grain trade, travelling with their
pack-oxen.20
The Delhi Sultanate (established, AD 1206) found these merchant castes ready
to collaborate with the new rulers: the Multanis, on the one hand, lent money
to the Turkish nobles in exchange of drafts on the revenues of their territorial
assignments; and, on the other, obtained loans from the state treasury of Sultan
‘Alåuddðn Khaljð (1296–1316) in order to carry on long-distance trade.21 By
initiating and then greatly increasing the amount of coinage (tankas) in gold and
silver, besides billon and copper, from Iltutmish (1210–36) onwards and especially
under ‘Alåuddðn Khaljð, the sultans provided an ample supply of money-tokens
15
D. Le Strange, Lands of the Eastern Caliphate, Cambridge, 1930, p. 350.
16
R.S. Sharma, Urban Decay in India, c.300–c.1000, New Delhi, 1987, esp. pp. 132–47, where
factors for the urban decline are discussed.
17
Such insecurity is brought out in the tale of two Ujjain merchants setting out to trade with
Pushkarawati (in NWFP, Pakistan), told in Somadeva’s Kathåsaritsågara (written in Kashmir, 1063–81).
Cf. B.N.S. Yadava, Society and Culture in Northern India in the Twelfth Century, Allahabad, 1973,
pp. 281–87.
18
Irfan Habib and collaborators, Economic History of Medieval India, 1200–1500, Delhi 2011,
pp. 131–33.
19
W.H. Moreland, ed. and tr., Relations of Golconda in the Early Seventeenth Century, London,
1939, pp. 16–17.
20
Z[iyå Baranð, Tårðkh-i Firozshåhð, ed. Syed Ahmad, Calcutta, 1862, pp. 305–07, calls them
Kåravånðs, while Shaikh Nas[ðruddðn in his conversations recorded by ¡amðd Qalandar, Khairu’l
Majålis, ed. K.A. Nizami, Aligarh, 1959, p. 241, calls them Nåyaks—both of them are mid-fourteenth
century authorities.
21
Z[iyå Baranð, op. cit., pp. 120, 310.
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that must have greatly facilitated commerce.22 It is also possible that credit and
circulation of bills of exchange also correspondingly expanded, but our information
on the matter is very scarce.
It is in the period of the Mughal Empire that our knowledge of commerce and
credit expands considerably. The opening of trade with Europe led to a silver influx
and a huge expansion of coined money supply in India on which much research
has already been undertaken.23 It is possible that this silver influx represented, in
part, a real (doubtless multi-stage) capital movement into India, which caused
a fall in the interest rates in India around the mid-seventeenth century.24 At the
same time the expansion of currency supply might have led to a ‘profit inflation’
to the advantage of merchants.
There is also much evidence for advanced commercial techniques including
brokerage, deposit-banking, traffic in bills of exchange (hundðs), merchandise
insurance (bðma) and a form of bottomry (avag).25 The merchants also laid out
much capital in making advances to artisans in order to ensure supplies of pro-
cessed material, the advances being made in both money and raw material, while,
in the case of expensive material, the merchants could bring numerous workers to
work under the same roof in kårkhånas or workshops (where a gain from division
of labour, a lá Adam Smith, might also have occurred).26 Since these phenomena
in many ways mirrored the forms that merchant capital assumed in pre-industrial
Europe, there have been attempts to explain why in India, a similar further growth
into industrial capitalism did not occur, or, at least, why Indian merchants were
driven out of overseas trade by their European, notably British, competitors. Older
opinions, like those of W.H. Moreland, to the effect that Indian merchants could
not obtain wealth or power beyond a certain minimum because of the threat of
expropriation by the Mughal state,27 are now no longer held. A more popular theory
has been derived from van Leur’s general thesis about Asian trade being large in
22
For an almost definitive quantitative study of Sultanate coinage, see Shireen Moosvi, ‘Numismatic
Evidence and the Economic History of the Delhi Sultanate’, PIHC, 50th session Gorakhpur, 1989–90,
pp. 207–18.
23
For a comprehensive study, see Shireen Moosvi, ‘The Silver Influx, Money Supply and Revenue-
extraction in Mughal India’, republished in her People, Taxation and Trade in Mughal India, New
Delhi, 2008, pp. 34–80. Also see Najaf Haider, ‘Precious Metal Flows and Currency Circulation in the
Mughal Empire’, JESHO, XXXIX(3), 1996, pp. 298–336.
24
See quotations of commercial rates of interest tabulated in Irfan Habib, ‘Usury in Medieval India’,
Comparative Studies in Society and History, 6(4), pp. 402–04.
25
These various commercial practices are described, with references, in Irfan Habib, ‘Merchant
Communities in Pre-colonial India’, in James D. Tracy, ed., The Rise of Merchants Empires: Long-
distance Trade in the Early Modern World, 1350–1750, Cambridge, 1990, pp. 388–96.
26
Cf. Irfan Habib, ‘Potentialities of Capitalistic Development in the Economy of Mughal India’,
in Irfan Habib, Essays in Indian History: Towards a Marxist Perception, New Delhi, 1995/2005,
pp. 218–23.
27
W.H. Moreland, India at the Death of Akbar, London, 1920, pp. 50–52, 264–65. See also
B.B. Misra, Indian Middle Classes, London, 1961, pp. 22–35.
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Trade and merchants in Indian history / 7
volume, but carried out by multitudes of pedlars, who lacked the information and
efficiency of the large European Companies: its main later exponent has been
Neils Steensgaard.28 In view of the evidence of rich Indian merchants with their
agents or factors stationed in various places and an efficient system of information-
gathering maintained by them, Steensgaard’s argument appears essentially flawed;
and it has been much criticised since it came to be formulated.29
What led to the triumph of the English East India Company was surely not its
superiority in trading practices, but its superior gunfire. It is often forgotten even
by some western Marxist historians that, according to Marx, ‘the genesis of the
industrial capitalist’ in Europe took place partly through a process of ‘primitive
(or primary) accumulation’, of which ‘the colonial system’ was an essential com-
ponent, one that depended entirely on ‘brute fore’.30
There is no doubt that the English conquest of India, under the aegis of the East
Indian Company, adversely affected the domain of ‘indigenous’ capital. The main
lines of trade shifted to completely new channels, by the creation of new networks
for tribute payment to Britain; and the earlier relationship between the state and
Indian merchants–bankers collapsed as the Presidency banks and European banks
took over state business in the nineteenth century; and, finally, much merchant-
capital was swallowed into the colonial state’s coffers as merchants turned into
auction-purchasers of tax-defaulting landlords’ properties.31 Nevertheless, Indian-
owned capital was large enough for it to be said in 1898 that indigenous bankers
(‘shroffs’) ‘finance nearly the whole of the internal trade of India’, despite such
trade having by then expanded so greatly due to railways. In 1899–1900 indigenous
bankers and moneylenders paid `38 lakh in income tax while persons from the
modern or corporate sector paid just `13 lakh.32
The ultimate transformation of a part of Indian merchant capital into industrial
capital has a tortuous and not an entirely creditable history. The place where this
transformation originally occurred, namely, Bombay, owed the prosperity of its
business initially to opium trade. Indian opium exports to China for the large part
of the nineteenth century were essential for the maintenance of India’s tributary
relationship to Britain, which undertook the Opium Wars (1839–42 and 1856–60)
to force the drug down the throats of the Chinese people. As Amar Farooqui has
underlined, since the opium passing through Bombay originated in Malwa, within
28
See his The Asian Trade Revolution of the Seventeenth Century, Chicago, 1974, pp. 22–59.
29
See, for example, Tapan Raichaudhuri, ‘Inland Trade’, in The Cambridge Economic History of
India, ed. T. Raychaudhuri and Irfan Habib, Vol. I, Cambridge, pp. 340–41, for insistence that port
towns of Mughal India had merchants comparable to ‘Europe’s merchant princes’.
30
Karl Marx, Capital, Vol. I, tr. Samuel Moore and Edward Aveling, ed. Frederick Engles, London,
1887 (Dona Torr, ed., London, 1938), pp. 775–76. The passage ends with the famous dictum: ‘Force
is… itself an economic power’.
31
Unfortunately, no general study of the impact of British colonial rule on indigenous capital in the
nineteenth century seems to exist, at least to my knowledge.
32
Irfan Habib, Indian Economy, 1858–1914, New Delhi, 2006/2012, p. 113.
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territories of princely states, it was outside the clutches of the East India Company’s
monopoly, unlike opium from the middle Gangetic basin located within the Bengal
Presidency. The traffic in Malwa was thus controlled by Indian tax-farmers and
merchants, who finally congregated at Bombay, the main port of export.33 In 1854
the first textile mill, with `5 lakh raised as capital from 50 Bombay merchants,
was established at Bombay; and the age of Indian industry dawned.
Irfan Habib
33
Cf. Amar Farooqui, ‘Empire, Opium and the Nascent Capitalist Class’, in Capitalism, Colonialism
and Globalization: Studies in Economic Change, ed. Shireen Moosvi, New Delhi, 2011, pp. 81–92.
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