 INDIA'S
first Prime Minister, JAWAHARLAL NEHRU,
is once believed to have said, in anger and frustration, that the Banias
should be hanged by the next lamp post. The statement was denied and
retracted and never really substantiated. Yet, it remained stuck in the
public memory for a long time.
Jawaharlal Nehru had
initiated a set of policies aimed at social and economic transformation of
the country. Agricultural and industrial output was growing and yet his
tenure as Prime Minister was marked by chronic food shortages. Nehru
attributed it to hoarding and profiteering and since the entire trade in
food grains was dominated by the Bania community from the villages to the
towns and the cities right up to the national capital, Nehru's frustration
with the Banias was understandable. But ever since then, blaming the Bania
has become a Pavlovian reflex with successive Congress-led governments
right up to the present times.
Jawaharlal Nehru was
A FABIAN SOCIALIST and he was extremely impressed with
the developments in the Soviet Union. The communist regime in the Soviet
Union had banished all its entrepreneurial classes to Siberia. Jawaharlal
Nehru held the Zamindars, the Banias and the Princes as responsible for
the past and concurrent misfortunes of India. He even accused them of
having collaborated with the Britishers in the organized loot of the
country. He, therefore, pensioned off the Princes, dispossessed the
Zamindars and shackled the Banias while his daughter, the then Prime
Minister Indira Gandhi, went a step further, scrapping the privy purses of
the princes and nationalizing the wheat trade. The country paid dearly for
these ideological hang-ups of its mass leaders for almost four
decades.
This schism was picked up
by the country's intellectuals, authors, artists and, most particularly,
by the Indian film industry and perpetuated through their creative works.
The depiction of the Bania, the thakur or the zamindar exploiting the
misery of the poor and deriving sadistic satisfaction from it has been the
recurring theme of most creative works which never failed to draw
applause. Was this paradigm wrong? Well, it is difficult to say because,
if it were so off the mark, why would it always draw applause? It did
because it corresponded to the everyday experience of the masses. In
analyzing societies, it is difficult to pronounce any judgements with any
degree of finality because, at the end of the day, it is your own
world-view that colours your judgement. But subsequent wisdom reveals that
these elements got all the flak because they were at the front-end of a
system that impeded the society's march towards prosperity and
progress.
The wheel turned full
circle in the 1990s when Dr. Manmohan Singh, as the then Finance Minister,
unshackled the ubiquitous Bania once again. India's accession to the
WORLD TRADE ORGANIZATION expanded the canvass of this
entrepreneurial community and the result is there for all to see. For the
first time ever, we are witnessing India's entrepreneurs taking over sick
enterprises of the West and turning them around.A product of the otherwise
hated caste system of India, the Indian Bania has no peers, as far as
business sense is concerned, in the world he is destined to dominate in
the 21st century. What are these qualities that make the Bania tick?
India had always occupied
a central place in INTERNATIONAL TRADE until as late as
the 18th century. Even in the ancient world, Indian merchandise used to be
carried across the PERSIAN
GULF and the Red
Sea and through Land Routes to Afghanistan, Iran, Turkey,
China, Egypt, Greece and Rome. Towards the
East, there were extensive trade links with countries like
Burma, Sri Lanka,
Thailand, Malaysia,
Indonesia, the
Philippines, Korea, China and Japan..
Indian skills and technology in agriculture and industry were looked up to
with envy in the courts of Egypt, Greece and Rome. It is not for nothing
that the Gupta period of ancient Indian history has come
to be known as the GOLDEN
AGE of Indian history. This economic march of the country was
naturally led by its Vaishyas. It could not have been
otherwise in the several millennia old caste structure of the Indian
society.
WHO ARE THESE
BANIAS ?
The term Bania is derived from
the Sanskrit Vanij meaning people engaged in commerce. It was most likely
a social stratification in the beginning, an umbrella classification which
came to be used for all the mercantile castes of India. Because of India
being a vast civilization since the very beginning, even the caste system
came to have so many local variants. In common parlance, the Bania is
today understood to include the Gujarati Banias/Jains, Punjabi
Banias, Marwaris, Aggarwals, Chettiars of the South and other
non-Gujarati Banias/Jains from various parts of the country. The
Parsis and the Punjabi Khatris, though very prominent and
successful mercantile communities in their own right, are not included
under the Bania umbrella. Like other castes and communities in India you
can only be born a Bania and no in-migration is
allowed.
MAJOR
Traits:
The Bania castes and sub-castes are endogamous
but these, in turn, are divided into exogamous units that are called
Gotras. Widow re-marriage and divorce are practically forbidden. All
Banias are Jains or Vaishnav Hindus and are strict vegetarians. They are
worshipers of Goddess Laxmi and Ganpati, the Lord of wealth and
prosperity.
Business
Acumen:
For the Bania,
every penny saved is every penny earned. He is, therefore, invariably
A hard bargainer. It is not unusual at all for a
billionaire Bania to be negotiating hard even on deals involving a few
lakhs or even thousands of rupees. If you do not worry about thousands,
you will never amass millions. Every deal must be struck on a stand-alone
basis on its own merits at the best available price, regardless of the
size of the deal and its significance to the over-all business plan. And
never rush to put your signatures on the first offer, howsoever
attractive. Keep it on
hold until you have made
inquiries in the market
and are ready with your counter offer and your bargaining stance.
Risk taking is in their blood
but the risks they undertake are always very cool and calculated risks. A
Bania can smell a business opportunity from a long distance and he is
quick to calculate the returns on any kind of investments
in his mind, all in a matter of seconds. Once he is assured of adequate
returns after discounting all the risk factors, he does not hesitate to
take the plunge. It does not matter to him thereafter if he is traveling
along entirely uncharted pathways. And once he has taken the plunge, he
puts in everything he has for the success of his venture. Yet, he remains
nimble on his feet, ready to retreat or to make an exit at the first signs
of serious trouble. The only passion he pursues is profit and he has no
emotional or sentimental attachment to any venture if it has no profit in
it.
In his business dealings, The
Bania never goes
back on commitments made as regards
price and delivery schedules. Even oral commitments have the same sanctity
as the written agreements enforceable in law courts. However, nine times
out of ten, he will avoid going to the courts and will strive for out-of
court settlements even at a discount. He does not wish to risk throwing
good money after bad.
Family and
Community Ties:
The Banias are strong
believers in family and community ties. All major business decisions are
taken only after intense consultations within the family and after seeking
the blessings of the elders. They prefer to work within the community, in
so far as business alliances or choice of vendors is concerned because of
the commonality of shared cultural values and business ethics. One of
these business ethics is vayada which means that most of even the
financial commitments are made only through word of mouth. These
commitments, within the community, are underwritten by the underlying
community ethic that commitments must be kept at all costs. Even if a
person dies, his debts must be discharged by the sons for the peace of the
departed soul. That is one major reason why they prefer to keep the
business within the community.
Dexterity with
Numbers:
Because of the rigid caste system, they know
from early life that they have to be in business and they are, therefore,
Trained on the Basics of Trading from Childhood itself.
Business is thus in the very DNA of a Bania from birth
itself and it is nurtured in that very environment. One significant aspect
of this environment is familiarity with numbers and mastery over complex
mathematical calculations. Even if we don't go to any business
school or university, we are most likely to excel in business in
general, says a small
Bania dealer in computer peripherals, certain Business
Ethics and Values are given to us on a daily basis right from
childhood and it all becomes A Part of our
Personalities..
We transact business worth crores, based
merely on word of mouth. So people trust the community as business people,
especially as payments are made on time. Our forefathers gained this
goodwill and this kind of inherited knowledge helps to a great extent says
another. At the very least this is the self-perception of the community
which is not always shared by the society at large outside the business
circles.
THE NEGATIVE
IMAGE:
The stereotype Bania image, particularly
promoted by Bollywood as has been said before, is that of A
RUTHLESS PREDATORa ruthless predator who invariably manages to
grab the properties mortgaged to him in return for small loans,
particularly in the villages. In film after film, ever since the
beginnings of the Bombay film industry, the Bania has always been
typically cast as a villain, exploiting the extreme poverty and misery of
the helpless farmers. The village Bania, normally having a monopoly over
THE MONEY LENDING activity in the
village, charges usurious rates of interests and fudges the land records
in league with the local Patwari and manages to ruin most of the poor
farming families in the village by the time the movie ends. Being
practically the only literate person who can read and write, knowing the
property laws and having the necessary financial clout, he is
advantageously positioned to EXPLOIT the Illiterate Village
Community in unequal business and financial dealings.
Money-Lending Services
?
The Bania defends himself against this charge
saying that the money lending services provided by him have been the main
stay of Indian agriculture over the centuries. He says that he is willing
to lend his money on security that is totally unacceptable to the banks
and, very often, on no security at all. The farmers need money at the time
of sowing their crops and also to live on while their crops are growing
and The Money Lending Bania is the Only Societal
Institution that caters to this need of the farming community.
The Bania is also willing to wait indefinitely for the repayment of the
principal if the interest is paid regularly. This, in effect, means that
debts can be postponed in a bad year and repayment accelerated in a good
one. Regarding the Usurious Rates of Interest at 25 or
50%, the Bania claims that the agriculture business is such that financing
has always been based on a 25-50% sharing of the crop yield and that he is
doing nothing new. This Crop Sharing
System translates into high rates of interest after the
introduction of cash as the basis of all transactions. Of course, all
these are things of the past. The times have changed and the Bania has
changed with the times. This is particularly so with the foreign educated
younger scions of the business families. This younger generation has taken
to modern management practices as smoothly as fish to water, even while
capitalizing on age-old Bania skills like dexterity with numbers and a
sense of opportunity
Free
Market:
This is an argument difficult to win because all
the three sides, the farmer, the Bania and the film industry have a good
case to argue. But the fact remains that in this unequal bargaining, the
dice is heavily loaded in favour of the money-lending Bania. The best that
can be said in his defense is that he is only running his business as per
business principles where There is No Room for Sentiment or
Emotion and that if the other side or the counter-party is
handicapped, it is just too bad.
But, then, what happens to the famed Bania ethic of
absolute honesty and a commitment to honour even the agreements made
orally? Well it seems that this principle applies in the case of B2B
transactions and not to the same extent in B2C transactions. Free market
assumes every stakeholder to be fully alive to his own interests and to be
able to negotiate and bargain for promoting his best interests. If certain
types of consumers do not satisfy this basic test of participation in a
free market, they should stay away from such participation or,
alternatively, the government should intervene to empower such segments of
the community.
That brings us to the Bania's penchant for free
market economy. The Bania is Best at Creating and Multiplying
Wealth, for Himself and for the Society, in free market
conditions. He hates complex regulations but is willing to go along as
long as he knows the ground rules before hand. Once the regulations are
made known, he will respect them simply because he is mortally scared of
falling foul of the authorities and jeopardizing his considerable earnings
and assets, so assiduously created. In fact, the Indian Bania is what he
is today mainly because he has learnt to live with all kinds of
governments through the centuries. As a matter of fact, most governments
in India between the Gupta empire and the coming in of the British, have
been hostile to the Banias, may be, partly due to the Muslim rulers'
aversion to the charging of interest.
Switch Over to
Modern Economy:
At the time the East India
Company was expanding its activities across India, the
enterprising Banias had positioned themselves as financial advisers and
bankers to the numerous cash scrapped independent principalities that had
come into existence during The Decline of the Mughal Empire.
Others were engaged in money lending and trading and acting
as Modis or army provisions suppliers to these Princes. The commissioning
of the Railway Line from Delhi to Kolkata in 1860 led to
a massive Movement of the Banias
Eastward to Kolkata, Dhaka, Burma and beyond. Quite A few
stayed back in Central India to participate in the Opium and Cotton Trade
with China which the British had forced open after the infamous
Opium War of 1839-1842.
Simultaneously, the Industrial Revolution of
Europe was rubbing off on the Indian colony as well and towards
the End of 19th Century, Ahmedabad had 25 Cotton Textile Mills, 21
of themControlled by Banias and JAINS. Their conterparts
in the South, The Chettiar Money Lenders were
making their mark in Burma, Malaysia and Sri Lanka
besides consolidating their hold in the southern States.
The
HUNDI:
One of the major reasons for
the success of the Banias in the 18th and 19th Centuries
was their success in Forging Financial Negotiable Instrument
called The HUNDI, entirely on their own initiative, and without
any official recognition or support. A Hundi is like A "Bill of
Exchange" which initially came into existence to avoid the risk
of carrying cash during long journeys when the law and order situation in
the country was not very encouraging. The hundi made possible the transfer
of cash without the need to physically carry it. Over time it became a
credit instrument. Just to take one example, a merchant bringing a
commodity, say, sugar or cotton, to Mumbai or Kolkata to sell could decide
to take a hundi (IOU) of an equivalent amount drawn by the buyer of the
commodity in his favour. He could take this piece of paper with him and
encash it from the buyer's agent in his home town. Or he could use the
hundi to take a loan by transferring it through endorsement to the lender
of the loan. The lender would give the loan at a discount to the value of
the hundi and, when the loan became due, he could encash the hundi on
par.
The hundi thus was The Progenitor of the Complex Modern
Banking Networks. But, in those early days, it required a
strong element of Trust amongst various participants to succeed.
That was also probably the reason why the businesses remained only within
the families and communities, because any weak link could snap the entire
chain. The Banias thus became a truly networked group through the
indigenous hundi though they also started taking advantage of the British
built railways and telegraph by the end of the century. At this point of
time, Large Multi-Branch Trading Firms run by with
different Bania communities also started to emerge, the famous ones
amongst them being Tarachand Ghanshyamdas of Kolkata and
Bansilal Abheerchand of
Nagpur. They became magnates attracting members of their
respective communities and many of them were Ancestors of to-day's
Famous Industrial Houses. Ghanshyamdas Birla's
Father, Shivnarayan was a clerk in a Hyderabad firm and
the Grandfather of the World's largest STEEL Producer, Laxminarayan
Mittal, worked with him.
And once the famous Bania
talent is unleashed it is only the skies that can be the limit. Take any
field of economic activity today and you have Banias dominating it.
Take Steel and you have Mittals, Ruias and Jindals
dominating it. The Ambanis and The Birlas are running the
country's largest conglomerates today. So is Sunil Mittal of
Bharti Airtel.. Anil Aggarwal of Vedanta is on
way to becoming the World's largest player in
Mining. Rakesh Jhunjhunwala can cause
tremors in the Stock Market almost single handedly.
Kishor Biyani is the emerging star of India's retail.
The Dhoots, The Singhanias, The Goenkas, The Oswals are
only some of the any number of Bania success stories in the
country.
But all that is not the real
point of this story. The real issue is the competitive advantage of a
country. By all accounts China and India are the
Emerging Success Stories of the 21st Century. The two countries
have reached where they have via different routes. While China has burst
on to the international scene through its state driven economy, India's
success started with the state withdrawing from the economy in the early
1990s. India's success has been achieved entirely through private
initiative which has been led from the front largely by the Banias and
also with significant contributions by the other business
communities.
Other business
communities
In fact, capitalism in India has come a
long way since independence and is fairly well diversified today, not just
in terms of production profile but also social base. Capital is no longer
a privileged bastion of a few mercantile castes, the way it was; its base
has extended to incorporate a wide spectrum of communities. However, this
`Inclusive Capitalism' has been more a feature of
Southern and, to some extent, Western
India, Writes Harish damodaram in his Book "India's New
Capitalist Caste Business and Industry in A Modern Nation".. Even
in the North, there have been significant contributions
by other communities, say, The Khatris.
The sterling contributions made by the Parsis led by The
TATAS are too well known to need any recounting. In the
South, of course, all communities such as The
kammas, the Gounders, The
Naidus, The Mudaliars,
The Komati, The
Reddys, The Ezhavas, The Idigas,
The Nairs and The Rajus have participated vigorously in the
modern Indian economy. It is just that in the current story we are
discussing only the Banias. May be, in subsequent issues, we might take up
other communities, one by one.
The Complete
Advantage:
The main burden of the
song in the current story is whether the Banias, a
product, like all other castes, of India's otherwise hated caste system,
represent the country's competitive advantage in today's globalised world.
If one goes by the results achieved since the reform process began in
India, the answer has to be in the affirmative. The Bania has hundreds of
generations of trading skills behind him at the time of the birth itself
and he is groomed from early childhood in that tradition. The label Bania
itself invests him with having the necessary Business Skills,
Methodology and Reputation. He has the necessary community
environment to provide him external support. He thus has everything that
constitutes a competitive advantage for any business or other
organization.
One is talking here of
competitive advantage as distinct from David Ricardo's comparative
advantage of nations. The entire genesis of this competitive advantage in
the 21st century lies in knowledge which represents the most important
value-creating asset. It lies in an entity's distinctive capabilities
which cannot be easily replicated. Is this competitive advantage
sustainable? Yes, of course, because the caste system was exclusive to
India and it cannot be replicated in this day and age. There is,
therefore, no danger of this competitive advantage being ever eroded
except through a process called transferability. If some other countries
can lure India's Banias to relocate themselves elsewhere, the advantage
can be eroded to some extent. It has happened before and it could happen
again. Dubai's progress actually started with its then
Amir providing all kinds of facilities to lure the Indian Banias to set
shop there. But, then, it will be for the Government of India continue to
provide the necessary environment within the country wherein the Bania's
talents can get a full play. Left to himself, the Bania would give up
anything, even sacrifice some profits (which is saying a lot) to stay
rooted in the soil of his country.
Long Live the Indian
Bania. You have the worlds to win and nothing to lose, except,
may be, a little bit of your profits. |
