Indians write a lot of economic history but rarely any business history. There are less than 25 good books on the subject. The rest tend to be dull accounts of companies or fawning biographies of their founders.

That’s truly extraordinary considering how rich our businesses are and how they have played a central role in the economy’s and the country’s affairs. Not just that. Until Independence ours was as capitalist a system as any in the West.

There are many descriptions of capitalism but basically it involves a completely free interplay of the major markets’ resources, namely products, labour and finance. All these resources are privately owned and all transactions are purely voluntary.

India had all these things and, as a result, possessed a vibrant and highly productive and efficient economy. But it never industrialised the way Europe did. It was capitalism without industrial capital.

So our history writers, with a few exceptions, can’t define their subject. The ones who do, however, produce excellent books.

Harish Damodaran, a former colleague in this newspaper, wrote a superb book on India’s business castes. It’s called India’s New Capitalists.

Omkar Goswami, an economist of repute, wrote one on the British managing agencies that led to the development of corporate India. It’s called Goras and Desis. It uncovers a lot of facts that we have chosen to ignore or forget.

Some years ago Medha Kudaisiya, who also wrote a biography of GD Birla, edited a very useful anthology. FICCI had also attempted one around the same time.

Gurcharan Das, former CEO of Procter and Gamble, author and a public intellectual edited an entire series of about a dozen books on Indian business. A few others, like Gita Piramal, have also written. Someone wrote about the Sindhis. Someone else wrote about the Marwaris. And so on.

Coherent story

Overall, these books don’t quite add up to a coherent story of Indian business. The first proper book on the subject that I can recall is called Oxford History of Indian Business by Dwijendra Tripathi of IIM-A.

He says that although businesses were dynamic during the Mughal era, the markets were fragmented and law and order was poor. The merchants therefore had no incentive in moving towards industrial capitalism. That became possible only when the British improved law and order and gradually unified the markets via better governance and contract enforcement. Thus, peace and scale made all the difference.

It’s interesting that after Independence we have had peace but not scale.

Tripathi’s descriptions also suggest that far from de-industrialising India, the British actually helped its industrial development by bringing in capital and technology, albeit not of world class. He says that India’s businesses evolved in a copycat way emulating the British practices. Come to think of it, so did its politics and veneration of all things English.

Analytical excellence

The only other book, at least to my mind, that comes anywhere close to this one, in terms of analytical excellence, is by Tirthankar Roy. It’s called, very precisely and very unimaginatively, A Business History of India.

Roy is a professor at the London School of Economics. He is also the author of the fifth volume of the history of the Reserve Bank of India. I should add here that these five volumes — with the third volume of which I helped — are themselves a history of Indian capitalism and business and how the state interfered with industry’s need for finance. The RBI became a capital rationing agency.

Roy asks a very important question in his book: how did capitalism thrive in India alongside stagnant agriculture? And well, yes, before you jump up, it’s indeed true that in the period he has studied after 1700 capitalism did indeed thrive here.

In this context Roy makes another very novel point. The so-called business castes, he admits, were important in the development of Indian capitalism but they weren’t the only thing running it. After all, there can be no capitalism without capital but capital was costly because it was scarce. So how did capitalism develop?

Roy says that technological developments apart, there was a major difference between Indian and European capitalism. This was that while Indian firms depended on their own money, the Europeans invented the joint stock company so that they used other people’s money. The capital constraint nearly disappeared there.

To find out more about the development of Indian capitalism you must read the book but the short answer for its success is the integration with the global economy that the British empire enabled. Capital, technology and markets all came from the empire.

India after 1991 went back to such integration but after 2014 it has been withdrawing somewhat. We now have elements of Nehruvian import substitution and Indira Gandhi’s welfarism. It will be interesting to see which way our socialistic capitalism evolves now.