Communities as open-air business schools

S. GURUMURTHY | Updated on September 20, 2013

Using the community model, Tirupur, in Tamil Nadu, became the world leader in knitted garments by the 1990s. — M. Balaji   -  THE HINDU

The Kathiawaris, Nadars and Gounders have disseminated business skills like no modern business school could have done.

On February 19 this year, the BBC had reported that armed robbers posing as police broke into the cargo of a Swiss-bound plane in Brussels airport and spirited away diamonds worth $50 million (Rs 250 crore). This must have left Surat, the world’s largest diamond handling centre, which sees some Rs 80,000 crore of diamonds criss-crossing the region in open roads, quite amused. Here, couriers on motor cycles carry unpolished diamonds worth Rs 50-60 crore day after day from traders at Surat to the polishing units tens of kilometres away. Polished diamonds are brought back to traders on motorcycles on open roads without any gun-wielding security person guarding these diamond couriers.


This is possible because the Surat diamond trading system is entirely based on trust among and within caste-based communities. Entry into the diamond business, whether as traders, polishers, or handlers, is regulated and overseen by a system of community reference and verification. No one without verification can enter the network.

An instructive research paper (Yale University, November 2006) on the transition of the farming community of Kathiawaris, titled From Farming to International Business: The Social Auspices of New Entrepreneurship in a Growing Economy, traces how the Kabin Patels (Kathiawaris) entered trade late but formed a new community-based business network. They moved over from agriculture to international business – the diamond industry dominated by the Vaishyas, Palanpuri Jains and Parsis – over just a single generation. In three decades, they have achieved parity in scale with the Palanpuris and Marwaris. The paper says that the successful entry of Kathiawaris in the diamond business points to the fact that in businesses where connections are critical, non-Vaishyas have also had occupational mobility where opportunities opened up. Thus, contrary to Max Weber’s view, caste has actually made occupational mobility possible. This is because caste familiarity generates trust, and the caste itself turns into an open-air business school of self-learning for entrepreneurs, teaching them to build businesses. But are diamond trade and Kathiawaris exceptions? Just anecdotes? No.


Take the Gounder community in western Tamil Nadu, the equivalent of the Kathiawaris. This is what the World Bank’s World Development Report 2001 says about how the community that has built a global knitwear business.

“By 1990s...Tirupur was a world leader in the knitted garments industry. The success of this industry is striking…What is behind the story of this development? The needed capital was raised within the Gounder community, a caste relegated to land-based activities, relying on community and family networks…These networks were viewed as more reliable in transmitting information and enforcing contracts than banking and legal systems that offered weak protection to creditors’ rights.” The community network which promoted entrepreneurship based on self-learning also trained new entrants the knitwear business and customer management. Very much an open-air business school, isn’t it?

Both the Kathiawaris and Gounders were land-owners. But even the landless have become entrepreneurs. Turn to the Sankagiri transport cluster in western Tamil Nadu, the second largest centre for lorry traffic in the country. Some 90 per cent of the Sankagiri truck owners were agriculturists and a fifth were cattle grazers. They now own the largest population of Taurus vehicles in the country. Seven out of 10 Sankagiris are now involved in transport-related activities, according to Indian Models of Economy, Business and Management by Prof P Kanagasabapathi.

Tiruchengode is the next stop. In the 1960s, a severe water crisis forced Tiruchengode’s farmers to jointly buy a rig to dig deep bore-wells. But seeing the demand for such wells, they successfully turned this into a business that soon spread over to Karnataka, Andhra Pradesh, Maharashtra, Madhya Pradesh, Rajasthan and Odisha.

Today Tiruchengode boasts of the largest providers of bore-wells in the country, according to Prof Kanagasabapathi. The open-air learning process led to training and initiating others into the business, in a way no modern business school could have done.


Studies on the Chettiars show how the community was able to internationalise based on their networks and a culture of training sons for the business, embracing best practices, and replicating domestic social structures overseas. Research about the Nadar community’s economic and business models reveal how the Nadar Uravinmurai’ (relation-based network) evolved as an endogenous and innovative trade-linked caste organisation. Uravinmurai was set up for safe movement of the community’s goods and later became an instrument for self-discipline and collective learning. There are some 1,000 Uravinmurai in Tamil Nadu. Again, aren’t these cases of open-air business schools spreading knowledge of trade and business?

These are just illustrations, not exhaustive of the phenomenon all over the country, particularly in over 2,800 artisan and industrial clusters. Apart from the traditional Banias, the Marwaris, and the Sindhis, there is also the rise of the Ramgadias of Punjab, the Jatavs of Agra and Kanpur, and the Kammas of Andhra. Harish Damodaran, in his book India’s New Capitalists: Caste, Business and Industry in a Modern Nation,calls this the‘Field to Factory’ movement, signifying the expansion of the social base of Indian business ‘beyond the Bania’. The 2005 Economic Census indicates that the rise of backward classes in businesses is now becoming a massive entrepreneurial movement in which the state has had no role.

But this cannot be as recent as it appears. It has to be in the still unexplored periods of Indian history. Studies of Paul Bairoch (1983) and Angus Maddison (2001-2010) have indeed found evidence of extensive economic activity in India, which could not have been confined to just one Vaishya caste. According to the American Journal of Economics and Sociology (April 1993), the Mauryan model of export-led economic growth had secured a huge export surplus for India. The economic history of the Greco-Roman world tells us that India ran a continuous trade surplus with Egypt that worried Roman rulers, the annual value of which in today's gold prices would be $178 million.

Marco Polo’s travelogue says that the gold-silver arbitrage ratio was 1:6 in India which was the other way round in Europe, indicating the huge trade surplus India must have achieved over centuries. The Bank of International Settlements Report (1934-35) says that during the period 1493 to 1930 (for 427 years), India’s gold absorption rate was 14 per cent of the world’s production, which means that much was perhaps the share of India’s trade surplus as against the rest of the world. Again, Marco Polo says that the size of India’s merchant ships was larger than its contemporaries. India’s merchant navy had 40,000 ships during Akbar’s time and 34,000 with a capacity of more than a million tonnes when the British came to India. When the British left, India’s merchant navy’s strength had dwarfed to couple of lakh tonnes.

A study by the Centre for West Asia Studies at the Jamia Millia Islamia University affirms that, in Akbar’s time, consumption in India was higher than in Europe. According to colonial records studied by Dharampal, a well-known Gandhian, the consumption pattern of the high-, middle- and low-income groups in Cudappah and Bellary in the 17th century showed virtually no difference in 23 of the 24 items accounted for.

Economic history

India could never have been an agrarian economy then as it is now, given India’s share in world manufacturing at 24.5 per cent in 1750 and with industrial employment then estimated at between 21 and 28 per cent. It was the collapse of Indian industry during the colonial period that drove people back to the farms. This kind of widespread and widely shared economic activity would not have been confined to the minuscule Bania community.

There is need to recall, re-author, and review Indian economic history, which is even now a prisoner of the Marx-Weber perspectives.

This need is no more academic. After the global economic meltdown in 2008, when efficient market theories and model building approaches were heavily questioned, Bradford Delong, Professor of Economics at University of California, Berkeley, wrote that it was not an economic crisis but ‘economics in crisis’. He called upon schools of economics to generate fewer efficient market theorists and modellers and more economic historians.

Subsequently, Howard Davies, who was the first chairman of the United Kingdom’s Financial Services Authority (1997-2003) and formerly Director of the London School of Economics, cited the view of the Institute of New Economic Thinking (that consists of eminent economists, financial minds and businessmen), insisting on teaching more economic history. This is equally a call for India to trace its business propensities back in time.

(The author is a commentator on political and economic affairs, and a corporate advisor)

Published on May 30, 2013

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor