The Marwaris represent the only business community one would truly call pan-Indian .

For a cluster of Bania/Jain merchant castes originally from the Marwar (Jodhpur), Bikaner and Shekhawati desert tracts of Rajasthan, their sinking roots into the business landscape covering virtually the whole of the country is a remarkable phenomenon.

Till around the 16th century, the Agarwals, Oswals, Maheshwaris and Khandelwals of this belt – loosely clubbed under the appellation of ‘Marwari’ – were confined to their homeland as local traders and money-lenders, if not army provision suppliers and financiers for various Rajput princely regimes.

The latter role was crucial in expanding their footprints to other lands. As ration suppliers and paymasters, they often accompanied Rajput units attached to Mughal armies, which, in turn, opened up avenues for setting up shop all over the Gangetic plains and the Deccan.

From the 18th century, there were Marwari bankers financing even the assorted independent, yet cash-strapped, principalities that had arisen from the ruins of the Mughal Empire. Thus, the Jagat Seths became treasurers to the Nawab of Bengal, just as the firm of Gopaldas Manohardas bankrolled the Kingdom of Benares, and the Ganeriwala and Pittie families ingratiated themselves with the Nizam of Hyderabad. Typically, they lent against the security of ijara or land revenue-farming rights assigned for a particular region.

Desert diaspora

But the real impetus to Marwari outmigration came during British rule. By the early 19th century, they were significantly present across Delhi, the grain markets of Hapur, Khurja and Hathras in western Uttar Pradesh, and the river ports of Farrukhabad, Mirzapur, Patna and Bhagalpur along the Ganges.

This process gathered further steam with the coming of the railways, as the community spread itself to Kolkata and beyond to Bangladesh, and from there, up the Brahmaputra valley into Assam and across the Bay of Bengal into Burma. Within this overall eastward direction, there were sideward forays into Jharkhand, Orissa, northern Bihar, Nepal and the highlands of Jalpaiguri, Darjeeling and Kalimpong. Another large migration stream was to Central India (especially the princely states of Gwalior, Bhopal and Indore, and also Chhattisgarh), Vidarbha and the Maratha hinterland. Some of it spilled over to the Deccan, before trailing off to a trickle at Madras and Mysore.

Towards the middle of the 19th century, a veritable pan-Indian Marwari business community had emerged – a commercial resource group using the hundi , an indigenous bill of exchange, to move money and goods across the length and breadth of the subcontinent.

The hundi made it possible for a grain dealer from Kanpur to sell in Kolkata without taking cash and risk being waylaid during transit. He could, instead, have the buyer draw a hundi of equivalent amount in his favour and present it to the latter’s agent or drawee at Kanpur, who would make the payment in cash. Alternatively, the seller could transfer the hundi through endorsement to a lender, who would extend the loan at a discount to its value. The same hundi was, then, encashed at par by the lender.

The hundi , in other words, served both as a cashless remittance facility enabling long-distance inland trade and also a source of mobile credit, by virtue of it being freely transferable through successive endorsements before being finally presented to the drawee. It was the lubricant that greased the wheels of commerce, by connecting some 1,700 nationwide produce mandis and 12 nodal money markets handling the bulk of discounting of these bills at the turn of the century.

The first conglomerates

The traditional hundi , alongside the modern-day railways and telegraph, also laid the ground for the birth of large multi-branch Marwari trading firms such as Tarachand Ghanshyamdas – which, in 1870, had offices at Kolkata and Mumbai, Amritsar in Punjab, the Malwa opium belt of Madhya Pradesh and elsewhere, including through related entities.

These firms were magnets for attracting fellow Rajasthani clansmen, who could join as clerks, managers, brokers and partners. G.D. Birla’s grandfather, Shivnarayan worked with Tarachand Ghanshyamdas; so did the grandfather of the global steel czar, Lakshmi Niwas Mittal. Likewise, there was Sevaram Ramrikhdas that employed, among others, the RPG Group patriarch, Rama Prasad Goenka’s grandfather’s great-grandfather, Ramdutt. The Sevaram Ramrikhdas firm’s division resulted in independent offshoots at Kanpur, Mirzapur, Farrukhabad and Kolkata: The Singhanias are descendents of the Kanpur line.

The functional utility of such extensive upcountry networks was soon recognised by British expatriate firms, who started engaging the Marwaris as intermediaries to finance and forward raw jute for their mills or to redistribute cotton piece goods imported by them.

But increasing awareness of the power derived from control over the hinterland supply chain led the community, in due course, to also undermine the operations of the British agency houses themselves. In this, the practical trading skills and financial ingenuity of its members, honed over generations, proved most useful.

‘Desi’ futures & options

In 1905, six Marwaris introduced fatka or futures trading in raw jute that registered meteoric growth at the baras (informal exchanges) of Kolkata’s Burrabazar market.

These contracts – rarely resulting in delivery of the underlying goods, since most purchases and sales got cancelled against each other before maturity date – weren’t taken kindly to by entrenched European interests. Used only to spot buying, they saw their supply-and-demand calculations and produce flows disrupted by the rampant speculation engendered by such trades, which extended to cotton, opium and grain as well.

No wonder, one of their representatives claimed fatka to have been “invented” by Marwaris “deprived of the pleasures of rain gambling”, and only to satisfy “their craving for the gains of chance in a system of contracts purporting to evidence the purchase and sale of jute, but [where] in no single instance has jute ever been delivered”!

That view, in a sense, echoes those of many who even today harbour a suspicious attitude towards futures transactions, which they contrast to ‘legitimate’ business.

Apart from the hundi and fatka , the Marwaris also pioneered trading in indigenous options ( satta ), giving the buyers the right, but with no obligation, to buy or sell a certain commodity at a specified future date and price. These could be teji (call) or mandi (put), with the premium paid by the buyer of the option known as nazrana .

The success of Marwari enterprise can, in short, be put down to three components:

Pan-India presence , key to the forging of long-distance networks of trade and finance, extending from the desert towns of Rajasthan to the Brahmaputra valley;

Community resources and connections , which could be leveraged to raise capital or expand the scope and spread of business operations. A firm could open as many branches as the number of brothers, nephews, in-laws, cousins or trusted accountants permitted. Over time, each of these would develop into or further spawn independent firms, facilitating diffusion of entrepreneurship within the community;

Evolving sophisticated trading and financing mechanisms , complementing their ostensibly hardwired talents at sourcing/selling of produce and ability to draw on information or ground-level knowledge not normally accessible to others.

These traditional strengths have revealed themselves even in more recent times – be it in organised industry, share markets or, for that matter, modern-format retail and e-commerce (the promoters of Big Bazaar, Flipkart, Snapdeal and Myntra happen to be all northern Bania/Jains, if not Marwaris).

The second part of this essay will look deeper at the relevance and limitations of the ‘Marwari way’ of doing business in today’s world.

(To be concluded)