Caste, trade and colonialism

Before colonial rule, India was already a trading economy: it was extensively monetised, with manufacturing centres (famous for cloth), merchant groups and a system of banking.

Trade over long distances needed trust. Indian merchants used the hundi, a bill of exchange: a note written in one city that could be cashed in another, like a cheque. It worked because trade ran through caste and kinship networks: merchants trusted those of their own community.

The Nakarattars (also called Chettiars) of Tamil Nadu ran a caste-based banking system. Members lent to each other, pooled money, and took collective responsibility, so their network stretched across Southeast Asia.

India's traditional business communities include the Vaishyas (banias), Parsis, Sindhis, Bohras and Jains. Some groups specialised: the Banjaras were long-distance traders in salt and grain.

Colonialism changed the economy deeply:

• Cheap British machine-made cloth ruined India's handloom weavers.
• India was turned into a supplier of raw materials (cotton, indigo, jute) and a market for British factory goods: from an exporter of manufactures into an importer.

Some communities made the most of new chances. The Marwaris, traders from Rajasthan, moved to Kolkata and other colonial cities, made money as traders and moneylenders, and later rose to become industrialists, the owners of many of India's big companies (such as the Birla family).

The lesson: in India, trust travels through community; business has long been organised through caste and kin.