Book Excerpt From Fortune Seekers By Raman Mahadevan

The Southeast Asian connection was crucial in determining the pace, magnitude and nature of accumulation. It also had contradictory influences. Thus, while it considerably hastened the accumulation process and gave visibility to their economic strength, it also had the effect, particularly during the pre 1930 period, of slowing down their ability to exercise effective control over the south Indian product and credit market. In sharp contrast to the Marwaris who, despite the erosion of their traditional caste-based institutional structure, persisted as a source of industrial entrepreneurship in pre- and post Independence India, the Chettys failed to exhibit their earlier entrepreneurial zeal when it came to investment opportunities in the 1940s and in post-Independence Tamil Nadu.

How would one explain the lethargic and subdued role of a business community which was once dynamic and proactive? It would appear that the setbacks of the 1940s and the enormous loss they incurred following the appropriation of their assets in Burma dented their risk-taking propensity, forcing them to become more inward-looking. The legacy of this loss perhaps propelled the subsequent generations to move out of business and seek white-collared employment

What are the lessons that the Chettiars’ story provides for a student of history and business and for a modern entrepreneur? Their story seems to underline the perils of over-commitment to a particular line of activity, inability to gauge the economic winds of change and to diversify into slow gestating but emerging, promising sectors of investment when such opportunities presented themselves.

Unlike some of the other business communities, which still spawn entrepreneurs, albeit in a transformed economic scenario, the Chettiars have so far not shown signs of enthusiasm for any major entrepreneurial initiatives.

The business community as an organizational structure, as this book has shown, had relevance at a particular historical juncture, as it greatly assisted the process of wealth generation when capital markets were underdeveloped. But with the development of the market and the growing economic distance between family firms, it steadily lost its raison d’être.

The need to look beyond the success stories of entrepreneurs and analyse the mortality of firms, which is common across India, is underlined by this work. The mortality of firms and groups, when appropriately contextualized, throws up important lessons on entrepreneurship and entrepreneurial behaviour. Is the dividing line between success and failure thin? As indicated earlier, the notable cases of KV.AL. RM. Alagappa Chettiar, besides those of A.L.A.R. Chettiar and AR.AR.SM. Chettiar firms, are revealing. Though prompted by the desire to greatly speed up the process of wealth generation, ‘ultimately overtrading’ and speculative commercial transactions are, by their very nature, fraught with a high degree of risk. A slight miscalculation or misjudgement, as in the above cases, was sufficient to trigger a commercial tsunami and eventually spell doom for the family firm.

Mortality and erosion of commercial pre-eminence was also the outcome of disputes and splits within Chettiar business families, leading to the partitioning of the original firms. This was, however, not unique to the Chettiars but common to Fortune Seekers.indd 190 19/03/25 8:06 PM most business families across India.

Indian business history is replete with instances of the original business house or family experiencing a split following the departure of the founder of the firm. Such splits necessarily weaken the strength of the original founding firm and often result in the atrophy of the branches of the parent firm.

Counterfactually, one could perhaps argue that had the Chettiars as a community seen the writing on the wall and collectively repatriated their capital back to India by the late 1930s, or had the Japanese not overrun Burma and other parts of Southeast Asia, the story may have been very different. In short, perhaps the role of unexpected external forces was critical in affecting the fortunes of this otherwise thriving entrepreneurial community. Additionally, the economic landscape of southern India may well have been also very different. In fact, the Southern India Chamber of Commerce did articulate this idea in the context of what it perceived as an unfair and unjust taxation policy of overseas Indian capital. It argued that ‘recent trends of legislation’ in some of these overseas countries was not favourable and that the Chettiars were keen ‘to bring back their monies to India’. However, the ‘income tax laws’ in India acted as ‘a deterrent to such transfer’.

Under the IT Act, ‘the difference in the present appreciated value on the sale of properties consisting of land, plantations, mills, houses . . . and the book value of these properties has to be taken as incomes earned in that year and taxed’. The Chamber wanted the government to intervene and help ‘by exempting such incomes . . . from the operation of the Indian income tax act’. The government was in no mood to relent and oblige.

Obliquely criticizing the colonial government, the Chamber stated candidly, ‘It was this sort of fear that was mainly responsible to discourage the Indian landowners (to be read as Chettiars) in Burma to sell off their properties before the year 1941 and before the Japanese invasion took place in that country, (and) had it not been for this discouragement, among other causes, a good deal of land should have been sold there and the Indian landowners will not been in the precarious position in which they are placed now.’ Using the platform of FICCI’s twenty-first annual session in 1948, R. Ramanathan Chettiar drew the ‘Governments attention to the UK Burma Agreement of October 1947 . . . whereby payment of equitable compensation in the event of acquisition of the existing UK interests in Burma is fully provided.’ It urged the Government of India to negotiate with the Burmese government for an agreement ‘under which the position of Indians would not be worse off than that of United Kingdom interests in that country’.

The Chettiars didn’t spare the post-Independence Congress government either. The Southern India Chamber of Commerce, in 1950, did not mince words in pointing out the paradoxical position of the Government of India:

The Government are anxious and are prepared to make several concessions to foreigners for encouraging them to invest their capital in industrial undertakings in this country . . . if only the government show this amount of concession to Indian property owners in foreign countries there is great scope for attracting Indian capital . . . for industrialization of this country.5

While the story of the Chettiars as it unfolded in the 1940s did have a depressing edge to it, yet the fault lines in the caste-community structures had been obvious much earlier and, in this respect, perhaps the other business communities encountered similar conditions. The post-Independence entrepreneurial trajectory was of the individual business house or one that was family-centric, a striking departure from the earlier community-based business networks.

Excerpted from Fortune Seekers: A Business History of the Nattukottai Chettiars by Raman Mahadevan with permission from Penguin Random House India