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Chettiars, Big And Small, Of Tamil Nadu

An example from the south of the varna-jati conundrum, which explains the Vaishya vacuum

Chettiars, Big And Small, Of Tamil Nadu
Photograph by Alamy
Chettiars, Big And Small, Of Tamil Nadu

The divide between North and South India with regard to the role and influence of Vaishyas or traditional merchant castes or business communities and castes is striking. The sheer magnitude of maritime trade points to the importance of merchant castes in early and medieval South India. However, their influence waned thereafter. For colonial administrators, who came to see them as ‘banias’, the Chettiars denoted both an occupation and a caste.

The confusion was confounded by the multiplicity of sub-divisions within the Chettiars across the southern region. In modern times, the most prominent of merchant castes to emerge in the region were the Nattukottai Chettiars. Central to any discourse on the commercial history of southern India, were the Nattukottai Chettiars really comparable to the merchant castes of the North with respect to the entrepreneurial response and the economic hegemony over the region? The ans­wer is clearly in the negative. Unlike their counterparts in the North, for various reasons described below, they were unable to exercise effective control over the bazaar economy or the credit and commodity market.

In the early 19th century, the Chettiars—traders in a host of commodities, but principally pearls and salt—got into money-lending or bazaar banking in response to the growing dem­and for credit, propelled by the commercialisation unleashed during British rule. By the late 19th century, lured by better prospects, large numbers of the Chettiars had moved to Ceylon, Burma, Malaya and Indo-China, today’s Vietnam. It was the most organised and unique outmigration of capital from India during the colonial period.

Unlike their ­counterparts in the North, the Nattukottai Chettiars were unable to exercise effective ­control over the credit and commodity market.

These regions were then being opened up for intensive colonial commercialisation (rice in Burma, rubber and tin in Malaya, coffee and tea and coconut in Ceylon), leading to a heightened demand for credit. Through the complex intra-caste credit network they had developed, the Chettiars successfully emerged as the principal purveyors of credit, in the process generating huge profits and sometimes amassing enormous wealth. The major downturn in Chettiar fortunes came in the late 1920s, when the Great Depression struck.

Through the 1930s, the prices of primary products plummeted, making it difficult for producers and peasants to repay the loans taken from the Chettiars, who responded by foreclosing the collateral—the immovable assets, invariably land—thus triggering a liquidity crisis. The pressure for repayment was relayed from above, to the smallest, last firm in the chain. Most of the Chettiars stayed on, mistakenly, hoping for a turnaround, sooner than later. The Japanese occupation of South-east Asia majorly disrup­ted their business and the final blow was dealt by the 1949 land nationalisation bill in Burma. Big and small Chettiar firms, with investments in land, lost heavily as a result. It  was the end of the road for them.

The crisis also eroded the traditional Chettiar system of networked banking as, over time, it undermined the intra-caste institutional structure and hastened the process of differentiation within the community. This brought to the fore the latent contradictions between the small, medium and large-sized firms.

Increasingly, individual Chettiar firms were organised as limited liability joint stock companies in place of caste-based family firms, a reflection both of the relative weakening of caste as an organising principle as well as of the need for adjust­ment to the changing economic environment. Institutions like caste associations and caste panchayats had clearly outlived their relevance.

Business communities and caste-based organisations were critical mainly in facilitating wealth generation by the family firms in the initial phase of their growth, in a given historical context; but with the growing economic distance between family firms over time, community structures became economically less relevant for some. Prominent Chettiar firms increasingly came to rely on organisations like chambers of commerce and trade associations to further their interests.

Looking back, one could say this outmigration was a game changer in the Tamil region. It resulted in the creation of an economic environment bereft of the hegemony of merchant capital over channels of distributive trade and fin­a­nce in the region. With relatively weak entry barriers, players from non-ethnic and non-commercial castes could participate in the accumulation process. Sections of the rich and middle peasantry, the upper echelons of artisanal castes and other socially-marginal, occ­upational castes could channel investment into trade, finance and, later, industry, both large and small-scale.

The broadening of the social space of entrepreneurship also lent dynamism to the subsequent industrialisation process, as it allowed the entry of capital from distinct caste and social groups such as the Kamma Naidus, the Gounders, the Rajus, the Kaikollars or Senguntha Mudaliars, the Devanaga Chettiars and the Nadars, among others. While caste identity was, and continues to be, a means for political mobilisation, the merchant castes do not figure in this scheme of things.

The writer is a Bangalore-based business historian.

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