This book on the Nattukottai Chettiars is the fifteenth in the Penguin series on the Story of Indian Business and the fifth of the books on business communities. The notion of a business community itself seems an anachronism leading to the question of its relevance in modern times and changing economic landscapes. Gurcharan Das, the series editor, points out the comparative advantage that a traditional business community/caste has in adapting to the rise of market-based international economic order, while also pointing out that these are limited by time and space.
The Nattukottai Chettiars or Nagarattar are the most prominent of the business communities of South India. In Tamil Nadu, the Chettiars are equated with success in business, entrepreneurship and shrewdness. Families like the Raja Sir Annamalai Chettiar family with their business empire starting with the Indian Bank founded in 1907, the AMM group which is one of the largest conglomerates in India today, AV Meyyappa Chettiar (AVM Studios) as well as names like M CT Chidambaram Chettiar who started the Indian Overseas Bank (1937), Karumuthu Thyagaraja Chettiar and Alagappa Chettiar (after whom the AC College of Technology is named), all reinforce this popular perception of a community that has reinvented itself and made a smooth transition into the modern world of business.
Raman Mahadevan’s intensive, though short, study of the Nattukottai Chettiars recasts these general assumptions. Tracing their business activities from around 1800, he shows how they utilized the opportunities and challenges which arose during the nineteenth century and their era of great prosperity and subsequent decline, and how their traditional time-honoured social cohesiveness has weakened in the changing economic and political environment during the 20th century.
The region known as Chettinad is located in Ramanathapuram and Pudukottai districts, where nine exogamous clans of Chettiars live in a few towns and seventy-eight villages. The nine clan temples (supported by a compulsory contribution from each household), the joint family (unique in that each married member lives as a nuclear family in the same large mansion), and the family firm (where all family members were partners with the oldest male member as the deciding authority) were the three pillars of Chettiar society.
Traditionally Chettiars were traders who traded in salt and rice. By 1800, their trade network had extended to interregional trade in rice which extended from Calcutta to Sri Lanka. They also diversified into banking, most probably to enable them to carry out money exchange to finance inter-regional trade. The 19th century was a period of significant political and economic change which propelled Chettiar businesses to a different plane altogether. In the early 19th century, the local zamindars who were unable to pay the land revenue dues to the Madras Government resorted to borrowing from Chettiars and many ultimately lost their lands which were forfeited when they could not pay back these loans. Thus, Chettiars became landowners on a large scale in the southern districts. This in fact was the business model followed by Chettiar firms as they expanded their activities from Sri Lanka (where they had trade interests well before British rule) into Malaysia and Burma and even further east to Southeast Asia. All this drew on intra-community resources of capital.
There was an exponential expansion of the business activity of the Chettiars overseas from the 1850s which was due to both push and pull factors. The growing industries in the West generated a continued and almost insatiable demand for raw materials to feed their factories, and this accelerated after the opening of the Suez Canal in 1869. This led to a significant growth in the production of raw materials from plantations, agriculture and mining in Sri Lanka, Burma, Malaysia and further east. Unable to find a favourable climate for their business ventures in colonial Madras, Chettiar capital moved to these areas providing finance.
An increasing number of Chettiar firms began to invest in Sri Lanka, Malaysia and Burma in the new plantations and expanding agriculture. These overseas ventures were managed through agents, all recruited from the Chettiar community. As prices rose consistently, these businesses yielded very high profits. Chettiars were now also able to get credit from the European banks. The Indian Bank (1907) and the Indian Overseas Bank (1937) were started by prominent Chettiar families to provide easy capital to the Chettiar firms. Chettiar firms also acquired large properties which were forfeited when the borrowers could not repay their loans. The largest land acquisition was of agricultural land growing rice in Burma.
As an outsider reading this detailed account of the halcyon days of the growing prosperity of the Chettiars, I was visited by a feeling of déjà vu wondering whether this balloon would burst. And the collapse came in the 20th century. The depression of the 1930s was the first serious blow. While the larger business houses were able to stay afloat, the medium and small firms suffered a near collapse. Next came World War II and the Japanese invasion. After the War, the British left and colonial rule ended, and the former colonies witnessed the rise of assertive nationalism. All these virtually ended the hegemony enjoyed by the Chettiars in Burma, Malaysia and Sri Lanka. Losses were particularly severe in Burma where almost all the land was expropriated.
The Chettiars now had to return to their home base in a changed economic world. But relatively few made the transition to modern industrial enterprises and organizations. Mahadevan points out that a few far-sighted Chettiar families did enter textile manufacture, leather, etc., but most of these could not be sustained. Even well-known names like the M CT family, Alagappa Chettiar, and many others faded from the scene in the last century.
This brief overview does little justice to the scholarship and the depth of the detailed account that Mahadevan presents of dozens of Chettiar families listed by name along with their business details. The question that is never fully answered is why other Chettiars could not follow the path of the AMM group (for instance) and succeed in the modern business world. One explanation that Mahadevan offers is that community linkages weakened, especially after the setbacks following the Depression, and lower and middle-income Chettiar families opted for white-collar professional jobs. Or, is it possible that after successfully exploiting the free-wheeling, high-profit commercial prospects of the earlier century, the community was not able to penetrate the competitive, capitalist environment of the 20th century?
Kanakalatha Mukund is the author of Merchants of Tamilakam (Penguin India, 2012), the second volume in the Story of Indian Business series.