Role of Business in the Development of Economy

Business — including trade and commerce — has played a vital role since time immemorial, a theme the NCERT Class 11 Business Studies chapter opens with. India had a golden economic past, and trading contributed greatly to its prosperity.

Evidence of ancient trade

• Archaeological evidence shows that trading was the mainstay of the economy in ancient times, carried on by both water and land routes.
• The Silk Route and maritime (sea) trade were especially prominent in moving goods and commodities.

A favourable balance of trade

• The Indian subcontinent enjoyed a favourable balance of trade — exports exceeded imports by large margins.
• The indigenous banking system supplied manufacturers, traders and merchants with additional capital funds for expansion. Later, commercial and industrial banks evolved to finance trade and commerce, and agricultural banks provided short- and long-term loans to farmers.

Hundi and Chitties — early instruments of exchange

• To move money safely over long distances (where travel by land or sea carried the risk of theft and robbery), merchants used Hundi and, in the south, Chitties — documents that transferred money from one hand to another.
• The word Hundi literally means "to collect." It was written in the vernacular language and, as an instrument of exchange, it embodied a contract that (i) warranted the payment of money through an unconditional promise or order, and (ii) was capable of being transferred by valid negotiation.
• The spread of such credit transactions, loans and advances strengthened commercial operations.

Types of Hundi used by Indian merchant communities (a Darshani hundi is payable at sight; a Muddati hundi is payable after a fixed term):

Leading trade centres

Many trade centres grew up for the import and export of goods, including Patliputra, Peshawar, Taxila, Indraprastha, Mithila, Madura, Surat, Ujjain and Kanchi. Notable ancient centres:

• Pataliputra (today's Patna) — a commercial town and a major centre for the export of stones.
• Peshawar — exported wool and imported horses; a big share of trade between India, China and Rome in the first century AD.
• Taxila — on the land route between India and Central Asia; a city of financial and commercial banks and a famous Buddhist centre of learning (Taxila University).
• Indraprastha — a commercial junction on the royal road where routes from all directions met.
• Mathura — an emporium of trade; many routes from South India touched it (and Broach).
• Varanasi — on the Gangetic route and the North–East highway; a textile centre famous for gold silk cloth and sandalwood work; linked to Taxila and Bharuch.
• Mithila — its traders crossed the Bay of Bengal to the South China Sea, trading in Java, Sumatra and Borneo and setting up colonies in South China (Yunnan).
• Ujjain — exported agate, carnelian, muslin and mallow cloth; linked by land route to Taxila and Peshawar.
• Surat — the emporium of western trade in the Mughal period; textiles famous for gold (zari) borders; the Surat hundi was honoured as far as Egypt and Iran.
• Kanchi (Kanchipuram) — the Chinese came here to buy pearls, glass and rare stones, selling gold and silk in return.
• Madura — capital of the Pandayas, who controlled the pearl fisheries of the Gulf of Mannar; attracted Roman merchants.
• Broach — the greatest seat of commerce in western India, on the Narmada, linked to all major marts by road.
• Kaveripatta (Kaveripatnam) — a scientifically built port city with loading, unloading and storage facilities; a hub for perfumes, cosmetics, silk, wool, cotton, corals, pearls, gold, precious stones and ship building; convenient for trade with Malaysia, Indonesia, China and the Far East.
• Tamralipti — one of the greatest ports, connected by sea and land to the West and the Far East and linked by road to Banaras and Taxila.

Types of towns and travellers' accounts

• There were port towns, manufacturing towns, mercantile towns, sacred centres and pilgrimage towns — their very existence was an index of the prosperity of merchant communities and professional classes.
• Business activity spurred the growth of aids to trade — transportation, banking, finance and communication.
• Many travellers — Megasthenes, Faxian (Fa-Hien), Xuanzang (Huen Tsang), Al Beruni (11th century), Ibn Batuta (14th century) and the Frenchman Francois (17th century) — repeatedly wrote of the country's prosperity, and it was popularly called "Swaran Bhoomi and Swaran Deep."

India's share of world wealth (Angus Maddison estimates)

• Between the 1st and 7th centuries CE, India is estimated to have had the largest economy of the ancient and medieval world, controlling roughly one-third to one-fourth of the world's wealth.
• Illustrative figures: about 32% in 1 AD and again in 1000 AD (the largest regional share); around 24% through 1500–1700; roughly 25% of world industrial output in 1700–1750; then a steep decline to about 5–10% by 1850, 2% of global industrial output by 1900, and around 3–5% through the mid-20th century, until economic liberalisation in 1991.

Colonial decline

• With the rise of the British Empire, the East India Company used the revenues of the provinces it ruled to buy Indian raw materials, spices and goods. This turned India from an exporter of processed goods into an exporter of raw materials and a buyer of manufactured goods.

Rebuilding after independence …