Discussion Papers In Economics
And Business

Merchants, institutions and the market:changes in the salt trade in early colonial Bengal
Sayako Kanda
Discussion Paper 08-02

Graduate School of Economics andOsaka School of International Public Policy (OSIPP)
Osaka University, Toyonaka, Osaka 560-0043, JAPANMerchants, institutions and the market:changes in the salt trade in early colonial Bengal
Sayako Kanda
Discussion Paper 08-02

January 2008

この研究は「大学院経済学研究科・経済学部記念事業」
基金より援助を受けた、記して感謝する。

Graduate School of Economics andOsaka School of International Public Policy (OSIPP)
Osaka University, Toyonaka, Osaka 560-0043, JAPANMerchants, institutions and the market:changes in the salt trade in early colonial Bengal＊

Sayako Kanda†

Abstract
This paper explores the transformation of the economy and society in early colonial Bengal,roughly between c.1780 and c.1840, through a case study of the salt trade and its changes. It
argues that several private trade institutions, particularly various types of intermediaries atdifferent stages of transactions and multi-caste elite organisations, enabled a large flow ofcommodities, cash, credit and information despite regional and functional divisions in themarket as well as social divisions among merchants.
The coming of the British led to an expansion of the market and opened up various
commercial opportunities to the socially inferior ‘amateur’ merchants, and this led to a
confusion in mercantile communities and necessitated a new order among them. By
strengthening the functions of those private trade institutions and utilising the new British
legal system, mercantile communities managed to accommodate these new merchants andrespond to the increased volume of trade.

JFL Classifications: N45, N75, Z13
Key Words: Colonial Transition, Economic History of India, Private Trade Institutions,Intermediaries, English East India Company＊

I would like to thank Prof. Peter Robb, Prof. Kaoru Sugihara, Prof. Tetsuji Okazaki, Prof. Tomoko
Shiroyama, Prof. Masaki Nakabayashi, Mr Yasuo Takatsuki, Dr Tomoko Yagyu, and Mr Tomoki
Shimanishi for their helpful comments and suggestions.
†
Graduate School of Economics, Osaka University, 1-7 Machikaneyama, Toyonaka, Osaka 5600043
Japan. email: saykanda@econ.osaka-u.ac.jp / saykanda@xa2.so-net.ne.jp1Introduction
This paper explores the transformation of the economy and society in Bengal during theperiod between c.1780 and c.1840— ‘a period of colonial transition’ in the history of SouthAsia, through a case study of the salt market, particularly focusing on the structuralcharacteristics of the market, the features of various private trade institutions, and the changes
in them. This period has been seen merely ‘transitional’ with no major economic or politicalchanges, being stuck between the eras of dynamic changes—the eighteenth century and thehigh imperial era from the late nineteenth century onwards. Though it has recently attracted
scholarly attention, empirical studies have just begun.1 This has made our understanding ofIndia’s colonial transition too simple (and rather teleological), and has blurred thecomplicated process of transition and changes that occurred in the indigenous economy andsociety.
Recent studies have emphasised that the indigenous economy was resilient in many
respects in the face of the British commercial and political expansion. But, as this study willshow, fundamental changes were taking place in the meantime. Changes occurred not only byexternal forces or internal forces alone but also by repeated interactions between them. This
paper stresses the importance of such complexity and interactions—the ways and processes
that shaped the colonial economy and society.
In order to do so, this paper particularly examines the market, which has been ignored byrecent historical studies, and will take up the following three issues. First, it will show that themarket in eastern India was divided both structurally and regionally. Secondly, there wereseveral kinds of trade institutions that enabled a massive flow of commodities, cash, credit
and information. This paper particularly focuses on various types of intermediaries andmulti-caste merchant organisations, which played a significant role in connecting merchantsof various social origins and in acquiring credit at newly entered markets. Their presence was
the reason why the divided market structure did not interfere with this region’s buoyant
economy. Thirdly, the study will clarify that the advance of the English East India Company(hereafter the Company) rule led to an emergence of new merchants and an expansion of themarket, which fuelled confusion in the existing mercantile society. The merchant society
adjusted itself to this new situation by strengthening the role of intermediaries and merchantorganisations, and by utilising the new legal framework and social order instituted by the
British.

1

For example, Modern Asian studies, 38-3 (2004) featured articles on this period.
1

The significant role of private trade institutions and organisations in economic andhistorical change has long been studied. In the South Asian studies, Institutions and Economic
Change in South Asia, edited by Burton Stein and Sanjay Subrahmanyam, generated scholarly
attention in 1996. But after that, there has been little advance of historical studies that focuseson institutional aspects. This is partly because of the general decline of the field of economic
history particularly on India, and partly because of the widening gap between economics andhistorical/social studies. This study attempts to fill this gap in order to enhance ourunderstanding of the economic and historical transition.

The Salt Market in Eastern India under the Company Raj
The structure of the market
The Company began to monopolise salt in 1772, and through a series of reforms during the1780s, it established a stable system of monopoly that produced large profits.2 Salt, hereupon,
became the second largest revenue source for the Company, playing a crucial role insupporting the Company rule, and consequently in making the British India.
The market and trade in salt in eastern India were largely influenced by this change. The
Company took the following five measures in order to control the supply of salt. First, it
confined the production in certain districts along the Bay of Bengal, known as salt agencies.
Secondly, it banned salt imports on private accounts, which shut out the import of northIndian varieties of salt—the most important item of import for the pre-British Bengal. Thirdly,
it began to ‘import’ foreign salt mainly from Coromandel and Orissa instead.3 Fourthly, itprohibited the production of any other saline substances such as by-products of saltpetre
within the monopoly area. Finally, various preventive measures were introduced to suppress
illicit production and smuggling that was caused and stimulated by these changes. As a result,the market was rather converged in Bengal and Bihar; varieties of salt were restricted; and thestrict control of supply and the high price of salt created a market for illicit salt, which became2

The high-price policy characterised the Company’s system of salt monopoly, in which the Company
controlled the salt production and all the production was sold by public sales in Calcutta. This policy
was maintained by the synergy of the Company and large salt purchasers; the Company controlled the
supply while large purchasers bought up salt at public sales and kept up prices in the market. Thissystem functioned well until 1836, and the monopoly itself lasted until 1863. For details, see Sayako
Miki (Kanda), ‘Merchants, markets, and the monopoly of the East India Company: the salt trade in
Bengal under colonial control’ (Unpublished PhD thesis, University of London, 2005).
3 Since foreign salt was ‘imported’ on the Company’s account as revenue, this trade was not includedin the trade statistics.
2

an integral part of the salt market in eastern India.4 In spite of such changes in the market, theright to trade in salt was given exclusively to indigenous merchants. Study on the market
under such governmental control and problems caused by such control will shed light on theactual working of the market.
Salt was produced at six salt agencies (Hijili, Tamluk, Twenty-Four Parganas, Jessore,
Bhulua and Chittagong), whence exported northwards to the interior (see Map). Almost all
salt was brought to and stored in merchants’ warehouses at large salt entrepôts near the salt
districts, before being distributed to nearby wholesale markets, bazaars (regular markets) andhats (periodic markets) in towns and villages, and distant wholesale markets. These salt
entrepôts played a significant role in distributing salt, in adjusting the balance of
supply-demand, and in controlling prices, which were the notable functions of wholesalemarkets in general.5 A series of detailed price data at major salt markets6 suggest that these
entrepôts influenced prices in the neighbouring wholesale markets that depended on them forthe supply of salt. Accordingly, the salt market was divided into several regional market
zones centred on these entrepôts.7
As is shown in Table 1, a chain of several regional market zones formed larger
inter-regional commercial zones.8 There were roughly four commercial zones in eastern
India: western Bengal and Bihar; central Bengal; eastern Bengal; and Midnapur andwestwards.9 In the western Bengal and Bihar zone, western Bengal salt (the produce of Hijili,
Tamluk, and part of Twenty-Four Parganas agencies) and foreign salt were exported from thesalt entrepôts along the Hugli to places in western and north-western Bengal, and Bihar.
4

Miki (Kanda) ‘Merchants, markets, and the monopoly’; Sayako Kanda, ‘Energy in indigenous
industries: Re-considering the decline of the salt industry in mid-nineteenth century Bengal’, Keio
University market quality research project, discussion paper series DP2006-25 (February 2007).
5
See C. A. Bayly, Rulers, townsmen and bazaars: north Indian society in the age of British
expansion 1770-1860, Indian ed. (Delhi: Oxford University Press, 1992) , pp.411-412; Rajat Datta,
Society, economy and the market: commercialization in rural Bengal, c.1760-1800 (Delhi: Manohar,
2000), pp.213-216.
6 The Company was extremely keen to collect salt prices in principal markets, since price fluctuations
would affect its salt revenues. It obtained prices systematically through the reports of district collectors
and magistrates.
7 For details, see, Miki (Kanda) ‘Merchants, markets, and the monopoly’, chapter 2.
8 There were salt checkpoints known as chokis, along the boundaries of the salt agencies, where all
salt cargoes and accompanied rowanas or transit passes, were to be examined. Each rowana specified
the quantity of salt, the name of the agency, the destination, the name of the proprietor(s), and the dateof purchase. A close examination of the lists of checked rowanas and the price data at major markets
makes it possible to identify salt entrepôts, regional market zones, dominant merchant groups andlarger inter-regional commercial zones, as is shown in Table 1.
9 Regional difference in salt prices and the consumer preference, in addition to eastern India’s
physical feature, supported such clear regional division of the market. For details, see Miki (Kanda)‘Merchants, markets, and the monopoly’, chapter 4.
3

Twenty-Four Parganas and Jessore salt was supplied to places in central and north Bengal
mainly through Madhukhali and Sirajganj, which formed the central zone. In the eastern
Bengal zone, eastern varieties (Bhulua and Chittagong) were distributed mainly through
Narayanganj in markets in eastern and north-eastern Bengal. In the Midnapur and westwards
zone, salt was exported to places inland in south Bihar to Chotanagpur, mainly throughKashiganj.
The Ganges and Brahmaputra River systems obviously played a major role in forming
such commercial zones, as eastern India’s trade was particularly dependent on its
sophisticated system of river transport. This determined what varieties of salt to circulate ineach zone. But there was also a clear regional difference in the consumer preference in salt,
and this suggests that the market for each variety should be determined not only by eastern
India’s physical environment but also by its social and cultural diversity.10 Moreover, certain
groups of merchants of different social origins dominated the trade in each zone; interestingly
their territories and four commercial zones coincided with each other.11
Another important aspect of the market structure was that the trade was functionallydivided between the inter-regional and local trade. The former involved large wholesale
merchants in urban commercial centres and the transport of goods between wholesale markets(ganjs) on a large scale. The movement of commodities between wholesale and rural markets
by miscellaneous small merchants, variously known as byaparis, paikars and farias, werecategorised as local trade. Rather than being hierarchically structured, each trading process
maintained its own structure, and together worked as one trading system, inter-linked bywholesale markets (see Diagram 1).12
Private trade institutions and their functions
As was seen in the previous section, the geographical division and the functional dualism
were key structural features of the market, and different types of merchants operated in eachcommercial zone as well as in each trading process. Such divisions and differences did not,however, interfere with the province’s buoyant economy. Despite such divisions, certain trade
institutions allowed a flow of commodities, cash, credit and information on a large scale, and10

For details on the consumer preference and taste, see Kanda, ‘Energy in indigenous industries’.
For details on mercantile activities, see Sayako Kanda, ‘Family, caste and beyond: the management
techniques of Bengal salt merchants, c.1780-1840’, the XIV International Economic History Congress,
Helsinki, August 2006, http://www.helsinki.fi/iehc2006/papers2/Kanda.pdf.
12 For detailed discussion on the indigenous trading system, see Miki (Kanda) Sayako, ‘The English
East India Company and indigenous trading systems: the grain trade in early colonial Bengal’, in S.
Sugiyama and Linda Grove (eds), Commercial networks in modern Asia (London: Curzon Press
2001); Miki (Kanda), ‘Merchants, markets, and the monopoly’, chapter 6.
114

linked merchants of various social backgrounds. Most significant was the existence of a range
of intermediaries, especially gomastas and dalals, and merchants’ organisations, known asdals (or dalas).
Intermediaries played a crucial part in interlinking various merchants, who differed incaste, birthplace, business custom, and culture such as language, taste and appearance. A
merchant was generally unable to engage in any commercial transactions outside his local
market, because he was not seen as creditworthy and his family’s honour would not beprotected at places outside his locality, which was seen ritually impure. In other words, inprinciple, credit of a merchant and his family would not circulate beyond his local community.
Therefore, to extend his business to unknown places, a merchant would need to contact local
intermediaries (contact men) first. By establishing such linkages, he would be able to conductbusiness in a new marketplace without damaging his family’s reputation. That was whyintermediaries were usually men of credit and power in their respective territories. Thishonour system of family firms, together with the division of the market enhanced the positionof intermediaries as sources of information and credit who provided merchants with security,
and a way to connect with other people.13
A gomasta was an agent of a merchant or a manager of a firm. A mercantile house waspractically managed by several gomastas at its head office and branches. It is well known thatgomastas were well acquainted with all matters regarding their masters’ business since theyusually served the same family for generations, and that they even had more information of
the state of the market in their charge than their masters as they resided on the spot.14 In paststudies the gomasta had been seen just as a paid manager, 15 but their long experience inbusiness affairs, profound knowledge about a particular area, and the ability to deal with local
merchants were indispensable to a firm.16 On the other hand, merchants with no gomasta in a
There were local commercial languages and modes of trade, which outsiders were not able tounderstand. For example, in eastern Bengal, there was a peculiar language called tar between weavers
and cloth merchants, and the practice, known as ‘arithmetic of the touch’, in which the parties
communicated by touching each other’s hands under a cloth (James Taylor, A sketch of the
topography and statistics of Dacca, Calcutta: G. H. Huttmann, Military Orphan Press, 1840,
pp.267-268).
14
BCSO-Salt, the West Bengal State Archives, vol.263 (4/12/1829), no.9.
15
Gautam Bhadra described a gomasta as ‘a paid manager of the private trader’s concerns’, andclaimed they had ‘hardly any share in the profit and loss of his employer’s business’ (Gautam Bhadra,‘The role of pykars in the silk industry of Bengal, c.1765-1830’, Part I, Studies in history, vol.3, no. 2,
1987, pp.160-161).
16
Their importance was also clearly shown in the management of estates of new zamindars(landholders). It was said that the estates with gomastas who were well acquainted with the area andpeople were usually well managed, which led to extended cultivation (B. B. Chaudhuri, ‘Agriculture
growth in Bengal and Bihar, 1770-1860: growth of cultivation since the famine of 1770’, Bengal pastand present, vol.95, 1976, p.319).
13

5

particular area had ‘hardly any just or accurate knowledge of the state of the market’,17 andwere likely to be deceived by false information.
Dalals were usually denominated as commission agents or brokers. The dalal was‘essentially a contact man and information supplier’, and ‘received a commission on thetransaction and as such no capital was necessary for his work’.18 The dalal played a crucialrole in ‘introducing the parties to a bargain, setting a price, weighing or assessing the produce,
verifying the payment, accepting it, and recording the deal’, even in a small market.19
A merchant usually found business partners from members of his own family or of thesame caste. But these intermediaries were not restricted to the same caste as merchants. Manyof them belonged to higher castes such as Brahmins and Kayasthas. Upper-casteintermediaries would make it much easier to deal with merchants of various social origins.
Another significant feature of the indigenous trade during this period was the multi-caste
elite organisations, known as dals. According to S. N. Mukherjee, dals ‘were social factions,formed under the leadership of a rich man, a dalapati’. 20 Dals dealt with all mattersconcerning caste rules. Importantly, ‘most dals were multi-caste bodies; Baidyas, Kayasthas,
Tilis, Kaibartyas, Sadgops, Weavers, Subarnabaniks and Brahmins could belong to the samedal and the Brahmins in many dals accepted the leadership of other castes’.21 Some castes,
like Subarnabaniks, had their own caste dal. Many new dals were formed in Calcutta in thelatter half of the eighteenth century, as rich Hindus of different castes moved in. Thesefamilies, who were large zamindars, merchants or top administrators, formed thebhadralok—an open social group of elites. 22 Every bhadralok belonged to a dal, andinfluential bhadraloks among them set up dals and acted as dalapatis.
Mukherjee did not mention the influence of dals on their members’ trading activities.
However, dals must have affected the business of their members, because the majority of thewealthy population in early nineteenth century Calcutta was associated with commercial orbanking activities in one way or another. In Murshidabad, the dalapatis ‘managed thebusiness in Murshidabad for the collective body’, and ‘regulated the activities of its members
spread out over an extensive catchment area’.23 In these districts too, dals were multi-caste
17

BRP-Salt, IOR, P/105/5 (21/11/1834), no.1B.
Bhadra, ‘The role of pykars’, p.161.
19
Peter Robb, ‘Peasants’ choices? Indian agriculture and the limits of commercialization in
nineteenth-century Bihar’ Economic history review, vol.45, no.1, 1992, p.98.
20
S. N. Mukherjee, ‘Class, caste and politics in Calcutta, 1815-38’, in Edmund Leach and S. N.
Mukherjee (eds), Elites in South Asia (Cambridge: Cambridge University Press, 1970), p.71.
21
Ibid.
22
Mukherjee, ‘Class, caste and politics’, pp.47, 51-52, 56 and 71.
23
Datta, Society, economy and the market, pp.211-212.
18

6

bodies; ‘other castes had to be incorporated in the wider network of the dalas’,24 including
lower castes.
Therefore, it is safe to assume that dals were equivalent to multi-caste merchants’organisations found in other parts of India.25 The main functions of such organisations were
to guarantee members’ creditworthiness, to establish rules and regulations, to arbitrate indisputes, and to punish members who broke the rules. The loss of creditworthiness as amerchant indicated the loss of his family’s reputation, which could lead to a total ruin of thefamily, so it was necessary for the heads of mercantile families to take risk-avoiding
behaviour and follow the rules of such organisations and the verdict of dalapatis.
The influence of dals and dalapatis was not limited to large towns such as Calcutta andMurshidabad. Most Calcutta dalapatis had followers in the rural areas, in their zamindarisand their ancestral villages. 26 North Bengal merchants had regular meetings with theirdalapatis in Murshidabad. Leading salt merchants of Dhaka, who dominated the eastern
Bengal commercial zone, also acted as dalapatis. 27 It was highly likely that suchorganisations influenced the formation and division of commercial zones, as was seen earlier.

Confusion and New Order in Mercantile Community
Rise of new merchants
Late eighteenth-century Bengal saw not only an emergence of Calcutta banians orcompradors who served European traders but also a rise of up-country Bengali merchants
who were based on up-country marketplaces and dealt in articles mainly for domestic
consumption. A beneficial situation contributed to their rise. The Company’s policy-making
during this period was based in ‘the principle of free trade’ and ‘the centralisation of
tax-collection rights’. Particularly important was ‘a permanent settlement of marketplaces’, asSudipta Sen called it.28 Through a series of administrative reforms in the late eighteenth andearly nineteenth centuries, the Company state gradually secured control of marketplaces by
24

Ibid.
During the pre-British period, multi-caste merchants’ organisations were not uncommon in India.
Among them were sabhas in the north and mahajans in the west. In Bengal, unlike other parts of India,
there were few ‘professional’ or ‘traditional’ mercantile communities, known as Bania, so theformation of mercantile and elite communities seems to have been very different from other regions.
26
Mukherjee, ‘Class, caste and politics’, p.71.
27 For details of one of these merchants (the Baliati Babu family), see Kanda, ‘Family, caste andbeyond’.
28
Sudipta Sen, Empire of free trade: the East India Company and the making of the colonial
marketplace, (Philadelphia: Pennsylvania University Press, 1998), especially chapters 4 and 5.
25

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making them ‘public property’, and deprived zamindars (landholders) and other old interestsof privileges and authority over marketplaces. This process not only made it easier for theCompany to obtain access to production sites, though through intermediaries (the Company
gomastas), but also led to a proliferation of private marketplaces and enabled merchants ‘toexpand their direct control over the internal market’.29
The establishment of the salt monopoly was another favourable chance for theiremergence. Many merchants went into the salt trade, as exporters of salt to the market.
Among the new up-country merchants, salt merchants attracted much attention by theirsuccess and wealth.
As will be examined in the following section, the Company’s salt monopoly brought
about an emergence of large salt purchasers in Calcutta where all salt was to be auctioned.30
Many of them were established merchants or bankers (shroffs) of Calcutta, belonging to
Subarnabaniks, the long-established trading and banking community of Bengal; somebelonged to higher castes such as Kayasthas and Brahmans. Since they bought up salt merely
for speculative purposes and thus had little interest in the internal trade, up-country merchantsbegan to play a crucial role in exporting salt to the market. Unlike Calcutta’s salt purchasers,
many of them were rags-to-riches type of merchants, belonging to certain communities suchas Tilis, Tamlis (Tambulis), Sadgops, Basaks and Sahas (or Sunris)31—Sahas and Tilis inparticular. Therefore, there was a wide social and commercial gap between the establishedelite merchants who belonged to the bhadralok and the new merchants.
Some of the up-country salt merchants, such as the Pal Chaudhuris of Ranaghat in Nadia
District and the Nandis of Kalna in Burdwan District, had moved to Calcutta and settled
there.32 Since they were not only principal salt purchasers at public sales like the established
29

Datta, Society, economy and the market, pp.200-206.
Almost all large salt merchants were Bengali Hindus, except for the Greeks.
31
According to the original occupational category, it is said that Tamlis were betel-leaf
preparer-cum-dealers; Sadgops were cultivators; Basaks were cloth merchants—the sub-caste ofTantis (weavers); Sahas were the sub-caste of Sunris (distiller-cum-liquor dealers). The traditional
occupation of Tilis had been rather controversial. Some say that they were a sub-caste of theoil-pressers (Telis), but others say that they were a traditional trading community (S. C. Nandy, Lifeand times of Cantoo Baboo, Krishna Kanta Nandy: the banian of Warren Hastings, vol.1, Bombay:
Allied Publishers, 1978, pp.23-24). Also see, James Wise, Notes on the races, castes, and tribes ofeastern Bengal (London: Harrison & sons, 1883), pp.389-391. These several caste groups had given
up their traditional occupations and formed broader trading communities. According to Hitesranjan
Sanyal, the continuous formation of sub-castes generated social mobility in Bengal (Sanyal, Social
mobility in Bengal, Calcutta: Papyrus, 1981). When certain sections of a community took advantage of
new opportunities such as technological improvement or specialisation within their traditional
occupations, they formed new sub-castes.
32 For details on Bengali family firms including these families, see Kanda, ‘Family, caste and beyond’,in which their family trees and management techniques are re-constructed by collecting and examining
30

8

merchants in Calcutta but also large exporters to the market, a small number of such familiesof up-country origin came to dominate the market across eastern India. These families became
extremely wealthy and extended their business operations beyond salt to landholding,money-lending and dealing in other commodities. These new rich merchants, who weresocially inferior, became be recognised as the bhadralok.
How and when was the social and commercial gap between the established and the newmerchants filled? Changes in the composition of participants of petitions to the government
indicate the social status of new salt merchants and their relationships with the existing
mercantile community over the period. Until the mid-1820s, there were two types of petitionsin terms of social status of the participants: those led by speculative purchasers and by ‘real’
merchants. The former organised petitions of their own rather than joining new merchantssuch as the Pal Chaudhuris. Differences in commercial interests between these two groups
characterised this division; the former looked only at the state of the Calcutta market, while
the latter were interested in the market both in the interior and in Calcutta.
From the mid-1820s, Calcutta experienced successive financial crises. Since many saltpurchasers traded in salt papers (chars), on which merchants took out a loan from indigenous
bankers or British banks, large salt merchants were easily caught up in the fluctuations in thefinancial market.33 This series of financial crises produced many defaulters and bankrupts.
Frauds were widespread among large merchants; some of them were even arrested by thepolice. In the early 1830s, there was still a great deal of uncertainty among Calcutta
merchants, and the economic prospect was still poor.
Repeated petitions from the late 1820s involved many large salt purchasers of different
social origins. This suggests that the widespread confusion and uncertainty among merchants
facilitated the unification of large Calcutta purchasers as a collective body, in order to protect
their common commercial and social interests. Around that time, large salt purchasers began
to be collectively known as the dhuratias (the privileged). This meant that some of the newsalt merchants successfully joined the elite community in Calcutta by that time; some of them,such as the Pal Chaudhuris, were even seen as abhijats (aristocrats)—the highest social status
in the indigenous community.34

court papers preserved in the Calcutta High Court as well as various official documents (the Company
papers).
33 The vulnerability of the monopoly system and the impact of financial crises on salt purchasers are
discussed in detail in Miki (Kanda), ‘Merchants, markets, and the monopoly’, chapters 3 and 4.
34 Mukherjee, ‘Class, caste and politics’, pp.46-47.
9

Changes in trade institutions
This section looks at the background factors that entangled the confusion and brought about anew order among merchants. First, the function of intermediaries became intensified.
Secondly, the dals played a leading role in mitigating credit uncertainty among merchants byembracing a variety of merchants in the established community. Thirdly, Brahmans acquired
much greater importance as intermediaries and as dalapatis (the heads of dals).
Under the public auction system, the Calcutta-centred salt trading system emerged. Thiswas because up-country merchants had to attend the sales in Calcutta, to send their gomastas(agents) to the sales, or to meet first purchasers through dalals (brokers) in order to buy salt,
to pay for it and to obtain necessary documents (chars and rowanas) to receive and transport
it. When the sale by public auction began in 1788, rich men in Calcutta entered the salt
business as dalals of up-country merchants, since they were familiar with the business custom
and the mode of transactions in Calcutta. This kind of agency system was particularlycommon among merchants in western Bengal and Bihar, which area was equivalent of thewestern Bengal and Bihar commercial zone. Merchants in these regions were socially andculturally more diverse. In addition, the role of dalals became more important as anintermediate between anonymous buyers and sellers, when the trade in salt papers (chars) for
speculative purposes in the Calcutta market became popular during the first decade of thenineteenth century. British banks also began to accept salt chars as security for loan, whichbecame their main branch of business.
At wholesale markets in the interior too, merchants sold salt at their warehouses to otherwholesale merchants and smaller merchants (byaparis, paikars and farias) through theirgomastas and dalals who brought various merchants together. It was crucial for marketingstrategies of wholesale merchants to utilise the local information and commercial networks ofsmaller merchants, through their gomastas and dalals. 35 Though it was strategicallyimportant to establish warehouses at major entrepôts, this was not sufficient to be a trader atthese markets. It was crucial to establish personal networks and linkages with local
intermediaries, who guaranteed merchants’ creditworthiness.
The case of the salt trade suggests that the expansion of the market and the growth of
trade demanded intermediaries, and inevitably their importance increased.
How did merchants who shared common interests come together? When their common
interests were threatened, merchants united and expressed their dissatisfaction. The
government tended to see caste linkages as an important reason for enabling merchants ‘to35

For details, see, Miki (Kanda), ‘Merchants, markets, and the monopoly’, pp.269-275.
10

form combinations against the public with greater facility than in other countries’.36 Castecertainly played a role in interlinking merchants, but there were many cases where merchants‘combined’ across social and regional boundaries.
It had always been said that there was a ‘sub-monopoly’ by ‘combinations’ among large
salt purchasers. Petitions led by Calcutta’s privileged purchasers (the dhuratias) in the early
1830s were regarded as ‘combinations’ against the public interest. However, H. M. Parker,
the junior member of the Board of Customs, Salt and Opium, was of the opinion that ‘there isno general organised system of submonopoly strictly speaking’,37 and ‘submonopoly ishardly a correct word. It is rather an understanding a feeling of common interest which unites
the Dhuratea [privileged] merchants in some cases, though even in those very loosely’.38
But there was an exception; merchants ‘combined’ at the time of re-sale of defaulters’salt, since having the salt re-sold was regarded as extremely humiliating and shameful,
especially for respectable men.39 They always tried ‘to make all re-sales in short as difficultand disagreeable to this office as they possibly can’.40 As Ramratan Mallik, one of the mostinfluential merchants in Calcutta said, being a defaulter was highly injurious to ‘a merchant ofwealth, opulence and credit’, and would ‘affect his credit within the mercantile community in
Calcutta’.41 This clearly suggests the importance of reputation, without which a man could
not be a merchant.
The dals and dalapatis always brought merchants or different castes together, andfacilitated a circulation of members’ credit in the market during this period. A merchant wholost credit due to a failure would be punished by the dal or in the worst case would be
expelled from it. Therefore, the dals seem to have been behind such ‘combinations’, and tried
to save fellow members.
As said, the majority of intermediaries and dalapatis were Brahmans by caste. Wheneversalt belonging to a Brahman was to be re-sold, the sale became a disaster. According to thegovernment, ‘a Bramin, besides resorting to the customary modes of exciting the sympathy
and procuring the support of the other dealers, used those means which a Bramin alone can
employ to deter them from breaking him down’.42 Many Brahmans were involved in the salt
business during the period. They were at first acting just as dalals (brokers), since ‘although
36

Datta, Society, economy and the market, p.234.
BRP-Salt, IOR, P/105/17 (1/12/1835), no.24.
38
BRP-Salt, IOR, P/105/20 (2/1/1836), no.16.
39
BRP-Salt, IOR, P/105/17 (1/12/1835), no.24. When purchasers failed to pay for their purchases
within a certain period of time, their salt was re-sold by the Company.
40Ibid.
41 Ramruttun Mullick v. East India Company, SCP (equity), 1818.
42
BRP-Salt, IOR, P/105/17 (1/12/1835), no.24.
37

11

the Shasters [Shastras] prohibit trading in salt to a Brahman, that prohibition … is notconsidered to extend to agents between the buyers and the sellers to the article’.43 The
government saw the dalals, who were mainly Brahmans, as one of the chief impediments tothe operation of salt sales. Brahman dalals were able to bring the up-country merchants intothe ‘combination’ of large purchasers of Calcutta. More information thus went to the hands ofBrahman dalals, who were concurrently dalapatis in many cases.
External forces of change
The mercantile communities adjusted themselves to the new economic and social
environment by making the most of their existing trade institutions and social relationships.
At the same time, institutional changes outside mercantile communities began to affect them.
First, the so-called ‘caste society’ emerged under the British.44 Though controversial, the‘caste society’ was a hierarchical society with Brahmans on the top according to the Laws ofManu, and was divided into numerous ‘castes’, which was translated as classes. This change
raised the social and ritual status of high caste intermediaries even further. As was seen earlier,merchants of socially inferior depended more on Brahman dalals and gomastas not only forbusiness purposes but also for the enhancement of their social status within the indigenous
community, which enabled them to enter dals and secured their creditworthiness.
Secondly, as the Company was in the process of materialising ‘the rule by law’, a new
judicial system was established in Bengal in 1793.45 From the late eighteenth century, theCompany developed the common law by integrating various religious customary laws andinterpreting customs and common practices. Adjudications by private judges like dalapatis
were examined and gradually integrated into official law. At the same time, through extensive
projects of discovering and examining the Shastric [Hindu] texts and other indigenous legal
codes, ‘the Hindu law’ was codified and formed. In civil cases, the Hindu law was applied to
Hindus, and the Islamic law was applied to Muslims. When the existing laws did not cover asituation, equity was to be applied.
In Calcutta, many merchants began to compete with each other to go to court in order tosolve various matters including debts, contracts, joint venture, caste issues, and inheritance,
though arbitration by the court was not popular outside Calcutta until the mid-nineteenth
century. Many families spent huge sums on litigation, as did the Pal Chaudhuris and other salt
43

BRP-Salt, IOR, P/105/26 (19/7/1836), no.8.
For example, see Susan Bayly, Caste, society and politics in India from the eighteenth century tomodern age (Cambridge: Cambridge University Press, 1999), chapter 1.
45 Fujii Takeshi, Rekishi no naka no kāsuto—kindai indo no <jigazō> [ Caste in history—aself-portrait of modern India] (Tokyo: Iwanami-shoten, 2003).
44

12

merchants. According to Samachar Darpan, a Bengali newspaper, ‘for the Zemindars lawsuitin the Supreme Court was esteemed a token of respectability and when to say that a man had
two or three cases in equity gave him as great distinction as to say that he had spent [Rs.]20,000 at the Doorga Pooja’.46 Many rich men in Calcutta, thus, went to court to display theirprominence. This situation encouraged particularly nouveaux riches like the new saltmerchants.
Why did Calcutta elites become so dependent on the new British legal system? It appears
that ‘the customary law’ and ‘the arbitration by a respectable merchant according to the
tradition of merchants’, which was one of the main roles of dalapatis, were no longer working
effectively in Calcutta. A rapid growth of the bhadralok and diversification of its members’social backgrounds had gone beyond dalapatis’ control in Calcutta.47 Even though manycases were judged in accordance with equity as common law and the so-called ‘Hindu law’
were still in the process of being prepared, official judges gradually filled in for dalapatis.
In addition, the new legal system was more protective of properties than communal
arbitration, so it was highly likely that it became more attractive for merchants whose firstpriority (dharma) was to protect their family’s honour and physical continuance. Especiallywhen the fear of failure prevailed among merchants of credit in the late 1820s and early 1830s,
many of them became more dependent on the court in order to avoid default.

Conclusion
By intensifying existent trade institutions, the confusion in mercantile communities caused by
the rise of miscellaneous ‘amateur’ merchants was unsnarled, hence did not interfere with the
expansion of the market stimulated by the advance of the Company rule. First, the function ofintermediaries was strengthened. Credit and information from the intermediaries successfully
met the demand of new merchants, and supported the expansion of their commercial networks.
More information seems to have come into their hands. Moreover, since the majority of new
merchants were socially inferior, intermediaries of higher castes played a crucial role ininterlinking various buyers and sellers. Secondly, dals incorporated newly emerged merchants
Cited from Chattopadhyay, ‘Police tax and traders’ protest in Bengal 1793-1798’, in Basudeb
Chattopadhyay, Hari S. Vasudevan, and Rajat Kanta Ray (eds), Dissent and consensus: protest in
pre-industrial societies, India, Burma and Russia (Calcutta: K P Bagchi, 1989), p.31. Durga Puja isthe biggest festival in Bengal held in autumn for worshipping the goddess Durga.
47 In the rest of the province, codified legal systems were not yet in effect and ‘traditional’ arbitration
was much highly regarded as a trustworthy method (Bayly, Rulers, townsmen and bazaars,
pp.420-421).
46

13

through high-caste dalals, which further diversified members’ castes. By doing so, theestablished mercantile communities restored order, while new merchants gained access tocredit outside their local community, and both of them successfully avoided their reputationfrom being harmed. External changes—the emergence of ‘the caste society’ and theintroduction of the new legal system—also influenced private institutions and governance.
It is well known that from the mid-nineteenth century, particular mercantile or banking
communities such as the Marwaris, the Parsis and the Chettiyars emerged, based on bazaars
in Calcutta, Bombay and Madras. These communities took advantage of the newtransportation and communication networks under the British, expanded their commercial andbanking networks beyond South Asia, and finally spearheaded India’s industrialisation to thisday. Though the British occupied the ‘organised sector’ of the economy, their emergence has
been regarded as the symbol of resilience and dynamism of the indigenous economy undercolonial control. Even so, the findings of this study strongly suggest that the colonialtransition was not as simple as previous studies have claimed, since changes in the economy
at the regional level had gone through more complicated processes.
Nevertheless, from the mid-nineteenth century on, the homogenous communities rather
than multi-caste or heterogeneous ones obviously responded successfully to changes andfurther expansion of the market. The role of intermediaries became even stronger. But
merchants had become more dependent on intermediaries from their own communities rather
than from different castes. This was partly because the emergence of ‘the caste society’
gradually drove away Brahmans from any commercial activities, as ‘the Hindu law’ wasgradually being enforced. Brahmans lost their information advantage and no longer
functioned as the centre of information networks. Moreover, since private law was based on
personal law, the ties among the same caste members became strengthened across regionalboundaries. This certainly encouraged horizontal ties—caste-based networks over much wider
geographical area.
As the new judicial system prevailed, the system of local communal arbitration began tolose its effectiveness throughout the British territories. In Calcutta, dals, which were once sopowerful in the society, had completely disappeared by 1870. But this did not mean that thestate took over all the functions of private institutions. Caste provided its members with credit,
information that had been accumulated within the community, personal networks and othernecessary facilities. Intermediaries still played a central role in caste-based commercial
networks. Meanwhile, caste councils (panchayats) worked as a private or communal court,
and influenced members’ personal and ritual matters. Since honour or reputation was integral
part of a firm, caste rules were influential to members’ commercial activities.
14

Table 1: Commercial Zones in Eastern India

Commercial
Zones

Major
Varieties of
Salt

Major
Distribution
Markets

Business Bases ofMajor Wholesale
Merchants

Major ‘Castes’of Merchants

Bengali:
Tili
SadgopTambli, etc.
Bihari:Kalwar, etc.

Western

Hijili;

Ghatal; Amta;

Calcutta (Hatkhola,

Bengal&Bihar

Tamluk;Ghirihati; Kalna;

Chitpur); Kalna;

24-Parganas; Katwa; Sutanuti

Katwa;

Foreign(Calcutta); Patna;Marketplaces along

Salkhia (Market

the Hugli

for foreign salt)

Central24-Parganas; Madhukhali;

Faridpur District;

BengalJessore;Tallyganj (south

Sirajganj

BhuluaCalcutta)

Eastern

Bhulua;Narayanganj;

Narayanganj;

BengalChittagong;

Nalchiti

Dhaka & Faridpur

JessoreMidnapur &Westward

Hijili;TamlukTili
Saha

Districts

Kashiganj

Kashiganj;
Midnapur District

15

Saha
Tili
(Greek)Tili?

Diagram 1: Personal Networks in the Indigenous Trading System

Inter-Regional Trade

Local Trade

Wholesale Markets

Wholesale
Merchants(ganjs)Gomastas
Dalals16

Paikars; farias; byaparisGlossary
Abhijat

An aristocrat

Bazaar

A fixed market

Bhadralok

A gentleman or the gentry

ByapariA merchantChar (Chhar)

A delivery order

Choki (Chokey)

A toll or customs station

Dal (Dala)

A social faction among the upper classes in large
towns

Dalal

A broker

Dalapati

A head of a dal

Dhuratia

A proprietor or a large salt purchaser at public sales

Faria (Pharia)

An itinerant merchantGanj

A wholesale fixed market

Gomasta

An agent or a manager in a firm

Gola

A warehouseHat

A periodic market

Hundi

A bill of exchange

PaikarAn itinerant merchant, small wholesale trader

RowanaA pass or a permit

ShroffA money-changer or a banker

ZamindarA landholder

Zamindari

The estate or tenure of a zamindar

Abbreviations
BCSO-Salt

Bengal Board of Customs, Salt and Opium Proceedings—Salt

BRC-Salt

Bengal Revenue Consultations (Salt, Opium and c.)—Salt

BRP-Salt

Bengal Board of Revenue (Miscellaneous) Proceedings—Salt

IOR

India Office Records, British Library

SCP

Supreme Court Papers, Calcutta High Court

17

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