Om Amriteswari Namah

Unique Characteristic Features of Indian Economy and Business

(Compiled by Cultural Dept – Amritpuri Campus- Amrita Vishwa VidyaPeetam)

India today is a rich country inhabited by poor; an ancient country but a young nation.
When 23% of its population is still struggling with poverty, India is zooming into the 21 st
century to be one of the richest countries of world. A seeming contradiction, but it is an
economic reality. Along with Chinese Dragon, the Indian elephant is dancing its way to
prosperity. With its GDP at $3.288 Trillons , India stands today as fourth strongest
Economic Superpower in terms of PPP. (Purchasing Power Parity). Twelfth in terms of
GDP calculated at Nominal Prices ( Source : IMF data 2008)

Today, when whole world is shrinking with economic slow down (2008 &2009), India
and China are doing good, contributing their best to World Economy. The saga of Indian
riches is not a new one to be inked in Golden words, but a shinning fact of richness with
more than 2000 years of history.

India was very prosperous country in ancient times; People of World were attracted by its
riches. The reputed Harvard Economist Maddison Angus wrote a book called “The
World Economy – A Millennial Perspective”. According to him, in the year Zero CE( ie
2010 years ago)World GDP was calculated at $102.5 billions and India’s GDP was
around $33.75 Billions, around 32.9 percent , ie almost one-third of global GDP. India
was followed by China with its GDP of $ 26.82 billions around 26.2 percent. This means
India and China contributed to 59% of world economy and rest of world contributed only
41% (1).

The richness of the ancient India was based on major factors like very high yield of
Agriculture & Food Production, good Industrial Output based on various vocations
practiced in India, an enterprising International Trade, innovation in Science and
Technology , high standards of Indian Education system and above all emphasis on
Spiritual, moral and ethic principles
Ancient India’s Prosperous
Agriculture:
• The Greek historian Megasthenese,
Rest of India who visited India about 2300 years
the 25% ago had noted,“ the greater part of
world the soil is under irrigation and
40% consequently bears two crops in a
year” (3)
United China
kingdom 33% • During the year 1760, in
2% Chengalpattu region(Madras
Presidency)agricultural lands
yielded at least 2.5 tonnes of paddy
per hectare according British
Manufacturing Output of World in the revenue records (4)
Year 1750 • Alexander walker who visited India
Source : Keenedy Paul, in the book “The rise in 18th century had given detailed
and fall of the great Powers- Economic description of Indian Agriculture.
Change and Miltary Conflict from1500-2000 The Walker’s Report can be found
(2) in Dharmapal’s great volume “
Indian Science and Technology in
the 18th century (5)
India withstood many shocks and survived for last thousand years the onslaughts from
the barbaric invasions from the Middle East that had commenced in the eleventh century
C.E. The riches that were looted out from Indian Soil; ruthless torching of universities
like Nalanda etc. the exploitation of natural resources during British regime; the
methodical destruction of Indian vocations and trade ; systematic annihilation of Indian
educational system; the impact of Industrial revolution that happened in Europe and the
Two World Wars that ensued, stand testimony to India’s Economic Downfall. Every
page of blood stained Indian history reveals the above facts.

For the first forty years after

“Angus Maddison, a Cambridge historian has independence, Modern Indian
estimated that in 1700, India and China, each had a Economy was sandwiched by
share of world income of about 23%, about the communistic ideals of Soviet
same as Europe’s. By 1950 Europe’s share had Russia and the Principles of
increased to around 30%,China’s had fallen to 5% Western Capitalism. The
and India ‘s had collapsed to just 3.8%, this decline Government Controls were
is now beginning to be reversed. Rapid growth- caging and chaining the surging
witnessed first in china 25 years ago and more Indian Economic giant from all
recently in India suggests that both countries are sides. In the year 1991, the
on the way to reclaiming their rightful places in the chains of Indian Economic
world economy. “ Elephant were removed and
- Dr.Manmohan Singh, renowned economy was liberalized to
Economist & Prime Minister of India( in have its natural growth and
an article published by wall street journal – India is now on its road of
Jan27 2006- www.ibef.org)(6)
prosperity.

India has unique systems of Economy, Business and Management that are being
practiced for ages. These traditional Indian economic and business principles had helped
India to survive in its darkest years of crisis and in the current years of economic
uprising. The entrepreneurial spirit of Indians is being lauded very loudly in recent years.
The inherited talents of Indian business Psyche is being manifested very significantly.
The traditional & modern Indian Business Communities are today hoisting the Indian
flag of Economic Pride.

Let us have a look at the basic characteristic features of Indian Economy and Business.

Economy, whether it is modern or ancient, thrives on factors like Production, Services,

Trade, Employment generation, Revenues through taxation etc. The goods and services
that are produced in sectors like Agriculture or Industry hold the key for wealth creation.
There are certain unique cultural factors that stimulate growth in India and these factors
stand as time tested principles, the core roots for the mighty Indian economic tree.

1.Joint family & Community Support is the heart for Indian Economy: Even
today, around 90% of major industrial houses in India are run by “ Business families”(7).
The Indian society is family based. The smallest social, economic and cultural unit of
India is family. The institution of strong families with close knit communities is the
unique feature of Indian civilization. Every activity around India revolves around
families. There is no individualism as such in India unlike western countries, where self
interest is the guiding principle and self is placed before everything. In India, everyone
belongs to family and has a specific duties and responsibilities. Each family is a part and
parcel of a community (caste) of close-knit relatives.

Everyone who starts a venture does it not just for himself but for the family as a whole.
With the result all businesses are family businesses. Siblings, children and grandchildren
participate in them and inherit them. The parents, grandparents, siblings and even
contribute funds to venture. Other close relatives, community men and friends also
supply capital for ventures. Indian communities support business ventures of families,
this capital is being termed by economists as “Social Capital”. This social capital
provides a strong base to economic development. In this system, everyone plays one’s
part in the business for the overall benefit of the family and the community around them.
It is a typical business feature in India that housewives also contribute by way of helping
the husbands in conducting the business apart from performing the household
responsibilities. The siblings are exposed to business environment from their childhood
and are groomed to obtain necessary competence in conduct of business/profession.(8)

The head of family business shall be eldest member of family and his word shall be final
in all respects. He is often respected for his experience, high sense of integrity and spirit
of sacrifice.

“If at the midnight on august 15 1947, as the world indifferently slept, 18 families owned
almost every company in the country, at the mid-day on August 16,1997, as the global
economy jealously watched,461 of the 500 most valuable companies in the country were
controlled by families. Thus it is the business family that is the most powerful form of
enterprise in corporate Indian even today.”(9)

But, India’s lifeline is Non Corporate Sector. It is single largest sector in the Indian
economy with 42.12 millions enterprises and 98.97 millions working for it.( Source:
Economic Census 2005). (10) They constitute proprietary firms, Partnership firms and
Small Scale Industrial Units. These business units work as clusters supported by the
community.

The Indian business is society driven. It is the community that supports the business
family. The traditional Indian trading class is called vaisyas/ Bania. Traditionally in India
the most of major businesses are dominated by traditional bania families. The Aggarwals
and Guptas(marwaris) in north, the Chettiars ,Komatis & Syrian Christians in south, the
parses, gujarathi jains and banias, Muslim Khojas and Memons in the West , Marwaris in
east and across the India. (11)
But in the last one hundred years, new communities other than vaisya/bania order have
taken up businesses in a big way and are equally shinning on par with traditional trading
communities.
 • Nadars, Gounders , Reddiars and Kongunadu Naidus & Tamil Brahmins of
Tamilnadu .
• Konkani Muslims,Gaud Sarswat Brahmins of Kokin Region; Batkal Muslims ,
and Idigas of Karnataka.
• Ludhiyana Khatris & Ramgharias of Punjab & Harayana.
• Ezhvas ,Nairs, Malbar Muslims of Kerala
• Kammas, Reddys , Rajus and Kapus of Andhra Pradesh
• Patels,borah muslims of Gujarath: Kunbis(Patils) of Maharastra
• Jats of UP;Roys & babus of Bengal. (12 &13)

2. Indian Society is Savings Oriented:

Traditionally Indians are known for savings. Saving is the habit of Indians and forms part
of culture and tradition. The official savings rate as percentage of GDP is 36.4 % for the
year 2007-08 & 32.5% for the year 2008-09 ( Source: Economic Survey 2009-10). Where
as USA’s saving rate is around 14% of GDP in 2008.

When western economic thought believes in spending and consumerism, eastern thought,
including countries like China and Japan believe in Savings. In USA people are advised
to spend more than what they earn by opting for finance schemes.In India, since ancient
days people are advised to save for the rainy day. The typical Indian woman fasts only to
save for future of family. Indians are the largest buyers of the gold. Indians have
tendency of investing in gold. Gold is purchased and often gifted when a baby is born,
when named, when a girl becomes a major, at the time of marriage and many other
festive occasions. Gold is treated as the insurance of social security for the large majority
of people in India. The investments in gold are much larger than stock market investment
in India.(14)

There are many indigenous avenues that facilitate savings among Indian communities
especially Chitfunds. Today in India, NGO initiated Micro finance schemes are utilized
by the poor communities as a method of saving device than as a financing option.

It is the habit of saving, which is imbibed in the Indian Culture, that had made India to
survive in the toughest times.

3. Self Employment as the Base.

Millions of tiny independent cells make our body. Little drops of water make the mighty
ocean. Ancient Indian Economy was built on principle “ Small is Beautiful”. Millions of
Traders and Professionals (service providers) through their vocations and trade
contributed immensely for the might of Indian Economy. The Self Employment and
entrepreneurial quality is considered as a virtue in Indian Tradtion. Vindura Neeti of
Mahabharatha considers “Self – employment as the best status of life.” A weaver,
cobbler, goldsmith, a vegetable vendor, a Doctor, Farmer, even the trader, obtained his
livelihood by his independent activity. Even today the above fact can be verified. A farm
laborer who works in a field for daily wages also owns a few acres of land and cultivates
them and sells the produce independently. (15)
“Indians prefer self-employment. This was revealed at the 62nd round of the National
Sample Survey Organisation (NSSO) report on employment situation of India in 2005-
06. The number of self-employed people were highest both in rural and urban India in
2005-06. While the national average was 254 per 1,000 people in rural India, it was 149
for the urban areas.(Source: financial express 29th jan 2008)”(16)

4.Earn Money through Hard Work –No Easy Money Please!

Even today, many Indian business men all over the world are known their “ Hardwork”
“Intelligence” and “Integrity”. The are known for making money by selling the products
at a competitive price. The NRI success as the wealth creators has its origins in Indian
culture. The inherited spirit of “Indian hard work” and Indian Resurgence, finds its
source in Vedas. “Krishithonasthi Dhurbhiksham” , is an inspirational sayings of our
Ancient Rishis, meaning a hardworking person never gets ruined. There is a Rig Vedic
saying that “Akshairmaa Divyah Krushimath Krushaswa“ -“Don’t gamble for earning,
but work hard for living”(17)

Making Quick money is a sort of gambling. Stock Exchanges, all over the world are
becoming big gambling dens, where game of speculation is being played. The World
today is buzzing the mantra of making quick money. The Stock Exchange Transactions,
Trading in Commodities and Future, Real Estate Deals and making profit out of creating
Artificial Hype ,all have single hidden agenda of a making “Quick bugs and easy
money”. When these transactions dominate the economy and when wealth is created
without hard work and is a product of hype, the economies are bound to collapse in a
long run. Today’s economic recession being witnessed in the world has roots in it. Quick
money makes one lazy and search for shortcuts of making money leads to speculation
trade and greediness ensues.

5. Dharma as the Pillar of Economy (Artha):

In India, the Artha (Wealth Creation) & Kama (Desire Satisfaction) are always guided
and guarded by Dharma( Righteousness and Ethical conduct) and Moksha( Spiritual
Freedom). Among the four Purusharathas, (Dharma,Artha, Kama & Moksha), the
Dharma was given the foremost importance for creation of wealth (Artha) and for
satisfaction of desires(kama). Even for achieving Moksha (spritual freedom of the soul)
people followed the path of Dharma.

According to Varna Ashrama Dharma , the Vaisyas are the trading community and were
contributing to ancient India’s trade and commerce a big way. But Production of goods
and services for over all prosperity of the economy were contributed by all the four
Varnas. Barbers, Farmers, Goldsmith, Blacksmith, Weavers, Tribals were contributing to
the economy through their services. Almost every community was doing agriculture in
India and even Brahmins had agricultural fields and were performing agriculture.
Most of business was carried on the basis of “Faith” and “Trust”. Be it a business venture
or vocational trade, the finance or loan was generated from the community on the basis of
verbal commitment. Even today this system prevails in India. Bad debts among the
traders are less in India, compared to other countries.

The concept of “Athithi Devo Bhavo” applies to business also. Every customer is
believed as God (The originator of business transaction.) and tradition continues. The
words of Mahatma Gandhi, who hails from a traditional trading community of Gujarat
reflects the Indian ethos of business
“A customer is the most important visitor on our premises. He is not dependent on us.
We are dependent on him. He is not an interruption of our work. He is the purpose of it.
He is not an outsider of our business. He is part of it. We are not doing him a favor by
serving him. He is doing us a favor by giving us the opportunity to do so.” (A Speech in
given in South Africa in 1890)

It is a Business practice in India, that a person, who follows a Vocation or Trade, offers
the first “Product” to God. Companies like Hero Honda, Bajaj, Mahindra and Mahindra
continue the tradition of offering its first produced vehicle of any new brand to Lord
Venketswara of Tirupathi. In most of the hotels or eateries in India, (even traditional
Muslim hotels) the first prepared item is kept aside for God and later distributed to a
person (beggar) as Prasad.

Most of Professional/vocational instruments in India are worshipped before starting of

the activity and special Puja is performed in a year, during the festivals of Dasara and
Deepavali. Many traders set aside some part of daily income as an offering to deity of
their choice (Ishta Devata) and contribute that money for the development of Temple and
creating facilities in and around temple. The above custom is prevalent, even in
traditional Muslim trading communities of India.

Mahabharatha: While explaining Raja Dharma ( Principles of Governance) Bhisma

exhorts Dharmaraja certain principles to be followed while imposing the taxes. King
should able to collect taxes without troubling the people like a bee collecting honey
from flowers ;Like milking a cow without troubling the Cow & Calf; Like a leach that
sucks the blood without people knowing it. Looking after Sales and Purchases, the state
of Roads, the Food and Dress and the Stocks and Profits and Traders, the king should
impose taxes on them.( Source:MahabharathaSanthi Parva- Chapters 87 (13) & 88 ( 4 & 5) )

Ramayana : Lord Rama while advising his brother Bharata about the secrets of
administration, says the following words, about the King’s duty in protecting the
Creators of Wealth. “Do the people who depend on Agriculture, Cattle Rearing and
Commerce feel happy about the state of affairs of Your governance? In their happiness
and well being lies country’s prosperity.” (Source : 100 Sarga- 48 verse-Ayodhya Kanda
– Ramayana-)Rama was explaining about importance of wealth creator’s wellbeing for
over all prosperity of the country.
Kautilya’s Arthashastra: The legendary treatise on Administration, Economics and
Foreign policy mentions many Dharmic principles of fair trading“No artificial scarcity
shall be created by accumulation of commodities constantly in demand; these shall (be
made available at all times and) not be subjected to restrictions on when they may be
sold (2.16.7)”
Kanna Vikramaditya, S, in the book,”The Economic History of Corporate form in ancient
India describes similarities between an ancient form of business organization called “
Sreni” and Modern day US corporation. During the Gupta Empire these “Srenis” were
prominent and was acting as bedrock for economy.(18)

The Indian “ Bills of Exchange” is called “Hundis”. Even today they are very popular
mainly a negotiable instrument and as a credit instrument among business communities.
The Marwari “ Partha” system of accounting is considered to be the simplest way of
calculating costs and profits every day. It is popular among Marwari community. In Birla
group of companies, this systems prevails even today . It seems world’s second richest
man Lakshmi Mittal insists on partha style of accounting form his managers (19)

6.Artha (Wealth ) & Moksha (Spiritual Goal)

The famous Economist E.F. Schummacher (Author of book “Small is Beautiful”), asserts
that, Buddhisitic Economies of East successfully and naturally blend the Spiritual Values
with Economic Progress.(20) Gandhian Economist Joseph C.Kumarappa noted that the
Economic Systems based on the values of permanence would be sustainable. Especially
Kumarappa in his book ‘Economy of Permanence” discussed that when old civilizations
of Eygpt, Babylon,Greece and Rome are no more exist to discuss their tales; in a striking
contrast even older civilizations of India and China, which base their economies on
altruistic and non-violent principles stand tall and strong today with much vigor and
strength.Spiritual values like altruism and non-violence, when practiced sincerely and
honestly, irrespective of position or profession leads to perfection. .(21) Most of Indian
wealth creators become spiritual in their old age and renounce their wealth and seek
peace and realization.
There is a beautiful episode in Mahabharata as narrated by Bhishma to Yudhistra while
explaining Raja Dharma – The conversation between a great ascetic ‘Jajili’ and a
cosmetic selling merchant ‘Tuladhara’ on matters of Spirituality and Commerce. It
reveals how an ordinary trading merchant can obtain liberation by adhering fair business
principles, even without performing austerities and penance. (22)

The opening verses of Isavasya Upanishad wonderfully conveys the spiritual essence that
pervades Indian ideal of Wealth Creation. It says, “in this ever changing universe every
thing is pervaded (owned) by the God, hence develop the virtue of renunciation and enjoy
the life without coveting others Wealth. Live hundred years this way by doing sincere
efforts and there is no other way.”(23).
What ever we earn or acquire in this world had to be left here, when we leave the world.
We come into world empty handed and die empty handed. We own nothing in this
World, everything is owned by God the creator. Knowing this truth, let us develop the
quality of Non-Attachment and enjoy the life, without falling pray to the greed and
coveting others Wealth.( that is not earned by one’s efforts). Create Wealth ! Produce !
Do Not become greedy and covet others Wealth! Earn! Share! Live and Let Live!
Enjoy life with virtues of righteousness and Non-attachment.
Peace .. Peace .. Peace

References & Acknowledgements:

The above material has been prepared based on the book “Indian Models of Economy, Business
and Management by P.KanagaSabathi, Director. Tamil Nadu Institute of Urban Studies,
Coimbatore, Published by Prentice Hall of India Pvt Ltd – 2008”and other books as referred
as under.

1. Indian Models of Economy, Business and Management by P.KanagaSabathi,

Director. Tamil Nadu Institute of Urban Studies, Coimbatore, Published by
Prentice Hall of India Pvt Ltd – 2008 page No : 7
2. Ibid page No : 14
3. Ibid page No : 9- (Quotes from India’s planned Poverty by Daya Krishna)
4. Ibid page No : 12-( Quote fromTimeless India Resurgent India-Centre for policy
studies Chennai)
5. The Organic Farming Source Book by other India Press.
6. Article published by Wall street journal jan27, 2006-www.ibef.org
7. Indian Models of Economy- P.Kanagasabapathi 2008 , op.cit- Page No:194
8. Ibid page No : 113,114 &115
9. Ibid page No : 205- Quote from Business today, Annual Survey(aug22-sep6).97
10. Ibid page No : 168- Quote from Economic census 2005
11. Ibid page No : 216 &217
12. INDIA’S NEW CAPITALISTS(Caste, Business and Industry In Modern
India)
By HARISH DAMODARAN-NEW INDIA FOUNDATION 2008
13. –Ibid- subtitles of book
14. Indian Models of Economy- P.Kanagasabapathi 2008 , op.cit- Page
No:116 &117
15. Indian Models of Economy- P.Kanagasabapathi 2008 , op.cit- Page
No:120 &121
16. The Financial Express 29th jan 2008 ( Source :web)
17. Rig vedic quote fromRushipeetam ( The Telugu Spiritual magazine April
2004)
18. Indian Models of Economy- P.Kanagasabapathi 2008 , op.cit- Page
No:162 & &163( Refer the quote)
19. Source:www.jeremyjosephs.com
20. SMALL IS BEAUTIFUL - A STUDY OF ECONOMICS AS IF PEOPLE
MATTERED.BY E.F.SCHUMACHER PUBLISHED IN INDIA BY
RADHAKRISHNA-JUNE1978- PAGE 48
21. Indian Models of Economy- P.Kanagasabapathi 2008 , op.cit- Page
No:107
22. Mahabharata- Santhi parva( sub parva- mokshadharma parva- chapters
261-264)- English translation M.N Dutt- Parimal publications -New delhi
23. Isavasya Upanishad Verses 1 & 2

Om Santhi