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Chapter: 11th History : Chapter 16 : The Coming of the Europeans

The Economy

India was primarily an agricultural economy.

The Economy


India was primarily an agricultural economy. Most of the population lived in the rural areas and they depended on agriculture for their livelihood. In addition to food grains, they grew several commercial crops. These included sugarcane, oil seeds, cotton and indigo. There was a brisk trade in food grains, ghee, jaggery and other food products from the surplus areas to the deficit areas within India. Food grains, particularly, were transported on coastal boats and the Tamil region, for instance, imported food grains from the Andhra region and Bengal.

On the west coast, food grains from Gujarat were exported to the Malabar region in return for pepper, cinnamon and ginger. Food grains were also shipped to the Dutch establishments in Sri Lanka and Batavia.

Cotton Manufactures

India also had a strong manufacturing base and was particularly famous for the variety of cotton fabrics produced at various centres across the country. Weaving was the second most important economic activity in the country, supported by subsidiary activities like spinning and dyeing. Manufacturing – that is, handicraft production – was carried on both in urban and rural areas. Luxury crafts, like metalwork were urban based. Weaving was mostly done in rural areas. India had a great advantage in that cotton was grown in the country. Indian craft communities also possessed specialized knowledge about dyeing cotton using chemicals like alum to produce a permanent colour. The Coromandel region was famous for its painted (kalamkari) fabrics which had designs drawn on the cloth and then dyed. By the sixteenth century these had become staple products for consumers in south-east Asia, especially the Indonesian islands. Cotton fabrics were the most important exports from all parts of India to the rest of the world. This continued well into the eighteenth century.


Production for an external market was widespread, so that there was a high degree of commercialization of production beyond subsistence levels. This required the organization of marketing by agencies which were distinct from the producers, that is, a class of merchants. Merchants thus linked producers who were dispersed in the rural areas with urban markets within the country, and with external markets outside the country. The extensive trade network in the country operated in several circuits, from the village markets, to regional markets and large urban commercial centres, culminating in the ports which were the gateways to the markets outside the country.

Merchant Groups

Just as the various kinds of markets functioned at different scales, merchants were also not a homogeneous group. There were traders and retailers who serviced markets in smaller centres. If mercantile activity can be deemed to be a pyramid, this class of merchants would be at the base of the pyramid. At its top were the great merchants, who were the prime movers in overseas trade with great reserves of capital, who controlled the producers in the hinterland of the ports. They generally employed the services of a network of brokers and sub-brokers to acquire goods from the interior regions or hinterland of the port towns. These agents could be said to form the middle tier of the merchant pyramid.

Banking and Rise of Merchant Capitalists

Commercial institutions were also well-developed to promote such extensive trade. Because a variety of coins were in circulation, there were money-changers or shroffs to test coins for their purity and decide their value in current terms. They also served as local bankers. Instead of transferring money as cash from one place to another, merchants issued bills of exchange, known as hundis which would be cashed by shroffs at different destinations at a specified rate of discount.

This well-developed infrastructure and organization of trade enabled the rich merchants to amass large fortunes. Such merchant princes or capitalists were found in all parts of India – the banias and Parsi merchants of Surat, the nagarseths of Ahmedabad, the Jagat Seths of Bengal, and the merchant communities of the Coromandel. Contemporary European observers noted that these merchants appropriated all the profits from trade to themselves, while the earnings and condition of the weavers and peasants were pitifully poor. This rendered them especially vulnerable to natural calamities like famines. In the Madras region, for instance, famine occurred at least ten times between 1678 and 1750. Sometimes there was widespread famine which lasted for several years on end. This drove the rural poor to sell themselves into slavery. Dutch records from the Coromandel regularly mention male and female slaves among the cargo sent to Batavia.

Overseas Trade

The overseas trade from both the east and west coast was incorporated into Indian Ocean trade which had stabilized into a well-set pattern by the sixteenth century. Shipping in the Indian Ocean was segmented and carried on over several demarcated stages. Ships coming from China and the Far East sailed up to Malacca, where their cargoes were unloaded, and in return, goods from the west were taken back. From Malacca, ships sailed to the west coast of India, to Calicut or Cambay or Surat in Gujarat. Such intermediate ports were known as “entrepots”. Goods from Europe and West Asia were exchanged in these ports for goods from the east, as well as locally produced pepper, spices, dyes, clothes and food grains. In the sixteenth century, Calicut gradually lost out to the Gujarat ports which were served by a much larger hinterland producing a wider range of products. The ports of the Coromandel coast, like Masulipatnam, Pulicat and other ports further south served as intermediate ports for the ships from Burma and the Malay peninsula.

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