In 2011, a US citizen of Pakistani extraction sued India’s Custodian of Enemy Property for the return of his shares of Western India Vegetable Products Ltd. (WIPRO), a leading Indian information technology firm listed on the New York Stock Exchange. In his civil suit filed in Bombay High Court, Abubaker Cochinwala argued that the Indian Custodian could no longer term the shares as “enemy” property since he, who had received the shares from his Pakistani father in 1951, was a US citizen. The father’s contested gift was worth approximately $153 million in July 2011.Footnote 1
Mr. Cochinwala’s abortive quest illustrates not only the enduring and messy nature of South Asia’s decolonization but also points to the understudied consequences of Partition on Indian capitalism. Culminating in the establishment in August 1947 of India, under Prime Minister Jawaharlal Nehru of the Indian National Congress (INC), and of Pakistan under Governor-General Muhammad Ali Jinnah of the Muslim League, the decolonization of British India has been described as a “spectacular moment of state-making.”Footnote 2 The postcolonial nation-states have given rise to twin statist myths—“the Muslim League for Partition” and “the Congress for unity”—as well as a lasting controversy over the trajectory of the subcontinent’s history and nationalization.Footnote 3 The orthodox historiography of independent India and Pakistan has been challenged by scholars such as Ayesha Jalal, whose “revisionist” theory decenters the foundational date of 1947, and by Vazira Zamindar’s processual analysis of state and citizen formation.Footnote 4 More recently, the spatial turn in historiography has highlighted implications of the new geographies established by the contentious postcolonial borders that partitioned British India.Footnote 5 Nisha Mathew’s theorization of an intermediate zone between the retreating British Empire and the nascent nation-states underscores trans-regional aspects of the ensuing economic vacuum and reveals a transformation that ultimately benefited regions beyond South Asia.Footnote 6
It is not just Cochinwala’s waylaid shares that speak to forgotten connections. Unofficial trade (i.e., trade sanctioned neither by India nor by Pakistan) is five times greater than official trade. Neither Partition nor even ensuing tensions and wars between the postcolonial states have fully severed the economic linkages that had existed across British India.Footnote 7 These stubborn linkages are particularly surprising given that the idea of economic development had been mobilized by Indian nationalists in the 1930s and 1940s in opposition to the drain of wealth by the colonial state, leading to a wide range of conceptions of economic planning in the final years of the British Raj.Footnote 8 The economic linkages that have endured in spite of India’s and Pakistan’s post-Partition hostility become more legible when seen from the lens of the numerous constitutional and political possibilities that circulated in late colonial British India before the accelerated timeline implemented by colonial authorities in 1947.Footnote 9
This paper examines important movements of capital and changes to the significant shipping sector during the period of transition from British India, whose patronage underpinned a largely unified economy, to a postcolonial order mediated by the antagonistic territorial nation-states of India and Pakistan.Footnote 10 It makes a scholarly contribution to the role of business during imperial retreat, and aims to fill gaps in official narratives, metropolitan and postcolonial alike. “End of Empire” documents discovered in 2011 point to Britain’s efforts to maintain archival and narrative control over imperial retreat, but scholars have also drawn our attention to efforts by postcolonial nation-states to rewrite “connected” histories that predate “decolonization.”Footnote 11
To fill these lacunae, scholars have searched for alternatives, from literature to oral history.Footnote 12 Indeed, Urvashi Butalia’s pioneering oral history transfigured historiography some 50 years after Partition, and has been followed by works on material histories of Partition, including Anindya Raychaudhuri’s transnational approach to memory and recent oral histories of business leaders.Footnote 13 Whereas these approaches tend to analyze history and memory from within a state-centered framework, this paper draws attention to other possibilities offered by South Asian business archives, many of which precede the establishment of postcolonial nation-states. Decentering postcolonial state formation thus decenters the category of “Indian” business, providing for more complicated narratives than the nationalist version of Indian shipping, and greater context to a recent study of the Tata Group that points to World War II, not Independence in 1947, as the major turning point in Indian capitalism.Footnote 14
This paper builds on the conception of business history as an alternative archive of decolonization and the Global South, and seeks to reconcile corporate histories within global histories of capitalism.Footnote 15 South Asian merchants and companies responded variously to the momentous transition from colonial to postcolonial: from WIPRO (which refused to ally with the Pakistan movement and did not relocate) to Habib Bank (bankers associated with the Muslim League who moved from Bombay to Karachi after the Partition) to yet other companies such as Godrej, which were committed to the anti-imperialist swadeshi (economic nationalism) but lagged in their commitment to the postcolonial order.Footnote 16 By teasing out business histories from the weighty and dominant state-driven narratives of South Asia that have largely overshadowed economic histories of the region, this paper aims to better understand the rearticulations of economic and commercial relations that accompanied the establishment of territorial national economies in 1947 and to reconstruct a more exact historical account of imperial retreat.Footnote 17
Based on a close study of the reporting in Commerce, a leading financial weekly in late colonial British India, this paper focuses mainly on two corporate announcements: the October 1945 advertorial announcing the launch of Mahindra & Mohammed, now better known as the Indian multinational Mahindra & Mahindra; and a detailed proposal in May 1947 outlining the launch of Muhammadi Steamship Company, which became a Pakistani company. These cases of companies established shortly before the territorial nation-states of India and Pakistan in August 1947 reveal an initial acceptance of a unitary Indian economy, in spite of their differing political affiliations. Their subsequent retreat from this commitment in favor of postcolonial India (in the case of Mahindra) and postcolonial Pakistan (in the case of Muhammadi) was a response to the modalities of Britain’s imperial retreat and highlights the contrast between the expansive economic visions circulating in late colonial India and the narrower realities following the economic territorialization of India and Pakistan.
Overlooked Economic Ties
Business historians tend to be relatively circumspect about the effects of the Partition of British India, sometimes for pragmatic limitations that hamper research, notably the tortuous process of procuring visas that curtails travel between the post-colonial descendants of the Raj.Footnote 18 In an expansive 2018 overview of 300 years of Indian business history, Tirthankar Roy makes a mere five references to Partition, even though he notes that the exception to the region’s characteristic openness to trade, capital, and labor flows in the period from 1950 to 1990 follows almost immediately from the Partition that coincided with Independence.Footnote 19 Relocations to Delhi by as significant an institution as the Punjab National Bank—established in Lahore in 1895—are glossed over and the leading bank is referred to as an “Indian-origin bank.”Footnote 20 Similarly, in his 2014 introduction to Business History’s special issue on India, the doyen of Indian business history Dwijendra Tripathi used a map of India, territorially distinct from its neighbors.Footnote 21 This map is based on the contested borders of 1947, which were only made public after the formal independence of India and Pakistan – as strong an indication as any of the deeply political nature of the boundaries that embody the two-nation theory.Footnote 22 Indeed, the unproblematized acceptance of the 1947 borders obscures British Indian ownership of important Indian companies such as Tata Steel Ltd., Birla Corp. Ltd., Hindustan Unilever, and ACC Ltd., all predating August 1947. This contested ownership remains in evidence many decades after the rushed division of British India: in 2016, the government of India held around $400 million worth of contested shares of listed Indian companies, holdings that have served in recent years as a “windfall” to Delhi.Footnote 23
As scholars have shown, World War II transformed British India into a major supply base for the Allied war effort, driving massive profits for Indian businessmen and prompting an intensification of industrialization beyond the traditional industrialized provinces of Bengal and Bombay to the point of “exhaustion of both machinery and labour.”Footnote 24 Emboldened and strengthened, Indian industrialists were planning, even before the war ended, for new industries and a new future under a national government.Footnote 25 Not enough attention has been paid to the disruptions and dislocations caused by an economic partition that surprised industrialists affiliated with both the INC and the Muslim League and profoundly reinscribed Indian capital and commerce. The division of an economy, which in 1945 had been the world’s tenth-largest producer of manufactured goods, disrupted merchant and trade networks that extended not only across India, Pakistan and the subcontinent, but across the Indian Ocean to the Persian Gulf and British Malaya.Footnote 26
Thus, in January 1947, the founder of Western India Vegetable Products (the company whose shares Cochinwala attempted to recover in 2011), lamented the lack of clarity about the political life of the country. Speaking less than a year after the share issue of his WIPRO, Mahomed Husein Hasham Premji, outgoing president of the Congress-affiliated Indian Merchants’ Chamber (IMC), was concerned in January 1947 by “portents of a general breakdown.”Footnote 27 Neither Premji nor his successor foresaw the implications of August 1947 on territories that had been, at the very least, economically interdependent. Premji’s inability to plan for the modalities of the postcolonial order does not appear to be an anecdotal failing; even long-established businesses such as the Godrej group, founded in 1897, would only formalize the postcolonial borders in March 1949, issuing a directive that designated shipments to Karachi as “exports.”Footnote 28 To highlight the foundational link between Indian and Pakistani independence in 1947 and its obverse, the division of the British Indian economy via Partition, this paper uses the term Partition/Independence.
Methodology and Approach
Focusing on the narrow timeframe of 1945 to 1948 and on Partition/Independence, this paper examines two late colonial Indian companies before situating the cases in economic discussions occurring in British India and which extended to the “Indian” India of Princely States, comprising two-fifths of the subcontinent.Footnote 29 Both the announcements from Mahindra & Mohammed and from Muhammadi Steamship Company are gleaned from a microhistory of the short-lived Bombay-based financial weekly, Commerce, A weekly review of Indian financial, commercial and industrial progress.Footnote 30 One of only a handful of English-language financial weeklies in late colonial India, Commerce was considered influential in Bombay within a few years of its establishment, despite its fairly limited circulation. It was one of the four newspaper sources used by the Reserve Bank of India in its own institutional history.Footnote 31
Commerce was launched in 1935, the same year as the Government of India Act, and during a period of significant churn in both Indian politics and journalism. The act, which provided for provincial autonomy and a federal union with the Princely States at the center, provoked debates in the leadership of the INC, which only intensified in the wake of their party sweep in the ensuing elections.Footnote 32 Following a bitter clash between the INC’s Sardar Patel and Jawaharlal Nehru over INC leadership in Bombay, Commerce was established as a paper in support of the new constitutional landscape.Footnote 33 Reflecting Bombay’s centrality to Indian-owned industry, commerce, banking, and insurance, Commerce focused on British Indian companies. Its coverage was thus in sharp contrast with the largely non-Indian editorial staff of Capital, based in the center of British capital and industry, Calcutta. Commerce maintained a pro-Indian tone, giving space to the role of Princely States but in no way confining its coverage to the land mass of South Asia.Footnote 34 The corporate announcements of both the companies I elaborate on thus are situated in the co-production of an economy that was grounded in a particular reading of political possibilities, one of many that were cultivated and contested in the plethora of English-language and vernacular periodicals in late colonial India.Footnote 35 The materiality of Commerce’s discourse can be understood as structuring a particular form of national imagination implying specific state-nation relations.Footnote 36
Along with Commerce, I relied on the archives of the Indian Merchants’ Chamber (IMC), a broad-based organization of Bombay-based trading interests and part of the national umbrella group the Federation of Indian Chambers of Commerce (FICCI).Footnote 37 The IMC advertised its nationalist credentials through its embrace of Mahatma Gandhi.Footnote 38 Officials’ statements and IMC initiatives to mediate dislocations following August 1947 underscore the surprise within IMC circles at the division of the British Indian economy. In contrast to the “inevitability” theory that had convinced influential businessmen such as INC-affiliated industrialist G. D. Birla by the late 1930s of the necessity to partition India along religious lines, the paper concludes that well-connected businessmen—some associated with Muslim League politicians linked with the creation of Pakistan—were making plans for a future that would not materialize.Footnote 39
A recent study highlights this point, for the banking sector foresaw no economic dislocations, not even in Bengal and the Punjab, the provinces that would be most affected by Partition.Footnote 40 Although the well-connected multinational Unilever was informed by March 1946 that “some form of Pakistan” was inevitable, the specific shape of that Pakistan remained unclear, even in June 1947, when Viceroy Louis Mountbatten announced that there would be no unitary India, but two separate Dominions of India and Pakistan.Footnote 41 Commerce’s coverage revealed the many questions that remained after the announcement of the Mountbatten Plan:
Third June, Nineteen Hundred and Forty-seven will go down as the “D” Day in the history of India. Whether it will prove to be the day of deliverance or the day of the devil, or as some prefer to describe it, the day of “Indian Munich,” the future historian alone can tell, for that will depend on how the British Government’s new plan for transferring power to Indian hands is put into effect and worked.Footnote 42
The National Purpose of Mahindra & Mohammed
In a full-page announcement in Commerce on October 13, 1945, Mahindra & Mohammed introduced itself as “a co-operative effort to secure for India that industrial development so indispensable to the full realisation of her dreams.” Inscribed within late colonial ideas of planning for economic development, the announcement evokes an impatience with “plans, many plans” and instead offers a “positive, concrete and co-ordinated scheme to develop India’s resources and raise the standard of living of the masses.”Footnote 43
Opposition to an economically damaging colonial state, mobilized by Indian nationalists in the 1930s and 1940s, had shifted in the final years of the British Raj into a wide and competing array of economic planning.Footnote 44 The most famous of these, the “Bombay Plan,” aimed to mobilize an ambitious Rs. 10,000 crore, or Rs. 100 billion, to boost prosperity through industrialization.Footnote 45 Bearing the imprint of leading industrialists J. R. D. Tata, G. D. Birla, and Purshotamdas Thakurdas, the Bombay Plan had its origins in a broader INC-initiated conclave of the National Planning Committee.Footnote 46 The Bombay Plan was published in two parts between January 1944 and 1945, revealing the significant clout of Indian industry during this period. Welcomed by Commerce as “a clear picture of what the proposed economic development of India is going to be like, or rather must be like,” it was promptly embraced by the colonial government and FICCI although with disparate criticism.Footnote 47
At the time of Mahindra & Mohammed’s 1945 announcement, it was clear that Indian industrialists’ needs for capital imports could only be met by the United States, the world’s biggest supplier of capital goods.Footnote 48 Their American hopes had largely been quashed by the evident failure of Indian industrialists’ lobbying efforts, prompting the urgency in Mahindra & Mohammed’s announcement.Footnote 49 After a “careful three-year study of American war-time achievements,” Mahindra & Mohammed offered a scheme devised by Indian businessman K. C. Mahindra that benefited from “the support and ready assistance of a group of business men with long experience and a firm faith in their country’s destiny.” Rallying around technocratic expertise—“the tools with which to finish the job of India’s industrial and agricultural rehabilitation”—the announcement champions “the acceptance of the fact that ability is the sole test of merit and advancement and that neither colour, creed nor caste should stand in the way of harmonious working.” Moreover, the announcement showcases Mahindra & Mohammed as “a joint venture of Hindus and Muslims,” which appears almost naïve in light of the 1947 Partition of British India that followed less than two years later.Footnote 50
The assumptions of the Bombay Plan included a recovery of the huge “sterling balances” accrued by Britain during the war and owed to British India, as well as the vital need to maintain the “economic unity of India.”Footnote 51 To quote more fully from the first part of the Bombay Plan:
Underlying our whole scheme is the assumption that on the termination of the war or shortly thereafter, a national government will come into existence at the centre which will be vested with full freedom in economic matters. The maintenance of the economic unity of India being, in our view, an essential condition of any effective planning.Footnote 52
In light of these assumptions, Mahindra & Mohammed was very much a technocratic complement to the plan’s vision for the need for industrialization, and, moreover, fitted the plan’s conception of what was deemed Indian. Rather than a ‘fun fact’ as Mahindra’s 2016 website referred to its origin as Mahindra & Mohammed, the Hindu-Muslim joint venture proposed in late 1945 appears to be an explicit effort to include both communities in the name of the company. To consider Mahindra & Mahindra as an Indian company merely renamed, as some business historians do, glosses over a shift in the conception of India that occurred with Partition/Independence.Footnote 53
With objections to the Bombay Plan ranging from the left’s concerns about “laissez-faire capitalism” to reservations expressed by some Muslim League politicians about the plan’s premised powerful state, which they feared would undermine provincial autonomy, the idea of India outlined by Mahindra & Mohammed was closer to that of Bombay’s leading industrialists.Footnote 54 So formidable were the Tata and Birla groups—the latter worth six times as much at the end of World War II as at its start—that the Bombay economist and public intellectual C. N. Vakil, who had excoriatingly critiqued colonial war-finance and Britain’s sterling balances before Partition/Independence, referred to the Bombay Plan as the “Tata-Birla Plan.”Footnote 55
For the Muslim linked with Mahindra, Ghulam Mohammed (also spelled Mohammad), was no Muslim Leaguer. He brought with him significant experience in commerce, finance, and administration, having worked alongside J. C. Mahindra at Tata Iron and Steel. In 1942, Mohammed was named in a soon-to-be-launched Tata venture to manufacture machine tools alongside notables such as Sir Ardeshir Dalal, whose subsequent involvement in the Bombay Plan was rewarded with a ministry position in Delhi, as well as M. C. Ghia (the outgoing president of the Bombay-based IMC) and A. D. Shroff (who had represented India at the Bretton Woods conference).Footnote 56 As a Finance member of the Nizam of Hyderabad’s government, Mohammed had turned around the budget of the wealthiest of India’s Princely States and positioned Hyderabad to face the postwar period “to go ahead with the policy of developments and reconstruction of activities by nation-building departments, thus adding to the moral and material resources of the State.”Footnote 57 Inscribed within the context of personal relationships in nationalist- and government-affiliated circles, and the rising tide of enthusiasm of Indian entrepreneurs, the joint venture of Mahindra & Mohammed makes perfect sense. It also underscores that at this stage in the history of the subcontinent, at least one section of Indian capitalists was explicitly rallying behind the notion of unity and cooperation between Hindu and Muslim Indians, between castes and regions. This is particularly relevant, given that the joint venture survived Partition, albeit without Mohammed. Mahindra & Mahindra went on to build a global presence from independent India, including a foray on the New York Stock Exchange.
The corporate archives that are being established by Mahindra have not yet revealed documents pertaining to any financial transactions related to Ghulam Mohammed’s share at the time of Partition/Independence.Footnote 58 Nonetheless, within six months of Partition/Independence, even as tensions between India and Pakistan were mounting over Kashmir and over their postcolonial financial imbrications, a public announcement by company chairman K. C. Mahindra that the company’s name had been changed to Mahindra & Mahindra Limited effective January 14, 1948.Footnote 59 Mohammed had by this point become the first Finance minister of Pakistan, and in spite of his vituperative battle with Reserve Bank Governor C. D. Deshmukh, was evidently cooperating with economist C. N. Vakil.Footnote 60 Mahindra & Mahindra went on to establish technical collaboration agreements with international companies to produce machinery, automobile components, and vehicles, and was listed on the Bombay Stock Exchange in 1955; by 1958, it was ranked among the top 20 managing agencies of independent India.Footnote 61
The Curious Issue of Muhammadi Steamship
On May 31, 1947—at the tipping point of the Pakistan movement—a group of Muslim industrialists closely associated with Jinnah’s Muslim League advertised the launch of the Bombay-based Muhammadi Steamship Company, with the details of its prospectus appearing in Commerce.Footnote 62 Muhammadi’s announcement is replete with religious text but makes no mention of Pakistan. Instead, it alludes to the postwar plight of British shipping and describes the business case for “a Steamship Company in all its aspects and also for the purpose of running Air services either supplementing or separate from its steamship service.”Footnote 63 Of the 14 directors named in the Muhammadi announcement, five were based in Bombay, five in Bantva (in western Kathiawar), one in Karachi, and two in Calcutta. Leveraging the variegated sovereignties of the small Princely States of Kathiawar—“the only ports outside British India which maintained a significant overseas maritime trade, mainly with the Persian Gulf, the Horn of Africa, and East Africa”—the ambitious vision of Muhammadi Shipping hinged on colonial India’s strategic oceanic connections. The plan aimed “to acquire, gradually, a tonnage of about 50,000 tons” to establish routes from Bombay to Karachi; to Colombo via Calicut and Cochin; to Rangoon and Calcutta; to Madras; via Karachi to Persian Gulf ports; to Aden, Suez, and Europe; to Mombasa; to Rangoon, Java, China, Japan, and Australia; and to the Cape of Good Hope and the Americas.Footnote 64
The beginning of the endgame of the British Raj had been sounded in February 1946. Prime Minister Clement Attlee, whose Labour government had already begun nationalizing key British industries, announced Britain would ensure Indian independence “no later than June 1948.” Indeed, Commerce dubbed 1946 the “most eventful year in India’s history,” a year in which Britain’s Cabinet Mission flushed out the Muslim League’s willingness to settle for less than a sovereign Pakistan, and, even as violence across the sub-continent ratcheted to unprecedented levels, an interim government navigated a brittle coalition between the INC and Muslim League.Footnote 65
To this political uncertainty, one must add a litany of socio-economic disturbances. These ranged from joblessness and serious food shortages to workers’ strikes and a mutiny by the Royal Indian Navy that had spread to Bombay, Karachi, and Madras in February 1946; concerns about sovereignty are highlighted by the moves made by one of the Princely States, Travancore, toward a declaration of independence.Footnote 66 As this paper shows, the disruptions would also include a stock market strike.
The standoff between the INC and Muslim League had deepened after Calcutta proved to be a political powder keg, ignited by the Muslim League’s call for Direct Action Day in August 1946. The hitherto unimaginable violence of the Calcutta killings, in which more than 4,000 people were killed and 15,000 maimed, fanned religious polarization and encouraged retaliatory violence. With violence and anarchy spreading to other parts of Bengal, to Bihar, and to the United Provinces, an outraged Birla concluded that the Calcutta killings marked a point of no return between the two communities.Footnote 67 Whether as a result of those emotions or of the extremely close connections with the INC, it appears that the Birla group, India’s second-largest industrial grouping, was better than others in relocating machinery and liquid assets before Partition.Footnote 68
The Calcutta killings were certainly a significant turning point in INC–League relations. Nonetheless, the anti-colonial parties would maintain an uneasy coalition in the interim government for another few months. It was not until the ill-fated budget for 1947–48—presented by Finance Minister Liaquat Ali Khan of the Muslim League on February 28, 1947—triggered an industrialists’ crisis that cooperation between the INC and League appeared doomed.Footnote 69 Big business shrilly denounced the populist budget, framed to discipline exorbitant war-time profits and “based on Quoranic injunctions.”Footnote 70 The interim government’s member for Industries and Supplies expressed his concern; so did Purshotamdas Thakurdas, one of the architects of the Bombay Plan, who warned in March 1947 against “any deliberate set-back to industrial development.”Footnote 71 Stock exchanges in Bombay, Calcutta, and Madras closed in protest, forcing Nehru, whose INC had only reluctantly given the major finance portfolio to the Muslim League, to distance himself from the budget and his long-endorsed socialist values so as to soothe businessmen:Footnote 72 “Representatives of industry and commerce … almost on the verge of panic, as a result of the taxation proposals of the Hon’ble Mr. Liaquat Ali Khan, sought some consolation in the speech of the Hon’ble Pandit Jawaharlal Nehru on 3 March in New Delhi.”Footnote 73 Within days of Nehru’s reversal, the INC would pass its resolution of March 8, 1947 accepting the partition of Punjab.Footnote 74
Yet in May 1947, the directors of Muhammadi were intent on the expansion and growth of the Indian transportation industry. Unlike Ghulam Mohammed, discussed in the preceding section, many of Muhammadi’s directors were closely associated with the Muslim League. Seth Mirza Ahmad Ispahani, one of the two Calcutta-based Muslim League directors, had been president of the Calcutta-based Muslim Chamber of Commerce and has been described as Jinnah’s “confidant in Calcutta.”Footnote 75 Underwriting the ambitious new shipping line were the “keen businessmen” behind Habib Bank, which as noted earlier, relocated to Pakistan following Partition/Independence.Footnote 76 Another director, Seth Yusuf Abdoola Haroon has been described as a Karachi-based merchant. His involvement suggests that the directors of Muhammadi were also versed in financial and economic considerations at an international level. In January 1946, Haroon was involved in the legislative assembly discussions over India’s ratification of the articles of agreement of the International Monetary Fund and International Bank for Reconstruction and Development. The committee that he served on was unable to weigh the cost to India of accepting the terms of the Anglo-American loan agreement against membership in the Bretton Woods institutions given the pending sterling balance negotiations with Britain.Footnote 77
It is highly unlikely that the League-affiliated directors would have been unaware of the unstable political landscape, or the political fallout of what was seen as Liaquat Ali Khan’s budget, all of which makes the timing of their announcement in May 1947 even more surprising. Although the text employs religious language—“God willing” and “Inshallah”—it is the role of Princely States, rather than of Pakistan, that is underscored by the proposal to develop the smaller ports on both coasts, “and where such harbours are within the territories of Indian Princes to obtain their co-operation in such development.”Footnote 78 Figuring prominently in Muhammadi’s announcement is Bantva, located about halfway between Bombay and Karachi on the Kathiawar peninsula, and one of the hundreds of small Princely States whose layered sovereignties within the British Empire was thrown into uncertainty after Partition/Independence.Footnote 79 Rather than a territorial Pakistan, the Muhammadi scheme seems tailored to maritime and trans-imperial cosmopolitan commercial networks that would rapidly be disrupted by the emergence of nation-states.Footnote 80 Muhammadi Steamship’s plan thus appears in the cross-hairs of two strands of historiography: Ayesha Jalal’s revisionist theory of Partition that questions whether Jinnah truly wanted a separate territorial state of Pakistan, and what Claude Markovits has described as the understudied contrast in Indian economic history between a continental and a maritime economy based on its strategic position in the center of the Indian Ocean.Footnote 81 At the very least, Muhammadi’s subscription list, which was to open on May 28 and close on June 23, 1947, indicates that Muslim industrialists closely associated with Jinnah did not anticipate that the economic unity of the subcontinent would be compromised by the Pakistan project.
Muhammadi’s announcement proposed a transportation network on a grand scale. The reliance on both Bombay and Karachi would have leveraged long-established Central Asian/Indian Ocean/Arabian Sea trade networks, as well as the more recent changes during World War II that had transformed Karachi into a crucial node of air travel. With British shipping crippled by the Germans, and civilian shipping often diverted to military ends, Karachi had become a pivotal staging post for the British Army as well as a base for US military involvement.Footnote 82 At the time of Muhammadi’s announcement, some eight airline companies operated in India, run by powerful players, including a joint venture of the Nizam of Hyderabad, India’s richest Princely State, and Tata Airlines.Footnote 83 Western One India, which provided air services between Bombay, Delhi, Ahmedabad, Saurasthra, and Mangalore, was owned by the Scindia Steam Navigation Company, which was well connected to the INC and celebrated for its role in challenging British interests and establishing a nascent Indian shipping industry.Footnote 84
Invoking nationalist arguments similar to those of Scindia, Muhammadi Steamship argued that the Indian Mercantile Marine was largely excluded from the voluminous shipments of cargo and passengers along India’s extensive coastline.Footnote 85 There were other similarities as well; more than a year earlier, in January 1946, Commerce had reported that Scindia, which had been championed by the nationalist media since the 1920s for challenging the British shipping monopoly in Indian coastal waters, was seeking to raise capital.Footnote 86
Muhammadi would never compete directly with Scindia. The “crisis of state power” resulting from the uneven pressures of World War II, growing anti-imperial sentiment, and increasingly complicated high politics embodied in the interim government precipitated the simultaneous announcement by Prime Minister Clement Attlee and Viceroy Lord Louis Mountbatten on June 3, 1947, that there would be no unitary India, but two separate Dominions of India and Pakistan.Footnote 87 The Bombay Stock Exchange, where restrictions imposed after Liaquat Ali Khan’s budget had been gradually lifted, responded to the Mountbatten Plan with “erratic fluctuations.” According to Commerce, rumors and political uncertainties about the plan deflated investor confidence.Footnote 88
Muhammadi’s ambitious 1947 vision for a worldwide transportation company would not materialize, although the company went on to look for ships and listed on the Karachi Stock Exchange in 1949.Footnote 89 By the late 1950s, Muhammadi’s finances had deteriorated, and the company was nationalized in the 1970s. By comparison, by 1957, Scindia had established cargo routes from independent India: via Aden and Port Said to London, Liverpool, Hamburg, Bremen, Antwerp, and Rotterdam; via West Africa to Apapa, Lagos, Accra, Takoradi, Free Town, and Dakar; and via Black Sea ports in the USSR.Footnote 90 The extensive circuit is, nonetheless, not as expansive as the scheme outlined by Muhammadi in Commerce.
Indeed, it would seem that the failure of Muhammadi’s ambitious global vision coincided with the gradual fade of postwar efforts to develop Indian shipping. A report in March 1947, subsequently adopted by the colonial government of India, had targeted an increase of two million tons over five to seven years, as well as complete Indian control over coastal trade: 75 percent of India’s trade with Burma, Ceylon, and with geographically adjacent countries; 50 percent of India’s distant trades; and 30 percent of trades formerly carried in Axis vessels in the Orient.Footnote 91
At a conference of Indian and British shipping interests held in London in July 1947, after Mountbatten announced the division of British India, the Indian delegation saw its pleas rebuffed. Much to the distaste of the Indians attempting to negotiate the acquisition of ships, the delegation was asked to acquire the necessary tonnage before claiming its overseas trade.Footnote 92 The British were once again negotiating with Indians to “accept our policy of non-discrimination in shipping matters,” quite the opposite of the objectives formulated by Indian authorities in March 1947 to wrest control of local waters from British shipping.Footnote 93 Shipping matters deteriorated further with the entrenchment of the postcolonial order: the rivalry between India and Pakistan escalated during the 1965 war, when two Scindia ships were impounded by Pakistan in the port of Karachi and three Pakistani ships were impounded at Indian ports, and Indian shipping companies suspended their services to Pakistani ports.Footnote 94
The Essential Economic Unity of India
The changes in the plans of Mahindra & Mohammed and those of Muhammadi Steamship following Mountbatten’s Partition Plan suggest that these otherwise well-connected businessmen had not planned on the form of territorial partition that came to pass on the subcontinent. The name change to Mahindra & Mahindra took effect only in mid-January 1948, nearly half a year after Partition/Independence. By this time, as this section argues, it was increasingly evident that assumptions of economic cooperation and continuity were fraying fast. The Bombay Plan’s essential condition of “the maintenance of the economic unity” had given way to intractable differences between India and Pakistan over their joint sterling account, sparking a feud between Ghulam Mohammed and Reserve Bank Governor C. D. Deshmukh that ultimately led to an early termination of monetary arrangements between the postcolonial nations and the establishment of the State Bank of Pakistan in July 1948.Footnote 95
Neither Mahindra nor Muhammadi were alone in misreading the future. In March 1947, even as trading on the Bombay Stock Exchange was beginning to resume in the wake of the Muslim League’s “populist” Budget, Hyderabad State Bank opened a new branch in Bombay with great fanfare and a political message.Footnote 96 The new Bombay branch signaled the “essential economic unity of India” and the hope that such branches would play a notable part in promoting that unity, according to Sir Homi Mody, who had been enlisted to make the case for economic unity at the inauguration of the new branch.Footnote 97 The public effort to invest Hyderabad’s significant wealth in an economically undivided India is particularly significant given that the Princely State would be blockaded by the new Indian state and would cease to be a sovereign entity within a year of the establishment of India and Pakistan.Footnote 98
Mody was an established leader of the Bombay business community and no stranger to the impact of politics on business. A former member of the viceroy’s executive council and chair of the Central Bank of India and a director at Tata, Mody had issued warnings in the late 1930s about the advance of a populist and rural-friendly INC, and in 1945 had been charged with economic considerations as part of the Sapru Committee’s constitutional proposals.Footnote 99 Differing from the Sapru Committee’s overall emphatic opposition to the political division of India, Mody proposed a scheme under which political separation as a means of “conciliating Muslim sentiment” could be made acceptable without serious risk. Along with John Matthai, also affiliated with the Tatas, Mody argued for an intergovernmental council to “bind” the governments stemming from a division of British India to matters of economic development and defense for mutual consultation as a means to mitigate economic and security risks that partition could entail.Footnote 100
By contrast, N. R. Sarkar disagreed with Mody’s and Matthai’s recommendations, noting that a division would not only be prejudicial to Pakistan but also would undermine efforts to improve the standard of living of the masses by disrupting the interdependence of “Hindustan and Pakistan” and by curtailing the size of the market.Footnote 101 Commerce, too, was dismissive of plans for Pakistan, describing as “highly academic” the arguments made by Mody and Matthai in favor of the feasibility of Pakistan.Footnote 102 Pointing once again to the various possibilities at play in British India in the 1940s, Commerce’s reaction indicates that the willingness of Bombay businessmen to accommodate Partition was not the overwhelming groundswell that some observers have described it to be.Footnote 103 Among the impracticalities of dividing India into separate Hindu and Muslim states, Commerce’s front-page article raised the status of Princely States, the question of defense budgets, the uneven distribution of resources between the two states, and that “experience from other parts of the world that had shown that wholesale movement of population provides no satisfactory solution.”Footnote 104 Commerce took an especially dim view of the caveat maintained by Mody and Matthai that stagnation or disaster might ensue “unless some effective and continuous form of co-operation in matters relating to defence and economic development,” concluding prophetically that assumptions of cooperation sounded “unrealistic.”Footnote 105
Hyderabad’s and Muhammadi’s commitment to the economic unity of India, as evidenced by their investments, contrasts with other movements of capital taking place around Partition/Independence. Waves of violence in March and April 1947, stemming from uncertainties about Lahore’s future nationality, dashed the confidence of Hindu and Sikh communities that had dominated banking, insurance, and the stock exchange, and unsettled Punjab’s economic and social foundations.Footnote 106 Crucially, the capital flows to Delhi and other “safe” areas preceded Mountbatten’s announcement of Partition in June, and appear to reflect the growing appreciation in financial markets that the INC was “prepared for a division of India into Pakistan and Hindustan,” with the assumptions that the transfer of power would be peaceful and that “both the parts of the country will cooperate with each other and remain friendly.”Footnote 107
The largest Indian industrialists appear not to have waited for evidence of that cooperation. By April 10, 1947, Birla’s United Commercial Bank had moved 80 percent of liquid assets from its branches in Punjab and Sindh to “safe” areas, implemented policy changes in restricting credit offered, and stopped trading of shares “till market conditions were more favourable.”Footnote 108 The Tata Group appears to have been mostly unaffected by the dislocations of Partition/Independence.Footnote 109 It is beyond the scope of this paper to compare the experience of these two industrial groups, which remained important well past 1947. It is nonetheless important to underscore the different trajectories that Partition/Independence implied for a company such as Muhammadi; they were more dramatic for Hyderabad State Bank and (to a lesser extent) Mahindra.
Capital, Borders, and Business Anxiety
By early May 1947, these movements of capital appeared as a prelude to the financial “funk” that would accompany territorial anxieties in later years and in other parts of the world.Footnote 110 Commerce confirmed reports that “anxiety among business interests” had driven an estimated Rs. 40 to Rs. 50 crores out of the Punjab, Sind, and North-West provinces to Delhi and adjoining districts, driving up land prices in Delhi.Footnote 111 Citing figures from The Eastern Economist, a Birla-funded newspaper, Medha Kudaisya estimates the capital flight out of Lahore to have reached a staggering Rs. 250 crores by May, which was one-fortieth of the funding envisaged in the Bombay Plan, but 4.5 times the disputed Reserve Bank funds that Mohammed and Deshmukh would spar over later in 1947.Footnote 112
Whether it was because the League lacked the close connections that industrialists such as Birla had to INC leaders or because of their systematic unwillingness to become involved in efforts such as with the Sapru Committee’s report, it appears that implications of the INC’s March 1947 Punjab resolution—essentially accepting territorial Partition—were not fully comprehended by Muslim League-associated businessmen. In contrast to the economic nationalism of swadeshi, closely associated with the INC and images of a territorial India, some scholars have argued that the League’s ideology had a limited attachment to a bounded piece of land.Footnote 113 Jinnah’s political maneuvers may also have been hampered by difficulties in mobilizing “Muslim” capital relative to the preponderance of the capitalists who engaged with the INC’s National Planning Committee and other efforts at planning for industrialization.Footnote 114
In its report on share markets for the week of April 26, 1947, Commerce sums up the situation as follows:
The political situation is still obscure. While the Congress [INC] is now prepared for a division of India into Pakistan and Hindustan, subject to certain conditions, the attitude of the Muslim League is still enigmatic. The Muslim League’s conception of Pakistan is still an undefined quantity, although one is able to make out that the latest concession of the Congress does not fully satisfy the vaulting ambitions of the League.Footnote 115
The Muslim League’s troubles, however, do not account for Mahindra’s lack of preparation, nor does it explain the surprise echoed by close observers of the economy. The influential Bombay economist C. N. Vakil commented in his 1950 study: “To the surprise of the country, the leaders of the Indian National Congress who were wedded to the idea of a United India, agreed to divide the country as the price of independence.”Footnote 116 Even six months after Partition/Independence, Bombay businessmen had not reconciled themselves to the economic division, as is apparent from the January 1948 address of IMC President Ratilal Gandhi: “For it is inconceivable that the two new Dominions, which have so much in common and are at all events economically interdependent, will allow their future progress and prosperity to be jeopardized by indeterminate political wranglings.” Efforts such as these to maintain “the continuity of economic life in the two Dominions after Partition” make it clear that the division of British India was not universally welcomed, let alone expected.Footnote 117
As the postcolonial states moved toward ever more stringent constraints on travel between India and Pakistan in the months after Partition/Independence, the IMC’s concerns about the postcolonial realities of doing business proliferated.Footnote 118 Along with legal and bureaucratic technologies to regulate and “fix” the movement and belonging, the nationalization of people and citizens that took place in the wake of Partition extended to the economic arena by the “minoritization” induced by “evacuee property” laws that were enacted nearly simultaneously with Partition/Independence in August 1947.Footnote 119 Within a month, Pakistan and then India established their offices of a Custodian of Evacuee Property to oversee disputes about properties left behind by subcontinentals moving from one side of the 1947 borders to the other. The new laws and institution did nothing to ease the fundamental disagreement between the two postcolonial states about the value of the immovable properties left behind by refugees.Footnote 120
This was not limited to cities such as Delhi and Lahore, whose populations, culture, language, and economic structures were entirely rewritten following massive and often violent movements of populations. Nationalization along religious lines extended to institutions such as the Bombay Stock Exchange (BSE), whose authorities lobbied the Indian government in April 1948 to exclude stocks and shares from the purview of the Transfer of Property (India) Ordinance of 1948. In an echo of Sarkar’s concerns about the impact of Partition on the size of markets, the BSE worried that the regulation, which applied retrospectively to the disposal of properties by Muslims migrating to Pakistan, was “bound to affect the working of the share markets.”Footnote 121 Elaborating on those fears about the prospects of Bombay’s share market in April 1948, Commerce notes the “loss of hundreds of crores worth of assets to non-Muslims of Pakistan” as well as the lack of interest from British investors and “the diversion of the attention of almost all the Muslim millionaires in the Indian Union to Pakistan.”Footnote 122
The same BSE that had gone on strike a year earlier in protest over the Muslim League’s budget saw its warnings dismissed by the post-Partition Indian government. In justifying the ordinance, the precursor of the legal conundrum that Cochinwala would try to unravel decades later, Indian authorities cited tax evasion amounting to more than 1 crore of rupees in Bombay. The sum is, however, a far cry from Commerce’s conservative estimates of capital flight of Rs. 40 to Rs. 50 crores, underscoring a significant shift in trade and capital movements that followed Partition/Independence.
Conclusion
This paper has focused on the circumscribed time period of 1945 to 1948, three years of accelerated political change, to recover and uncover some economic dimensions of the decolonization of British India. This study demonstrates the limits of state-based narratives of businesses in South Asia, which often neglect the changes to “the magical state” that accompanied the territorial changes of August 1947.Footnote 123 The tumult of possibilities reflected in Mahindra’s reference to the “many plans” in currency in late colonial India included economic plans and constitutional possibilities. Notwithstanding broad-based political mobilization in opposition to an economically draining colonial state, opinions varied, even within a relatively select group like the Sapru Committee.
The evidence presented here shows that economic separation – as opposed to a political division that was increasingly viewed as inevitable – surprised businessmen aligned both to the INC and the Muslim League. Even the wealthy Princely State of Hyderabad that was inclined toward declaring its own independence, was not planning on economic separation. Efforts by INC-affiliated institutions such as the IMC in Bombay to minimize the costs of the division on trade and commerce after Partition/Independence were largely ineffectual. Underlying the unpredictable political landscape, notably the accelerated timeframe and vague treatment of the varying sovereignties of the hundreds of Princely States implicated by the Partition Plan of June 1947, was the reality that Indian capitalists’ debates and visions about the economic future of British India were not just competing domestically and with other social groups but also with British economic elites.Footnote 124
The transition to the more constrained postcolonial India appears to have taken longer for Mahindra than for Muhammadi, whose business plan of May 1947 was based on leveraging connections to Princely States in an India in which the conjoined ports of Bombay and Karachi would serve as the base for a worldwide transportation company. Further study may well show that this enforcement of the postcolonial borders could be responsible—rather than postcolonial Indian economic policies—for a break in South Asia’s characteristic openness to trade. A scheme such as Muhammadi’s—linking the Indian Ocean ports of Bombay and Karachi (the latter having been transformed by World War II into an aviation hub)—certainly envisioned an India that was outwardly oriented and central to international trade.
The postcolonial borders, hastily drawn and confusingly made public only after the handover of British power prompted a “nationalization” by forcing citizens, businesses, and capital to “choose” one or the other postcolonial states, thus interrupting the imaginings of a bounded economic and territorial whole that had informed the anti-colonial struggle.Footnote 125 A recent study of Indian nationalism and political economy points to the “appropriation” of swadeshi by the short-lived Hindu nationalist government of Bharatiya Jana Sangh in 1977.Footnote 126 The cases presented here point to an earlier rearticulation that occurred alongside the profound reinscription of sovereignty that accompanied Partition/Independence.Footnote 127
Dr. Hussain brings a world history approach to the study of imperial retreat from British India. Her book project, based on her dissertation on the economic history of the Partition of British India, situates decolonization and development within global histories of capitalism.
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