Potentiality of Emergence of Capitalism in Mughal India
Was there any genuine potentiality for the emergence of capitalism in Mughal India, along lines comparable to what unfolded in Europe? And why did India ultimately fail to industrialise and evolve a capitalistic economy before the British conquest?
This question has engaged generations of historians. In the 1920s, scholars such as W.H. Moreland and Brij Narain took up the enquiry; in the 1960s, Toru Matsui, Bipin Chandra, and Tapan Raychaudhuri revisited it — though their analyses largely concentrated on 19th-century India. It was Irfan Habib who made the pioneering enquiry specifically into the status of the Mughal economy itself, and whose framework continues to anchor this debate for UPSC History Optional aspirants.
- It is worth noting that Europe itself did not possess a fully capitalist economy during the 17th century. In England, capitalism began to properly emerge only from the second half of the 18th century, and even then, it was merchant capitalism — not industrial capitalism — that prevailed at first.
Features of Early Capitalism
The essential features that mark the emergence of early capitalism include:
- Control of capital over the production process.
- Money or market relations as the organising principle of exchange.
- What Karl Marx termed an “immense accumulation of commodities.”
- A genuine breakthrough in production technology.
Evidence of Mercantile Wealth in Mughal India
The merchants of medieval India possessed considerable capital, with estimates of their wealth largely drawn from surviving European records.
- Some merchants of Surat, by 1663, are recorded as owning more than 5 to 6 million rupees.
- Mulla Abdul Ghafur of Surat held assets worth 8 million rupees, together with twenty ships ranging between 300 and 800 tons each. English factors testified that the sheer volume of his trading transactions was no less than that of their own East India Company.
- Virji Vora is similarly reported to have held an estate valued at 8 million rupees.
- The traveller Manrique (1630) was astonished by the immense wealth of the merchants of Agra, describing money piled up in some merchants’ houses that “looked like grain heaps.”
Merchants routinely put their capital into active commercial circulation, and it was not merchants alone who participated in this economy — non-mercantile groups, including Mughal emperors, royal ladies, princes, and nobles (many of whom owned their own ships), also invested directly in trading ventures. Collectively, this activity considerably expanded the overall size of India’s money-market.
Financial and Credit Institutions
The system of credit and banking in Mughal India was, by contemporary standards, remarkably well developed.
- The sarraf functioned as a banker, remitting money across distances and issuing bills of exchange known as hundi.
- Sarrafs also discounted the hundis of merchants, thereby further enlarging the overall volume of money available for commerce.
- There existed an established practice of insuring goods in transit, covering both inland and maritime trade.
- Institutions of money-lending and interest for commercial purposes were similarly well established, including bottomry (a loan secured against the ship itself) and respondentia (a loan secured against the cargo).
Taken together, the basic financial and economic institutions necessary for a capitalist transition were, in good measure, already operating during the 17th and 18th centuries — a foundation that may well have placed the medieval Indian economy on a road that could, in principle, have led toward capitalism.
Commodity Production
- Commodity production was occurring on a genuinely vast scale, particularly of textiles, saltpetre, and indigo.
- The institution of brokerage made the procurement of these commodities considerably easier for both Indian and foreign merchants alike.
- Means of transport, too, were reasonably well developed by the standards of the time.
Merchant Capital versus Industrial Capital
True capitalist relations of production could only emerge once capital came to genuinely dominate and control large areas of the production process itself — and this distinction lies at the very heart of the difference between industrial and merchant capital.
- Merchant capital, by its nature, is not directly involved in manufacture — production itself remains outside merchant control.
- In Mughal India, production was carried out by independent artisans, who owned their own tools, invested their own money in raw materials, worked from their own homes under the prevailing domestic craft system, retained ownership of the finished goods, and sold them independently in the market.
- Capitalism, by contrast, systematically dismantles all of these features, giving rise to genuine industrial capital and turning previously independent artisans into wage-workers.
The transition from merchant to industrial capitalism, however, was never abrupt or sudden — historically, it passed through a distinct transitory stage that arose from within merchant capitalism itself. This intermediate stage is known as the putting-out system, through which industrial capital gradually assumes control over the means of production and, eventually, the entire productive system.
The Putting-Out System (Dadni) in Medieval India
The penetration of merchant capital into the existing artisan-level mode of production in Mughal India occurred principally through the putting-out system, locally known as dadni.
- This appears to have been a fairly well-established practice — albeit on a relatively small scale — even prior to the 17th century.
- Brokers occupied a central position within this system, since the cash advances that merchants extended to primary producers were typically routed through them.
Economic Structure of the System
- The Indian economy of the 17th century functioned essentially as a sellers’ market (that is, favouring producers): demand was consistently high, and a large number of competitive buyers actively flooded the market.
- From the perspective of merchants — particularly those engaged in foreign trade — the putting-out system served two crucial functions: it excluded rival buyers from a given producer’s output, and it secured timely delivery of a stipulated quantity of goods at previously agreed rates.
- The primary producer, for his part, accepted cash advances chiefly because he needed to fulfil large orders for which he often lacked sufficient capital to purchase raw materials outright — a need that, in some cases, extended to the supply of raw materials themselves.
- The putting-out system thus rendered genuine economic services to both parties — merchant and artisan alike.
Assessing the Depth of Merchant Control
The actual degree to which merchant capital had penetrated the production process through this system can be assessed by examining precisely what was advanced to the artisan — cash, raw materials, tools of production, or some combination of these.
Evidence from the Textile Industry:
- The evidence for cash advances is substantial and well documented.
- Evidence for advances of raw material, however, is comparatively sparse, and evidence for the advance of instruments of production is virtually negligible.
- The occasional need to supply raw yarn to weavers arose chiefly because yarn procured independently by weavers was often of inferior quality, even when they had already received a cash advance.
- Some weavers, in fact, derived a modest profit by purchasing lower-quality yarn or raw silk themselves — which partly explains why weavers did not always welcome the merchant’s direct supply of raw materials, preferring instead to retain this small margin of independent profit.
- This dynamic helps account for the relative scarcity of documented instances of raw-material advances, confirming that the predominant form of the putting-out system was, overwhelmingly, the cash advance.
- Only a single reference exists in the English factory records to an advance of raw material — and this instance concerned raw silk specifically, where impoverished weavers were simply unable to procure silk of the requisite quality on their own.
- A broadly similar pattern is observed in Gujarat, where this practice may have been somewhat more widespread than in Bengal — though there is no clear evidence that it ever became the dominant form of the putting-out system even there.
- Even Chicherov, despite his own strong advocacy for the view that capitalistic relations were genuinely developing in this period, is struck by the marked scarcity of data on raw-material (yarn) advances to weavers. He explains this by noting that:
- The supply of raw materials was rarely, if ever, a genuine problem in rural India, since cotton cultivation was extraordinarily extensive — in some regions, almost universal — and represented a defining economic-geographical feature of the subcontinent.
- He further observes that spinning was widespread not only within weaver households but also among ordinary peasant families more broadly, creating a constant and abundant source of raw material readily available to the weaving trade.
The Nature of the “Tie” Between Merchant and Producer
It can therefore be concluded that the single most distinguishing feature of the putting-out system during the 17th century was the practice of the cash advance. Notably, there is no clear evidence of any deliberate tendency among merchants to actively intervene in the production process in a manner that might have brought about a truly radical change in the underlying relations of production.
- It is true that the producer was, in a limited sense, “tied” to the merchant — he now bore an obligation to deliver the commodity in accordance with the merchant’s specifications, within an agreed timeframe and at a previously fixed price.
- Yet the artisan continued to retain ownership of both his tools of production and, in most cases, his raw materials as well. In practice, he had simply sold his future produce in exchange for advance payment, entirely of his own volition.
- There is no evidence of any extraordinary economic compulsion — beyond ordinary poverty — that forced the artisan to accept such orders, nor any indication that merchants resorted to non-economic coercion to compel such arrangements. If anything, it was the merchant who had to actively induce the producer to accept the advance, very much in the merchant’s own interest.
- Even this limited “tie-up” therefore remained genuinely slender. The artisan had, at most, transformed from an “independent” producer into a “contract-producer” — no longer the owner of his finished output, perhaps, but certainly not yet alienated from ownership of either his raw materials or his tools.
Thus, the relationship between merchant and producer during the 17th century conspicuously lacked the defining hallmarks of true capitalist relations: economic bondage, economic dependence, physical coercion, and merchant monopoly. As long as the artisan continued to operate within the domestic system of craft production, genuinely capitalistic relations of production could not take root.
- The fact that the putting-out system did not deprive the producer of either his tools or, generally, his raw material, indicates clearly that merchant capital’s actual control over labour remained genuinely weak.
- Until this deeper alienation of the producer from his means of production had actually occurred, true commodity-production manufactories — that is, the assemblage of large numbers of workers in one place, at the same time, producing the same commodity under unified capitalist direction — simply could not emerge.
- At this stage, the putting-out system itself, along with the network of brokers sustaining it, would ultimately have had to disappear altogether, giving way to genuinely new relations of production for capitalism to fully take hold.
- Nor is there evidence for the creation of surplus value — for instance, through the systematic depression of wages — during this period, such that a portion of labour time might have gone effectively unpaid. In the absence of non-economic coercion by merchants, this remained impossible so long as artisans, working within the domestic system, continued to retain ownership of their tools of production.
- These tools were, in any case, simple and inexpensive enough for the average artisan to make or purchase independently. Since no genuine technological breakthrough occurred to render such tools significantly costlier — and therefore beyond the reach of an ordinary artisan — artisans were never truly alienated from their means of production.
- As Marx himself observed: “The process that clears the way for the capitalist system is the process which takes away from the labourer the possession of his means of production and transforms the immediate producers into wage-labourers.”
The Limits of Merchant Influence
This is not to suggest that merchant capital exercised no influence whatsoever on the organisation of production. The putting-out system, through which it operated, did indeed transform the previously “independent” status of the primary producer into that of a genuine “contract-worker,” and it also effectively cut him off from direct access to the open market.
- The sporadic examples of karkhanas maintained by various patrons, along with the dyeing and refining “houses” established by foreign merchants in Gujarat and Bengal, do indicate the general direction of change during the latter half of the 17th century.
- Yet these changes were neither fundamental in character nor sufficiently widespread to justify identifying within them the genuine seeds of real capitalistic relations.
Merchant capital, in short, retained only a genuinely feeble hold over the underlying production process. It would therefore be incorrect to conclude that merchant capital had, in any meaningful sense, “broken through the traditional bonds of production” in 17th-century India.
Why Did Merchant Capital Fail to Control Labour?
This crucial question has been examined in detail by Irfan Habib, who concludes that this failure was not attributable to any lack of underlying economic development. Several distinct factors help explain it:
- The considerable enlargement of demand, combined with a market flooded by large numbers of competitive buyers, placed the primary producer in a genuinely favourable bargaining position.
- The corresponding absence of any extraordinary economic compulsion or non-economic coercion left the artisan largely free to strike a deal with whichever buyer he considered most advantageous.
- A further important factor was the continued coexistence of independent, artisan-level production alongside the putting-out system — quite possibly operating on a scale larger than, or at minimum equal to, the putting-out system itself.
- The considerable territorial and occupational mobility available to artisans often allowed them to escape falling into genuine economic bondage or dependence on any single merchant.
- The interests of the broker and the merchant did not always neatly align.
- Brokers frequently seized opportunities to secure their own irregular income, at the expense of both producer and merchant alike. As a result, brokers did not consistently act in ways that promoted the underlying interests of merchant capital — at times, they worked instead in quiet collusion with the artisan against the merchant’s own interests.
- It is plausible that certain merchants — particularly “broker-contractors,” or middlemen merchants working in close proximity to the actual production process — may, in some cases, have gradually evolved into genuine manufacturing entrepreneurs. The existing examples of karkhanas maintained by Mughal emperors and nobles, and occasionally by foreign trading companies, could well have served as potential models for such a transition.
- However, a mere change in the organisation of production, unaccompanied by any corresponding basic transformation in underlying technology, could ultimately not carry the process very far.
Conclusion
Mughal India, by the 17th century, had developed nearly all the surface institutions typically associated with early capitalism — substantial mercantile wealth, sophisticated credit and banking mechanisms, large-scale commodity production, and an active putting-out system reaching deep into artisanal production. Yet the underlying relations of production remained fundamentally unchanged: artisans continued to own their tools and, in most cases, their raw materials, and no genuine technological breakthrough emerged to force their alienation from these means of production. Merchant capital, in short, had penetrated widely but not deeply — and without that deeper transformation, the potentiality of an indigenous transition to industrial capitalism in Mughal India, however tantalising in its surface parallels to early modern Europe, ultimately remained unrealised.
