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Marwari Businesses: Leveraging Social Capital

Trust, more than collateral, is vital for taking on business risks. This enabled capitalism and entrepreneurship to survive in the years of independence

Published: Mar 7, 2014 06:12:43 AM IST
Updated: Mar 6, 2014 05:31:01 PM IST

This issue’s cover theme on Marwari businesses is unusual for Forbes India. Not because we don’t track success or entrepreneurship, for that is our stock-in-trade, but because we have never tried to profile an entire business community collectively. What we are trying to do with this issue is to understand the social context of a business community’s continued success.

Marwari Businesses: Leveraging Social Capital
India is an oddball in terms of entrepreneurship because our business successes are often the result of community support and seed funding. Thanks to our huge diversity, and thanks particularly to the Indian state’s suspicions about business from the time we became independent in 1947, it was the social capital provided within communities that proved critical for entrepreneurship. Whether it is the Marwaris, the Parsis, the Gujaratis, the Reddys, the Chettiars or many other communities, business has flowered around a community’s social capital. This is because trust, more than collateral, is vital for taking on business risks. It was this trust that enabled capitalism and entrepreneurship to survive in the hostile initial years of independence—and all the way till the opening up of the economy in 1991.

The Marwaris are, arguably, among the three or four most influential business communities in India—and even abroad, if one considers the fact that Lakshmi Mittal is the world’s largest steelmaker and the Aditya Birla group was a global business long before globalisation became a fashionable term in India. Originally hailing from the Marwar region of present-day Rajasthan, today’s definition of Marwari has outgrown this geographical limitation. Most successful Marwaris, despite an emotional connect to the region, live outside Marwar.

In many ways, the early Marwaris were ahead of their times in terms of understanding risk and cash. Their parta system of daily cash-based accounting, for example, enabled them to keep close tabs on business trends which even today’s sophisticated ERP systems may not be able to match. If today’s trend is professionals turning entrepreneurs, the Marwaris did this decades ago by encouraging valuable employees to develop their own businesses as suppliers to core businesses.

But, in other ways, the Marwari businessman has lagged behind change: For example, it is difficult to think of a single big Marwari business that has made waves in IT or biotech or any business that involves knowledge and IPR. Marwaris have largely excelled in trading and commodity-based businesses.

Clearly, the challenges ahead are immense in the brave new world we are entering. But Marwari businessmen are also beginning to change. More power to them.

R Jagannathan
Editor-in-Chief, Forbes India
Email: r.jagannathan@network18online.com
Twitter id: @TheJaggi  

(This story appears in the 21 March, 2014 issue of Forbes India. To visit our Archives, click here.)

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  • Sean Kumar

    Thanks to Forbes India for discussing this topic regarding a business communities\' continued success in business and finance circles. A few things that I would like to add to the above analysis by the editor . 1. Marwari\' were initially the farmer/traders in the north Rajasthan region of India and migrate primarily to Calcutta and then to all parts of the country. Though the community is not as widespread around the world as the Gujaratis but it still has made its mark in several sectors of economy. 2. Apart from the big names in business as the world\'s largest steel producer the Mittals, Birlas and Bajaj\'s there are inumerable success stories of industries in most of India\'s cities and town run by marwari families. Actually there is a chance that one in 2/3 industries in most cities or town will be run by this community outside of Gujarat.. (as Gujaraties themselves are quite successful themselves) 3. The community is indeed makings its mark in IT with most of the large industrial houses having their own IT companies, several leading e-commerce companies are headed by Bansal\'s, Shaadi.com and many other prominent websites are also run by them. Even on the bio tech front many large companies in MP manufacture medicines are run by the community. Zee TV, India\'s largest media company, Jet Airways, India\'s largest airline (after stateowned), Kedia\'s, Jindal\'s, Goyals, Mangals.. I think about 20% of India\'s listed companies would have the community as directors. 4. For those who think that the community is only successful in business one should look at the percentage of MP\'s and MLA representing their constituencies, a great number of charitable institutions are run primarily by the community from hospitals (Birla), Schools (Poddars), Dharmshalas, Ashrams (Sewadham, Ujjain, Narayan Sanstha) and temples. 5. A unique distincition of the community is it is one of the few communities in India that is vegetarian (by birth) and most members still practice vegeterianism. It has perhaps the largest proportion of its members as vegetarians in the entire world (as a community). Actually if you were to attend a marwari wedding you can safely assume (90%) of the time that the food will be vegetarian. 6. Another unique characteristics of the community is that a large number of Chartered accountants, finance professionals are marwaris. In some regions even 75% of the CA are marwaris. The academic success of marwari children can be seen the top ranking lists of various institutes. 7. It is indeed one of the most religious and spiritual community with stalwarts like Hanuman Prasad Poddar, the Birla family and the millions of other individuals who sponsor religions events and spread the philosophy of dharma in India and worldwide.

    on Jan 25, 2015
  • Ravi Kiran

    One of the most thorough pieces on a ethnic business group I have ever read. Raises some questions on stereotypes though. Do acceptance of ethnic stereotypes such as this impede growth of entrepreneurship in the society?

    on Mar 14, 2014
  • Praveen Goenka

    The word Marwari is a misnomer. Neither do they come from Marwar region. It is the baniyas (trading community) of the Shekhawati region (comprising of Jaipur, Jhunjhnu, Fatehpur, Sikar are the so called Marwaris. The word Marwari was wrongly given to them by the bengalis once these business community migrated to Kolkata, as Marwar was amongst the better known areas of of Rajasthan due to the famed Rajputs known for their fighting skills and valour.

    on Mar 13, 2014
  • Daniel Pacheco

    Based on a ten year study of Marwadis I have come to the conclusion that if a poor person replicates their behavior he will no longer be poor after ten years. Marwadis set a daily goal how much money they intend to earn in that day. Then they are willing to work very hard to earn that money. At the end of the day they have a daily balance sheet to know if they have made a profit or a loss. If they have made a profit they do not waste that money. It is hard earned money . They save some of it, they invest some of it and they live off some of it. Please look up to them with respect for their business acumen and do not look down on them with condemnation.

    on Mar 12, 2014
  • Daniel Pacheco

    Marwadis are successful in business because they set a daily goal. How much money they intend to earn during that day. At the end of the day thy evaluate themselves to know if they have made a profit or a loss for that day. (Daily balance sheet ). The most important reason they are successful is that they are willing to work hard every day to achieve their goal. After they achieve their daily goal they use their Mahajan Secret formulas to decide how much to spend , how much to save how much to invest etc. Over a period of time say ten years their small daily savings amount to a very large sum of money. Business in not in their blood but in their hard work. If a poor person learns to behave like them, and work as hard as them, and treat money with respect, and not waste it - within a few years he will no longer be poor. This is based on a ten year study I have done on marwadis.

    on Mar 12, 2014
  • Chandresh Jain

    Truly marwar is a region which promotes and inspires to become Enterprenuer right from stage of birth and there is long long list of them ..

    on Mar 7, 2014