5. Businessmen and Nationalists: Rise of Money in Congress Politics


Gandhi and Sir Stafford Cripps at the steps of Birla House after a crucial meeting in 1942

From the late 1920s onwards, whenever Mahatma Gandhi visited New Delhi, he was usually found at the house of business tycoon Ghanshyam Das Birla. Some of the most important political decisions of this period were taken in this house. On 30 January 1948, Gandhi was gunned down in its garden. Today, this building is known as Gandhi Smriti, a memorial dedicated to Bapu. On the surface, the image of world’s most famous “half-naked fakir” living under the same roof as one of India’s richest men appears strange, if not an outright contradiction. In fact, the friendship between Birla and Gandhi symbolized the powerful alliance between big Indian businesses and the Congress party, which was forged in the mid-1930s. From this point onwards, India’s industrial magnates began to play an important role in the country’s Independence Movement, and eventually ended up influencing the course of history.

For this story, we must first take a moment to understand the business landscape, as it looked, in colonial India. In the early twentieth century, gigantic business houses were still a new phenomenon for India. Most of them were based in the three major industrial hubs of the country – Bombay, Calcutta and Ahmedabad. Some of these families have survived till today, others have faded out from national memory.

Bombay was dominated by the Tatas, a Gujarati Muslim family called Currimbhoys, Wadias of Bombay Dyeing, and another Gujarati family called Thackerseys. The city was also home to big trader families, which had minor interests in industries but controlled imports and exports in and out of the city, like Purshottamdas Thakurdas and Jamalal Bajaj (whose family later started Bajaj Auto Ltd). Calcutta, although dominated by British businessmen, had Indian industrialists of its own. Most prominent of these were the Birlas, Sir Sarupchand Hukumchand and Nalini Ranjan Sarkar (who would later be instrumental in establishing Indian Institutes of Technology (IITs)). The third largest commercial center – Ahmedabad – was dominated by Sakarlal Balabhai, Kasturbhai Lalbhai and Ambalal Sarabhai, and Chamanlal Parekh (of Mangaldas group).

The three major industries of India – jute, tea and coal – were dominated by the British capital. For Indians, the money to be made was in textiles. Most of the business families had built their fortune by setting up textile mills or trading raw cotton. One exception to this trend was the Tatas, the only major conglomerate in India for the first three decades of the century. The Tatas were by far the richest business house in the country. In 1931, total assets of their public companies were worth more than Rs 50 crores (for the second richest Indian business house – the Currimbhoys – this figure was only Rs 6 crores!) Along with usual textile mills scattered across the country, the Tatas had TISCO, the only steel plant in India, and several companies in the power sector.


Top Tata leadership: Jamsetji Tata (left), his cousin RD Tata (centre) and sons Ratan Tata (standing) and Dorab Tata (right).

It was only in the 1930s that other Indian conglomerates began to emerge, with major interests outside textiles. Ramkrishna Dalmia, a speculator on Calcutta Stock Exchange, founded Rohtas Industries to produce sugar, alcohol and paper, and established Dalmia Cement Company. He would later go on to buy Punjab National Bank and The Times of India. Karamchand Thapar, a Punjabi coal merchant, established the Thapar Group, which would later include Oriental Insurance, The Pioneer and Crompton Greaves. The Birlas, the Calcutta-based Marwari family, added sugar mills, paper factories and manufacturing of textile machineries to their existing cotton and jute businesses. In 1927, they also started The Hindustan Times. Lala Shri Ram, the tycoon of Delhi, in addition to his textile business, started one of the largest factories in Asia called Jay Engineering. Today his most famous legacy is the Lady Shri Ram College (LSR) in New Delhi. Walchand Hirachand, the head of Scindia Steam Navigation Company, became the shipping magnate of Bombay.

Rise of these new business families represented an explosion of energy and ambition in India Inc. The business community wanted more. But they did not have the political weight to match their growing appetite. In the late 1920s, Indian big business had little say in the corridors of power in New Delhi. While the British businessmen in India were organized, Indian merchants were divided and disunited.

Some of these differences were due to strategic reasons. For instance, Bombay textile mills, which produced coarse clothing, were facing stiff competition from Japan. They wanted to build an alliance with the British textile manufacturers, which produced finer clothing and thus were not in direct competition with Bombay. On the other hand, Ahmedabad business had major stake in finer clothing and saw Britain, rather than Japan, as it primary competitor. Therefore, both cities lobbied for a completely different trade policy for India.

However, the cause of difference need not always be strategic; it could also be personal and petty. In 1923, the Birlas were kicked out of the Marwari Business Association of Calcutta for the simple reason that one of their sons had married into a lower-caste family, upsetting the conservative opinion of the Marawari community.

By the end of 1920s, the more far-sighted businessmen had started looking to build a united front to lobby for Indian business interests. Characteristically, the most ambitious idea came from the Tatas, who had always been more politically-savvy than most of the industrialists. In the past they had cultivated politicians of their own like Homi Mody, who became one of the rare Indian leaders with a deep understanding of economics. As the biggest Indian government contractor, the Tatas also maintained close relationships with the New Delhi bureaucracy. Now, they planned to use all that political acumen to launch a capitalist political party. But they soon found out that there were few takers for the idea and it died a silent death.

Indian Industrialist G. D. Birla (L) backer & benefactor to Hindu ldr. Mohandas Gandhi, posing next to bust of his father, the founder of the Birla firm, at his palacial home 1946

Ghanshyam Das Birla

A more workable plan came from the Birlas, who started preparing for an alliance between the business community and the Congress Party. Ghanshyamdas Birla had tried his hands at politics at a younger age, but quickly realized that it was too murky a game for a straight-edged businessman like him. Better to stay on the wings and let professional politicians promote a business-friendly agenda and combat the rising tide of socialism. The crux of his argument was, “it looks very crude for a man with property to say that he is opposed to expropriation…” That should be left to “those who have given up property… If we can only strengthen their hands, we can help everyone.” In other words, pro-capitalist arguments sound much nicer from the mouths of khaddar-wearing freedom fighters than businessmen in suits.

But before building an alliance with the Congress, the business community needed to organize itself. “If you want to live, just unite,” said Birla while urging Indian merchants. In 1927, he and Pushottamdas Thakurdas (a politically-active cotton trader from Bombay) were instrumental in establishing the Federation of Indian Chambers of Commerce and Industries (FICCI), which is the foremost business lobby group in India to this day. By 1930, FICCI had emerged as the single biggest umbrella organization for the Indian business, although Tata-led faction of Bombay industrialists warily stayed away.

At the same time, Birla started making inroads into Congress. Traditionally, Indian big business had stayed away from the party, lest it anger the government. This attitude had begun to change by the late 1920s, partly at Birla’s insistence. He had always had a close relationship with the senior Congress leadership, including Gandhi. Now he started cultivating new rising stars of the party as well, like Vallabhbhai Patel, Rajendra Prasad and C Rajagopalachari. Congress also seemed receptive to his advances. Gandhi soon began including pro-business demands into the party’s agenda. By 1930, Birla was pouring in lakhs of rupees into the party coffers.

The first joint venture between the capitalists and Congress came at the beginning of the Civil Disobedience Movement, launched by Gandhi in 1930 after the onset of the Great Depression. Angered by the government’s economic mismanagement, the corporates were willing to give Congress a chance. In addition, the party’s swadeshi campaign to boycott foreign goods added to India Inc.’s bottom line.


ndian businessmen were happy to support the swadeshi campaign which helped them get rid of the foreign competition

However, soon the precarious alliance collapsed as the movement started disrupting day-to-day business and it became clear that the government was willing to come down hard on anyone supporting it. Whereas only months before the industrialists were lining up to play good freedom fighters, now Congress was drawing up an enemy list of Indian textile mills in Bombay which were to be boycotted. The first experiment of capitalist-nationalist cabonhomie ended in tears on both sides.

The business community went back to being divided. Some, like Ahmedabad textile magnates, stayed loyal to Congress; while others, like Tatas-led Bombay industrialists, looked to make a deal with the government. The rest reverted to their old position of staying out of politics altogether. But Birla was not deterred. “We cannot afford to take sanyas where the interest of the commercial community is directly concerned,” he wrote. He understood that the fate of business in India was only going to get more entangled with the politics of the day.

Changing politics of the mid-1930s did pull Indian business community back into the mix. By now, the businessmen were realizing that the colonial government had little interest in listening to them. In one of the major decisions made at the British Empire Economic Conference in Ottawa in 1932, India had been shut out of any significant opportunity to export its industrial goods. In 1935, the government established Reserve Bank of India in a way that disappointed most of the corporates.

Meanwhile, trouble was brewing on another front. Leftists had started rising within the Congress and were soon threatening to take over the party. The last thing the capitalists wanted was for the largest political party in India to turn socialist. Moreover, the socialists wanted the party to immediately launch another civil disobedience movement, which would have again disrupted business. Corporates preferred that Congress contest the upcoming 1937 elections instead and form government in various provinces.

Feeling threatened by the Congress socialists, once again the Tatas went for the nuclear option, reviving their old idea of a capitalist party. However, Thakurdas and Birla helped kill the idea. Rather than threatening Congress openly, they wanted to strengthen the position of the Gandhian Right Wing within the party, which included leaders like Vallabhbhai Patel.

Yet, things seemed to be going against the Right Wing at first. In 1936, Congress elected the darling of the Left, Jawaharlal Nehru as its president. In his inaugural address, Nehru laid out an ambitious socialist agenda that scared the daylights out of Indian business community. Within days, major industrialists, including Thakurdas, the Tatas and even Congress loyalists like Walchand Hirachand, put out a public rebuttal to Nehru’s address. Birla thought this move was in poor taste. Privately, he agreed that Nehru was “a first-class fanatic”. But attacking him in public would achieve little. Instead, he had to be opposed behind the scenes by supporting Congress’s Right Wing.

When the dust settled, Birla stood vindicated. Patel had managed to kill most of Nehru’s socialist agenda, including the plan for Congress to build alliances with the unions. “Mahatmaji kept his promise… he saw that no new commitments were made,” Birla gloated. “Jawaharlalji’s speech in a way was thrown into the wastepaper basket.” Right Wing also managed to prevail on the issue of 1937 elections. Soon the party was preparing to get its first taste of real power.

Financed by corporate India, Congress’s election campaign proved immensely successful and the party formed government in eight of the eleven provinces. Some industrialists worried that armed with so much success, Congress might try to implement populist measures that would hurt their interests. However, in the long-run Congress provincial governments proved to be largely business-friendly. Most Congress governments began promoting Indian businesses and started giving preferential treatment to swadeshi companies. In many cases, big government contracts were specifically given out to Indian firms. Congress also began to help out the industrialists in their union problems. Patel even tried to set up a new union organization, which would be less militant and more pliable. All in all, Congress proved to be a good bet for Indian business.

Of course, the corporations had to pay a cost as well. In 1939, when the British Government offered a trade deal which was in favor of Bombay textile industry, Indian businesses spurned it because of Congress pressure. Industrialists were beginning to discover they were slowly being drafted into Congress’s nationalist movement. Businesses across the spectrum began moving closer to the party, and away from the colonial government. Even the Tatas moved closer to Congress in the late 1930s and eventually joined FICCI. Indian business now had a united voice, but that voice slowly got wedded to Congress’s nationalist loudspeaker. There were ups and downs in later years, but the alliance between India Inc and Congress only grew stronger. By 1944, Indian business was firmly in the Congress camp.

The Capitalist-Congress alliance was a complicated relationship. It was not just a matter of businessmen writing cheques to buy politicians. There were limits to how much influence corporations could buy within Congress. Instead, the alliance was a symbiotic bond, which allowed both sides to grow more powerful together. Nevertheless, the mere existence of the alliance had a huge impact on the way Congress evolved. Most significantly, the alliance stemmed the tide of socialism within the party. Had the capitalists tried to oppose Congress, as businesses like the Tatas had suggested, instead of collaborating with it, it is likely that the Left would have grown stronger within the party. Instead of cooperating with big business, Congress would have sought out allies like the unions and the communists.  These developments would have set the party on a path radically different from what it actually took. In that alternate universe, the history of India would have probably unfolded altogether differently.

Next on Revisiting India – 1937 Elections: The Indian Democratic Experiment Begins

Sources: Chatterji, Basudev. “Business and Politics in the 1930s Lancashire and the Making of the Indo-British Trade Agreement, 1939.” Modern Asian Studies 15.3 (1981): 527-573; Kudaisya, Medha (2003). The Life and Times of GD Birla. Oxford University Press; Markovits, C. (2002). Indian Business and Nationalist Politics 1931-39: The indigenous capitalist class and the rise of the Congress Party. Cambridge University Press; Sarkar, Sumit (1989). Modern India 1885–1947. Springer.


One thought on “5. Businessmen and Nationalists: Rise of Money in Congress Politics

  1. Pingback: 6. 1937 Elections: The Indian Democratic Experiment Begins | Revisiting India

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