Credit, Markets The Agrarian Economy of Colonial India: Sugata Bose

CREDIT,MARKETSAND.
THE AGRARIANECONOMY
OF COLONIALINDIA
Editedby
SUGATA BOSE
DELHI
OXFORD UNIVERSITY PRESS
OXFORD NEW YORK
1994
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Contents
GeneralEditors'Preface vii
Author's Preface ix
Acknowledgements X
Introduction 1
SUGATA BOSE
Prosperity and Debt 29

MALCOLM DARLING
Peasants, Moneylenders and Colonial Rule: 57

An Excursion into Central India
ERIC STOKES
Small Peasant Commodity Production and 80

Rural Indebtedness: The Culture of Sugarcane
in Eastern U.P., c. 1880-1920
SHAHID AMIN -
The Markets 136

C.J.BAKER
Lenders and Debtors: Punjab Countryside, 197
1880-1940
NEELADRI BHATTACHARYA
The Peasantry in Debt: The Working and Rupture 248

of Systems of Rural Credit Relations
SUGATA BOSE
The Career of an Anti-God in 301

Heaven and on Earth
RANAJIT GUHA
Annotated SelectBibliography 329

General Editbr's'Preface
This series focuses on important 't~~mes fnIndian history, on

those which have long been tl!e.;subjectof interest and deb~te,
or which have acquired importance more 'recently.
Each volume in the series consi~ts of, first, a detailed Intro-
duction; second, a careful choice of the essays and book-extracts
vital to a proper' understanding of the theme; and, finallyr an
~nnotated Bibliogr~phy. '
Using this consistent format, each volume seeks as a whole
to critically assess the state of tlie art on jts theme, chart the
historiographical shifts that have occurred sirice the theme
emerged, re-think old problems, open-up questions which were
considered closed, locate the theme within wider historiogr~phi-
qll debates,, and pose .new issti.es ofinguiry by which further
work may be made possible. ·
This volume. focuses on a theme which has been central to
all discussions on the colonial economy. For nineteenth.:century
British officials, peasant indebtedness was-a cause of worry: it.
was a sign of poverty and a likely reason for the lack of dynam-
ism in agriculture. Be.hindall peasant revolts officials saw a long
history of inherited debts, the machinations of usurers; and
consequent land alienations. In nationalist discourse, indebted-
ness was evidence of peasant impoverishment caused by high
levels of state revenue demand. Twentieth-century British offi-
cials ,like Malcolm Darling inverted the poverty thesis. It was
not poverty, wrote Darling, but prosperity-the increased·
power to borrow-that led to the accumulation.of debt.This
was a picture reassuring to the offitj.al mind.
Discussions on rural credit have now moved away from the
simple issue of poverty and prosperity. The focus is currently
on a range of other questions. Why did peasants borrow? How
viii / CREDIT, MARKETS AND THE AGRARIAN ECONOMY
and in what ways does credit affect the peasant's life? How do
we characterize the relationship between peasants and usurers?
How do debtors perceive their creditors? Some historians have
looked at the different forms of credit-at the structures of
network which tied peasants to a cent{al bank,, and, through
which peasants were both financed- and ·subordin~ted: Others
have located the working of rural credit within the logic of the
production system: the temporal rhythms of production, the
natural constraints of the harvest calendar, the timing of kist
payments. Still others have explorep. the cultural order: 'the
relations of reciprocity which mediate debt and bondage; the
symqolic processes through which the oP.press~d deify and
resist the oppressor. The essays in the volume reflect these
proliferating horizons among historians of rural credit.
In his introduction, Suga ta Bose examines the issues _which
underlie discussions of credit and markets. He argues that it is
possible to understand complex and contestatory agrarian rela-
tions in colonial Ind1a only by breaking out of the neat
dichotomies which are frequently posited: continuity and
change, prosperity and poverty, reciprocity and resistance, free-
dom and bondage. Taken in conjunction with the articles he has
chosen for this volume, Dr Bose's Introduction will seem both
,l;'rovocative and useful to stuqents of the Indian colonial eco-
nomy.
Author's Preface
I wrote the introc;iuction to this voh,me during a period of

academic leave sp~nt at the programme .in Agrarian Studies at
Yale University. I would like to thank Jim Sc:ottfor providing a
very lively and stimulating enviromnent at the 'plantation' to
reflect on·a wide array of issues concerning agrarian economy
and society. Kay Mansfield and K. Sivaramakrishnan made sure
that unlike most r~(ll plantations this was also a very congenial
place to be an intellectual labourer';·The Provost, .DeaI\Sand, my
splendid colleagues at Tufts University were as usual geni::rqus
with their understanding and support.
I have greatly benefited from careful comments on an earlier
draft by Chris Bayly and Neeladri Bhattacharya. I am also grate-
ful to Neeladri for bringing to my attentiQn a couple of important
articles which I would otherwise have missed.
None of my scholarly endeavours carried out in India, the
USA and Britain would reach fruition without the nurturing
support. of Sisir K. Bose and Krishna Bose, the intellectual and
emotional comra.deship of Ayesha Jalal, the steady encourage-
ment of Sarmila Bose and Alan Rosling, and the infectious
intellectual energy and vitality of Sumantra Bose.
My involvement with the issues dealt with in this volume
began some fifteen years ago when I arrived in Cambridge as a
graduate student. On a beautiful autumn afternoon, as the ivy
on the walls of the colleges was turning red, I was given my firf?t
supervision on the subject of peasant history (interspersed with
many others, inclu.ding the history of English architecture) in
the course of a long, meandering·walk along the Backs:I would
like to dedicate this volume to the memory of Eric Stokes, who
taught me that day.
SUGATA BOSE
Acknowledgements
We thank the following for permission to reproduce the material

included in this book: Cambridge University Press for Eric
Stokes, The Peasant and the Raj: Studies in Agrarian Society and
PeasantRebellionin ColonialIndia (1978), pp. 24~4, and Sugata
Bose,AgrarianBengal:Economy,SocialStructure and Politics1919-
1942 (1986), pp. 98-144. Sage Publicatiorts for Neeladri Bhat-
tacharya, 'Lenders and Debtors: Punjab Countryside 18&0-1940'
from Studies in History, 1, 2, n.s. (1985), pp. 305-42; and to Ranajit
Guha for 'The Career of an Anti-God in Heaven and on Earth',
in AshokMitra (ed.), The Truth Unites:Essaysin Tribute to Sarnar
Sen (1985), pp. 1-25.
Introduction
Credit, Markets and the Agrarian

Economy of Colonial India
SUGATA BOSE
The social relations of debt constituted a deeply unsettling

presence .within nineteenth-century colonial discourse which
sought a semblance of coherence by wrapping itself around the
binary .opposition between freedom and bondage. Scraps of
paper known as debt bonds were part and parcel of the econ-
omic existence of 'free' peasant proprietors engaged in com-
.• modity production for a capitalist world market. Yet bonds ef
debt also implied dependence and in extreme circumstances
smacked 'of 'serfdom' that was so offensive to the tenets of
bourgeois political economy. Debt was troubling because it -
defied-the rigid binarism between freedom and the la'ck of it.
The more brave among scholars and historians have written
extensively during the past century about the problematic as
well as the problematiqueof relations between creditors and
debtors in the context of colonial capitalism. Few have failed to
comment on the paraq.oxes which appeared to riddle these
relations of production and exploitation, at once nourishing and
impoverishing those who were caught in their web. The ques-
tion of debt has been central to debates about continuity and
change under colonial r:ule.Fierce disagreements have surfaced
over whether prosperity or poverty better explains the ·pro-
digious expansion of credit and deepening of debt in the late
nineteenth and early twentieth ceI\tury. ~reditor-debtor sociar
and cultural relations in colonial agrarian economies marked
simultaneously by reverence an~ reciprocity as well as resent-
2/ CREDIT,MARKETSAND THE AGRARIANECONOMY
ment and resistance have formed a critical terrain for the battles
between the moral-economy and rational-choice approaches to
studying peasant consciousness and action. This introductory
essay contends that the analytical breakthroughs in historical
. writing on this 'theme' have occurred when the more perceptive
..s~holarshave been able to break out of the binary mould set by
nineteenth-century colonial discourse. It is only by disturbing
the neat dichotomies of continuity and change, prosperity and
poverty, reciprocity and resistance, and the most vexing and
pernicious of all, freedom and bondage, that it is possible to
unravel the complicitous, contestatory and complex labour pro-
cesses and agrarian relations in colonial India.
Although the theme of credit and markets has produced a
voluminous literature since the late nineteenth century, it has
been by no means the primary focus of attention for agrarian
historians. The formal structures of revenue and rent have
certainly captivated many more scholars than the informal and
somewhat elusive ties of credit networks. The search for the
basic tenure of land in India among colonial offici<;ils.anxiousto
find a peg on which to attach the right of private property
gave way to encyclopaedic studies of zamindari, raiyat\V¥triand
mahalwari systems of land revenue. 1 A good number of British
civilians were perplexed and agitated by the problem of peasant
indebtedness since the late nµieteenth century, but scholarly
exercises were.Jar fewer Jn. number in this fielq... While late
nineteenth-c~ntury nationalist critics of coloni1;1l
rule pointed to
India's export surplus as the main chaQ.nelof drain of wealth
from the country, the prime target of attack continued to be the
ftate's high land revenue demand. 2 Once historians of the post-
col,onial era began to write, agrarian history o,n the ,basis of
cqlonial records, land revenue systems and the determinants
and movements .of rent became the staple of research articles
and monographs. Credit '}tld finance were c\rguably th~ more
1 Tne best nineteenth-century example of this genre is B.H. Baden-Powell,

The'LandSystems of British India (Oxford, 1892).
2 See, for instance, Romesh C. Dutt, EconomicHistory of India, Vol. 2, In the
VictorianAge (London, 1904, reprinted Delhi, 1960).
INTRODUCTION/ 3
important aspects of the colonial context since the la.te nine ..

teen th century than revenue· and rent and certainly more critical
as modes of appropriation. So th'.efield of agrarian history was
much the poorer until very recently as a result of the relative
neglect of these dimensions.·
If the colonial government's 'revenue.proceedings' dragged
historians into an increasingly sterile engagement with the legal
categorles of landlord and·tenant, those who preferred to bury
themselves in the colonial census records advanced arguments
about agrarian continuity.or change by counting and evaluating
a category 'Itamed agricultural laoourers. Quite apart from the
whimsical shifts in the criteria used to define this category, this
particular research orientation concentrating on wage-labour
largely left out of account peasant families wl\o forll).ed the vast
majority of workers on the land. More imp'ortant, peasant labour
was the key element in the process of agrarian production under
conditions of colonial capitalism. 3 The theme of cr~dit, markets
and the agrarian economy qm be used as a strategi';'.entry-point
to address the intereaction between peasant labour and colonial
capital by integrating the histories of labour, land and:capital.
It can be tempting in a volume of this sort· treating the
historiographical development of a theme to re-read works
written ten, twenty, or fifty years ago in the• light of current
scholarly predilections. While taking full advantage of being
located in the present, it may be best to avoid· the kind of
presentism which unduly privileges today's fads and fashions
at the cost of losing sharp insights contained in older works and
the fayered corpus of knowledge accumulated over several
generations. As the academi~ spotlight has swung away from
the economy and focussed on problems of identity, much of
recent historical writing influenced by cultural anthropology as
well as literary and cultural c:riticism has tended to rediscover
cultural essences with little or no reference to material contexts.
The scnolarly product that has resulted from this academic
3 For an elaboration of this argument and the concept of 'peasant labour'

see Sugata Bose, PeasantLabourand ColonialCapital:Rural Bengalsince 177(]in
The New CambridgeHisto1yof India (Cambridge, 1993).
4/ CREDIT, MARKETS AND THE AGRARIAN ECONOMY
enterprise has often been marked by a culture fetishism that is

a mirror image of economic determinism. It has merely com-
pounded a sense of unease with the intricacies of political
economy with awkwardness in the unravelling of cultural
meanings. If this introduction were to be allowed to drift with
the current intellectual tide, it would indulge in a bit of polemic
against economic and political analysisi get embroiled in politi-
cal economy anyway in seeking to interpret colonial capitalism
since that phenomenon cannot wholly be reduced to a discursive
formation; and, in the end, assert that while appearing to have
to do with economics and politics credit relations did not operate
outside an all-important, historically given and culturally de-
fined context of power. That would be bowing to the moment's
historiographical tendency; the historiographical challenge, on
the other hand, is to blend imaginatively the aspects of political
economy and culture.
(CLARIFYING) CONTINUITY AND CHANGE
The theme of credit, markets and the agrarian economy began

to take scholarly form in the late nineteenth and early twentieth
century within the large problematique of the character and
extent of social transformation under colonial rule. The yard-
stick that was supposed to gauge the quantity and quality of
this change was the loss of peasant lands to moneylenders:Ihe
topic of numerous reports of commissions of enquiry in the late
nineteenth century, this concern found expression in the shape
of an early 'research monograph' in S.S. Thorburn' sMussalmans
and Money-lenders in the Punjab published in 1886. It was a
powerful indictment of the conversion of 'collective into in-
dividual ownership of land, plus the right to alienate it at
pleasure' introduced by the British in 1849-50.4 The 'munsifs
presiding over the civil courts and. in league with the money-
lenders were painted as the villains of the tragedy unfolding in
the Punjab countryside. Thorburn' s book and his report on
4 S.S. Thorburn, Mussalmans and Money-lendersin the Punjab (London, 1886),

p. 49.
INTRODUCTION / 5
indebtedness prepared ten years later 5 prov:ed to be effective

weapons in the hands of the authors and backers of the Punjab •
.Land Alienation Act of 1900 which sought to prevent alienation
of land from 'agriculturists' to 'non-agriculturists'. 6 Thorburn
might be regarded as one of the founding fathers of a 'Punjab
school' of coloniaL writing on the theme of debt. The capstone ·
to this 'tradition' was provid'ed by Malcolm Lyall Darling's The
PunjabPi;asantin Prosperityand Debt first published in 1925 an~
put out in a revised edition in the year of Indian independence.
It is often mistakenly supposed that the colonial sociology
of knowledge privileged,the domain of economy at the expense
of social and cultural identities. 7 It is true that colonial discourse
since the late nineteenth century was profoundly implicated in
the capitalist quest of maintaining the stability of a commodity-
producing peasantry, especially since this peasantry had been
settled and sedenterized at great cost, as revenue-generators in
the first half of the century. But the project of colonial capitalism
and the colonial sociology of knowledge were ..meshed in con-
tradictions which did not enable an unambiguous privileging
of the economy. It was not even that an uncertain colonial
discourse lurched awkwardly from one moment to the next
between.. the e~onomy and social identities such as ·religion and
caste as the basic organizing principles of its sociology of knowl-
edge. An ahistorical standardization of social and cultural clas-
sifications and characteristics went hand in h<1nd with the
5 Government of Punjab (S,.S.Thorburn), Report on PeasantIndebtednessand

I.and Ali'enationto 'Money-.lendersin Parts of the ~walpindi' Division.(Lahore,
1896). ·
6 See N.G. Barrier, The PunjabAlienationof I.and Bill of 1900 (Durham, North
Carolina, 1966); also, CliveJ. Dewey, 'The Official Mind and the Problem of
Ar?rian Indebtedness in India' (Ca_!11bridge, unp?blished_Ph.D. thesis, !972).
Gyan Prakash, for instance, argues that colonial knowledge treated the
'eco'norriy' as 'foundational' and culture as 'superstructural' in 'Writing post-
Orientalist Histories of the Third World: Perspectives from Indian Historio-
graphy' in ComparativeStudies in Societyand Histo1y,32, 2 (1990), pp. 383-408.
For a critique see Rosalind O'Hanlon and David Washbrodk, 'After Orlen-.
talism:' Culture, ~riticism and Politics in the Third World' in CSSH, 34, 1
(1992), pp. 141-67 followed by Prakash, 'Can the "subaltern" ride? A Reply
to O'Hanlon and Washbrook', pp. 16~4.
preoccupation with economic stability. The mixing of religious

and economic categories in Thorburn' s title Mussalmans and
Moneylenders captures the contradictory tendencies that co-ex-
isted in late nineteenth-century colonial discourse. This is not
surprising if it is borne in mind that it was Darwin, not Marx,
who cast a compelling influence on the official mind reinforced
by'the legal ideas of Henry Maine. 8 If Maine's flawed empiricism
helped construct the myth of India's ancient village com-
munities, his misplaced faith in social evolution suggested to
his followers·that a familiarity with 'natµral' traits and attributes
of castes and communities was a requisite for ensuring social
and economic stability, freedom and progress.
Bred in this official-intellectual milieu, Malcolm Lyall Dar-
ling was never quite able to free himself from its contradictions.
In a section entitled 'the bondage of debt' towards the end of
his book he writes: 'Economic freedom is a condition precedent
to progress, and to the Indian cultivator no progress is possible
till the power of ·the moneylender,· whether agriculturist or
bania, is broken'. 9 If Darling seems in this passage to be a
prisoner of the language of rational, bourgeois political eco-
nomy, he was equally shackled by the chimera of village com-
munities and stereotypical images of caste and religious groups.
The 'indolent' Rajput, the 'sturdy' Jat and the 'parsimonious'
Ahir had differing inherent propensities towards falling into
debt. No one.could beat the Arain in 'sheer ant-like industry',
but the Gujar and the Dogar regrettably had 'little of the ant
about them' and had not rid themselves of 'lazy pastoral. habits'
as was expected of good sedenterized peasants. Among the
money-lending castes the Bania was 'the most subtle and ih-
sidious' while the Khatri was 'a trifle-more human'. The Arora
or Kirar was the worst because' to 'tlie craft of the Bania' and
'the enterprise of the Khatri' he added 'a tenacity and thorough-
ness all his own'. Darling approvingly quqtes .Jhoi;burn' s
8 Perhaps the most influential single work was Henry S. Maine, Village
Communitiesin the East and West (3rd edn., London, 1$79).
9 Malcolm LJall Darling, The PunjabPeasantin Prosperityattd'Deb!'(4thedn.,
London, 1947; reprinted New Delhi, 1978), p, 247. Page references are to the
1978 reprint.
INTRODUCTION / 7
authority: 'Shylock was a gentleman by the side of Nand Lal,

kirar,as Shylock-,.though he spoiled the Gentiles, was yet a man
of honour. Nand Lal has none, commercially speakiti.g'. 10
Despite his penchant for colourful metaphors from the ani-
mal kingdom and fascinatio'n with apparently timeless traits of
communal 12haracter, Darling still had a more acute, intuitive
sense of the issue of continuity and change tpan latterday his-
torians who have failed to notice real change in creditor-debtor
relations and have written blithely about the gradual and con-
tinuous consolidation of the power of sahukars· 'over the
centuries'. 11 To be sure, Darling in one of his,more generqus
assessments of the moneylender wrote about the services he had
rendered over 2,500 years' for millions who must otherwise have
perished or never been born'. Yet he read reports by his pre-
decessors carefully and possessed the sharpness of observation
to pick up that, in the north-western ·frontier region in pre-
colonial times the Aroramoneylender was 'nothing but a servile
adjunct to the Muhammadan cultivator'. It was only 'when
British rule freed him from restraint and armed him with the
power of the law ... [that] he became as oppressive as he had
hitherto been submissive' .12
On the specific issue of alienation of agricultural land to
urban moneylenders Darling implicitly accepted or, at any rate,
did not explicitly question the grim story related, b)! Thorburn
and his contemporaries, But having had the opportunity to
witI).ess the operation of the Punjab Land Alienation Act since
1901,, he was not especially enthusiastic ,about it. The Act's
success in preventing the acquisition of land by the non-agricul-
turist moneylender had led peasant proprietors to regard it as
10Ibid., pp. 32--6,44, 61, 90-1, and 176-8.

11 For instance, Davi'd Hardiman, 'The Bhils and Shahukars of Eastern
Gujarat' in Ranajit Guha (ed.), Subaltern Studies V: Writings on South Asian
History and Society (Delhi, 1987), p. 37. Ironically, Hardiman's article accuses
various other scholars, who have attempted to identify elements of change
under colonialism, of adopting an 'ahistorical' approach. One cannot help
wondering whether the phrase 'over the centuries' is not just a mannerism
of a type of author enamoured of, yet quite out of depth, in Indian 'culture'.
12 Darling, Punjab Peasant, p. 178.
'a charter of his rights'. Darling felt, however, that the law might
thwart' agricultural progress' in the future. Affirming his evolu-
tionary belief, he writes: 'The child whose hand is always held
will never learn to walk; and the cultivator who is always
protected will never learn to be independent.' 13
Well before adopting the Punjab peasant the colonial state
had showered its paternalistic affection and care on the peasant-
debtor of the Deccan. This occurred when following the anti-
moneylender riots of 1875 in the Poona and Ahmednagar
districts the Deccan Agriculturists' Relief Act of 1879 imposed
'a partial interdict on the sale of land'. 14 The memory of the
revolt of 1857 had not quite faded in the ,1870s but the cotton
boom of the first half of the 1860s had. So it was in this decade
that the anti-utilitarian intellectual backlash registered some
success in reshaping colonial agrarian policy. The raiyatwari
land revenue settlement of Goldsmid and Wingate had been
instituted in the Deccan during the high point of utilitarianism
in the 1830s. In Ravinder Kumar's view the utilitarian reformers
failed to 'transform the kunbis into acquisitive peasants anxious
to exploit the raiyatwari system' .15 The intellectual temper of the
1870s was influenced by men like Raymond West whose booklet
The Law and the Land in India published in 1872 took account of
'traditional values and institutions' .16 Officials persuaded by the
new thinking not only sponsored laws against land alienation
but, as in the cases of Frederick Nicholson of Madras, H. Duper-
nex of the North-Western Provinces and Denzil Ibbetson of the
Punjab, were inspired· enough by the Raiffeissen banks in Ger-
many to promote a movement for cooperative markets .and
credit. The feeling of co-operation, they hoped, would check' the
individualism, the rationality, and the spirit of competition' 17
unleashed in rural society by the utilitarians.
Although he tended to accept rather uncritically Maine's and
l3 Ibid., pp. 156-7.

14 Ravinder Kumar, WesternIndiain the NineteenthCentury:A Study in the
SocialHistoryof Maharashtra(London, 1968), p. 328.
15 Ibid., p. 196.
16 Ibid., p. 203.
17 Ibid., p. 262
INTRODUCTION/ 9
West's fabrications of traditional India, Ravinder Kumar wrote

perhaps the best of the scholarly works puolished before the
1960s arguing the case for serious dislocations wrought by:
colonial rule in agrarian society during the nineteenth century.
He agreed with the finding of the commission which enquired
into the Deccan riots that 'in one village after another the kunbis
had been gradually dispossessed of their holdings by the vanis
who thrived under the new dispensation'. The 'dispossessed
peasant' had no option but 'to eke out a wretched existence as
a landless labourer, often on those very fields which he had
formerlytultivated as an independent proprietor'. Kumar readi-
ly accepted the.widespread existence of rural indebtedness prior
lo the British conquest in 1818but claimed that, being dependent
for the security .of their person and property on the kunbis, 'the
vani never presented a threat to the village' in the pre-colonial
era. The introduction of the individualistic raiyatwari land rev-
enue system as well as legal contracts and courts of law by the
British drastically and irrevocably skewed the balance of ad-
vantage between vanis and kunbis. The village-level vanis were
further bolstered by the sahukars who were based in the market
towns and had emerged as crucial players in the colonial eco-
nomy. Most revealing of the wealth of illustrative evidence
contained in Kumar's work is how a petition drafted in 1873 on
behalf of the indebted peasants by Gopal Narsingh Deshmukh,
a member of the old elite, was written in 'the romantic idiom'
and fell on deaf ears. The peasant-debtors found more effective
spokesmen and leaders in the young Westernized brahmins of
the Poona Sarvajanik Sabha who knew how .to articulate 'the
rational language of political economy'.
Kumar's narrative of debt and dispossession was quickly
challenged by scholars who questioned the disruptive impact
6f colonial rule. I.J.Catanach suggested a lower estimate of land
transfers, even though he did not object to the main thrust of
Kumar's argument. 18 It was Neil Charlesworth who boldly
stated that the 'myth' of the Deccan riots had been concocted by
l8 Kumar, WesternIndia,ch. V and I.J.Catanach, RuralCreditin WesternIndia,

1875-1930(Berkeley, 1970), especially pp. 19-20.
10 / CREDIT, MARKETS AND THE AGRARIAN ECONOMY
one faction of colonial officialdom in their opportunistic bid to

win the debate about agrarian policy then raging in the cor-
ridoors of government secretariats. According to his evidence
alien sahukars owned about ~% of the land under the plough
in the Deccan in 1875. Yet the alarmists were able to persuade
their own peers and subsequent generations that the Maratha
kunbis were being turned into the 'bond-slaves' of Marwari
moneyle11ders. Any 'sober assessment' of the Deccan riots
would have indicated that, other than the decline in the position
of the patels or -village heads, there were 'no symptoms of
revolutionary social or. economic change'. The sahukars may
have used the courts to threaten dispossession in their efforts to
collect dues, but it went against the. grain of their methods of
operation to carry through such threats. 19 What Charlesworth
neglected to consider was whether indebted peasant labour left
in possession of smallholdings but brought firmly under the
sway of moneylending capital represented a real measure of
social and economic change under colonial rule.
A more recent intervention into the Deccan debate by Sumit
Guha has provided a more careful periodicization of continuity
and change in credit relations. On the basis of evidence froqt
upland Maharashtra Guha argues that the early phase of British
colonial rule did not bring about any significant difference in
the sahukar's modes of operation. It was only after 1860 that
alterations in the structure of a commodity-cum-credit market
and the rise of a land market effected changes in the older forms
of monopsony and injected a new dimension of competition in
credit relations. Guha' s approach inverts in an interesting way
the usual debate about debt and land transfers and indicates
how the existence of a land market can mould the nature
of c;:reditrelations. 20
The most measured assessments of the moneylenders' role
in social change under colonialism were offered in a number of
stylish essays by Eric Stokes. The question which spurred him
l9 Neil Charlesworth, 'The Myth of the Deccan Riots of 1875' in Modern
Asian Studies, 6, 4 (1972), pp. 401-21, especially pp. 408--9,421.
20Sumit Guha, 'Commodity and Credit in Upland Maharashtra, 1800-1950'
in Economicand PoliticalWeekly, 26 December 1987, A-126-A-140.
INTRODUCTION / 11
to write the essay reproduced below was whether indebtedness

could be regarded 'the chief cause of the absence of effective
agricultural improvement and dynamic growth in Indian agri-
culture'. In summarizing his finding on this question in his
introduction to The Peasant and the Raj he wrote that in-
debtedness was 'in many ways as much a symptom as a cause
of agrarian malaise'. 21 Stokes·was also interested in "the large
problematiqueof the nature and degree of socio-economic trans-
formation under colonial rule· and its implications for peasant
politics before, during arid after that great watershed event-
the 1857 revolt. The peasant risings in 1857 had been-' complex
affairs'. Although they reflected resentment caused by 'loss of
land control to 'new men' or urban moneylending castes', 'the
toughest peasant resistance came from groups that had been
most successful in warding off this particular threat\ His case
study of the Saharanpur and Muzaffarnagar districts in northern
India revealed that 'Gujar hostility to the mahajans' was
prompted more by 'a potential threat than actual loss'; the
Pandir Rajputs in the forefront of the rebellion had' successfully
warded off alien intrusion'. Among material factors contributing
to peasant disaffection Stokes lent more weight to high land
revenue demand and ecological uncertainty which in interaction
with feelings of relative political deprivation were seerHo have
generated revolt. The British officers had a convenient scapegoat
il,}Jhe mahajan. Stokes found it' difficult to see the role of the
mahajan in provoking violence as more than tangential'. The
moneylender was just the proverbial 'fly on the,wheel'. 22•
In the essay reproduced below Stokes sets·about to.examine
whether in the latter half of the ninetej;!nth,eentury ~the mass of
agriculturists' were being reduced to 'cultivators WO{king,fdr
the barest subsistence return under a form of debt peonage'..rYet
:qe cannot quite get away from the question of land alienatiort
to address squardy 1 the question of peasant labour in debt. .He
finds some evidence in both Jhansi and Bundelkhand of Mar-
21 Eric Stokes, The Peasantqnd the Raj: Studies in Ag7:arianSociety and Peasant
Rebellionin ColonialIndia (Cambridge, 1978), p. 12.
22 Ibid., pp. 131, 170, 172, 174-5, 179 anp. 184.
12 / CR!!DIT, MARKETS AND THE AGRARIAN ECONOMY
wari moneylenders gaining control of agricultural lands which

led to the passage of the Jhansi Encumbered Estates Act of 1882
and the Bundelkhand Alienation Act of 1903. But he suggests
that the moneylenders were not really interested in owning land
but were simply cutting their losses during economic down-
turns. His excursion into relatively labour-scarce Jhansi and
Bundelkhand leads him to conclude that 'the institutional ar-
rangements of colonial rule were relatively powerless to bring
about decisive tenurial change in the absence of a decisive
expansion of agricultural production'. On the Saugor and Ner-
budda territories, especially the Jabalpur haveli, Stokes airs
some scepticism about the moneylenders' depredations grimly
described by British officials like· Bamfylde Fuller who were at
one with Ibbetson and other Punjab civilians on this question.
The 'major move of predominantly moneylending families into
landholding did not occur', according to Stokes, 'until the great
agrarian crisis and collapse of the decade 1893-1903'. That 'too
was not a result of greed and acquisitiveness on the creditors'
part but an attempt'to limit losses.
More recent work has posed the question of social change
under colonial rule differently. If creditors were generally un-
interested in debtors' lands, could the appropriation of surplus
through debt interest from peasants left in possession of their
smallholdings be interpreted as a qualitatively significant trans-
formation of social relations under conditions of cofonial cap-
italism? In an insightful theoretical intervention for which the
smallholding peasantry of late nineteenth-century Deccan was
the empirical reference, Jairus Banaji suggested that thepenetra-
tion of moneylending capital had brought about lm important
change.lt signified the formal, though not real, subsumption of
labour by capital. 23 Smallholding peasants had not been reduced
to proletarianized wage-labourers but surplus value was being
extracted from them through debt interest. Banaji's formulation
was more nuanced than several others advanced irt the context
23 Jairus Banaji, 'Capitalist Domination and the Small Peasantry: Deccan

Districts in the Late Nineteenth Century' in Economicand PoliticalWeekly,Vol.
12, No. 33-34, August 1977, 1375---1404.
INTRODUCTION/ 13
of the 'modes of production' debate of the, 1970s, especially the

notion of a 'colonial mode of production'. But the semantic
distinctions made from this theoretical perspective were still
insufficient to take account of the varieties of agrarian social
structures and the complexities oJ capitalist economic systems
and served to obfuscate the intricate modes- of articulation be-
tween production and markets. Shahid Amin' s article
reproduced below.correctly emphasises the importance-of 'the
problem of small peasant commodity production' for' vast areas
of the country'. While the logic of peasant production·analysed
by Amin can, be accommodated within the theory of formal
subsumption of labour under capital, that general theory cannot
account fm the variety of ways in which credit relates to agrarian
society. Even within, any particular area there were variations·
in the social organization of production depending orr the nature
of the credit relationship. My own piece relates the actual opera-
tion of credit relatipns to a typology of agrarian social structure.
Apparent continuities in agrarian social structure· often
masked significant elements of qualitative change. These ele-
ments remained uncaptured in the literature so long as the effect
of rural indebtedness on land transfers remained central toihe
debate about social transformation under colonial rule. So it is
crucial to recognize that,,'[r]egardless of its impact on the land
market', 'changes in rural credit relations alone [could] explain
shifts in the agrarian social structure and its link with the
economic system' .24 ThiS'is not to say that all qualitative changes
in agrari'an production relations were mediated through credit.
Th~re were important shifts in labour'relations, especially along
lines of gender and gerleration within the peasant family, ~hat
were not reflected-in either land transfer.figures or easily iden-
tifiable changes in credit relations. 25To fully grasp the transfou
mative potential· and role of, moneylending capital in, agrarian
society it is·necesssary to dissect the discourse not only ~mthe
relationship of debt to prosperity and poverty but also the
24 Sugata Bose, Agral'ian Bengal:Economy,SocialStructure and Politics,1919-
1947 (Cambridge, 1986), p. 148.
25See Bose, PeasantLabourand ColonialCapitalin The Neui CambridgeHistory
of India (Cambridge, 1993).
related yet distinct question of 'freedom' and forms of subor-

dination.
(PRO,BING)PROSPERITYAND POVERTY
'Darling's principal discovery,' writes Clive Dewey in introduc-

ing the 1978 edition of his book, 'was that the indebtedness of
a Punjab peasant was more directly related to his affluence than
to his poverty.' Darling himself wrote in his concluding-chapter
that 'debt was allied to prosperity and poverty alike, and that,
while its existence was due to poverty, its volume.was due to
prosperity'. The moneylender was said to be 'the link between
the two' and played the role of 'e~il genius' in relation to the
cultivator, 'exploiting him where he was prosperous, and en-
slaving him where he was poor'. 26Elsewhere in his book Da11ing
seemed to suggest that the volume of debt was a, sign of pros-
perity, an untenable extension of the proposition that debt
follows credit, for which he has been taken to task by Neeladri
Bhattacharya. As blanket statements on the·cause of peasant
indebtedness Darling's conclusions were hardly acute observa-
tions and made no sense at all outside the context ·of regional
and class differentiation which he skilfully described in great
detail in his substantive chapters. In this respect Eric Stokes's
investigation of the issue in central India echoes Darling's find-
ing that 'the problem was most severe at the two extremes--the
intensive and extensive margins' and the' most heavily indebted
areas and classes were the good soil tracts and the middle xank
of comfortably-off peasant cultivators' .27•
The 'poverty the,sis' related debt to the i,nitially high revenue
demand of the colonial. stati;: and the 'forced' character of the
process of agricultural commercialization. In•developing this
thesis nationalist commentators built on and extended certain
conceptions about the causes of rural poverty-·that already
formed an important strand of the colonial discourse on indeb-
tedness. Debt, of course, predated colonial rule but the debt
26 Darling, Punjab Peasant,pp. xvi and 246.

27 Stokes, Peasantand the Raj, p. 260.
INTRODUCTION / 15
problem was seen to have, been compounded under colonial

conditions. Eric ·Stokes quotes a .revealing statement by'the
Jhansi settlement officer in 1893that wheat as a commercial crop
was grown 'mainly for the bania and revenue collector' and the
predominance of land under wheat was regarded 'a serious
hardship'. ·The switch to more labour!-intensive and higher-
value cash-crops generally increased credit needs and, as B.B.
Chaudhuri pointed out in one of his many insightful articles on
this issue, saw the entry of 'new' creditor groups 'primarily
interested in a secure supply of a portion of the peasant's
produce', often at a low pre-determined price. 28 There is a lcirge
volume of historical writing on how poverty-stricken peasants
were compelled to cultivate cash-crops by outright extra-e·con-
omic coercion or through a system of advances which cir-
cumscribed their freedom both iri the domain of production and
marketing of agricultural commodities. 29
The literature on 'compulsive' commercialization never
quite explained how loans came to be 'forc~d' upon unwilling
peasants. So one dissenting view asserted the 'strictly fun-
ctionalist' character of credit. Peter Musgrave' s work on the
United Provinces, for instance, attempted to show how credit
relations worked according to 'the normal rules of village con-
nection' .30 This view neglected the qualitative aspects of socio-
28 B.B. Chaudhuri, 'Growth of Commercial Agricultµre in Bengal, 1859-

1885' fn IndianEconomicand SocialHisto1yReview,7, 2 Gune 1970), pp. 228---30.
See also B.B. Chaudhuri, 'Rural Credit Relations in Bengal, 1859-1885' in
IESHR, 6, pp. 203-57.
29 See, for instance, Amit Bhaduri, 'A Study in Agricultural Backwardness
under Semi-Feudalism' ·in EconomicJournal, 83, (1973), 120-137; Saugata
Mukherji, 'Some Aspects of Commercialization of Agriculture in Eastern
India, 1891-1938' in Asok Sen et. al. Perspectivesin Social Sciences2: Three
Studies in the Agmrian Structure in Bengal,1850-1947 (Calcutta, 1982); and a
number of articles in K.N. Raj et. al. (eds.), Essayson the Commercializationof
Indian Agriculture (Delhi, 1985).
30 P.J. Musgrave, 'Rural Credit and Rural Society in the United Provinces,
1860-1920' in Clive Dewey and A.G. Hopkins (eds.), The Imperial Impact:
Studies in the EconomicHisto1yof Africa and Indfa (London, 1978), p. 230; for a
statement of the 'functionalist' argument see Neil Charlesworth, Peasantsand
ImperialRule:Agriculture and Agrarian Societyin the BombayPresidency,1850-
1935 (Cambridge, 1985), pp. 86--92.
16 / '
CREDIT, MARKETS AND THE AGRARIAN ECONOMY
economic change in the late nineteenth century and did not

address the problem of how moneylending capital related to the
process of production. Shahid Amin' s article reproduced in this
volume engages precisely and perceptively in that task by ad-
vancing an argument resting on 'the exigencies of agricultural
temporalities'. His explication of the problem of rural indebted-
ness was at least partly foreshadowed by Elizabeth Whitcombe
who suggested that the timing of advances was of critical im-
portance to peasants who cultivated indigo, sugar and cotton
despite the minimal profits, if any, which they brought. 31 Amin
makes the argument in more rigorous fashion drawing on
Marx's insights into the lag between working time and a longer
production time. This hiatus created vulnerable moments for
small peasants which could then be seized upon to u~derpin
their unequal relationship with landlord and merchant-money-
lenders.
Amin predicates his analysis of 'the relations of men/
women to each other on a prior investigation of their relation-
ship to nature'. To the extent that he overplays the determining
influence of the 'natural' order of things, his criticisms of David
Washbrook's interpretations of debt relations in south India
are misdirected. For Washbrook the different configurations of
class forces formed the critical variable in explaining the only
'nominal' independence of indebted peasant smallholders in the
'dry' region of Madras Presidency and the absence of 'middle'
peasant dependence on usurious landlords and traders in the
'wet' regions of the Kistna and Godavari deltas. 32 Amin's own
evidence suggests that the structural basis of peasant depend-
ence and independence was set less by the inherent problems
31 Elizabeth Whitcombe, Agrarian Conditionsin Northern India. Volume I: The

United Provinces under British Rule, 1860-1900 (Berkeley, 1972), pp. 173--4,
176-9.
32 See David Washbrook, 'Economic Development and Social Stratification
in Rural Madras: The 'Dry Region', 1878-1929' in Dewey and Hopkins (eds.),
Imperial Impact, pp. 68-82; 'Country Politics: Madras 1880-1930' in J. Gal-
lagher, A. Seal and G. Johnson (eds.), Locality,Provinceand Nation: Essays on
Indian Politics, 1870-1940 (Cambridge, 1'973),especially, pp. 188-90; and The
Emergenceof ProvincialPolitics:The MadrasPresidency,1870-1920 (Cambridge,
1976), pp. 90-3.
INTRODUCTION/ 17
of natural harvest cycles or the intrinsic commodity characters

of gur and raab than the historically specifk balance of i,ow.er
between khandsaris and karkhanedars on tlte one hand and
commodity-producing small peasants on the other. The raab-
producing peasants of Rohilkhand. were dependent on advances
from khandsaris (sugar-refiners) while the gur-producing peas-
ants of Meerut and Muzaffarnagar districts cbuld carry on
agricultural operations without usurious advances. But gur pro-
duction in Gorakhpur was dominated by usury and merchant
capital. Moreover, the timing ofthe colonial state's revenue qists
cannot be reduced to a natural phenomenon even though it
took advantage of the natural constraints of the harvest calendar.
Social and political constructions built upon recurring vulner-
able moments in a scheme of agricultural temporality shaped
the debt relations of a commodity-producing peasantry.
The salience of the state-society 11exus and the context of
class relations is implied in Neeladri Bhattacharya' s article re-
prodl.,lced below. He adduces evidence from the Punjab to test
the widely held view of colonial agriculture that 'a mass of
impoverished peasants was inextricably integrated into a cycle
of forced commerce, subordinated to the power of ~he trader-
moneylender'. His finding, in brief, is that loans 'mediated
different types of relations between debtors and lenders'. While
rejecting Darling's connection between prosperity and debt 1
Bhattacharya also contests Amit Bhaduri's fo,:mulation prem ..
ised on the monopolistic control over debtors in highly personal-
ized, credit markets. Io the Punjab dependence on loans more
often 'meant a structural subordination of the petty producers
to money capital in general, not their individual, bondage to
particular creditors'. In certain regions of the Punjab countryside
where t~ social structural framework was relatively favourable
peasants were able to achieve social reproduction at a given level
of indebtedness. In more adverse ecological and social cir-
cumstances they could not avoid getting caught in a downward
spiral of pauperization which, could lead to exproprfation.
Making a 'broader comparison between regions Bh&ttacharyq
finds that the system of advances did not lead tq controls over
production and marketing in the Punjab of the sort that operated
in the instances of opium, indigo or jute in Bengal or sugarcane

in U.P.33
Within Bengal and U.P. there were important variations in
debt relations. Jute cultivation in early twentieth-century Bengal
was not quite the same kind of forced activity that indigo
cultivation had been between 1830 and 1860. The transition to
jute could be interpreted not as a straightforward response to
market opportunity but as a strategy of assuring subsistence for
the peasant family via the market. The distinction between the
dadni and lagni forms of credit representing merchant and
usury capital was quite as important in Bengal as it was in the
Punjab. But their formal distinction notwithstanding, my chap-
ter argues that merchant and usury capital effectively comple-
mented each other in exploiting peasant labour. In a situ,!ltion
of declining rental incomes landlord-moneylenders were able
to turn to usury thanks to an expanding product market. Even
where peasants were not tied by advances, trader-moneylenders
were aided in their efforts to buy the commodity cheaply by the
interest demand on lagni capital at the moment of harvest. The
heavy peasant demand for unsecured loans obviated the pos-
sibility of playing off creditors against one another. While the
product and credit markets were interlinked in the peasant-
smallholding system predominating in jute-growing east Ben-
gal, credit in the peasant smallholding-demesne labour complex
substantiated dependence on landlords' demesnes in west Ben-
gal and also assisted in the collection of rent from smallholders.
Debt interest formed an important part of the jotedars' crop
share within the rich farmer-sharecropper system typical of the
frontier regions.
Shahid .Amin suggests towards the end of his article that
analytical frameworks for-small peasant production and rural
indebtedness ought to be moulded by peasant experiences. 'A
33 For a differing view which sees the Punjab to be not so very different
from Bengal in its process of agricultural commercialization and claims
validity for the argument about compulsive cash-crop production even in the
Punjab, see Mridula Mukherjee, 'Commercialization and Agrarian Change in
Pre-Independence Punjab' in Rajet. al. (eds.), Essayson Commercialization,pp.
51-104.
INTRODUCTION / 19
historian of the peasantry who, forsakes the nakshatras for the

trader's grain pit,' he warns, 'is likely to fail in his/her unde.r-
standing not only of the peasant but also of the merchant-
money-lender.' Yet the rhythms and fluctuations of a supra-
regional capitalist economy were quite as much a part of the
moving constellation of nakshatras influencing the peasant
world as the annual monsoons. The scholarship of C.A. Bayly
has suggested that at least. from the 1820s onward exogenous
commercial cycles cast their imprint on agrarian economy and
society in interaction with demographic and climatic cycles. 34
After the 1850s the vicissitudes of product prices and credit
flows emanating from the wider capitalist economy and beyond
the control of peasant labour grew in relative importance in
shaping peasant experiences.
The great merit of C.J. Baker's work lies in his ability to
analyse the role of credit within the framework of the connec-
tions between the cultivator's field and the trader's marketing
yard. His approach is different from that of Shahid Amin who
writes that his own 'description of agricultural practices is
followed by a digression into the world of the moneylender-
manufacturer and the peasant'. In the extract reproduced below
Baker provides a clear picture of 'a pyramid of credit which
stretched all the way from the Imperial Bank to the lowly strata
of, the countryside'. He also draws attention to the specialized
flows of credit that tied an important agrarian region of South
Asia to the rice frontiers and plantationsuf Southeast Asia across
the Bay of Bengal.35 Comparable research is urgently needed on
the links that stretched across the Arabian Sea connnecting
western India with West Asia and East Africa. The nature of the
34 See C.A. Bayly, Rulers, Townsmen and Bazaars:North Indian Society in the
Age of British Expansion,1770--1870(Cambridge, 1983); also, Bayly, 'The Age
of Hiatus: The North Indian Economy and Society, 1830--1850'in C.H. Phillips
and M.D. Wainwright (eds.), IndianSocietyand the Beginningsof Modernization,
c. 1830--1850(London, 1976) and Asiya Siddiqi, Agrarian Change in a North
Indian State: Uttar Pradesh,1819-1833 (Oxford, 1973).
35 See also C.J. Baker, 'Economic Reorganization and the Slump in South
and Southeast Asia' in ComparativeStudies in Societyand Histo,y, 23, 3 (1981),
pp. 325-49.
articulation between agrarian production and markets. helps

explain the failure of trading capital to profitably invest in rice
mills, cotton gins and groundnut decorticators in early twen-
tieth-century Tamilnadu by contrast with sugarcane processing
factories in U.P. Baker makes a convincing case to support the
notion of a close interconnection between the finance of the
urban sector and European business, of internal trade, and of
cultivation. Neeladri Bhattacharya' s point about the 'false as-
sumption of an integrated rural and urban money market' holds
only partially on the narrow and restricted issue of the deter-
mination of interest rates.
The hierarchical connections between high finance in the
metropolis, intermediary capital flowing between regions and
usury within the countryside ensured that fluctuations in the
wider capitalist economy influenced and brought about a sub-
stantial measure of confluence in peasant experiences. Diverse
agrarian regions witnessed a rise in the volume and pervasive-
ness of indebtedness during the late nineteenth and first three
decades of the twentieth century. Debt interest became a more
important mechanism of surplus-appropriation than rent and
revenue. The various provincial banking enquiry reports of the
late 1920s calculated debt as a multiple of land revenue. The
multiples reported were 25.5 in the Punjab, 21 in Assam, 19 in
Madras, 15 in Bombay and 12.5 in the Central Provinces. The
C.P. report explicitly stated that annual interest chafges
amounted to two and a half times the land revenue demand.
Darling reckoned the interest ,charge in Punjab in 1929 to be
more than Rs 150 million of which Rs 120 million were owed by
proprietors· and the rest by tenants and farm-hands. Since the
land revenue demand that year was Rs 53 million, the pro-
prietors' interest burden was over twice their revenue obliga-
tion. My own work reproduced below discusses the extent to
which debt interest surpassed rent as a channel of appropriation
in Bengal districts, a theme also explored and largely corrob-
orated in the research of Prabhu Prasad Mahapatra on Chota-
nagpur.36
36The figures from the Provincial Banking Enquiry reports are compiled
INTRODUCTION / 21
The severe crisis in world capitalism in the 1930s affected

rural India across diverse regions. In Tamilnadu, Bengal and the
Punjab alike the depression decade witnessed a stoppage in the
inflow of foreign funds, the drying up of monetary credit in
rural areas, and the dramatic outflow of gold from 1931 repre-
senting a puge disinvestment by the agrarian sector. Baker's
research and mine suggest some gains in urban investment in
Tamilnadu and Bengal; Bhattacharya claims otherwise for the
Punjab. The state made broadly analogous interventions
through debt legislation and conciliation in almost all of the
provinces of British India. The long-term shrinkage in rural debt
lasted at least until the end of World War II in Tamilnadu and
Bengal; Punjab appears to have had a mild revival of credit from
the later years of the War.
The convergence in the destinies of diverse agrarian regions
as participants in a capitalist world economy did not mean that
the experience of an economic crisis of the magnitude of the
great depression was. socially and culturally undifferentiated.
My chapter below argues that impact of the snapping of mon-
etary debt bonds varied according to the type of agrarian social
structure that it affected. Grain loans often continued to be
handed out to dependants by demesne lords despite a long-term
rupture in the relations of monetary credit. 37 The cultural mean-
ing of an economic event or process was moulded by the
normative social values it upheld or violated. In order to draw
the connections between the aspects of political economy and
culture in peasant respectfulness towards and resistance agains\
creditors, it is necessary to address the question of reciprocity:
(RET,HINKING} RECIPROCITY AND RESISTANCE
The etymology of the two most common indigenous terms for
and presented in a tabular form in Darling, PunjabPeasant,p. 18. See also the
contri]:>utionsby Darling, Baker, Bhattacharya and me below and Prabhu
Prasad Mohapatra, 'Land and Credit Market in Chotanagpur, 1880-1959' in
Studies in Histo,y, 6, 2 n.s. (1990),pp. 165--8. .
31 Cf. Bose, below, on western Bengal and Mohapatra, 'Land and Credit
J:viarketin Chhotanagpur', pp. 174-5, 200-3.
moneylender has claims to deference ingrained in them.

'Mahajan' literally means 'great man' and has connotations of
generosity and respectability; 'sahukar' means a possessor of
honor with implied virtues of straightforward and honest finan-
cial dealings. While the creditor was by no means a novel
creation of colonial ·rule, there is little doubt that his position in
agrarian economy and society was bolstered by the colonial
state and colonial capitalism. The question remains, however,
whether the moneylender was able to take advantage of the
element of redprocity in debt relations and translate economic
power into a form of moral hegemony. What attributes did the
moneylender have in the culture and consciousness of peasant
debtors and what were the conditions and modalities of anti-
moneylender resistance?
In a deft deconstruction of the Rahu myth among the Doms
and other outcaste social groups in northern India, Ranajit Guha
has shown how the idea of power of 'a prisoner of debt' relied
'largely on his own experience of the creditor's power over
himself'. The casting of their patron deity-Rahu-in the role of
the creditor is interpreted by Guha as the ultimate' apotheosiza-
tion of the usurer'. 'But,' he goes on to note perceptively, 'if that
is the.way for the Dom, Dosadh, Bhangi and Mang to acknow-
ledge the creditor's power, it is also their way of liberating
themselves from it.' To begin with, these outcaste social groups
have defied the Brahminical canon in the deification of Rahu
who, as the enemy of the Sun and the Moon, is a deeply
malevolent figure for caste Hindus. More important, by iden-
tifying with Rahu the Doms weighed-down by debt 'transform
themselves into creditors by the same idealizing process, and
destroy, in the ideal world, that thraldom which, in th~ real
world, they are unable to overcome'. They symbolically share
with Rahu, at least occasionally, 'the role of devourer of ttt.e
celestial debtors'.
What is one to make of the symbolic inversion of the relations
of oppression in the minds of some of the worst victims of
usurious exploitation? How emancipatory is the process ·of
stunning negation associated with the shift in the site of the
career of an anti-God from heaven to earth. Guha has 'no doubt'
INTRODUCTION / 23
that such a transference 'does not achieve anything but a false

liberation'. Yet he also accepts that the descent of •he Rahu myth
from celestial heights has made a difference. What began as a
contest among the gods for amrta (the potion of immortality)
has been transformed at least potentially into a contest over
material resources and, one might add, the quest of the wretched
of the earth for their notion of human dignity. The folk-tales and
fables suggest to Guha that 'the struggle ... is still being waged
in the head' but has 'now a better prospect than ever of ma-
terializing itself in . . . social struggle'.
Guha' s intellectual interest remains captivated by the meta-
phor of the mutating Rahu myth. Beyond a tantalizing acknow,
ledgement of the possibility of materialization of a struggle
taking place in the debtor's consciousness, he does not draw th~
links between political economy a;nd,culture. James C. Scott's
most recent theoreRcal work on 'ideologica,l insubordination'
goes a little further in accepting that the 'infrapolitics' of resis-
tance by subordinates against dominant elites is 'very much of
a material struggle in which both sides are continually _probing
for weaknesses and exploiting small advantages'. 38 I would
make a stronger claim that in the historical context of colonial
capitalism the large contradictions within stru~t1;1resof political
economy are of critical importance, often emibling that' conquest
of 1nevit~bility39 ot succumbing to power. i ~hich allows theI
1 1,
hidderi trattscri)?tSof cultural dissel}t al;d'n~&ation t!?make their

dramatic entry on to the public stage. 1
Eavesdropping on the back 7t~ge discourse of subordin~ted
groups such as peasanf d'ebtors rather than simply observing
the public -pei"r9rmances of deference reveals the, near-bank~
ruptcy of theories of negemony and false consdousness:On this
question Scott's inversion of a'n important aspect of Gramsci' s
analysis of hegemohy is compelling. Contrary to Gramsci' s
formulation, a reading of hidden transcripts suggests that sub-
ordinate classes are 'less constrained at the level of tho~ght and
38 James C. Scott, Domination and the Arts of Resistance:Hidden Transcripts.
(New Haven, 1990), p. 184.
39The phrase is Barrington Moore's in Injustice:The SocialBasesof Obedience
and Revolt (White Plains, New York, 1987), cited in Scott, Domination, p. 220.
ideology' and 'm01:e constrained at the level of political action

and struggle' .40 This is not to deny that indebted peasant la-
bourers often saw their creditors as all-powerful beings. The
Bhils and Grasias of western India were just two among several
tribes which ascribed to sahukars the power to stop rain as part
of their scheming designs. We have it on the authority of close
anthropological observation that the Bhils 'never look[ed] so
meek, so humble and so docile as when they [we ]re dealing with
the moneylender'. 41 But the mocking and searing sarcasm ex-
pressed in some of their proverbs provide a better glimpse into
their minds. 'I love the Sheth-Vaniya so much,' went one such
gem, 'that I have given him a fat stomach.' 42 A rustic poet of
east Bengal had a clear sense of the predicament of the indebted
peasant:
'Jedin theke mahajaner shange janajani
Shedin thekei Kalu Sheikher bejay tanatani' 43
[Ever since he made the mahajan's acquaintance
Kalu Sheikh has been in straitened circumstance]
Yet even as the predominantly Muslim peasantry of east Bengal
shed some of its syncretist cultural practices and carved out an
increasingly autonomous space for a dissident culture from the
late nineteenth century onwards, they remained enmeshed in
what I have termed an 'unequal symbioisis' in social relations
with their mostly Hindu landlord and merchant creditors. Sus-
tained and overt' political conflict did not erupt between credi-
tors and debtors in the east Bengal countryside until 1930.
Despite the recognition of the exploitative role of money-
l~nders and their portrayals in hidden transcripts ~s people to
be held in disdain if not despised, anti-moneylender uprisings
were exceptional occurrences in the history of colonial In4ia.
When they did occur, two distnguishing features appeared to
stand out: first, the destruction of debt bonds and accounfbooks
40 Scott, Domination,p. 91.
41 S.C. Varma, The Bhil Kills (Delhi, 1978), pp. 354-355.
42 Fuljibhai Bhili, Rajasthani Bhilo lei Kahavate (Udaipur, 1954), cited in
Hardiman, 'Bhils and Shahukars' in Guha (ed.), Subaltern Studies V, p. 3.
43 Maulavi Sheikh Idris Ahmed, KrishakerMarmabani,cited in Bose, Peasant
Labourand ColonialCapital,p. 122.
INTRODUCTION / 25
and second, the demand for a continuance of .subsistence loans.

These provide important clues for understanding the secrets of
the domination exercised by creditors and the apparent willing-
ness to accept the hegemonic appearances that came with sub-
ordination on the part of debtors. There is a danger of
over-emphasizing the public displays and public discursive
affirmations of the power of moneylenders and ignoring the one
crucial area where their power sprang from the ability to be
inscrutable. This was the sphere of keeping written accounts of
debt. Several scholars have noted that peasant debtors were at
a disadvantage because they were not literate and numerate.
But it was not a straightforward case of debtors believing their
creditors to be possessors of 'that seemingly most magical'of all
powers,, the ability to read and write'. 44 As an insightful article
on rural Sind points out '[e]ven if the client were literate, it
~eldom made much difference because accounts were kept in
the bania-Sindhi script which was incomprehensible to most
non-banias' .45
Of greater significance to the maintenance of the unequal
social symbiosis was the reciprocal role played by the money-
lender in guaranteeing.the subsistence of peasant debtors during
the recurring ,lean months of the agricultural cycle and oc-
casional bad years brought about by climatic or market fluctua-
tions. This was not a form of reciprocity which took place
outside the context of exploitation in terms of surplus-value
being appropriated. But it was an important obligation in a
normative scheme that regarded the right to minimal ~ubsis-
tence;-asinviolable. Nor was this a form of reciprocity rooted in
pre-colonial and pre-capitalist communitarian values. But it was
an important expectation of a quid pro quo for accepting the un-
certainties and inequities of the capitalist marketplace. Serious
crises of capitalism were occasions for major breakdowns in the
symbiotic aspect of unequal relations between creditors and
debtors.
If for most subordinated groups there was a crucial strategic
44Hardiman, 'Bhils and Shahukars' in Guha (ed.), S.ubaltem Studies V, p. 22.
4? David Cheesman, "'The Omnipresent Bania": Rural Moneylenders in
Nineteenth-Century Sind' in Modem Asian Studies, 16, 3 (1982), p. 451.
and dialogic dimension to their interrogation of power, for

peasant debtors the expectation of a reciprocal subsistence
guarantee was an important additional factor enhancing the
use-value of hegemonic appearances. 46 Yet even during the
extended periods when the unequal symbiosis underpinning
credit relations at a societal level was intact, the 'murder of
extortionate moneylenders had social sanction'. 47 In other
words, the violation of socially negotiated norms by individual
moneylenders could be punished. But murder was not a very
common form of retribution when peasant-debtors charged the
entire class of moneylenders with the crime of dereliction of
duty in providing services that were promised by their own
attempted hegemonic discourse. Anti-moneylender uprisings as
varied in place and time as the Deccan riots of 1875, the Bhil
attack on sahukars in the Eastern Mahals of Gujarat in 1899 and
the Kishoreganj disturbances in east Bengal in 1930 were marked
by a remarkable absence of personal 'violence against oppres-
sors.48In each of these three instances the peasant debtors were
emboldened to act by rumours that the distant colonial govern-
ment would countenance movements of resistance that sought
to reorder the unequal symbiosis in creditor-debtor relations
along lines more acceptable to the subordinate party. One his-
torian of the events in the Deccan in 1875 has sought to dismiss
them as a series of minor grain riots; another historian of the
Bhil rising of 1899 has attempted to draw a sharp, false distinc-
tion between grain riots and the 'multiple arenas of conflict' in
complex agrarian economies. 49 Yet in the perception of peasant
debtors entitlement to food-grains was precisely what inequi-
table credit relations were meant to assure. Credit formed the
key thread in the complex relationships linking the labour,
46 Cf. Scott, Domination,ch. 4.

47This is what Neeladri Bhattacharya reports on the Punjab. See below.
48 See Ravinder Kumar, Western India, ch. V; Hardiman, 'Bhils and
Shahukars' in Guha (ed.), SubalternStudies V, pp. 37--44 and Sugata Bose, 'The
Roots of 'Communal' Violence in Rural Bengal: A Study of the Kishoreganj
Riots 1930' in Modern Asian Studies, 16, 3 (1982), 463-91.
49 Charlesworth, 'Myth of the Deccan Riots' in MAS, 6, 4 (1972), p. 416;
Hardiman, 'Bhils and Shahukars' in Guha (ed.), SubalternS"tudiesV, pp. 48-50.
INTRODUCTION / 27
capital and land markets and entitlement to subsistence was. the

minimal demand of subordinated classes if they were to tolerate
fundamentally skewed debt relations.
The quite widespread negation of the creditors' domination
in the realm of c;ulture and consciousness was1tempered by a
strategic and dialogic negotiation of the balance of class power
by peasant debtors. An analysis of political economy and the
state becomes indispensable in unravelling the conditions of
possibility for those exceptional and effective onslaughts on
landlord and trader moneylenders as a class that were launched
periodically between 1857 and 1947. The.great contradiction and
crisis of the depression decade·provided the setting for arguably
the most potent resistance movements attempting to translate
negation from thought to political action. Yet the pre-existing
configuration of the agrarian power structure set some initial
handicaps that influenced even if they did not wholly pre-det~r-
mine the outcome of social struggle. My own research has
suggested that the common crisis of the-depression had a bond-
snapping effect for the peasant smallholders in east Bengal while
the ties of dependence were strengthened between demesne
lords and agrarian dependants in west Bengal. soOnce the rejec-
tion of a hated social order came within the fold of realistic
possibility, the legitimizing ideology drew heavily on cultural
resources that were already available and well- developed but
not publicly stated to the audience of erstwhile oppressors.
FREEDOM FROM BONDAGE
Malcolm Lyall Darling had written early in this century of how

a demoralizing brand of prosperity had created a system under
50 A similar point can be made about a common economic conjuncture and

the salience of different configurations of class forces in West Bengal and Bihar
in influencing political outcomes in the anti-indigo planter struggles of the
late 1850s. See my Peasant Labourand ColonialCapital, ch. 5. Cf. the debate
about class conflict and alternative routes to agrarian capitalism in England.
and France in T.H. Ashton and C.H.E. Philpin (eds.), The Brenner Debate:
Agrarian Class Structure and Economic Development in P1·e-l11dustrial Europe
(Cambridge, 1985).
which 'the creditor [wa]s in danger of being turned into a tyrant

and the debtor into serf'. 'The cultivator sows,' he lamented,
'that another may reap, and toils that his creditor may gain.' 51
The 'principle of liberty' ingrained in the nineteenth-century
colonial discourse of rational political economy' merely insured
the exploitation of the kunbis by the vanis' of nineteenth-century
western India. 52 The kamias of South Bihar found bondage
written into the nineteenth-century colonial discourse of free
labour. 53 The discourse of freedom sought to be orchestrated by
the Indian National Congress in the early twentieth century
hedged when it touched on the emancipation of peasant debtors.
As the Gandhian stalwart Vallabbhai Patel urged Harijan peas-
ant debtors during the celebrated Bardoli satyagraha of 1928:
'The government wants to divide you and tlie sahukar, but for
you your sahukar is everything. You should laugh at and con-
sider him to be a fool if somebody says that you should change
your sahukar. It is just like saying to a pativrata (a chaste and
faithful wife) that she should change her husband. How can you
leave the sahukar who has helped you in your difficulties?' 54
The colonial and mainstream nationalist discourses of
freedom were of course constantly contested by subordinated
classes. Unable to settle accou~ts with the moneylenders, the
peasant debtors nevertheless settled scores by torching the more
grossly unjust among them. And when on those rare occasions
in village after village the haystacks and houses of mahajans and
sahukars were set alight, it was a sure sign that the unextin-
guishable flame of a hidden transcript had leapt dramatically
and uncontrollably on to the public stage.
51 Darling, Punjab Peasant, p. 247.

52 Kumar, Western India, p. 195.
53 See Gyan Prakash, Bonded Histories: Genealogies of Labor Seroitude in
Colonial India (Cambridge, 1990).
54 Satyagraha Patrika, 12 April 1928, cited in D.N. Dhanagare, Peasant
Movements in India, 1920-1950 (Delhi, 1983), p. 103.
I
Chapter One
Prosperity and Debt*
MALCOLM LYALL DARLING
'The devil's grown wiser than before; He tempts by making

rich, not making poor.'
PROSPERITY OF THE PROVINCE
The Punjab is agriculturally the most prosperous province in

India, and it is probably also the most indebted. The object of
this chapter is to examine this apparent paradox.
Materially, there is no comparison between the Punjab of
today and the Punjab of seventy years ago. Only in the south-
west of the province does the immemorial poverty of India still
continue. Everywhere else there has been change, and, as we
saw in examining the rise in the standard of living, the change
has been most marked in the central districts and the canal
colonies. The peasant is better fed and better clothed than he
1 was a generation ago, and he is beginning to be better housed.
Luxuries, once confined to the town, have appeared in the
village: gold is worn instead of silver, and muslins instead of
homespun. Many who went on foot, travel in tum-tum, tonga,
and lorry, and, although since the fall in prices many have taken
to their feet again, few remain who are obliged to walk unshod.
• Extract from Malcolm Lyall Darling, The PunjabPeasantin Prosperityand

Debt (4th edition, 1947; first published 1925; reprinted Delhi, 1978).
Thanks to 20,000 miles of canals,1 the fear of famine has been

almost banished, and if cattle still die in thousands, man himself
is safe. He may have to leave his village in a period of drought,
but he need no longer starve. He is.also busier, for till 1921-the
position has 2 changed since-<:ultivation increased faster than
population. With the spread of the canal, too, has come an
immense development of trade. In 1872, the Punjab received
only 4 lakhs for its surplus grain; in 1918, over 24 crores. 3
In fifty years, the value of agricultural produce rose from 35
to over 120 crores, 4 and during the years of high prices after the
war the canal colonies alone produced £ 20 millions a year. In
two years (1919-21) over 9 crores were absorbed in gold and
silver, 5 and in 1929, before the fall in prices, the deposits of the
province were estimated at over 30 crores. 6 Most significant of
all is the rise in the value of land. Worth in 1866 about Rs 10 an
acre, it sold in the five years ending 1926 at an average of Rs
238.7 In 1862-3, Government congratulated itself that the sale
price stood as high as seven years' purchase of the land rev-
enue;8 in 1930 the corresponding figure was 261. In the sixties,
land in Ferozepore was hardly saleable at a11;9now perennially
irrigated land sells at Rs 600 (£ 40) an acre, 'which is higher than
what good land sells at in Britain' .10
t'fn 1945-6 over 23,000 miles.
2 Between 1881 and 1921 population increased by 22 per cent and cultiva..1
tion by 50 per cent. But in the next twenty years population increased by 37
per cent (from 20.68 t6 28.38 millions) and cultivation by only 5.1 per cent
(from 29.5 million acres, av~rage of the five years ending 1921, to 3101 rpillion
acres, average of the five years ending 1941). Even allowing for the increase
in the yields of rice and wheat, which expert authority puts at about 10 per
cent for the whole province, it seems clear that population has outstripped
cultivation.
3 Calvert, op. cit., p. 162.
4 It fell to 55 crores in 1930-1 but by 1945-6 it had risen to 311 crores (see
p. 16, 3rd note).
5 Pb. Bkg. Enqy., p. 326.
6 Ibid., p. 147.
7 Land Revenue Administration Report, 1930, stmt. xxvi. For the four years
ending 1940, the average price was Rs 241. Later figures are not available.
B Indian Famine Commission Report, ii. 125.
9 Memorandum by Financial Commissioner, dated 15 August 1889.
10 Roberts and Faulkner, op. cit., p. IL
PROSPERITY AND DEBT/ 31
INCRE~SE IN DEBT
But there is another side to the picture. If prosperity has in-

creased, so also has debt; and the increase in the one is only less
remarkable than tlie increase ih the other ... [For] though at ~e
,
I
1
'
beginning of British rule mortgage was rare and the money-
lend~r weak, oy the seventies the orie was common and the pther
powerful. By 1874 over one million acres were mortgaged, and
by 1891nearly four million. In the next thirty years, though there
was no great increase in the area under mortgage, mortgage
debt apparently increased by over 25 crores. 11' And' what has
happened since is even more striking. In the next ten years
(ending 1931)proprietors' mortgage debt increased by 31 qores.
This is a startling figure, and the following Taple taken from the
report of the Banking Enquiry Committee, 12 shows that it pas
no parallel in the thirty years ending with the Great War:
TABLE 1.1
'for the ten yeats ending Net increasein usufructuary mortgagedebt·

(proprietorsand occupancytena11ts)
Crores
1899 9.95
1909 5.06
1919 10.42
1931 34.2213
11 This has been calculated by deducting the amount paid for redemption
from the amount raised every year by mortgage-see annual statements in
the Land Revenue Administration and Land Alienation Act reports; figures
for the Norfh-We~t Frontier Province have been excluded, but not those for
the Delhi Province, which was separated from the Punjab in 1912; the latter,
however, are not important. Some deduction must be made on account of
mortgages to non-agriculturists since the passing of the Land Alienation Act,
as these are now automatically extinguished after twenty years without
payment, but informal enquiry suggests that the de?uction to be made on
this'account is small.
12 BankingEnqui1yCommitteeReport,p. 18.
13 This figure differs from the one given above (31 crores), because it
includes mortgages by occupancy tenants as well as proprietors. The total
increase in mortgage debt for the twelve years ending 1931 is 36.41 crores: for
the nine years following it is 191a crores. Figures after 1940'are not available.
In discussing these figures, which relate only to usufructuary

mortgage debt, the Committee observed justly that the increase
since the war was not so serious as appeared, since the rupee
was much less valuable in the twenties than in the nineties.
Unfortunately the fall in prices that has occurred since robs us
of even this consolation, and the figure-34 crores--must now
stand in all its hideous nakedness. As stated in the first chapter, 14
in nine years total agricultural debt rose from 90 to 140 crores,
and though the increase is only 56 per cent, the fall in prices has
doubled the burden. Such a conclusion must give every lover
of the peasant furiously to think.
OUTSIDE THE PUNJAB
At the same time, we must not suppose that an increase of debt

is peculiar to the Punjab. The reports of the Banking Enquiry
Committees contain indications of it in other parts of India. In
the North-Wes~ Frontier Province, to take the case of a neigh-
bour, mortgage debt is increasing in every district, and the
figures suggest that the increase is rapid. 15 Outside India only
one country need be mentioned. In Germany, from the end of
the war to the autumn of 1927, agriculture incurred fresh debt
of over£ 350 millions; 16 and in the eastern provinces a heavy
fall in the price of rye recently produced an agricultural crisis
which 'has become so catastrophic that thousands of farmers
must become bankrupt if they are not helped by the State' .17
14 BankingEnquiiy CommitteeReport,p. 16.

15 The following figures for mortgage debt are given in C:A.A. Banking
Enqui1y.
1907-8 1928--29
(except where stated)
Lakhs Lakhs
Dera Ismail Khan district 22 (191-3) 58
Bannu tahsil 35 67'
Lakki tahsil 42 93
Peshwar tahsil 8 (last settlement but one) 23 (recent settlement)
16 Horace Plunkett Foundation, op. cit., p. 377.
17 Economist,15 May 1930.
PROSPERITYAND DEBT / 33
EXPANSION OF CREDIT
... It [has been] stated that if the existence of debt 'Yas due to
necessity, its volume depended upon credit, and that the link
between th4;!two was the moneylender. 18 In examining the latter
and hi~ methods we find that with the advent of British rule the
old village system of barter gradually gave way to a money
economy; that land which had been of little value became an
~bject 9f general desire, that the moneylender, seeking, an outlet
for his tncreasing wealth, did his utmost to make the cultivator
borrow, and that the ~ltivator was unable to resist the tempta-
tion. In a word, money was plentiful, security good, credit easy,
and borrowing uncontrolled. Now experience shows that
when these conditions prevail, rural debt invariably increases.
We have abundant evidence of this in the settlement reports of
the last fifty years. 'Indebtedness', says one of the earlier ones ,
'seems due not to the impoverished condition of the
people ... but rather to the increased value of the land, which
has given the zemindar greater facilities for borrowing by im-
proving the security he has to offer.' 19It is pointed out that under
Sikh rule the agriculturist had to pay away all his spare produce
and that nothing was left on which he could borrow; but with
the introduction of a fixed cash assessment, the extension of roaq
and rail, the opening of ·new markets and the rise in prices, the
cultivator, $lfter meeting all his obligations, found himself with
a handsome balance, on the security of which the moneylender
was glad enough toqend. The next stage is described in another
report of the time. 'When the owner of a good well or a fat piece
of sailali1Ddeals with ~ bania, he finds that his credit is unlimited.
It is a case of spending made easy. He can have whatever he
wants whenever he wishes. All that he is troubled with is his
signature or assent to the usual six-monthly statement of
accounts'; and the settlement officer pertinently adds, 'so long
as a zemindar has credit so long will he borrow.' 21 Another and
18 Darling, The Punjab Peasant,pp. 13, 14.

19 Jullundu1·S.R., 1881-85.
20 Land irrigated by subsoil water oozing up.
21 ]hang S.R., 1874-80, p. 130.
most important aspect of the process is emphasized by Mr.

Thorburn. 'In 1849-50', he says, 'we converted collective into
individual ownership of land, plus the right to alienate it at
pleasure. By so doing we made an unconditional gift of a
valuable estate to every peasant proprietor in the Punjab, and
raised his credit. from the former limit of the surplus of an
occasional good crop to the market value of the proprietary right
conferred .... Until then his borrowing was limited to a few
rupees, recoverable only at harvest time .... In one day the olcl
order passed away and gave place to a new one, which imposed
upon this unsophisticated Punjabi a responsibility to which he
was unequal .... To his surprise and delight he found that his
former petty borrowing powers were now practically unlimited,
his bania being·ready to accommodate him to any extent.' 22
DEBT FOLLOWS CREDIT
As we have sald befc;,re,debt follows credit, and though there

are other factors, this is tlie key to the problem. It explains why,
in 1873, five out of the seven most heavily mortgaged districts
of the province were 'amongst the most prosperous and
wealthy',23 and why rportgage debt is now increasing fastest in
the richer districts. The six districts which stand first in this
respect for the six yea~s ending 1930 are given below, and it will
be noticed thf!.t9,.ll:ar~prosperous, particularly the first four:-
District Increase in Usufructuary Mortgage
Debt, 1923-4 to 1929-30.
Lakhs
Ferozepore 195
Amritsar 186
Lyallpur · 141
Lahore 133
Hoshiarpur 128
Ludhiana 124
22 Thorburn, Mussa/mans and Money-lendersin the Punjab, p. 49.

23 Note on Land Transfer,etc., p. 44.
The most significant figure is that for Lyallpur: In 1921,Tfstotal

mortgage debt ~as only 55 lalqls; 24 and nine years later it had
grown to ,141 lak.hs.... [In 192p] it was th,e ,nost prosperou~
distpct in the province.ar,td one of tr.Et least ind~Jed. Now it
seems qoomeq to become one of the most involved. There could
hardly be a :clearer <;ase o( t~e fatal facility with wl}ich debt
fpllows credit. Jhe Settlell).ent Officer qf Rohtak was right whep
he wrote ovei; twenty years ,ago t}:lat 'a zelllinqar limits his
bOffOWingnot by hi\' Wafl\Sbut qy his opport1;1nities'.25
I( it is true that debt follorvs <;redit,those who haven(\ credit
wiJl haye no debt. This, top,is the. case. In ~hang, at one poil\~
of time, there :Vere a nmpber of villages w!J~r~ therE; was I1?t
·even a ~i~gle ~ase of mortgage, as c1~.lttvat!onwas '-'ncertain, the
pe<;>ple nomadic, and credit co~resP,oppingl,Yl,ow.26In Ludhiana,
'villa&~swith weak soils and little irrigation an~very often ,more
free frqm d~bt than the finest villages'. 27 11)the Thal, where land
has little valuEr,,the shepherd is.not jn debt because no one will
lend to hi:µi;28 and in: Muzaffargarh, p~rhaps the tnost deepl~
involved district in the province, it is the same case in the po9rest
villages; of which the late settlement o/ficer gives the follo\-\;ing
example: 'Near Basira are two adjoining villages, owned by a
multitude of Balochis whose }loldings averag~ half an acre each.
T~e land in,both is,abopt the same qu4~i,ry,ljmt,the1e js a great
differepce in the water supply. Ip the vill,age ~ith the worse
there is no debt or n;iortg!3ge,a.s there js po security for a loan,
and the owners )ead a decent if penurious existence as day
labourers; in the village with the better canal supply, 100 per
cent of the land of the Balochis has long been mortgaged to
Hindus, who take the whole of the produce and treat the,
nominal owners as serfs, employing them as labourers to steal
cattle and water'.
24 Darling, The Punjab Peasant, p. 125 .

. ZS Gohana A.R., 1907, p. 12.
26/hang S.R., p. 172.
27 Ludhiana A.R., 1910, p. 14.
28 See Kot Adu A.R., 1924, p. 15, and Leiah A.R., 1924, p. 18.
36 / CREDIT,MARKETSAND THE AGRARIANECONOMY
EXPERIENCE OUTSIDE THE PUNJAB
It is not only in the Punjab that an expression of credit generally

leads to an inflation of debt. In Nagpur and Jubbulpore, two
districts of the Central Provinces, the rise in the value of land
which followed the opening up of the country by rail to the trade
of the world, produced an outburst of extravagance, 'and the
standard of expenditure on marriages ... reached a point which
it was altogether beyond the real capacity of the land to bear
except in very favourable seasons'. 29 In the Deccan, in the sixties,
a similar expansion of credit, this time due to a sudden rise in
the value of cotton (the result of the American War), led to much
improvident borrowing. 30 More recently, both in Madras 31 and
Baroda, 32 debt has been increasing with the rise in the value of
land, and in Burma, 'the natural result of the rapid increase
in money-income of paddy cultivators has been extravagant
spending and abuse of credit' .33 As the Royal Commission on
Agriculture remarked: 'Causes which the cultivator seldom
understands ... have endowed him with credit which he did
not formerly possess, and he has found it difficult to resist the
temptation to relieve present necessities by mortgaging his
future income and even his capital' .34
Outside India we find the same influence at work. The great
increase in peasant indebtedness., which took place in Europe in
the latter half of the nineteenth century, was due, amongst other
causes, to a rise in the value of land. 35 Till the French Revolution,
and in some countries till much later, the peasant in Europe was
29 Memorandum. by Sir J.B. Fuller.
30 Indian FamineCommissionReport, 1880, ii, p. 133.
31 Slater, Some South Indian Villages,p. 241.
32 BarodaReport, op. cit., para. 90.
33 Burma Banking Enquiiy, p. 61. The same appears to be true of the N.W.
Frontier Province. Four villages 'amongst the very finest in the Peshawar
District' were recently found to have a total mortgage debt of 83/4lakhs which
'is enormously higher than elsewhere', and in the Charsadda tahsil of the
same district, the ricJ:iestcircle is said to be the most heavily involved (Swabi
A.R., 1927, pp. 16-17). Compare also BombayBanking Enqui1y,p. 69 and C.A.
Banking E11qui1y,p. 99.
34 Op. cit., p. 432.
35 Nicholson, op. cit., i. 45 et seq.
still in a state of semi-villeinage, with by no means the right to

alienate his land as he pleased, and in most countries it was not
till after the Napoleonic wars that the independent peasant
proprietor of today began to emerge. 36 As in the Punjab, the
grant of full proprietary rights produced the mortgage, which
till then had been rare, and, as land rose in value, more and more
money was raised upon it; for, as Sir Frederick Nicholson ob-
serves, 'the peasant proprietor cannot refrain from pledging any
additional value which the land may acquire'. Of this Prussia is
a good instance. A hundred and twenty years ago, before von
-'Stein's reforms, the peasant who occupied without owning his
land was unable to mortgage it, and mortgage debt was 'in-
finitesimal'. 37 A hundred years later, . . . landowners' debt
amounted to £ 377 millions. Even in Switzerland, one of the
thriftiest and most educated countries in Europe, an abnormi3l
rise in the value of land led to a great increase in debt. 38 But
perhaps the most striking example of all is the case of the United
States. Broadly speaking, there was very little mortgage debt on
farms cultivated by their owners before 1875; it then increased
to such effect that in twenty years, 1890 to 1910, it more than
doubled. In the same period, the value of land also doubled, and
it seems that the one led to the otheJ. 39 It was this that made a
well-known American writer say that 'farmers who do not keep
accurate accounts and who have not a keen sense of values
sha,uld avoid the use of credit as th~y would the plague' .40 An
interesting point in the American case is that the increase in debt
was due less to increased production than to a rise in the
standard of living, and the agricultp.ral prosperity that accom-
panied it was almost entirely the result of a rise in prices. 41 The
parallel to the Punjab is curiously exact. In the one; as in the
other, there was little mortgage debt before 1875. Prices then
soared in both, land doubled or trebled in value, the standard
36 See Irvine, op. cit., p. 113.

37 Nicholson, op. cit., i, 48.
38 Ibid., i, 42.
39 Nourse, op. cit., pp'. 720-1.
40 Carver, op. cit., p. 275.
41 Carver, SelectedReadingsin Rural Economics,pp. 939-42.
of living rose, and debt greatly increased. No better instance

could be given of the close correspondence between even remote
countries in their rural problems.
EFFECT OF HIGH PRICES
The expansion in credit that followed th~ rise in the value of

land is undoubtedly the main factor in the increase of debt, but
the high prices which came with the-Great War also had some-
thing to do with it. It is commonly assumed that high prices are
good for the cultivator, and now that prices have fallen, the
assumption will be made more freely tha.n ever. But it is only
correct as long as he has more to sell than'to buy. If it is the other
way round, he benefits no more than any other class of con-
sumer. In the Punjab, the man with twenty or thirty acres
generally has more to sell than to buy, and if his'lar\d is secured
against drought by canal or well, high prices are an obvious
advantage. But where, as in some districts, a man is lucky'if he
has half a dozen acres to cultivate, they are as•likely as not an
evil; for it is only in good years that he has much to sell; and in
bad years he may have to buy the very grain he eats'. 'What do
we know of prices?' he asks ... 42 : 'It is all we can do to 'fill our
bellies'. In 1879, a Deputy Commissioner of Hosliiarpur, ex-
plaining why the great increase in the value of produce had not
enabled the agricultural community to better its position, re-
marked: 'Generally the produce raised on a holding is not more
than sufficient, if it is ever sufficient, to support the family of
the cultivator. It is only the larger owners ... who have a sur-
plus for sale' .43 Forty years later the same tendency was noticed
again in the survey of a Hoshiarpur village, 'The large land-
owners:{ we are told, 'have profited a lot by the rise in the
prices ... the small owners have suffered'; and the reason given
is that the latter have little to sell and as much as ever to buy. 44
Similarly in Ajnala (Amritsar), where holdings are as small as
42 Darling, The Punjab Peasant,p. 109.

43 Punjab FamineReport, 1879, p. 432.
44 Bhalla. op. cit., p. 86.
PROSPERITY AND DEBT / 39
in Hoshiarpur, we read that in certain villages of very small

holders high prices have been 'more a curse than a blessing', for
they hardly ever have any surplus to take to market, while in a
bad year they seldom have enough to eat. 45
In this connection Dr H.H. Mann's ertquiries in the Deccan
are of interest. After surveying two villages, he examined the
results in the light of a 50 per cent rise in prices, and came to
two conclusions: firstly, that only those who had plenty of land
and who cultivated it themselves benefited by the rise, while
upon the village as a whole the effect was bad; and secondly,
thAt the gulf between the solvent and the insolvent tended to
widen.• In the Deccan at least, he says, 'the evil effects of a rise
in·prices on th"egeneral conditions of the rural population earl
hardly be- gain~said'. 46 In the Punjab, in the ten years that
followed the beginnihg of the Great War, the prices of six staple
food grains rose 70 per cent,47 and though the effect of this would
appear to have been good for the province' as a whole, there is
evidence. that it has widened the ,gulf between the solvent and
inSblvent. As shown above, 70 crores of the total agricultural
debt is due to agriculturists. This has to be set off against the
fact 'that agriculturists owe 140 crores. It has alsb been shown
that only the small minority, probably not more than 26 per cent,
are free of debt. 48 Allowing for those who borrow as well as
lend, the probability is that the 70 crores are held by at 1nost 30
per cent of the agriculturists of the province. If so, the inference
is that while the bulk of the peasantry have been steadily getting
more involved, a favoured few have been growing increasingly
prosperous. Emigration/service, public works, and above all the
canals, have all contri11uted to this prosperity. 'Every year, the
province receives by rnoney order about 2 crores more than it
remits, and . . . from '4 to 5 crores in the form of treasure. In
1928-9, nearly 10 ,crores were paid' to its contractors, and 139
lakhs to its military pensioners', and in the same year its total
45 Ajnala A.R., 1913, p. 17.

46 The BombayCo-operativeQuarterly,March 1920.
47 Punjab Banking Enquiiy, p. 168.
deposits 'probably exceeded 30 crores.' 49 Much of this must have

gone to the town, but there are signs that much of it has also
found its way to the village. 50 This is particularly the case with
the three great colonies of Lyallpur, Shahpur, and fyfontgomery,
which in 1924-5, to take a typical year when prices were high,
grew produce to the value of 28 crores, where thirty years earlier
almost nothing had been grown at all.
THE RISE IN THE ST AND ARD OF LIVING
For the smallest holders high prices are proba):,Jy an evil, as for
the large they are clearly a blessing. For the holder who cul-
tivates ten or twelve acres it is a question whether they are good
or bad .... The rise in the standard of living suggest& that on
the whole they are good; on the other hand, we are faced with
an enoqnous increase of debt. The combination of the latter with
a higher standard of living was noted in the case of Ameriqi,
and there the increase of debt would appear to have been clos~ly
connected with the better style of living. In the Punjab, the rise
in the standard of living is primarily due to the great influx of
wealth produced by the spread of the canal combined with high
prices; but, as we have just seen, it is the few with plenty of land
who have derived the greatest advantage. Many of these have
been able to change their "Vhole mode 0£ life, to build pukka
houses, clothe themselves in fine raiment, and greatly improve
their diet. Now, where men are gi:egarious and the herd instinct
is strong, the general standard of living tends to, be. set by the
prosperous few. In the village, where a few hundred souls live
close together half isolated fr9m the rest of the world, this
instinct is peculia:dy strong, and is seen in the villager's tenden-
cy-'bhedchal' as-it is called in Pui;tjabi-to follow his neighbours
like sheep. A 'want', therefore, that starts as the luxury of the
few, is apt sooner or later to become the necessity of the many;
and, when the rise in the value of land has made it possible for
most to borrow as much as they please, it is generally sooner
49 Ibid.
50 Ibid., p. 20.
PROSPERIT'»AND DEBT / 41
than later. This tendency was noticed thirty years ago in- the
cultivators of .Gujranwala. Their expenditure and standard qf
living, says the Gazetteerof 1894,.'ate based.on the income of
good years and are not contracted {o meet the exigencies' of.bad,
Formerly, in bad years a self-acting law compelled them to' live
on what was actually produced, as they.had.no credit to supi
plement it. Now they find it easier.to borrow.than to alter their
I scale of living'. That putsthe case ih a nutshell> and with ·the fall
in prices there is a real dangei: that a,desperat6 attempt may-be
made to maintain the new standard of living, which to most has
become so dear, by borrowing., Even before the fall there .were
signs of this, notably in the lavish-expenditure upon marriage,
which ... is one of the ba§ic causes of debt. •,
" r
INCREASED COST OF MARRIAGE
In the absehce of systematic enquiry .at different dates~Jt!is

impossible to determine with certainty whether ext,ehditure
upon a given object has increased or diminisheddn the,caSe of
marriage we are forced to rely upon general enquiry.,M~,en-
quiries, which have been made in different parts of the province,
show that during the period of,high prices.expenditure,g.reaHy
increased, bub the increase, was by; no .means uniform. In, the
• north, where the increase of debt has been comparatively small;
not much more appears to, be spent upon marriage than thirty
years ago; and everywhere amongst the educated there are signs
Il of a desire for economy: the nautch and the firework dlsplay are
condemned, and less is spent upon jewellery\,But in the central
and more prosperous districts, where the increpse in :<febthas
I been greatest, the position is dominated by the extreme shortage
of women, 51 and more and more is spent 1uponobtaining a bride;
even by those to whom ,actual purchase is repugnant During
\ Sikh ·rule little could be spent for, want of means. But with
increasing prosperity expenditure rapidly .grew, and b~ 1870.we
find the settlement officer of Gujarat noting that 'the prosperity
of a district may be safely tested by the expenditure ~pon
51 Ibid.; p. 49 (n).
occasions of this sort', ?,nd he adds that 'the owner of a plough'

spends 'not less than Rs 165' upon his wedding, and the more
substantial cultivator Rs 545.52 In Rohtak, a girl's marriage in
the seventies cost from 100 to 150 rupees, and a boy's from 70
to 100.53 In Amritsar, it used to be 'common enough' to spend
only Rs 100 on a marriage, 54 a'.nd even now in the north and
south-west of the province not much more than this will be spent
by an ordinary cultivator. But in the canal colonies and the
central Punjab the cost is rarely less than Rs 500, and mayTun
into thousands;
A few specific cases will show the change. An ex-inspector
of police, who remembers the days of the Sikhs, recalls a small
proprietor who, having to raise Rs 26 for his marriage, sold a
cow, and, after borrowing as much as he could from his relatives,
was still two rupees short. The inspectors wedding cost his
father 400, but his son's cost him Rs 3,500. In 1923 the son of an
old Sikh kardarinformed me that his father married him in 1873
for Rs 150. He himself has married four sons and five daughters,
. the first son in 1892 for Rs 500, the second ten years later for Rs
1,000,.the third in 1913 for Rs 1,300, the fourth duringthe war
for Rs 2;000, and finally a daughter in 1923 for Rs 5,000. Yet he
inherited only lOPacres out of his father's 400. The president of
a co-operative union, who was also married in the early seven-
ties, states that on that occasion, though his father was headman
of the village,only-Rs 150 was spent upon jewellery, but that
when he married his own sons, four in number, in each case he
spent Rs 2,000, plus another Rs 1,000 upon miscellaneous expen-
ses. At his own wedding the jewellery was of silver, but for his
sons it was of gold. He had to borrow to meet the cost, and in
the end a large scale of his land was sold to pay off the debt. As
a final example we may mention the case of a Government
official, who has married thrice. The first time, in 1905, it cost
him Rs 1,000; the second time, nine years later, Rs 3,000;·and
finally, in 1922, Rs 4,000. On this occasion the jewellery alone
52 Gujrat S.R., 1870, pp. 50, 54.

53 Rohtak S.R., 1873-79, p. 64.
54 Amritsar Gazetteer.,1892, p. 47.
cost Rs 2;800. To many, even greater than the expense of the

jewellery is the price of the bride. In the fifties a Manjha Jat could
buy a bride for Rs 50, and he rarely paid more than Rs 500;55
but till the fall in prices he was lucky if he got one for Rs 1,000.
!
In other ways also expenses went up after the war, partly as a
l result of the higher standard of living and partly owing to the
l• high prices, which at a marriage hit the cultivator as hard as
<?-nyone else, for then he is more a consumer than a producer. It
I was not only that gold ornaments were substituted for silver,
but the trousseau clothes were no longer made at home. Also
instead of the customary single feast in the evening, breakfast
was given in the morning as well, and amongst the Sikhs th~
guests remained for two or three days. In short, few managed
to get married without spending at least a full year's income in
the process. The precipitous fall in prices of the last twelve
months has, however, changed all this and jerked the peasant
back willy nilly to his older and simpler ways.
OTHER CAUSES OF INCREASE
With this fall we are barely concerned, as it is too soon to judge

its effects. But the more gentle decline that began in 1927 comes
i into the scope of our su:i-vey,and it is an important contributory
cause of the increase of debt. In an agricultural country with an
improvident peasantry, it would seem as if debt increases fastest
when a long period of high prices gives way to a period of low.
When prices are high, the standard of living rises; and when the
tide turns, all hope it is temporary, and, if necessary, borrow to
maintain their new way of life. This they do with ease, because
the price of land, upon which agricultural credit largely de-
pends, does not drop as fast as the price of produce. If, moreover,
as in the present case, the turn of the tide is accompanied by
poor harvests, 56 the temptation to borrow is all the greater. And
in this case the tendency to do so has been strengthened by
another factor. Population, doubtless stimulated by the general
55 LahoreS.R., 1858, p. 11.

56 See Punjab BankingEnquily, p. 339.
prosperity, has grown as never before, completely outstripping

the increase in cultivation and resulting during the ten years
ending 1931 in the addition of nearly three millions to a popula-
tion of 20112millions. While, therefore, the great expansion of
credit has been the main cause of the increase, falling ptices,
poor harvests, and a rapidly increasing populatiort have all
ctmtributed to the account. And to·these must be added a fourth
factor,. which always comes into play when things are not going
well with the peasant-compound interest. ... [It has pre-
viously been explained] how insidious this can be, and it is
impossible to doubt that it is responsible for a considerabl~
proportion of the extra 50 crores.
PRODUCTIV? ~ORR0°WING
There is only one btight spot in the pitture. Part of the increase
is due to productive expenditure. 'In the last ten years over
27,000 masonry wells have been sunk at a cost of nearly 3 crores,
and in the last four years 750,000 acres of virgin land have been
brought under cultivation by Punjabis in the Punjab and in the
neighbouring States of Bikaner and Baha«ralpur.' 57 In regard to
th!! last, as about Rs 1,000 of capital are reqUired·to bring 25 acres
under the plough, ahother 3 crores must have been spent in this
way; and a good partiof· it, on~ may suppose; 'will have been
borrowed. Lar_g_e ~!:1.!Il's,too, hav~ been borrowed by the many
thousand t!migrants to finance their way abroad. This again is
prbductive,for elnigrants rarely return·empty-handed. If prices
had not falleh, we should have had to add the large sums
borrowed to buy land in the new colonies; but, as the event has
proved, these loans can hardly be called productive, for most of
those who bought have bitterly regretted the purchase. 58
LAND REVENUE AND DEBT
There is one economic factor which must now be discussed, as
57 Ibid., p. 21.
58 Ibid., pp. 45-47.
it is frequently mentioned in connection with debt, and that is

t!,.e·land revenue which is paid upon all land according to its
yield .... [It has been] observed that [this] was nqt an important
cause of debt. 59 The contrary, however, ·is so frequently stated
that it will be as well briefly to examine the evidence on thei
subject. For this we have to rely mainly upon the reports of
settlement officers, whose business it is from time to time to
reassess the land revenue of the province.
'The first point to notice is that under the Sikhs the land'
revenue demand was far heavier than it is now, but debt was
much less. As a rule from 33 to 40 per cent of the gross produce-
was taken, and occasionally even 50 per cent or more. 60.It was
nearly always taken in kind, and though the demand was high
it had at least the merit of aa.justing itself automatically to the
state of the harvest, If fairly administered, as was mbre o£ten the
case than is sometimes supposed, though leaving but little
surplus in the hands of the ,cultwatot, the system was not
oppressive~ and the fact that in the Lahore-district there were
more wells in the fifties than there pre now shows that people
found it worthwhile to sink capital in the 'land. 61 Much de-
pended upon the individual governor or kardat. Many wete
comparative!)' mild, and one, Diwari Sawan Mai,·who governed
Multan for twenty-three years (1821-44), was rememl5ered fifty
years later with esteem and_affection. Yet even he managed to
accumulate a private fortune o'f·over £ 1,000,000, which is more
than the whole land revenue that could possibly have been taken
I by the British Government during the·same period: 62 If, on 1:he
!
other hqnd, the governor was a tyran~1 like Ude Singh ofKaithal,
r the position was very different: 'Every man's hand was against
I
his neighbour. Bloody forays were of constant occurrence, and
\ the pfficers of the Sikh Government found it often to their

1
r
60 GeneralRepo1·tupon the Administration of the Punjabfor the years 1849-50
and 1850-51, p. 79; also Prinsep's Report on Sialkot.
6l At the first settlement, 1825--56,there were 10,449; in 1870, 12,364i and
in 1916, 9,501. The great extension of canals has led in many districts to a
reduction in the number of wells.
62 Multan S.R., 1873--80,p. 10.
46 / CREDIT, MARKETS AND THE AGRARIAN EC0NOMY
interest· to go shares with the marauders ... The cattle went to

graze guarded by herdsmen armed with matchlocks, the very
wells had to be protected by towers in which the cultivator could
take refuge with his implements of husbandry on the occurrence
of sudden alarm ... Many villages were altogether deserted, the
owners taking refuge in large villages which were able to defend
themselves both against their rulers and their fellow-subjects' .63
It might be a picture of the transborder tribes of today; actually
it is a picture of a district ,south of Ambala in the forties; and to
show that it is not exaggerated we may quote from the report
submitted to Government when Kaithal, the area in question,
was annexed: 'The State considered all land its own, to be dealt
with as it pleased. Cattle at graze were attended by bodies of
armed men; forays and bloodshed were frequent and want of
security caused the zamindars to plunder in self-defence' .64 It
can easily be imagined that under such a system debt was not
likely to grow very fast, and even at its best the system left the
cultivator but little surplus for the repayment of a loan. 65
With the annexation of the province came a radical change.
The demand was lowered and converted from kind into cash,
but it was not at first lowered enough to suit the less elastic
system o( collections in cash. Consequently, the cultivator was.
still sometimes in difficulties, and Mr Thorburn was inclined to
think that, when a man was already involved, the want of
elasticity, imp!i_cij_i_na cash demand, involved him deeper in
debt, but he states definitely that land revenue 'is rarely an
original cause of debt' .66 Since Mr Thorburn wrote, the,demand
has been still furth~r lowered and has become far less rigid than
it was. Even when paid in full it does not amount to more than
5, or at most, 6 per cent of the gross produce, against the 30 or
63 Kaithal S.R., 1888, p. 30.

64 Captain Abbott's report of October 1847 to the Commissioner, Cis-Sutlej
States (see ThanesarS.R., p. 32).
65 'The weak point of Sikh rule in the eyes of the agriculturist was that the
kardars never hesitated to impose arbitrary fines when they found that a man
had contrived to save money in spite of the land revenue demand' (!hang
S.R., 1874--80,p. 115).
66 Thorburn, Mussa/mans and Money-lenders,p. 33.
40 per cent taken by the Sikhs;67 and if a harvest fails it is

invariably suspended, and if harvest after harvest is bad it is
frequently remitted. 68 'I never found', says a settlement officer
of the seventies', a single authentic case of debt caused by the
necessity of paying revenue alone, although, of course, this is
always put forward as the' first reason'. 69 This, in one form or
another, is the burden of nearly all the official reports on the
subject. It would be tedious to quote from them at length, but
two instances may be given. In 1889, a number of district officers
were consulted by Government as to the causes of the increase
in debt, which was then beginning to excite alarm. 'Fhey were
unanimous that it was not due to any harshness in, the land
revenue system. 70 Similarly twenty-five years later, just before
the beginning of the war, careful enquiry made in the weakest
circle of the Amritsar tahsil 1 failed to elicit a single case in which
the pressure of the land revenue demand was in any way
responsible for indebtedness'. 71
From time to time revenue officers have advocated a highe:i;
demand on the ground that it would incite the cultivator to
greater effort. Thave little doubt', writes a settlement officer in
1864, 'that if we kept up the revenue to its full amount as levied
by the Sikhs, the pressure of revenue itself, combined with peace
and loss of service, would have compelled an extension of
cultivation greater even than has now taken place;' and of the
effects of reduction the same officer acutely observes: 'At first,
for five or ten years, there may be a slight improvement in their
condition: they eat a little more and keep a cow. But soon the
I
J F This is confirmed by the subsequent enquiries of the Punjab Land

I Revenue Committee, see their Report of 1938, p. 11. Present prices have
probably reduced the percentage to less than 2, see in Darling, The Punjab
Peasant, figures given on p. 16, n. 1, for the value of agricultural produce
(1946).
68 In the Punjab and United Provinces the average annual amount sus-
pended between 1881-6 and 1905--10rose from 4.08 to 32.86 lakhs, and the
average annual amount remitted from 1.98 to 27.97lakhs (note by Sir Edward
Madagan, dated 14 November 1911).
69 Rohtak S.R., 1873-79, p. 63.
70 Memorandum by the Financial Commissioner, dated 15 August 1889.
71 Amritsar.A.R., 1912.
family extends; the land is again subdivided; and instead of one

pauper there are now two as poor as the first used to be.' 72 This
view was endorsed by the high authority of Mr B.H. Baden-
Powell, who wrote: 'Nothing can be more curious than the result
of a low assessment. In one large district, where a low assess-
ment was secured for thirty years, the result has been, not that
a wealthy class has arisen, but simply that all restraint has
vanished and the poor population has multiplied' .73 This is a
good instance of what has been said more than once, and of
which we have just had proof, that in this country sooner or
later every blessing is neutralized by an increase of population.
Whatever else may happen, in normal times, a reduction of land
revenue will certainly not reduce debt. 'To reduce the Govern-
ment demand', says a shrewd observer of the seventies, 'is to
put so much more money in the mortgagee's pockets', and he
adds that nowhere is debt greater than in good villages lightly
assessed. 74 Lahore is the most lightly assessed district in the
province, 75 yet in the six years ending 1930 its mortgage debt
increased more rapidly than that of any other district except
three. 76 In Ferozepore itself the assessment is 'extremely leni-
ent' .77 In Gurgaon, as we have seen, the Ahirs are much less
indebted than the thriftless Meos, though they are' exceptionally
heavily assessed' and the Meos are just the contrary.7 8 The Meos
will exert themselves only under compulsion, 79 and experience
shows that in such cases cultivation is apt to deteriorate with a
light assessment.
It is clear, then, that land revenue is not a primary cause of
debt. This does not mean that it is not often an occasion of
borrowing, but this is due less to necessity than to convenience
or prudence. The revenue may have to be paid before the crop
72 Jhelum S.R., 1864, p. 76.

73 Land Systems of B1itishIndia, 1882,"i, 346.
74 ]hang S.R., 1874-79, p. 130.
75 LahoreS.R., 1916.
7:1FerozeporeS.R., 1916, p. 14.
78 GurgaonGazetteer,1910, p. 102.
79 Gurgaon S.R., 1909, p. 13.
can be satisfactorily marketed, or a farmer may decide to hold

up his crop for a rise in price .. Or possibly a man may be so
involved that he has to borrow for everything. The author has
had occasion to go thrdugh nearly all the settlement reports of
the last eighty ;years, and most of the-assessment reports of the
last forty years, and only in the case of three tahsils has he found
debt connected with land revenue. 80When it is remembered that
I land revenue averages oftly Rs i per cultivated acre against Rs
lI 46 in the case of debt, anci that in interest alone the cultivator
has every year to pay nearly three times the whole land revenue
of the province, the only grom;id for surprise is that anyone
should ever have considered it a serious cause of debt.
This was written bef9re the.fall in ,prices. The position now
is not so clear. In certain tra,cts, which include all the canal
colonies, land revenue no longer bears· th~ E;Xtre~ely modest
ratio to income that it did throughout the Punjab little more than
a year ago. Moreover, it has to be paid in cash, and owing to
'the rupee famine' all cash payments in the village are made
with difficulty. Accordingly in these areas for the first time in
the };tistoryof the province under Br~tishrple, it presses seriously
u pan resources and has le9-to much more borrowing than usual;
a good illustration of which is that in 1930-1 the amount ad-
vanced by co-operative societies on this account was 14 per cent
of their total advances as against an average of 3 pet cent for the
five years before. 81The situation was, however, greatly relieved
by a remission of over 1112crores in 1931.
l THE CAUSES OF DEBT SUMMARIZED
We have now examined all the causes of debt, and ... may
summarize our conclusions as follows: There are four main
reasons why the peasant proprietor is obliged to porrow:-
80 Namely, Pasrur (Sialkotj, Gujar Khan (Rawalpindi), and Ferozepore. In

Pasrur it is said to be difficult to pay land revenue in bad years, and it is
reported to be a cause of debt in the riverain area ol the Ferozepore tahsil.
The Gujar Khan report was written fn 1904; conditions have probably
changed since then.
81 Co-operative SocietiesReport:1931,p. 21.
1. The small size of his holding and the way it is split up,
conditions which make it almost impossible for him to live
without getting into debt, unless he is exceptionally frugal
and industrious, or has some extraneous source of income;
2. His constantly recurring losses of cattle from drought and
disease;
3. His ingrained improvidence, the effects of which are great-
ly aggravated "byinsecurity of crop; and,
4. His extravagant expenditure upon marriage and other
domestic ceremonies.
In addition there are two causes that make borrowing easy,
namely:-
The moneylender and his vicious system of business; and,
The great expansion of credit' due to high prices and the
inflated value of land.
The first four causes explain why the peasant proprietor must
borrow, the last two how he can borrow, and it is the combina'-
tion of 'must' and 'can' that explains the great increase of debt
in the last fifty years. Or, expressing it differently, we may say
that the first four causes explain the existertce of debt, the
moneylender, his system and its continuance, and the expansion
of credit and its volume.
Two minor points must also be noted: litigation, though a
serious factor in certain districts, is not a major cause of debt;
and land r~efffl~, 'though often a cause of borrowing, is rarely
a cause of indebtedness. 82The reports of the Provincial Banking
Enquiry Committees suggest that these conclusions have a wide
application outside the Punjab.
DEBT IN THE CANAI,,.COLONIES
Now let us try to summarize the effect of these causes upon the
82 For example, the Central Provinces Report states that 'the insecurity of
agriculture and the great variations in crop out-tum from year to year are the
main causes of the accumulation of agricultural debt' (p. 117). And the
Bombay Report says much the same: 'Apart from the expenditure on cere-
monials, bad seasons constitute the most important factor that compels the
agriculturist to borrow' (p. 47). For the United Provinces, see p. 248 below.
different parts of the province. The best \;\'ay to do this is to give

the results for each of our sbccircles, remembering that, except
where stated, they relate to 1921. They may be tabulated as
follows:__;
TABLE 1.2
Area (No of districts Debt's multi- Debt per cul- Debt per head of
concerned in brackets) ple of land tivated am~ the rural population
revenue 83 Rs Rs
Submontane (4) 2¢ 53 51
Central (7) 22 36 51
North (3) 13 12 20
South (4) 15 15 3i
West (4) 15 20 34
Canal Colonies (4) 2 5 9
84
Punjab---1921 (29) 19 31 49
1930 251;2 46 6885
The most striking feature of these figures is the lightness of

debt in the canal colony districts. At first sight this would seem
to flatly cohtradic.t the general principle laid dowri in this chap-
ter, that prosperity and debt go hand in hand. The inc;onsistency
is more apparent than real, and has already been briefly ex-
plained in connection with Gujranwala. 86 It was said then that
the immediate effect of the opening of a new canal was to reduce
debt, and in the light of our further experience we may add that
in a canal colony indebtedness is of little account for at least a
generation. Those wlto were poor find ·themselves prosperous,
83 The debt in question is the debt of proprietors and occupancy tenants

~mly(see Darling, The Punjab Peasant,third footnote on p. 37).
84 In the detailed figures given above three districts'"have been omitted,
viz., the hill, districts of Simla and Kangra, because their conditions are
peculiar, and the district of Jhang because it belongs partly to the canal
colonies and partly to the west.
85 This is based upon the rural population for 1931 (20.51 millions).
86 Darling, The Punjab Peasant,P. 73.
and those who were prosperous find themselves rich. Large

areas are reclaimed, production is increased, and with compact
holdings, regular harvests, and high prices, enormous profits
are made. The ultimate effect, however, is different. With an
improvident and almost wholly illiterate peasantry, wealth is
quickly djssipated, and what remains has to be divided amongst
a larger population. In 1891the whole population of the Lyallpur
district was 30,136. Thirty years later it was 979,463, of whom
about half were born in or near the colony;87 and now· (1931) it
is 1,151,351.88It is highly significant that in the six years en!1-ing
1930 mortgage debt in the district increased by141 lakhs. 89This
can be no mere coincidence, and it may be prophesied that, if
present conditions persist, the canal colony districts will even-
tually become as indebted as any other part of the province.
PROSPERITY AND INSECURITY OF HARVEST
Comparing the remaining·areas with each other, we see that

debt is lowest in the poor but hardy north, and highest in the
comparatively prosperous districts of the central and submon-
tane Punjab, which virtually form a single area. In the south and
west conditions are dominated by the insecurity of the harvest,
a factor only less important than prosperity. This will be clearer
if six prosperous districts are compared with six that are in-
secure, thus: _
Debt's multiple
of land revenue
Prosperous-- Lahore, Amritsar,,Ferozepore,
Jullundur, Hoshiarpur and Ludhiana 25
Insecure- Attock, Mianwali, Muzaffargarh, Dera
Ghazi Khan, Hissar and Gurgaon 20
There is not much tb choose between the two groups .... [As
87 ChenabColonyS.R., 1915, p.35.

881,296,303 in 1941.
89In the nine years ending 1940 it increased by 88 lakhs.
explained before,] if debt is lower in the insecure districts, it is

because insecurity, whye obliging a man to borrow, limits the
amount that can be borr,owed. 90 On the other hand, with pros-
. ' \
perity the necessity to borrow may be less, but the opportunity
is greater, and 'wants' are as much dictated by the one as the
other. Thus extremes meet. On the one side debt is high because
the lack of irrigation and rain places the cultivator at the mercy
of nature; on the other side, where harvests are secured by canal
and well, debt is even higher owing to the prosperity that
follows. It is a vicious circle from which some issue must be
found. But before this can be attempted the effects of prosperity
must be briefly examined.
DOES PROSPERITY DEMORALIZE?
In these days of material ends iLis considered almost eccentric

to question the benefit of a material good. Critics of the British
Governmef\t love to dwell upon the poverty of the country, and
there is nothing that they are more reluctant:to admit than the
possibility of its being comparatively prosperous, fearing, no
doubt, that such an admission would imply that Government
was virtuous and wise. They have less reason to fear than they
suppose, for prosperity is not necessarily good, as some nations
have found to their cost. Whether it is good or bad depends
upon· its effects, which vary from. country to country. In the
Punjab prosperity, on its pu.rely material side, has undoubtedly
been good. This is clear from the rise i11the standard of living,
which is all to the advantage of the country. So far, however, as
chp.racter is concerned, the question is more difficult to answer,
since there are no mathematical tests by which character can be
judged. We are forced, therefore, to rely upon the experience of
those who know the cultivator best. On questioning them I have
been surprised to find out that, with few exceptions, the general
agreement was that, though the standard of comfort is higher,
the general effect of prosperity is bad. In my own opinion this
view requires qualification, and the best way to show this is to
90 Darling, The PunjabPeasant,p. 88.

compare what are probably the two most prosperous districts

in the province, Ferozepore and Lyallpur. Both have already
been described, and it will be remembE;red that in both poverty
has been followed by wealth, but, whereas in Lyallpur this has
been due largely to endurance and effort, in Ferozepore it has
come unsought, like the shower of gold into Danae' slap. In the
Lyallpur colony, 2112million· acres have been reclaimed by a
select body of men, who had to face all the hardships of the
desolate Bar;but in Ferozepore, cultivation has only been slight-
ly extended. 91
The result is what might be expected. Ferozepore recalls the
spendthrift who dissipates a fortune that he has done little to
acquire; Lyallpur, the self-made man who has acquired his
wealth too laboriously to throw it recklessly away. In Fe~ozepore
drink, dissipation, and gambling; litigation, bribery, and ex-
travagance, are all rampant; and nowhere is more spent upon
marriage. Hence a vast increase of debt, which in the ten years
ending 1929 probably exceeded 6 crores. In Lyallpur, on the
other hand,.the increase in the same period, though consider-
able, was far less, and there is every reason to believe that ~
substantial portion of it was due to the acquisition of proprietary
rights and to agricultural development. In Ferozepore there is
hardly a sign of the latter, 92 but in Lyallpur there is more of this
than anywhere else in the province. In Ferozepore, too, educa-
tion hardly exists, but in Lyallpur it is everywhere in demand.
The difference is 'vital. Without education prosperity demoral-
izes, but with it a new and better order of things may be started.
The districts of Ferozepore and Lyallpur are typical of the
influence of prosperity in the Punjab. In so far as it springs from
effort and leads to education, it is good; but in so far as it comes
as a windfall to men who are too uneducated to apply it to their
advantage, it is a disaster. Lyallpur on the whole is a case of the
former, and Ferozepore a clear case of the latter. What of the
rest of the province? In the wealthy districts of Sheikhupura and

92 There are 'no new varieties of crops or selected seed; improved agricul-
tural implements are practically unknown' (Ferozepore&iut~·., p. 161}.
Lahore conditions resemble Ferozepore. 93 The Manjha, to which

most of the Lahore district belongs, has long.been notorious for
the boldness and variety of its crime. The advent of the canal,
in,1896, only made things worse. Holdings are large, and for the
most part in the hands of owners who are too lazy to cultivate
them themsejves. The few \Yho farm make large fortunes. Two
brothers, ·for example, who owned 150 acres, receµtly asserted
in court that they had Rs 70,000_incash, a statementwhich their
neighbours corroborated. Throughout the tract drinking and
crime are the rule, matricide and parricide not uncommon, and
female infanticide not unknown. The demoralization of the
people' is. complete, and before the fall in prices the adjoining
district of Sheikhupura·threatened to follow the same,primrose
path. In Montgomery, which also marches with Lahore, the first
effect of the new colony was to corrupt the aborigina~ Jangli. On
the other hand, in the much older colony of Shahpu:t although
bribery and extravagant living greatly increased, prosperity on
the whole probably did more good than harm, and, as in Lyall-
pur, was c1:ccompaniedby a keen desire for education. In the
older districts of the Central Punjab, the balance of good and
evil is inore difficult to determine. In parts of them we are
reminded qf Tolstoy's fable-'How the 4ittle Devil Atoned for
the Crust of Bread'. As long as the peasant was poor,,the devil
could do nothing with him; in despair he taught !,.imh~'w to get
rich, and thereupon all difficulty ceased. Explaining the process
to a colleague, the devil said with modest pride: 'I merely made
the peasant grow too much corn. That was all. You see the right
stuff (that is to say the blood of wild beasts) was in him already
... only it had no outlet so long as he grew corn merely for
food ... but he had no sooner come to possess a surplus of grain
than he came also to cast about how to divert himself. Then I
I stepped in and taught him a new diversion-namely, drink-
ing ... And now that he has once tasted liquor, he will remain
l 93 In two years, 1928--9and 1929-30, which were far from prosperous, six
central districts (including Lahore and Amritsar) spent a crore on drugs and
liquor (excluding foreign liquors and tobacco), a sum nearly equal to their
land revenue. Even in 1930-1, in spite of the fall in prices, they spent 45 lakhs.
a beast for ever'. The fable might almost have been written of
Ferozepore and the Manjha. And even if it does.not fit the canal
colonies exactly, it is a profoundly significant fact that in the
village chronic discontent is rare except where the canal runs.
The water seems to infect the simple peasant mind with the auri
sacrafames, a greed for gold, which is foreign to his nature and
demoralizing to his character. Our conclusion, therefore, is that
the prosperity of the last twenty years was too easily won, and
a great part of the wealth that came with it was thrown away
upon unproductive, ahd often unworthy, ends.
The evil has gone even further; for not only has present
wealth been thrown away, but future wealth haq been pledged,
and in ten years debt has risen by over 50 crores.94 Nor is there
any sign that the tide has turned. What is the remedy for
this most vital problem? 'J'.heBanking Enquiry Committee con-
sidered the question most anxiously, and coming to the con-
clusion that the three evils at the root of the increase were
excessive borrowing (made possible by the great expansion of
credit), carelessness about repayment, and high rates of interest,
wrote as follows in words which everyone acquainted with the
peasant will endorse:-
For this co-operation is the only lasting remedy. A scheme of Govern-
ment or joint-stock bank finance might reduce the rates of interest, but
only co-operation can teach the peasant to borrow at the right ti\ne
and in the right amounts and for right ends, and to repay on the right
date; and only co-operation can teach him to save so that he may not
have to borrow at all.
94 Darling, ThePunjab Peasant,p. 209.

Chapter Two
I Peasants, Moneylenders and

Colonial Rule: An Excursion into
I Central India*
ERIC STOKES
It is still widely supposed that the introduction of modern

transferable title destroyed or fundamentaliy distorted peasant
land rights in India and allowed the moneylender and mid-
dleman trader to gain a novel and portentous hold over the
countryside. This hold, it is p.rged, was largely parasitic, direct
investment in farm production being,scorned for the easier and
richer profits of rack-renting, usury, and the marketing of crops
obtained at 'distress' prices. Middleman agency thus siphoned
off the enhanced value of agriculture which r~sulted from in-
creased ~ash-cropping and the price rise from the late 1860s. So
far from peasant farming develoP,in&.a: depeqsantization' took
I
\ place that reduced the mass of agricultur~lists to cultivators
working for the barest subsistence retur!} under a form of debt
J peonage. This picture is not one original to latter-day Marxists
but was drawn by the British colonialists themselves. In essen-
' tials it was already complete by 1852 when Sir George Wingate
wrote bitterly of the moneylender in the Bombay presidency
l being intent on reducing the ryot 'to a state of hopeless indeb-

tedness in order that he may be able to appropriate the whole
fruits of his industry beyond what, is indispensable to a, mere
existence ... should the present course of affairs continue it
• Extract from Eric Stokes, ThePeasantand theRaj:Studies in AgrarianSociety
and PeasantRebellionin ColonialIndia (Cambridge, 1978).
must arrive that the greater part of the realised property of the
community will be transferred to a small moneyed class, who
will become disproportionately wealthy by the 1.mpoverishment
of the rest of the people'. 1 Now at first glance it might be
supposed that the grip of the moneylender-trader would be
strongest in the richer agricultural regions where the market
economy was most fully d,evelpped. But the extent of the
agriculturalist's dependence was not to be equated with the
sheer volume of indebtedness. The dependence was highest
where the professional moneylender exercised a virtual mon-
opoly of credit and hence where the agricultural community
was backward and lacking in a substantial rich peasant or gentry
class with financial resources of its own. Such regions were
marginal to the market economy or had only recently been
brought into close connection with it. They were typically char-
acterized by uncertain rainfall, insecure agriculture, and low
population density. Their natural propensity was towards sub-
sistence farming and a ryotwar or owner-cultivator form of
land tenure, -since the landtman ratio was generally too low to
generate the rental surplus which formed the b'asis of single 'or
joint landlord villages. Debt servitude was deepest and often
socially most explosive where the moneylender appeared as an
alien intruder, and resentment against him boiled over most
readily into violence among tribal peoples like the Bhils, Santals
and (to a markeclly less extent) the Gonds. Yet the relations of
the peasant cultivators of !he Bombay Deccan and Central India
with the Marwaris, and of the'West Punjab Muslim peasantry
with the Kirars or Atora mo:µeylenders worried the British much
more seriously. 2
1 G. Wingate, 2.4September 1852, DeccanRiots Commission.Appendix A.
Paper/;re the lnflrbtednessof the Agricultural Classesin Bombay(Bombay, 1876),
pp. 88-9. LO.R. (71) 204~/2.
2 On the threat pf the saukar to the Bhils c. 1870, cf. ibid., pp. 21 ff. For the
Santals, cf. K.K. Datta, 'f!ze San.ta/Insurrection 1855-57 ((:alcutta, 1940). On
West Punjab as well as connectiorfbetween indebtedness and agricultural
insecurity, cf. M. Darling, The Punjab Peasantin Pmsperity and Debt (Oxford,
1925), p. 107 passim. On Marwaris in Deccan cf. Selectionsfrom Recordsof the
Governmentof India Home Department,no. cccxlii (Calcutta, 1897), 'Papers re
Deccan Agriculturalist Relief Act 1875---94',II, p. 256, '[At the time of the
PEASANTS, MONEYLENDERS AND COLONIAL RULE / 59
In CentraUndia the :moneylender's grip predated British rule

and sprang from the tax system rather than the credit•needs.of
market-orientated agriculture. Under a,Severe revenue admin-
isb;atiori like that of the Marathas the absence of r a powerful
l
village landlord class capable of managing the revenue respon.:
I sibility, threw the peasantry into peculiar dependence on the
resources and expertise of the 'outside' financier. The extent of
I private debt incurred for revenue purposes and carried over
I from the Maratha period struck officials most forcibly in the
central Indian region betweeh the Jamuna and Narmada when
between 1803 and 1854 it came piecemeal unde11 British' ad-
ministration.
I A scrutiny of the later history of this region, which has lain

off the beaten academic track, permits the time-honoured ques-
tion of the effects of British rule on India.n agrarian structure to
I be looked at anew. For here' the derangement of indigenous

tenures and the onset of land control by the outside money-
lender appears to have proceeded more rapidly and extensively
than in the remainder of the North-Western Provinces, which
exercised administrative control 'of the r~gion until 1862, and
whose settlement system continued to exert a powerful in-
fluence. The northern portion comprising'the·Banda district and
parts of what later swelled to become the Hamirpur a'hd Jalauh
districts came under the British revenue system as early as 1803.
The fertile but disaster-prone black soils of British Bundelkhand
gave not only to their cultivation but to·their revenue manage-
ment an uncertain speculative quality, which. was enhanced in
the first decades of the century by the financing of cotton as an
export crop. The cotton culture had relied traditionally on ad-
vances from the East India Company's agents-of>}:>rivatetraders
and moneylenders. At one time the Company made purchase
of 40 lakhs a year in the Kalpi cotton market and private
I
individuals 18 lakhs. From 1830 the Company's purchases
Deccan Riots of 1875 the moneylenders were chiefly foreigners, different in

religion from their clients, entirely out of sympathy with them, and accus-
tomed to retire with their profits after a sufficiently long course of business
to their homes in Rajputana]'.
ceased and private investment dwindled until by 1842 it

amounted to barely 7 lakhs. 3
The prospect of gains to be made from gambling in revenue
farms and auction purchases on the·basis of the wealth brought
by cotton undoubtedly must have been the main incentive for
the disproportionate rush of speculators into Hamirpur' and
Banda districts in the first two decades of British rule. Many of
these speculators failed to survive the pe;iodic agricultural
failures and commercial slumps. 4 Yet in Banda they not only
overturned the old tenurial system but established themselves
permanently. The black mar 'cotton soils' flanking the Jamuna,
Ken and Chambal were inhabited by strong Rajput cultivating
communities organized into extensive bhaiacharavillage groups.
After the first experimerttal settlements they were quickly recog-
nized as the natural claimants to the proprietary title, but over-
assessment and the sale process soon stripped this from them
over large areas. Rajput communities, which were estimated to
have held some three-fifths of Banda district in proprietary right
at the outset of British rule, were reduced to a quarter by 1874.
They were superseded by a group of substantial auction pur-
chasers composed very largely at first of Muslim service families
connected with the British administration. But behind these
stood men like the notorious Khandeh Brahmin, Hate Lal Dube,
and the Kanpur bania Salig Ram Sona, to whom the leading
Muslim (and, later rebel) magnate, the Nawab of Banda, was
heavily indebted. In the wake of the Mutiny the moneyed
element bought up confiscated estates extensively, and general-
ly strengthened its grip so as to become the dominant landhold..,
ing class. 5
Jhansi did not come unde:r,permanent British administration
3 [Sir] William Muir, Report on Assessment of Calpee Pergunnahs. ~eports

of the Revenue Settlement of the N. W. Provinces under Regulation IX, 1833
(Benares, 1863), II, p. 825.
4 Cf. Hamirpur Settlement Report 1842, pp. 791-2, Banda S.R. 1881, pp. 109,
112, 114, 120 passim.
5 Banda S.R. 1881, pp. 31-4. On Nawab Ali Bahadur's indebtedness to Salig
Ram Sona etc., cf. N.W ..Provinces Political Proceedings, 27 January 1860, no.
123; 28 April 1860, no. 200.
PEASANTS, MONEYLENDERS AND COLONIAL RULE/ 61'
until 1854,but already by 1867the settlement officer was iament-
ing 'what a vast change has taken place in the constitution
6f these village communities since the time w.hen the disttict
passed into the hands of the British Government'. 6 In the ab-
1 sence of.strong coparcenary communities the'British invested
I the village 'headman with the proprietary right and so reduced
I all other village landholders to the formal status of tenants. But
f this internal derangement of the village appeared as nothing to
the effects of 'the fatal gift of proprietary right'. By the early
1870s in the wake of the severe local famine of 1868-9 there was
intimidating evidence of the rapid strides being made qy the
Marwari moneylender in gaining control of the land. It is true
that British officials believed that a condition of total serfdom,
prevailed already under Maratha rule in Jhansi. 'The advances
of seed and food being invariably made by local moneylenders
and grain merchants and the Government demand being prac-
tically realised from them also, all the profits of agriculture were
diverted into the pockets of the traders from the' tillers of the
soil, who were furthermore thrown hopelessly into debt, if such
a -term can, be applied to those whose labour went no fur-
ther than to support life'; such was the•historical appraisal of'
Maratha rule by the Jhansi settlement officer.in 1863.7 The grant
of proprietary title and,the accompanying power of mortgage
vastly extended the security for loans so that, whatever, the
position.under.the Marathas, by·1864 even in Moth, the richest,
pargana of Jhansi district, it was found that 'the whole of thee
profits are taken by the Marwarees, and no ye'arly settlement of
accounts takes place between them and their creqitors' .8
Yet Bundelkhand was no moneylender's elysium. By the.
1870s he was finding himself bound to the soil by .the• silver
chains that he had fastened on the peasant producer. '.llheBun-
delkhandi cultivator was by nature a subsistence farmer, grow-
6 Jhansi S.R. 1871, p. 115.

7 Ibid., p. 49. ,
8 fuid., p. 142; cf. also Minute of Sir J.W. Muir, 9 August 1872, Deccan Riots
Commission Report. Appendix B. Action of the Civil Courts and the Law on the
Agricultural Debtor (Bombay, 1876), p. 282. Also Census ofN. w:Provinces, 19,65,
I, General Report (Allahabad, 1867), p. 101.
ing millet crops for the kharif (or autumn monsoon harvest) even
oi:i the fertile dark mar soils. He practised an extensive rather
than intensive agriculture under the notion that a large scattered
holding only roughly tended was the best insurance against crop
failure. In these conditions the development of cash-crop agri-
culture was an artificial and forced activity, pushed by the
revenue demand and the creditor's pressure. 'Wheat is grown
mainly for the bania and revenue collector; and the predomi-
nance of wheat soil in a V\llage is frequently referred to, in
seeming paradox, as a serious hardship', reported the Jhansi
settlement officer in 1893.
The willingness of the bania to extend credit on the security
of the new proprietary title compounded the effects of the
inelastic revenue demand in a region where nature produced
violent fluctuations in the size of the harvest. It meant that the
engine of debt was driving the expansion of the cultivated area
and of cash-cropping to artificially high levels, and in -conse-
quence left the peasant economy dangerously exposed and
unbalanced. Severe drought or excessive rainfall, which else-'
where caused only temporary distress, could pull Bundelkhand
down into prolonged depression because it lacked the power 0£
rapid recuperation. Crop failure, followed by loss or distress
selling of plough oxen, destroyed the peasant's credit with the
moneylender and at once reduced him to a subsistence farmer,
who concentrated his cultivation, abandoned wheat, and used
the mar soilsToi growing the juar necessary for survival. The
substitution of a light scratching of the soil for the deep and
frequent ploughing required for wheat cultivation opened the
way for the·scourge of kans grass which often put the land out
of use for ten to fifteen years.
The typical Marwari moneylender was not by nature a
landholder, his Jain faith and distinct life-style marking him out
as an alien who was as unassimilable outside his own profession
as the medieval Jew. The proprietary title held out little attrac-
tion for him, since in thinly populated and calamity-stricken
Bundelkhand the proprietary right-or more strictly, revenue-
collecting right (malguzari)-yielded oqly_management P,rofits
and not a rental income. Moreover, with land freely available
PEASANTS,MONEYLENDERS
AND COLONIALRULE / 63
the cultivators were all too ready to abscond rathei"than live

under an alien landlord. As late as 1906, H.C.R. Hailey ':'7aS
warning of the. consequences of aUenatibn to 'non-agricul-
turalists in the Jalaun district.
It may be said without exaggeration that for every mell\9er of an
agricultural community'sold up, a cultivator of the soil is lost. For him
has usually been substituted a Marwari-"-an aliefi to the soil whose
last idea is to till it. In other parts of the province [of Agra] where_h~
is an agriculturalist b)l profession or a money lender. But inJalaun a
Marwari who has ousted the old proprietor has often no means of
finding cultivators in their ~Jace.9
This natural deterrent to moneylender landholding was
modified in some parts of the, Jhansi district 'where the new
proprietor could·look, cheerfully on the departure of the cul-
tivators. For with the growth of the market in clarified butter
(ghz)in Kanpur and elsewhere later in the century, there,were
profits to be made out of putting land down to pasture and
selling grass for fodder. But in general the move of the moneye'd
and trading classes into landholding after 1870 was more often
a signal of distress than an >indexof mofinting'prosperity.
Faced with the agricultural crash and widespread default on
loans that followed the 1868-c9Bundelkhand famine the money-
lender faute de mieux began to foreclosl! mortgages ,and• fasten
on the proprietary title to ensure himself of at least the rental
income. The danger, that such disposseSsion-woul_fi dri~e the
impoverished Bundela thakur gent1'y· <leepef in'to dacoity
prompted the eventual passing of the Jhahsi Enctifnbere'd Es-
tates Act of 1882. This had some effe'ct. Between 1864 and 1892
a fifth of the Jhansi district (discounting repeated trahsfers of
the. same land) was subject to sale, 1not a high rate on any
comparative' reckoning. But as much as ha1f the district 'was
9 JalaunS.R. 1906,p. 15; cf. also ]hansiS.R. 1889"-93,p. 81: :The money l~ndersJ
(all of them local [Marwaris] for outsiders will have nothing to do with the
country) ... have hitherto showed a marked unwillingness to become pro-
prietors. Zamindari is not their profession, they say, 'and they:<irive a much
better business by making tfie landowners their bond slaves ... than by
taking their place and entering into direct relations with an independent cl'I\d
possibly migratory tenantry.'
I
transferred by temporary mortgage. 10 Administrative policy

helped check further outright alienation in Jhansi, but in Banda,
with an additional half century of British rule behind: it, the
transfer process had been allowed a freer course and had been
accelerated by serious and prolonged overassessment. In 1874
Cadell, the Banda settlement officer, was lamentil).g over the,
gains of the grasping moneyed men who had stepped into the
proprietors' ranks in place of the bankrupted coparcenary. vil-
lage communities. It was noticeable, however, that their hpld
became dominant only when the famed cotton cultivation of
Bundelkhand began to fall into serious decline. As late as 1842
cotton still covered a quarter of the cultivation in Banda; by 1878
it was down to 15 per cent, and by 1907 to 10 per cent. 11 Moving
into landholding on an extensive scale proved to be no royal
road to salvation for the banker and bania. Firstly the estates of
Seth Kishan Chand went to the wall, and then in the wake of
the 1896--7famine the estates of the Khandeh Brahmins, founded
by. the famous Hate Lal Dube, had to be partially sold off.12 By
1906H.C.R. J-faileyin the nearby Jalaun'districtwas commenting
on the ineff!ciency of Marwari management. Having locked up
money unprofitably in land, a considerable number of Marwari
firms, he reported, were unable to finance their ordi-
nary money-lending and banking business and sd had come tQ
grief.13
1 ,Any further•tendency to move into direct landholding,was
repressed, 1:Jythe Bundelkhand, Alienation Act of 1903 which
forbade alienation to non-agriculturalists. In Jhansi the fears of
administrative officers.seem in retrospect to have been exag-
gerated. Between 1864 and 1945bania proprietary holdings rose
from 0.2 per cent to 6.3per cent, while Brahmins, of which a
proportions must be .set down to Marwarii Brahmins, rose from
20 per cent to no more than 24.66 per cent of the district. 14
Compared ,with the gains made by so-called 'non-agricul-
10 Jhansi S.R. 1889-93, pp. 73-5.
11 Distiict Gazetteers U.P. xxi; Banda, p. 49 .•
pp. 108-10; Banda S.R. 1907, pp.
12 Ibid., 11, 23-5.
13/alaun S.R. 1906, p. 15.
14 Jhansi S.R. 1947, p. 6.
turalists' ·castes in other parts of the U.P., these figures look

decidedly tnodest. 15 That did not mean that the moneylender
had faded out, only that he had fallen back into his more indirect
role. What,is not clear is the extent to which agricultural and
other .credit had come to be financed internally within the
landholding community and relieved it of total dependence on.
the extraneous agency of bania and banker. Certainly in the
backward tracts of Bundelkhand when the British came to bid
t11eirfarewell to India the sfory appeared to end as it had begun.
'The bunyas have been content to keep the cultivator per':.t
manently in their "jajmani"', observed H.T. Lane in the Jhansi•
Settlement Report of 1947, 'and the logical conclusion of thi's in
Lalitpur has often been a kind of economic serfdom'.
How far had traditional tenures been affected? In a region,
where lands were plentiful and hands few the bonds of depend-
ence within rural society had always been political rather than
economtc. In the absence of conditions for landlord rents all
cultivatoi:.:;;of whatever status paid ·at revenue rates. The village
elite realized the economic benefits of their political lordship by
a commission on the revenue collections and 'service tenures'
of rent-free oi: rent-privileged land. 16 The British constitute the
revenue-collecting right (malguzari) a separate and alienable,
property, but overassessment was sq general before the Mutiny
in British Bundelkhand that, as R.N. Cust described the position
in Banda in 1855, 'in a tightly-assessed estate the zemindare
profits are but the profits of management, Pure rent has been
reduced to a cypher. We cannot wonder then if a property
had become valueless' .17 Theoretically, therefore, a revolution
15 Figures pro4uced for 1873 purported to show thqt in the previous- 30

years non-agricultural proprietors in the N.W.P. had increased their holdings
from 10 per cent to 27 per cent of the revenue-paying area in 10 districts.
DeccanRiots Commission Report. Appendix A. Paper re Indebtedness(Bombay,
1876), p. 54. These figures probably exaggerated the position cf. above'
pp. 215-6.
l6 Before Jalaun District came under revenue survey in 1854, there were
already 34,922muafi claims on file of which only 7,864had been decided, and
the survey was.expected to bring many more claims to•light; N.W.P. Rev.
Programmes P /220/34 no. 533. , ,
l7 R.N. Cust, 26 Jan. 1855, Selectionsfrom the Recordsof the Govemment of th~
could occur in the revenue-collecting right without the cul-

tivator being affected-r-at least in his purse. Before 1857 the sale
or alienation of the revenue-collecting right away .from the
village meant-usually rro more than the installation- of an agent
(karinda) of an: absentee purchaser, although such agents had
made themselves sufficiently unpopular in 1857 to suffer whole-
sale ejection in the Mutiny uprising in the Banda district. 18
Internal change within the village is more difficult to trace.
The derangement of the bhaiachara communities in northern
Banda and Hamirpur in the early decades of British rule was
a familiar theme.19 The British broke up many of them for.
contumacy in resisting the revenue demand. Others were trans-
formed by internal struggles among members of the brother-
hood. By 1874 only 25 out of the 890 revenue-paying units or
'estates' in Banda were classified as bhaiachara, although to-
gether with imperfect and perfect pattidari estates cultivating
communities •still continued to own some 45 per cent ,of the
total. 20 Nevertheless the political and revenue·managemerlt of
the brotherhoods had been displaced in the remaihdeti<largely
by outsiders. This transformation probably remained essentially
micro-political in character. Although by 1874 Rajputs had been
reduced in their proprietary control of .the-occupied area from
three-fifths to one-quarter, they still worked -as 'owner· or
tenant cultivators-a third of the cultivated area (whkh formed
N.W. Provinces,new series, IV (Allahabad, 1868), p. 346. On over-assessment

of Hamirpur, cf. Reps. Rev. Sett[. N. W,P. Reg. IX, 1833, ii, pt 2, p. 797. Also
District Gaz. U.P. XXII-Hamirpur, pp. lOOff.
1
l8 In Bhadawur village, Darsenda pargana, the karinda's attempts to collect
rents (allegedly with the aid of Government chaprasis)led to violence in 1850;
N.W.P. Revenue Programmes 11 May 1854, no. 311. For rural uprising in
Banda in 1857,.cf. Banda S.R. 1881, pp. 81 ff.; also F.O. Mayne, Narratives of
Events re Mutiny, I, pp. 250 ff.
19 See above, p. 84. As late as 1842 (Sir) William Muir reported that the
bhaiacharatenure prevailed widely over Bundelkhand; Reps. Rev. Settl. N. W.P.
Reg. IX, 1833, II, pt 2, p. 867.
20 BandaS.R. 1881,p. 41. Bhaiachara survived better in Hamirpur, especially
in the predominantly Brahmin and Rajput parganas of Hamirpur and Suna-
pur, where in 1908 they still formed 39 per cent of tenures compared with a
district average of 12 per cent. But the difference from Banda may well have
resulted from different criteria of classification.
PEASANTS, MONEYLENDERSANDtOI.ONIAL RULE/ 67
little more than half the occupied area becaus'e of the extensive
amount of arable out of cultivation). In other words'it would
appear that on balance Rajputs lost most of their proprietary
control oyer 'tenants' of other castes and were forced back
roughly to the limits of the land tHey cultivated whether as
owners or tenants. This was a loss/we have argtfed, largely of
management profits ratner than of valuable rental property.
With propri¢tary cultivation continuing to run up to 40 per'cent.
in the northern and western parganas 1 there is reason to think
that the ·mainRajput proprietary losses occurred in the south
and the east, outside the main area of bhaiachara settlements. 21
Hence the etonomic or financial tlislocatiOI1was probably far
less. grievous than in a heavily populated district like nearby
Kanpur where proprietary rights despite overassessmeht were
more valuab'Ie. The loss· in political consequence is' another
matter and may well have played a large part in the 'SJ?On-
taneous agrarian rising of 1857 that so flabbergasted Mayne, the
Collector. Forming less than 10 per cent of the district population
of Banda the Rajputs had enjoyed unnatural pre-eminence in
land control in comparison with theit numbers. -Themass of the
cultivating classes outside the ranks of labourers were Kurmis,
Lodhis, and Ahirs; who lacked the supra-village organization
of the Rajput dans and who:se tenurial CUSt!)~Swere mu.en
nearer to those prevailing in the rest of Burldelkhahd.
InJhansi, we have'alrMdyobserved, the British officials were
quick to be~eve that a vast ~enurial revolution had occurred
within little more than a decade of annexation 1h 1854. Pro-
prietary title had been conferred on.the village ~eadmaJ exc~pt
in. t~e coqsider~ble portion of the district (one-qua.rte~ if! rr.ansi
proper and one half in Lalitpur) where the Bundela tli.akur had
fought successfully to translate his ubarioi \iiiit-rent lor.dship
fo'to'Za\Ilindari right. ·so limited were prorrietafy 'profits anq sp
aia.
lit,tle the pebple a'ppr~ciate'the new ar!angements ~hat it wa's
foitnd easi~i'to distribute the profit arising from the'limitation
of the Government demand in the shape'of ,flower ass~ssm~ht
rate dn the cultivation of headman 'famill.es. Hence in practice
21 Ibid., p. 38.
the old method of remunerating the headman for managing the

collections by a monetary commission (haq mehat)·or a reduced
assessment on his personal holding appears to have altered little.
Where there was derangement the cause was the carelessness
in ascertaining claims to headman rights. The relative paucity
of population and comparative abundance of cultivable land
meant that there was little prospect of the 01:,tomary lump
revenue payments on,holµings giving way to competition field
rates and of a more modern landlord-tenant relationship emerg-
ing. In 1907 the settlement officer found that in Jhansi 'the
zamindar, promoted from among his fellows by British ad-
ministration, is.still qnly primus 'inter pares [first among equals],
and the legal distinction between landlord an<,ltenant is more
marked th~n the ,social' .22
In a subjec! in which it is notoriously unsafe to make gen-
eralizations, one may conclude that the institutional arrange,
mrnt~ of colonial rule were relatively powerless to bring about
decisive. tenurial change in the absence of a decisive expan,ston
of agricul,tural ·production. The decline of cotton and wheat as
cqmmercial staples left Bundelkhand in a backward condition.
The artificiality of. the tenurial system imposed by British law

appeared at its most open and avowed in the Saugor and
Nerbudda Territories. These had been acquired in 1818 and
lqosely administered as part of the North-Western Provinces
until amalgamafed with the Nagpur territories to form .the
separate administration of the Central Provinceii in 1861. Be-
cause of this early connection the system of village 'estates' was
to be carried far to the south.
The districts forming the comparatively narrow valley of the
Narmada (Nerbudda) enjoyed reasonable agricultural security,
especially Hoshangabad, Narsinghpur, and part of Jabalpur
(Jubbulpore), while their dark soils constituted a natural wheat
plain. Charles Elliott called it with pardonable exaggeration' the
richest and most fertile valley in India' .23 Inhabited before the
sixteenth century almost exclusively by the animist Gonds, it
22 R.W. Gillan, Preface to JhansiS.R., pp. 2-3.

23 Cited NarsinghpurS.R. 1923-o (Nagpur, 1927), p. 5.
PEASANTS,MONEYLENDERSAND'COLONIAL RULE / 69
was a thinly-peopled marcher region into which Hindu colonists

had steadily migrated from all quarters untihhey outnumbered
and pushed back the Gonds into remote hill a'nd jungle country.
For the first twenty years the assessment•imposed by the British
proved ruinously excessive and the settlements were constantly
breaking down. In Hosharigabad in the 1820s the demand was
pifched up threefold on the Maratha figure, arid only in 1835
was some element of moderation introduced, when short-'term
settlements were at last abandoned in favour of a twenty-year
period. The paucity of population and the abundance of culti~-
able land meant an absence of true l~ndlord· tenures/ and .the
British were constrained to assess theirdemand on the cultivator
in ryotwar fashion. Both on grounds of expediency and principle
they were determined, however, to avoid a lormal ryotwari
system. The Marathas had laid responsibility for detailed col;
lection on a host of temporary malguzars drawn 'indifferently
from village headman, moneylender-traders, and petty•officials
alike. The British continued the practice, allowing. the malguzar
an estimated profit of 15 per cent on the collections. Ultimately
Vl 1854 in the Saugor Proclamation the Government announced
its intention of conferring full proprietary title on the malguzal'5>
and this was carried into·effect in·the settlements of the 1860s.
In districts of insecure rainfall like Sagar (Satrgor} ·and
Damoh; which covered part of the eastern Malwa,plateau north
of the Narmada valley, overassessment persisted uritil the 1'&60s
with a high, inflexible delllan'd. A'Slate as 1867,J.N.HlMaclean
could report that in the Banda tahsil of Sagar district,'not-
withstanding continuous reductions th~ Governme~demand
presses so heavily that all;enterprise has Heen crushed, and there
is not the slightest attempt at improvement. The widespread
misery and distress throughout this division must be seen·to be
appreciated. The impression conveye<;lto me on inspecting thes~
tracts was the Pergunnahswere dead,.so·vast:was the desolation,
and so scarce the sign of life on of human beings'. 24 .Yet in more
favourably situated districts like Hosnangabad iand. Nar.
singhpur the greater moderation of the twenty-year settlements·
I 24 Saugor_S.R.1867, p. 40.
of 1836 gave happier results. (Sir) Charles Elliott estimated that

in thirty years from 1832 the cultivated area of Hoshangabad
had doubled and large areas of the plain had been transformed
into 'an illimitable expanse of waving corn' .25 On the face of
things the result was an artificially created system of village
landlords. It was artificial because the economic conditions for
a true landlord rent had not emerged and the malguzar' s profit
resided simply in a·commission for managing the State revenue
demand. Even when Elliot resettled Hoshangabad for thirty
years in 1865 he could find nothing in the shape of competition
rents. Land was still too .abundant and cultivators too few, the
population falling at no more than 150 to the square mile
compared with the average of 460 in the N.W. Provinces. Hence
despite the, doubling of the cultivated area Elliot found it im-
possible to raise the overall demand in line with the obvious
increase in 'rental assets', for even with the informal aid of
Government officials the malguzars were unable to secure a
commensurate increase in the 'rents' cultivators paid to them.
That was the penalty of renouncing a ryotwar system in which
State power could be wielded to raise all cultivators' payments
irrespeci:tive of the land-man ratio. While Elliot put up the
Government demand on malguzars by 43 per cent, tenant rents
rose by ,only 32 per cent. This still left malguzars in Hoshan-
gabad with an estimated profit of 54 per cent on the revenue
engagement(before cesses);but in absolute terms revenue rates
remaine'.d so lo'V{that 'rental profits' provided only a.subsidiary
motive for landholding. Direct cultivation proved conversely a
much more remunerative activity, 'for with the present high
prices the profits of cultivators are very high and the rent bears
a,proportion to them so ridiculously low that it would hardly
be believed in the older Provinces'. 26 Elliott estimated in 1865
that after deducting all expenses of cultivation the direct profits
of agriculture ran at Rs ·4-8-0 per acre compared with a return
of Rs 1-4-0 per acre iri rental income. Hence the malguzars were
prominent as agriculturalists. A fifth of the cultivation was held
25 HoshangabadS.R. 1865 (Allahabad, 1867); p. 5.

26 Ibid., p. 188. •
sir (or proprietor's cultivation), a high proportion for so small a

proprietary body, in which no more than 632 recorded holders
shared the 218,705 acres under 'home farm' among themselves.
Many of the malguzars (br zaminda;s as they were alternatively
called) owned ten or tw~lve ploughs and cultivated 140 acres
apiece. One of' them, Tulsiram Snukul of the H~rda pargana,
had 'no less than 150 ploughs and occupie[ d] actually 4,500 acres
of cultivated land'.27
This seemed a c01;1tradictoryphenomenon for a region where
land rights were supposed to' have passed wholesale to the
non-agricultural classes. In Hoshan~abad, Elliot repo'qt!d that
non-agriculturalist Brahmins alone held as much as 29 per cent
of the land. In Jabalpur, Marwaris and 'banias' gained early
prominence as malguzars, and theif increasing hold over the
la~d was occasion for an official inquiry by the 1870s.. The
Commissioner of Jabalpur reported in 1874 that 211 villages
were. in the hands of the mahajans, tlie greater part of the
Jabalpur Tahsil being owned by Seth Gokal Das. 28 Yet such
appearances were deceptive, or rather, reality was more com-
plex, for no real distinction could be observed between agricul-
tural and non-agricultural classes: 'There is hardly a single
moneylender in the district who is not a landlord, and many of
the landlords, even of the agricultural castes, c-ombine the busi-
ness of money and grain dealer with that of a cultivator' .29
Traditionally the malguzar in the Narmada valley fulfilled
a much more important role than that of a petty revenue con-
tractor or lessee. In a country of recent colonization the provision
of credit was all important, and Elliott put down the hetero-
ge,neous character of the malguzari class in Hoshangabad ex-
clusively to tli.is cause:
Sp far as a cultivating clan possesses capital, it can, when it immigrates,
become proprietor of the land it settles on; but if it is unable to pay
the rent and support itself for a year till the crops are ready, it, -or at
27Ibid., p. 95.
28 Sels. Recs. Govt. India, no. CIV, 'Correspondence re Law of Land Sale'
(Calcutta, 1879), p. 402.
29HoshangabadS.R. 1905,p. 34. Cf. a similar statement by HR. Crosthwaite,
Hosha7tgabad S.R. 1919, R· 27; ]ubbulporeS.R. 1912, p. 18.
least the weaker members of it, must rely on loans from someone else;
and the same man who lends the money becomes the Malgoozar, and
interposes between them and Government. It is a mere accident
whether this man is an old Malgoozar, who has saved money from
the village he already holds, or a Brahmin who has made money by
astrology and prayers, or a wealthy merchant, or a follower of some
man in authority; whoever, having money by him, came forward with
it at the right time when the cultivators were ready to break up the
jungle, if fed and clothed, that man became the Malgoozar.30
While there was undoubtedly a strong element of artificiality
in turning ,the malguzars into a landlord class, it has to be
stressed again that the prevailing social struc.ture qualified the
grant of proprietary rights in an important way. The relative
affluence of malguzars was much less prominent where the land
had been 1;,rought into cultivation without substantial aid from
creditors and where the village patel families had retained the
malguzari right. In Nimar-outside the wheat zone-the posi-
tion of the ordinary ryot had been too strong to be ignored, and
under a ryotwar-minded official a high proportion of cultivators
were recogJ1ized as plot proprietors (malik mabhuza) a11d the
remainder given occupancy rights. The result was little different
from a ry<>twarsettlement, and the malguzar was unable to raise
hiipself much above his fellows: 'he is still as a patel, as he was
before, primus inter pares, but like his neighbours in his mode
of lif~' .31 ThiJ?_c<!P-~ciJy
to adjust to circumstances was sufficient
to give, thf malguzar a degre~ of mobility powerful enough to
overcome the occupational limitations of caste. In the wheat
zone the malguzar, seemed possessed of all the qualities of a
capitalist entrepreneur, able to lead and exploit the unparalleled
material development that ensued during the thirty-year settle-
ment from 1865. The completion of the railway in' 1870 was
followed by an immense acceleration in exports, 32 the wheat
30 Hoshangabad S.R. 1865, pp. 64---5.Cf. conditions in Jabalpur district soon
after cession, as reported later, where 'cultivators scarcely ever pay money-
rents, that the Malgoozar takes all the produce and feeds them, furnishes seed
and generally bullocks also; they are thus in reality mere labourers',Jubbulpore
S.R. 1869, p. 23.
31 Nimar S.R. 1895-9 (Nagpur, 1903), p. 17.
32 Hoshangabad's exports almost between 1872 and 1891, Census of India
PEASANTS,MONEYLENDERSAND COLONIALRULE / 73'
boom reaching its height in the 1880s. The inalguzars• took a

leading role, their proprietary cultivation rising by a, third to
become 23 per cent of the occupied area. By 1893 the ordinary
Hoshangabad mah;uzars constituted a plainly visible"'rich peas-
ant' or gentleman farmer class: 'They have almost without
exception good pucca houses built with an elaborate main en-
trance (darwaza) which is easily distinguishable from the houses
of the tenants, and around which cluster their cattlesheds ·and
granaries. They pract~cally never do any manual labour, the
majority employing bailiffs to do even the supervision of their
cultivation. 33 What was signi_ficant was that despite a steady
increase in their income from rents it still remained true in 1803
that two-thirds of their total net income (after payment of the
Government revenue) came from the agricultural profits reaped
from their direct cultivation. 34 There could be no stronger tes-
timony to the success of the 'green revolution' in wheat in the
Narmada valley. Even on the Malwa plateau to the north there
were twenty good years after 1870 to relieve its habitual in-
security. In Sagar (Saugor) district between 1865 and 1895 popu-
lation increased 18 per cent, the cropped area rose by 48 per
cent, and wheat exports by rail leapt from 40,000 maunds in ·1887
to 758,000 maunds in 1897.35
The extensive commercialization of agriculture (thdugh it
must be remembered that in the valley wheat remained the
staple food grain) was inevitably accompanied by an expansion
of credit. Malguzars who had never lost the role of moneylender,
or just as easily acquired it, lent freely to their fellows and to the
more substantial tenants, especially in Hoshangabad. Even be-
fore the long boom finally collapsed certain types of indebted-
ness were already causing more serious alarm. Just how much
weight must be given to the aI;txiety of British officials like
Bamfylde Fuller is problematical. Fuller joined readily in the
chorus orchestrated 'by Denzil Ibbetson and other Punjab offi-
1911, X. C.P. & Berm; Pa1·tX Report (Calcutta, 1912}, p. 16.

33 HoshangabadS.R. 1891-6 (1905), p. 35.
34 Ibid., 61.
35 Saugor S.R. 1911-16 (Nagpur, 1918), p. 23.
cials who formed the ruling official' clique at Calcutta against

the nefarious activities of the rural usurer and the danger he
posed to continued peasant contentment with British rule. 36 In
the Central Provinces it so happened that he could point to an
area where indebtedness took the shape of a direct confrontation
between the humble toiling peasant and the professional Mar-
wari and Parwar moneylender. It is evident that a rural entre-
preneur would be most readily diverted from direct exploitation
of the soil in areas where high farming and population pressure
on the most fertile soil enabled rentsi to be driven up to a
competition or rack-rent level. This happened earliest in the
Jabalpur haveli (the region containing the ,district capital) where,
as we have seen, circumstances had allowed the leading house
of Seth Gokal Das, the Marwari, to gain an early and decisive
hold. In the C.P. Revenue Administration Report for 1889-90
Fuller wrote that in the Jabalpur haveli rents had been run to
cruelly high limits frequently ranging from Rs 6 to Rs 7 per acre
for unirrigated land, and the tenants 'have been chained down
by debt into a position but little removed from that of servitude.
Analogous condition~, although prompted originally by higlt
revenue pressure, were observed in the S'agar and Damoh
havelis where the Kurmi malguzars struggled in the bania' s
grip. Yet apart from special instances, the major move of pre-
dominantly moneylending families into landholding did not
occur until 1he-great agrarian.crisis and collapse of the decade·
1893-1903 when, because of alternate flood and drought, famine
even swept the Narmada valley districts. Before this disaster
only some 16 per cent of villages had been transferred in Jabal-
pur during the whole thirty-year settlement, the losses falling
mainly on' old feudal families many of whom parted with their
villages to the moneylenders' .37 In the eighteen years that fol-
lowed 1889 some 40 per cent ofJ abalpur villages changed hands,
more than half going to the moneylenders. It was the same story
as in Bundelkhand; the creditor was seeking to limit his losses
36 Cf. C.J.Dewey, 'The Official Mind and the Problem of Agrarian In-
debtedness in India, 1876-1910', (Cambridge University, unpublished Ph.D.
thesis, 1973), pp. 61, 182.
37 Central Provinces Gazetteers-Jubbulpore, p. 190.
PEASANTS,MONEYLENDERS
AND COLONIALRULE / 75
by closing on his security rather than moving acquisitively into

landholding as some supposed. He C01J.ldnot escape unscathed
from his debtors' widespr~ad default and huge sums had to b'e
written off under debt conciliation proceedings.38
Unlike the fortunes of the cotton country of Berar to the
immediate south the vicissitudes of the wheat zone seem to have
had their origin more in fluctuations of weather than price, but
the risks of over~xtension irt wheat were sharply exposed. The
Narmatla valley districts experienced a savage setback in which
their population fell off sharply for a time; l;mttheir much higher
degree of agricultural security endowed them with a power of
recuperation denied to the Malwa plateau on the north. 'L'here
conditions resembled Bundelkhand more closely. The black mar
soils which prevailed in the haveli tracts had led to them being
devoted entirely to the monoculture of wheat (or wheat and
gram gr.own together, viz., birra) for the rabi harvest. Crop
· spectali.zation had so taken over that despite repeated crop
failure the cultivators felt bound to go on borrowing seed grain
and plunging themselves ever more deeply into debt. The
Datpoh settlement officer noted in 1914:
The Haveli ... is a one-crop tract, and if the wheat is ruined it may
be said that for that year all is lost ... The Haveli tenant is noted for
borrowing the same amount of rabi seed when he is in temporarily
reduced circumstances as when he is prosperous. He knows that if
wheat land is let go for a single year it may be lost to him for a decade.
He thinks.that he cannot afford to concentrate and in his reluctance
to lose a little he had often lost all.39
Indebtedness in the entire Sagar and Narmada region exhibited •
those characteristic features that Darling observed later in the
Punjab province. The problem was most severe at the two
extremes-the intensive and the extensive margins. In the Pun-
jab these proved to be firstly, the densely settled zones about
the capital, Lahore, and the overpopulated submontarte tract 'of
Hoshiarpur and Gurdaspur, and, secondly, the insecure and
thinly populated south-western district of Dera Ghazi, Mian-
38 Cf. Damoh S.R. 1908-13 (Nagpur, 1914), p. 20.

39Ibid., p. 10.
wali, Multan, and Muzaffargarh. In the Central Provinces these

extremes were given emphasis because of the stronghold which
the Marwari and Parwar bania moneylenders had established
at both margins, both in the close-settled Jabalpur, Damoh or
Sagar havelis and in the thinly-held insecure Khurai tahsil in the
north of Sagar district. This latter tract suffered severely ftom
drought and ka~s was never absent. Forty-one per ·cent of the
tahsil was transferred between 1896 and 1916, the big money-
lenders (including Diwan Bahadur Seth Ballabdas of Jabalpur)
taking over shares equivalent to nearly a quarter of the tahsil. It
was here that the galliaor debt serf was observed by the settle-
ment officer in the late 1880s, and though subsequent inquiry
fail~d to substantiate the charges Khurai tahsil continued to
cause anxiety. 40 The Provincial Banking Enquiry Committee
which reported in 1930 and which sought to put a good face on
things confessed to concern over these marginal areas. Yet it
insisted that these were exceptional. Despite bad seasons in the
1920s debt had not risen significantly in the secure tracts of the
wheat zone taken as a whole. Only 5 per cent of cultivators were
hopelessly indebted while 31 per cent were entirely free from
debt.
If, therefore, we accept that the seriously indebted tracts
were exceptional, what happened to the promise of capitalist
agriculture that had looked so favourable in the 1880s? The
boom conditions never returned after the series of unparalleled
disasters. That conjuncture of a revolutionary advance in output
led by a single leading crop, wheat, combined with high agricul-
tural and low rental profits, was part of the pioneer age. The old
singlemindedness of wheat monoculture was abandoned in
favour of a greater measure of mixed farming, in which kharif
crops and cattle products figured more prominently. The mal-
guzar spread his risk. Proprietary cultivation fell back, sublet-
ting of sir increased, and with even the tenant able to sublet at
two-and-a-half to three times the rent, he himself paid, rental
incomes took on a new importance. 41 Moneylending was also
40 Saugor S.R. 1911-16 (Nagpur, 1918), pp. 33 ff. SaugorS.R.188-97, pp. 41-2.
41 Cf. Hoshangabad S.R. 1913-18 (Nagpur, 1919), pp. 19, 25, 40.
PEASANTS, MONEYLENDERS AND COLONIAL RULB / 77
given a fresh lease of life. The Banking Enquiry Committee

found that while- some 20 per cent of rural credir in the wheat
zone was supplied by landlords the latter also played an increas-
ingly profitable intermediary role as sublenders between the
professional moneylender-bania and the tenant cultivator. Rai
Sahib Pandit Laxinarayan of Noni told the Committee that only
those malguzars and cultivators now accumulated wealth who
combined moneylending with agriculture and that the former
was the more paying business.4 2
Now it may be said thaHhis 'advance towards vagueness';
which Geertz argued was characteristic of Asian society, 43this
diffusion of economic roles and the obstinate refusal of the social
and economic order to evolve on clear, determinate lines of class
differentiation, all this was a return to the In_diannorm. Charles
Elliott had pardoned the low out-turn per acre in Hoshangabad
on the analogy of the opening of the. American prairies. 44But
the.malguzars of the Narmada valley werf no.Texans. 'Fheir
attachment to a traditional life style was not to be shaken.
Lordship and its attendant display were still dear to their heart.
In Narsinghpur, where moneyed men had made least Headway
into the landlord ranks, the malguzar as. late as the E;ndof the
:J..920swas still fond of purchasing an elephant to ·mark his
wealth and social ascendancy. 4~Even in Sagar, a Jain cult centre,
the Parwar banias vied with each-other in profuse pubiic spend-
ing, lavishing often more than a lakh on the costly temple car
(rath) ceremony in order to raise themselves thtough the hon-
orific degrees of Singhai, Sawai Singhai.and Seth.46Was it not
an illusion to look on such men as.capitalist entrepreneurs in a
system of 'federated grain factories'? 47Might it not be said that
42 Report of C.P. ProvincialBanking Enqui1y Committee 1919-30'(Nagpurr

1930), I, p. 45
43Cited above, p. 38.
44 HoshangabadS.R. 1865, p. 107.
45 C.P. ProvincialBanking Enquiry.CommitteeReport,Appendix II, p. 680.
46 SaugorS.R. 1887-97 (Nagpur, 1902), p. 39; C.P. District Gazetteer-Saugor
(Allahabad, 1906), pp. 4S---50.
47 Professor M.M. Postan's description of thirteenth-century English
monastic estates.
the exceptional profitability and expansion of wheat cultivation

between the 1860s and.1890s wa~ bound to end once the land
was taken up, populatitm grew, rents rose, and advancing pros-
perity made moneylending increasingly advantageous? Natural
disaster in the 1890s merely hastened this inevitable conclusion.
Yet this would be to misread the situation.
Like so many regions that had earlier experienced the surge
of commercialized agriculture, whether it was the Patna region,
Bundelkhand, or Benares and the eastern U.P., permanent dis-
appointment and frustration succeeded to the first spring hopes
of cons~ant dynamic growth. Yet it was underpopulation rather
than overpopulation that appears to have kept back the econ-
omic development of.the Natmada valley. Practising a careless
agriculture·and relying for labour chiefly on the massive.sea-
sonal migration of Gonds and others from the hills, even the
most fertile tracts remained thinly occupied. Cultivators were
under no pressure of population to abandon their careless mode
of agriculture more suitable for pioneer days. 48 Yet just as
Bundelkhand ·discovered after recovering from the famine of
1868-9 that the cotton market had permanently alter~d its sour-
ces of supply, so the Narmada wheat cultivators discovered that
the highly volatile market had gone. India's position as a major
world wheat supplier began in ahy event to fade away after 1900
and dwindled to nothing by 1930. Yet alinost the whole"Ofthis
declining export trade fell from the turn of the century into the
hands of the Punjab. More seriously· Puhjab and wes~rn U.P.
took up between them from the 1890s pretty well the entire
increase in the much larger domestic wheat market...49 Up to the
48 For seasonal migration of 15,000-20,000Gond labourers to Jabalpur, cf.

Census of India 1891, XI, C.P, Part I Report (Calcutta, 1893), p. 48; Census of
India, XIII, C.P, Part I Report (Nagpur, 1902), p.215. F.J. Plymen, the C.P.
Director of Agriculture, said total annual migration for harvest:labour was
up to 120,000 for the wheat zone, Royal Commission on Agriculture in India
(London, 1927), VI, p. 5.
49 For decline of India's overseas wheat exports and growing Punjab share,
cf. Report on Marketing of Wheat in India (Simla, 1937), p. 48. For increase of
domestic wheat production and Punjab's share cf. ibid., p. 3. Punjab wheat
acreage rose from 6 :Y4 million acres in 1870 to nearly 91,1million (as a ten-year
average) in the decade 1925-35. ·
PEASANTS,MONEYLENDERSAND COLONIAL RULE / 79
end of British rule the area under wheat and wheat-gram in the
Central Provinces never permanently recovered the figure of
31h million acres which it had attained by 1879.50 What is more
noticeable is that while the insecure districts like- Saugor and
Damoh recover-ed their peak wheat-acreage by 1923, Jhe major
wheat-producing district of Hdshanga't::ad rarely again tose
above 70 per cent of the old 1891-2 peak production,, and by
1935-6 after the slump was still only 64 per cent. 51
Plymen, the Central Provin1:es' r,:>'ir~ctorof Agri¢ultl}t-e,,ac::
knowledged to the Banking Enquiry Committee that the low
return c,>f800 lb an acre had allowed the Punjab to be"t the
Central Provinces in costs of production. 52 At the Cfit!cal point
when the high profitability of wheat cultiva.tfun cohld only be
sustained by high farming with its more intensive capital inputs
of irrigation facilities and manure, the Hoshangabad cultivators
turned away to the more certain returns from mixed s:r<;>ppip.g,
dairy-farming and rentier landlordism. The m'ore dynimic ele-
ments among the moneyed men fixed their attention increasing-
ly on the development of industrial enterprise ii) the city of
Jabalpur, Here the Marwari house of Seth GokaJdas maHe its
most significant contribt,1tion to~ards the futurE;,53 The ~econ~
Green Revolution in the Narmada valley is only now struggling
painfully from the planner's drawing board.
50 'The Wheat Production and Trade ~f India', Sels. Recs. Govt. India (Home,
Rev. & Agr. Dept.), no. dx (Simla, 1879), p. 16; and also G. Blyn, Agriculturhl
Trends in India, 1891-47 (Philadelphia, 1966), Appendix pp. 260--l, Table 3A.
~ee also above, pp. 13-4.
5l Am;iualSeasonand Crop Report~of C.f. from 1919-36 (Nagpµr, 1920 etc.).
52 Royal Commissionon Agriculture in india (London, 1927), VI, p. 72.
53 On the growth of Jabalpur and the Marwari contribution, cf. C.P. District
Gazetteers-Jubbulpore,pp. 224, 354, 356.
Chapter Three
Small Peasant Commodity

Production and Rural
Indebtedness: The Culture of
Sugarcane in Eastern U.P.,
c. 1880-1920*
SHAHID AMIN
'In a world where seasons are uncertain and six months elapse
between sowing and harvest, the need for advances was ·not
the intention of man; it was inherent in the nature of things.'
-R.H. Tawney, 'Introduction' to Thomas Wilson, A Uiscourse

Upon Usury by way of dialogueand orations,for the better variety
and more delight of all those that shall read this treatise [1572],
London, 1925, p. 19.
It is generally agreed that towards the end of the last century

an intensification of commodity production took place in the
Indian countryside. The character, direction and regional varia-
tions of this process have however been the subject of much
debate and polemic. It seems that in certain regions; like Meerut
(U.P.), the canal colonies of the Punjab, 'wet' deltaic regions of
• Extract from Ranajit Guha (ed.), SubalternStudiesI: Writingson SouthAsian
Historyand Society(Delhi, 1982).
SMALL PEASANT PRODUCTION, C. 1880-1920 / 81
South Inqia, plains of Gujarat, Bombay and Karnatak, rich

peasants did gain considerably from sugar, cotton and tobacco
cultivation. 1 However~ despite the valiant jats who have
adorned the narratives of peasants under the Raj, the problem
of small peasant commodity production remains an "important
one for vast areas of the country.
Various frameworks have been proposed £pr studying .the
growth of commercial agriculture in India in the· recent past.
qne such approach concentrates on the sums of money paid t9
the peasants for their produce, and order its discourse around
the notional or money value of cash crops. The peasantry is
shown to be receptive to the pull of the market, and the rising
curves cif 'cash crop' prices, once set in motion in the late
nineteenth century, are assumed to show a natural propensity
of sunn-ounting all hurdles and lining the pockets of even the
humblest kisans. The obvious problem with this scenario is that
it is unable to generate a sufficiently plausible explanation for
the failure of smaller peasants to overcome their dependence
even after a period of considerable involvement in commodity
production.
The explanation for the widespread phenomenon of depend-
ent agriculture is generally provided in terms 0£ the power of
the landlords and the moneylender-traders on the one hand and
the seasonality and fragility of small peasant production on the
other. Agriculture in India, it seems, is a kind of hothouse plant,
unable to grow on,its own without the crucial intei:vention of
outside forces. However, in most writings on the subject there
seems to be an amorphous disjunction between the processand
the relationsof small peasant production. While over the years
a mass of information has been colleded and 'frameworks used
for analysing the relations between tHe peasants and the 'out-
side' world of markets, traders, landlords and the state, the
actual process of production-the nitty-gritty of small peasant
agriculture-has received cavalier or at best ambiguous con-
sideration. Part of the explanation can be attributed to the
1 See Eric Stokes, The Peasant and the Raj (Cambridge, 1978), pp. 270 ff., for
some useful reference.
limitations of our historical sources. 2 However, it seems·mdre

likely that the .relative neglect of the process of production 'is
related to the dominant methodologies _that have informed
recent studies of the peasantry in colonial India. Either the
theoretical categories used are so general and abstract-viewing
agricultural production as an appendage of the working of
'capital' on a world scale-that the domain of the 'peasant' is
severely curtailed, without having been delineated in the first
place. Or, where some specific features of small peasant produc-
tion are apprehended, the exercise is generally conducted at an
empirical level; the analysis being once again confined to tlie
realm of the-peasant and the 'outside' world: credit networks,
local political domination, etc. Consequently, agricultural prac-
tices are either subsumed within the operations of 'moneyed
capital', or retreat before the mareh of local and regional political
and economic entities. Squashed between the heavy hammer of
high theory and the dull slab of empirical presentation, the
specificities of small peasant production fail to catch the eye of
the historian.
If one turns to the village studies of the social a_nthropologists
the picture is not very illuminating either. With the exception
of Louis Dumont~s monograph on South India and a group
study of rice culture among the Mundas, 3 the spate of eth-
nographic studie 9 seem to h~ve very little room for the peasant
producer. This postTwar neglect is in curious contrast to the
attention paid to. peasant agriculture, by the members of the
Radhakamal Mukherjee school of sociology in U.P. and by
I
2 Still, it
seems.that.a good deal oHh~ ethnographic material found in the
district settlement reports and the writings of Buchanan, Grierson, and
Crooke remains to be tapped by historians.
3 Louis Dumont, Une Sous-Castede f'Inde'du Sud: Ofganisation Sociale et
Religion·desPmmalai Kallar(Paris, 1957), pp. 83 ff., especially, 'Le Calendrler
Alimentaire', pp., 93-4. Cf. the rather neglected two-volume study of Munda
agriculture conducted under ap ambitious programme of 'Synthetic Re~earch
of the Culture of Rice Cultivating Peoples in Southeast Asian Countries';
Ryuiji Yamada, CulturalFormationof the Mundas (Tokyo, 1970),especially, pp.
13-103; ahd Koichi Sugiyama, A Study of the Munda VillageLife (Tokyo, 1969),
pp. 11-21.
SMALL PEASANT PRODUCTION, C. 1880-1920 / 8~
Harold Mann and his associates in Western India in the 1920s

and 1930s.4
Our concern with these problems arises out of something
more than a mere desire for an historical ethnography of"the
Indian peasantry. It is clear that a framework that,emphasizes
the role of the production process for an understanding of
peasant agriculture forms a part of a wider exercise in wntifl.g
subaltern history. At a more general level it stems from a view
that predicates a discussion of the relations of men/women to
each other on a prior investigation of tMir relationship to nature.
In the case of colonial Indian agriculture such a viewpoint
demands that more than just cursory attention be paid to the
harvest and fiscal calendar of the peasantry, and to agricultural
practices in their temporal sequence. As els~where, detailed
manuals existed which regulated the work pattern of the peas-
antry in the various regions of India. A ·dose study of these
in conjunction with other relevant factors might suggest that
the urgency of certain agricultural operations could have con-
tributed materially to the discernible pattern of 'unequal ex-
change' between the peasantry and other social classes.
To give an example from the world of the peasantry itself:
The season for harvesting of cane in eastern, U.P. clashed with
two other agricultural activities. The sugar. mills in the early
twentieth century for their part wanted a long cane-crushing
season, spanning the period from mid-November to the end of
April. This was dictated by the necessity of reducing overhead
costs, and to balance out on the sugar recovery; which for
climatological reasons was low during winters and increased
with the onset of the warm weather. The peasants, following the
adage attributed to the month of Magh Ganuary-February), were
caught up in three agricultural activities. The standing cane crop
had to be harvested, the fields had to be ploughed for the next
year's sugarcane, and inferior winter grains had to be· gathered.
Unable to take time off from these pressing engagements, and
4 See, for instance, Radhakamal Mukherjee (ed.); Fieldsand Farmersin Oudh
(London, 1929), pp. 46-68, 164-79, 234--42;Harold H. Mann, Land and Labour
in a DeccanVillage (London, 1917).
incapable of using his meagre livestock both for carting cane to

the mills and ploughing his fields, the small peasant sold his
standing cane crop to the itinerant dealer. More often than not,
he received a price much below the prevailing market rate. In
most cases these itinerant dealers were rich peasants. 5 They
could cope with all these conflicting activities at one point of
time because they had a surplus of land, bullocks and carts, and
were in a position to ·use hired labour on their own fields. It
could be argued that they made trading profits because, unlike
them, the smaller peasants who were followingthe same harvest
calendar, could find sufficient time for the conflicting agricul-
tural activities demanded of them atJhat particular moment of
the agricultural year. Though it would not be entirely correct to
suggest that one peasant's rigid adherence to 'peasant time' and
'natural work rhythm' here became anothei: peasant's money, a
connecting link is nevertheless discernible.
My purpose is not to multiply such examples but to argue
for their integration into the problematic of peasant commodity
production. In the first part of this essay I shall try to situate the
notion of the 'process of production' in some of the recent
discourses on colonial Indian agriculture. I shall then attempt
an analysis of cane culture in eastern U.P. in terms of the
specificities of small peasant production of the region. This
would involve highlighting some aspects of peasant agriculture
that have so.far failed to qualify as building blocks for the recent
theoretical constructs on the colonial Indian peasantry.
I OTHER APPROACHES
A review of the existing literature on commercial agriculture in
India must start with the writings of B.B. Chaudhuri on Bengal,
not only because he is the earliest practitioner in an otherwise
crowded field, but also because of the wealth of his data and
5 Cf. Report of the CommitteeAppointed tci Inquire into the Working of the
Co-operativeCane Supply Unions in the United Provinces(Allahabad, 1947), p.
22; Sugarcane Inspector, Gorakhpur, 'General Note on the 1935-36 Cane
Season' and letter to Collector, in Industries File 3 of 1935-6, Gorakhpur
Record Room. ·
SMALL PEASANT PRODUCTION, C. 1880--1920 / 85
the wide scope of his investigations. 6 Central to Chaudhuri~s

analysis is a distinction between the ·old and the neW, credit
agencies in the Bengal countryside. The traditional agency,
represented by the local moneylenders;iwas interested in realiz-
ing a high interest rate from their transactions in grain'.and cash.
As opposed to this, the new credit group, connected with trade
and manufacturing organizations dealing in grain, sugar, ingigo
and jute, 'was primarily interested in a secure supply of a
portion of the peasants' produce'. 7 With this distinction at hand
Chaudhuri locates the relative importance of the 'new groups'
in the production and marketing of various agricultural com-
modities-up and coming in rice, active in the important·cane
tracts in Darbhanga but relatively weak in the free and fluctuat-
ing market for raw jute in eastern Bengal. 8 Poppy and indigo
were in a different league altogether; one was under the firm
control of the government, and in the case of the other the
planter's monopoly of the channels of credit also resulted in' the
entire produce being surrendered at a fixed price' .9
This distinction between usurious and mercantile capital
and the differential integration of the various 'cash crops' with
either of the two is an important audition to our knowledge.
In other areas of commercial agriculture the functions of ,the
'banker', 'usurer' and the 'merchant'. could very well be per-
formed by the same agency-a reflection, as has been argued,
of a relative underdevelopment of commodity production and
a consequent absence of an elaborate, distinctic!n between 4:he
- branches of capital and those of commerce. 10 However, what is
perhaps more interesting is that.often it is with an enlargement
of markets for peasant produce that the boundaries bet\.veen the
6 See Benoy Chowdhury, Growth of CommercialAgriculture in Bengal,
1757-1900 (Calcutta, 1964); B.B. Chaudhuri, 'Growth of Commercial Agricul-
ture in Bengal, 1859--1885',Indian Economicand Social History Review, 7: 1&2
(March-June 1970) [HereafterIESHR]
7 IESHR, 7:2, CTune1970), p. 229.
8 Ibid., pp. 224-31.
9 Ibid., p. 223.
10 Jairus Banaji, 'Capitalist Domination and the Small Peasantry: Deccan
Districts in the Late Nineteenth Century', Economicand Political Weekly,,13:

33-4 (Aug. 1977), p. 1383.
'old' and the 'new credit agencies' get blurred and the roles
conflated. Instances can be found of trading and manufacturing
organizations securing their raw materials by dominating small
peasant production through usurious and other 'traditional'
dealings. 11 There seems a good case then for looking,.as it were,
for the weaker moments in small peasant agriculture, to locate
the points of entry for trading organizations, old and new.. :
Here again Chaudhuri' s initial probings have resulted in
some important insights. Grain loans were necessitated in pat1
by the need to pay hired labour for sowing, transplanting, and
harvesting winter rice at times when stocks had been depleted.
As the largest instalment of rent coincided with the winter
harvest, and as prices were lowest at that time, a greater quantity
of grain had to.be converted into cash than would have been-
otherwise necessary. 'A part of the grain loan was necessitated
by the tendency of the prices of food-grains to,rise'from April-
May onwards, which made it difficult for peasants to purchase
them in the market, even if their cash fund had not completely
run out' .12 Zamindars were wont to bring rent-suits against the
peasants around March, precisel)l when the latter:'s grain stocks
had been nearly exhausted: cash had to be raised for the pay-
ment of rent dues. Indeed, 'the most important occasion for
money loans was payment of rent'. 13 Clearly, any analysis of
commercial agriculture would be poorer if it did not take. into
account the above facets of small peasant production underlined
by Chaudhuri for nineteenth-century Bengal.
Unfortunately, even when scholars succeeded in moving
away from an exclusive preoccupation with tenurial history they
did not often concern themselves directly with the problems that
drew Chaudhuri' s attention a decade ago. To digress briefly into
the historiography of agriculture in colonial U.P., Sulekh Gupta
11 Cf. S. Amin, 'From the Field to the Factory: The Instruments of Cane
Procurement: A Case Study of Eastern U.P.-Sugar Mills in the 1930s', in Marc
Gaborieu and Alice Thomer (eds.), Asie du Sud: Traditionset Changements
(Paris, 1979), pp. 492-502. .
12 B.B. Chaudhuri, 'Rural Credit in Bengal, 1859-1885', IESHR, 6:3 (Sep-
tember 1969), p. 225.
13 Loe. cit.
and Imtiaz Hussain concentrated in the 1960s on 'landlords' and

'tenants' as legal categories created by British revenue policy in
the early years of ·the nineteenth century, and .Walter Neale
highlighted,the incomplete articulation of the two in an imper-
fectly developed. market for land and tenurial rights for the
whole span ,of colonial rule. 14 .Concerned primarily with the
intricacies of tenurial rights, these st,udies by and large ignored
the actual conditions of agricultural production. Since then two
general works on U.P. agriculture as it stood in the early and
late nineteenth century respectively, have dealt inter.alia with
small peasant commodity production, and pointed out its links
with the rigours of a monetized revenue demand and the com-
plex web of rural indebtedness.}5 Analysing the effects of early
nineteenth century revenue settlements, Asiya Siddiqi has.com"'
mented that 'the subsistence element in [the peasant] economy
was un'dermined and monetization was induced,. not pecause
[the peasant] had a surplus to exchange but because the neces-
sity of paying his instalment of revenue forced him to sell even
his food and stock.'.16 Siddiqi's own work, coupled with the
recent writings of Chris Bayly, has highlighted the linkage of
regional production of indigo, cotton and sugar to the overseas
and a growing home market in the first half of the nineteenth
century. 17 However, the emphasis is squarely on distant markets
and mufassil hats rather than on peasant production as such.
14 S.C. Gupta, Agrarian Relattonsand Early British Rule:A CaseStudy of Ceded

and ConqueredProvinces(Uttar Pradesh)(Bombay, 1963); Imtiaz Hussain, Land
Revenue Policy in Nortli India: The Ceded and ConqueredProvinces (Calcutta,
1967); W.C. Neale, Economic'Changein Ruraf India: Land and Reform in Uttar
Pradesh,1800-1955 (Yale, 1962). Attention must however be drawn to a rather
different contemporary study l;,y S.C, GuRta and A. Majid, Producers'Response
to Changesin Pricesand Marketing Policies:A CaseStudy of Sugarcan~and Paddy
in Eastern Uttar Pradesh(Delhi, 1965).
l5 Asiya Siddiqi, Agra,·ian Changein a Northern Indian State: Uttar Pradesh
1819-1833 (Oxford, 1973), pp. 132 ff.; Elizabeth Whitcombe, Agrarian Condi-
tions in Northern India, Vol. I: The UnitedProvincesUnderBritish Rule, 1860-1900
(Califorqia"l 971), pp. 173-7.
16 Siddiqi, op. cit., p. 133.
17 Ibid., chapter 6; C.A. Bayly, 'The Age of Hiatus: The North Indian
Economy and Society, 1830-1850', in C.H. Philips and M.D. Wainwright (eds.),
Indian Societyand the Beginningsof Modernisation,c. 1830-1850 (London, 1976).
Basing herself on the voluminous records of the Revenue

and Irrigation departments and utilizing the ,information con.:
tained in district settlement reports, Elizabeth Whitcombe has
painted a rich picture of late nineteenth-century U.P. country-
side. Her study contains a wealth of information on almost every
aspect of country life, from the implements used by the peasants
to the survey plans of the engineers workingon the western and
central U.P. canal systems. All the elements that go to constitute
the specificities of small peasant agriculture-geo-ecology, the
harvest calendar and its disjunction with the fiscal ·calendar of
the state, the vantage point that the peasant's need" for ready
cash afford to the usurer/ trader-are present in this work, either
in.terms of the primary documentation or in Whitcombe' s own
inferences. 18 But despite its encyclopaedic proportions Agrarian
Conditions in Northern India fails to generate a framework for
analysing peasant commodity production in colonial U.P.·
A similar lacuna is characteristic of Neil Charlesworth' s
study of western, India in the nineteenth and early twentieth
century. There is an awareness of the specificities of agricultural
production in themselves contributing to the dependence of the
small peasants on usurious traders, but the discussion of the
'agricultural time-table' somehow falls short of an adequate
conceptualization of the process under observation. Charles-
worth refers in passing to the uncertainties of the seasons and
the consequent diversification this required in the crop regimes.
He cites irtstances from mid-nineteenth-century Poona of the
aw,kwardness of the revenue demand (falling Before crops be-
came marketable commodities) necessitati_ng borrowing from
the mahajans.19 More interesting is his reproduction of the fol-
lowing contemporary observation about the urgency of certain
agricultural operations exercising a considerable influence on
the dependence of peasants on moneylenders:
18 Whitcombe, op. cit., pp. 21-31, 155--60,168-9, 172--7,Appendix 2.

19 Neil Charlesworth, 'Agrarian Society and British Administration in'!
Western India, 1847-1920' (Cambridge, Ph.D. Thesis, 1973), pp. 145--6,153;
also his, 'Rich Peasants and :poor Peasants in Late Nineteenth Century
Maharashtra', in Clive Dewey and i\..G. Hopkins (eds.), The ImperialImpact:
Studies in the EconomicHistory of Africa and India (London, 1978), pp. 97-113.
SMALL PEASANf PRODUCTION, C. 1880-1920 / 89
[Throughout Poona district] the ploughing season commencesas soon

as the khurrif ctop is off the groun~ and on this account the cultivator
seldom gets .the lc)tterimmediately ready for.the,market, but prefers
raising from the sowkar the sum that he requires for the payment of
the assessment.20
Charlesworth terminates his short discussion of the pro-
duction process with the above. quotation, maintaining rather
blandly that 'most cultivators needed help before starting-the
season's operations'. The discussion then moves on to inves-
tigate the complementarity between the state and the sowkar as
surplus appropriators and the distinguishing characte:ristics of
rich and poor peasants. 21
A relatively higher ..status is afforded to the peculiarities of
small peasant agriculture in a recent'study of South India. David
Washbrook ·in his work on the 'dry' districts of the Madras
presidency suggests that in the context of small holdings 'the
mechanics of production. were such that the ·independence of
most small cultivators could only be no,minal'. The small ryots
could not afford to dig their own wells or maintain the heavy
ploughs. Moreover, 'as revenue demand fell heaviest immedi-
ately after the harvest, they needed a market near at hand; they
did not· hav.e the cash-flow to meet their commitments while
holding their crop for storage and transportation'. The most
important need however was for credit to enable them to tide
o.ver crop failures, replenish their stock and seed, and to indulge
in,>occasional but lavish expenditure' on dowries and wedding
feasts. 22 Continuance of production from one cycle to another
was not possible in most cases without recourse to outside
sources of finance and credit. Washbrook concludes his analysis
of peasant production with ,the following observation: 'The
fulcrum on,,which the crucial question of the economic inde-
pendence of the average cultivator turned, was the nature and
20 Wingate Papers, Box 293/ 1, Diary for 10 May 1840, cited in Charlesworth,
'Agrarian Society', p. 153. •
21 Ibid., pp. 154--60.Cf. 'Rich Peasants and Poor Peasants in Maharashtra'.
22 David Washbrook, 'Economic Development and Social Stratification in
Rural Madras: The 'Dry Region' 1878--1929',in Dewey and Hopkins (eds.),
op. cit., pp. 70--1.
number of separate sources which could provide these neces-

sities, particularly·credit' .23
This seems a curious kind of reasoning. It was the small size
of absolute surplus (from small holdings) and the mechanics of
production which, the author admits, were what made credif so
important. Yet he ends up by identifying the number and nature
of credit agencies as the crucial variable determining the degree
of dependence or independence of~peasant households. The
assull_lption appears to be that theiincrease in' the number of
credit agencies would in all instances make the recurring effects
of small holdings and 'mechanics of production' irrelevant. But
Washbrook's faith in the 'impersonal systems of credit', i.e.
'mercantile interests external to the locality', is based on false
weights attached to the fultrum of dependence. Where the
structure of dependence is·rooted in-a skewedldistribution of
property rights and the 'mechanics of agricultural production',
the dealings of newer systems of credit and trading need not
create an independent peasantry, but in fact deepen that de-
pendence by superimposing themselves on existing patterns of
dominance. 24 Where the peasantry was able to gain considerably
by direct access to expanding markets, it was in most cases an
independent peasantry, Le. not constrained by pigmy-sized
holdings, adverse effects of land tenure or the mechanics of
agricultural production.
In fact, Wash brook's own description of a' middle peasantry'
in the 'wet' Tegions of the Kistna ·and Godavari deltas proves
our point. Here an expansion of artificial irrigation in the mid-
nineteenth century and the consequent growth'. of multi-crop-
ping mitigated the adverse effects of the small size of holq.ings,
and enabled the peasants to me~t the state demand on time'from
their own resources. An independent peasantry capable of car.:
rying on from one production cycle to ahother on their own
came into being, and unfettered by a dependence on usurious
traders and landlords (which the 'dry' region experienced be-
23 Ibid., p. 71.
24 Cf. S. Amin, 'Sugarcane Cultivation in Gorakhpur, U.P., c. 1890.-1940:A
Study in the Interrelations between Capitalistic Enterprise and a Dependent
Peasantry' (Oxford, D. Phil. thesis, 1978).
SMALLPEASANTPRODUCTION,C. 1880--1920/ 91
cause of the mechanics of production, among other things)

gained a direct access to expanding markets. It is existence of
this indepeI\dent peasantrY. ar;,.da relatively equitable distribu-
tion of property rights tl}at seem to be the more important
strµcfural features of the 'wet' districts, rather than a multiplicity
qf credit agencies. 25 In oth~r.regions more akin to 'dry' _Madras,
mu\tiplicity of markets came as no panacea to a peasantry which
did not hav~ an open acces~ to·a single one of them. 26
The emphasis on·credit networ!<s is carried to an extreme in
,the work of another Cambridge historian, Peter Musgrave. His
study of the U.P. countryside concentrates on highlighting the
factional or' connectional' basis of all relationships and transac-
tions, credit inquded. 27 The well-being of the 'villager', accord-
ing to Musgrave, rested 'upon a generally recognized need not
to be left alone, an individual in a world of com;i.ections and
to)lowing ... ' 28 Credit understandably figures in this kind of a
setup as an important system of resources. Musgrave starts his
disc4ssion of credit in ruraJ U.P. with two general propositipns.
First, that moneylending was a 'popular way of investing
,money', anq secondly, that credit and trade were inter-linked.
All sorts of men 4!nt mor;tey-mahants and pandits, orthodox
:tvf
uslims and scions of naw.abi families, prosperous co-sharers
and wily telis, school teachers and butchers were all equally
involved. 29 M~sgrave is so preoccupied with viewing this flurry
(
~ Cf. D. Washbcook, 'Country Politics: Madras 1880 to 1930', i!)J. Gallagh~r,

G. Johnson and A. Seal (eds.), Locality,Provinceand Nation: "Essayson Indian
Politics,1807-1940 (Camb'ridge, 1973), pp. 188ff;'Washbrook, The Emergenceof
ProvincialPolitics: The Madras Presidency,1870-1920 (Cambridge, 1976);·pp.
90-3 .
•26 Amin, 'Sugarcane Cultivation', pp. 92-4.
27 For a critique of indiscriminate use of 'factionalism' as a tool of-analysis
for studying rural India, see David Hardiman's contribution to this volume.
28 P.J. Musgrave,' An Indian Rural Society: Aspects of the Structure ofRural
Society in the United Provinces, 1860-1920' (Cambridge Ph.D. thesis, 1976),
p. 64.
29 Musgrave, 'Rural Credit and Rural Society \n the U.P., 1850-1920', in
Dewey and Hopkins (eds.), op. cit., pp. 217-19. It is necessary however to put
this phenomenon in its proper perspective. Small-scale moneylending among
neighbours and peasants was in fact characteristic of all peasar;it societies; it
was as common in thirteenth-century France as in sixteenth-century England.
of moneylending in terms of the 'normal rules of the village

connection' 30 that he does not deal adequately with how credit
is actually related to agricultural production. There are cursory
references to the importance of 'sltort term credit' to tide the
peasants over' the disasters and delays of the seasons', ~specially
when revenue instalments fell due before crops could oe
marketed, and the difficulties felt by tenants and labourers,
presumably between harvests. 31 The specificities of agricultural
production and the backdrop that these may have provided to
the unity of trade and credit does not receive more than passing
mention. The focus is on the protean 'connections' in the vil-
lages.
However, if the capital of the moneylenders was aug-
mented, as Musgrave himself suggests, by their getting a higher
price for commodities than that actually received by their debt-
or-peasants, then there is all the more reason for investigatin'g
the conditions under which cash could be recc;mpedin terms of
low-priced commodities. In the pre-railway age a part of the
trading profits could have been due to bottlenecks in the
markets (seasonal variation of prices and variations between
different markets). But increasingly these seem to have been the
result of the intervention of moneylending trading capital in the
very process of production.
An argument along these lines has been conducted by Jairus
Banaji for late nineteenth-century Maharash,tra. 32 Basing himself
on Marx's views on 'interest bearing capital' t1nd a recently
published appendix to Capital,Banaji .argues ,that where the
reproduction of peasant households from one cycle to another
is dependent on advances from 'monied capitalists', we have an
instance of what Marx termed 'the formal subsumption of la-
bour by capital'. While the form of the ent~rp.rise (peasant
households) and the labour process (small-scale production)
Cf. G. Duby, Rural Economy,and Country Life in the Medieval West (London,
1968), p. 254; R.H. Tawney. 'Introduction' to Thomas Wilson, A Discourse
Upon Usury, 1572 (London, 1925), pp. 1~23.
30 Musgrave; in Dewey and Hopkins, op. cit., p. 230.
31 Ibid., pp. 216, 218, 229.
32 Banaji, op. cit.
SMALL PEASANT PRODUCTION, C. 1880-1920 /'93
remain as of before, the moneyed capitalists are in fact extracting

surplus \'alue a~ interest. This hypothesis is buttressed by a host
of illustrations from the Deccan districts, showing how small
peasants were forced (by the manipulation of purely economic
relationships) to part with most of their produce at harvest time
to moneylender-traders, who doled out means of subsistence
and working capital to 'enable 'production to take place anew.
Banaji's central concerrt is to establish the command process.
But curiously this 'interventioh' is described and theorized
without adequate Consideration of the actual process in queiI-
tion. What are. the circumstances, apart from the operation of
moneyed capital itself, which result ln the inability of the small
peasant to 'reproduce [his means of production] from the pro-
:ceeds of the sale of his co111modities?' 33 Here Banaji, following
Marx, refers to the 'latent crisis of simple reproduction whith

the .small peasant economy is thrown into either under the
pressure of series of bad years or for more •basic structural
reasons, such as State exploitation of p'easanf production'. 34This
is all we have on the. structure and temporality of the small
peasant t:,roduction process «those subordinatibn t6 moneyed
capitalists is Banaji's central theme.
Perhaps the only recent attempt to look closely at peasant
.agriculture in a manageably ,small region ovet a long time-
period and with anything approaching the required detail is
Colin. Fisher's unpublished study of indigo in ndtth Biltar.35
Fisher seeks to highlight a qu~~i.:dualism between cf bastard
plantation system, with its reliance on 'indigenous corttrollets
of land', and a purely.peasant sector of the local agrarian econ-
omy. His analysis, aimed at underplaying the well-knbwn :de-
predatory aspects of indigo·cultivation, is ba'sed,.onan ingenious
studyof the gee-ecology and·croppingpattetn af the region. The
contiast·petween the late rice dominat~d,uplancls to the north
33 Karl Marx, Theoriesof Surplus Value,Part III (M~scow, 1971), p. 487.
34 Banaji, op. cit., p. 1390. Cf. Capital,vol. III (Mos.cow, 1971), pp. ~94-8,
where Marx though concentrating on contingentfactors, like"the death of the
peasant's cow placing him in the grip of the usurer, does suggest that the
characteristic domain of the usurer is the use of money as a means of payment.
35 C.M. Fisher, 'Indigo Plantation and Agrarian Society in North Bihar in
the Nineteenth and Early Twentieth Century' (Cambridge Ph. D'.thesis, 1976).
of the.Bur Gandak and the more fertile mixed cropped lands to

the south of the river is· used as a backdrop against which
the differing reactions to the incursions of the nilhe sahebs is
studied. 36 Cash advances given to the peasants are placed in a
temporal context: 'Advahces were an important part of peasant
agriculture and the timing of the advance was often a more
important consideration than the size of the final ;payment' .37
Fisher underplays the coercion that the planters exercised over
the Bhojpuri peasants along with unremunerative prices for
their indigo; 'there were other reasons which would have made
indigo unpopular whatever the price'; its unpopularity con-
sisted in the 'disruption of normal peasant production'. The big
push in indigo cultivation after 1830 was at the expense of
'peasant priorities'.3 8 Indigo monopolized the land for a year
and demanded more labour than any other crop, sugarcane
included. The planters caused it to be grown on the best lands
which would have otherwise borne two crops. The enforced
fallowing during the cold weather meant sacrificing the rabi,
which was the more galling as land required a minimum of
ploughing after oilseeds and pulses had been gathered in
February. 39
But despite the subversion of 'peasant priorities' it seems
that in the case of indigo, physical force, direct supervision, and
low prices were the important factors which accounted for the
peasants' aversion to incorporating the crop within their harvest
calendar. As we shall presently see, cane cultivation which was
an equally time-and labour-consuming crop, was sought in
neighbouring and ecologically similar Gorakhpur to be incor-
porated within an equally complex set ·of peasant practices.
Despite the hold of merchant-moneylenders, but-presumably
due to the absence of direct coercion characteristic of indigo in
north Bihar, cane culhJ,re in Gorakhpur was almost regarded as
a fetish: Ikh tak kheti haathi tak banaj,ran a local proverb. 40
36 Ibid., pp. 8-26, 149-67.

37 Ibid., p, 67.
38 Ibid., pp. 70, 74, 75-6.
39Ibid., pp. 76-86.
40 'What elephants are to merchandize sugarcane is to agriculture.'
In this essay a somewhat different perspective is offered for

comprehendirtg the significance of this saying for the peasants
of Gorakhpur in eastern Uttar Pradesh. A description of agricul-
tural practices is followed by a digression into the world of the
moneylender-manufacturer and the peasant. But while the ex-
isting historiography takes this realm as the universe of its
discourse, we move once again to the specificities of small
peasant production to indicate what in our opinion is the struc-
tural basis for the operation of usurious capital in the Indian
countryside. We start with an analysis of the cultivation of
sugarcane and the manufacture of raw sugar in eastern U.P.
Various practices associated with these-processes are noticed in
order to arrive at some idea of.the time, labour and organization
involved in producing raw sugar for the market. In the next two
sections we alter the perspective somewhat, by shifting the focus
from sugarcane, the crop, to raw sugar, the commodity, with
the 'buyers' of this peasant product very much in the picture.
An overview of the mar!<-etfor raw sugar is presented for the
main cane tracts of U.P. and the relative importance of the sugar
refiner and the merchant-moneylender undersc'or-ed. Finally, the
significance of sugarcane for small peasants is discussed in
terms of the spe~ific character of the turnover in agriculture and
the hiatus between working time and production time. This
hiatus, we argue in the last section, corresponds to the want of
c~mgruence between the farm calendar and the routine of rent
collections. At a general level the argument is that the exchange
and production relations which appear ,at first sight to emanate
from the demands of a particular crop, assume their full sig-
nificance only in the context of their role and place within the
overall production process and the economic condition of the
peasantry in a given area. Instead of discussing in great detail
the pyramid of property rights, the differentiation withi'n the
peasantry, the movements of population, prices, rent and rev-
enue, I have tried to abstract from all these the conditions under
which the reproduction of small peasant household economies
came to be dependent on the cultivation of sugarcane for usuri-
ous dealers. The emphasis is on the small peasant production
process; on a long enduring structure within which the 'high
valued' culture of cane is elevated almost to the level of a

strategy in the agricultural practice of the countryside.
II THE CULTURE OF SUGARCANE

Gur, or raw sugar was the predominant commodity form of
sugarcane. in the Gorakhpur region in eastern U.P. in the late
nineteenth and early twentieth century. 41 In fact, throughout
U.P. only one specific type of cane-paunda-was grown as an
edible market-garden cropP Sugarcane as a field erop-ikh, ukh
or ganna in the indigenous parlance-,-was cultivated by the
peasantry not so much for its gross tonnage, as for its gur
potential. The outturn of raw sugar, though obviously depend-
ent on the amount of juice contained in a. unit of cane, was
nevertheless substantially.determined by the quality of the juice
(the sucrose content), the efficiency of indigenous crushers (kol-
hus), and the care and attention taken in the boiling and clarify-
ing of the juice.,Sarauti, mango,reonra,hemja and baraukhawere
the predominant indigenous cane varieties of Gorakhpur. 43
Sarauti (from sravati:Sanskrit for 'oozes out') was the leading
native variety, not solely because of its high yield of gur, but
because it demanded relatively less attention and gave the best
results undet ordinary methods of cultivation. It figured in
peasant sayings as a veritable synonym for sugarcane: 'Grow
sarauti sugarcane-and dehula rice, and nothing elst'.'!',ran an
eastern U.P. proverb.44
If sarauti was a poor man's cane, mango was prized for. its
4 1 With the proliferation of sugar mills in the region in the 1930s an

important change took place-now sugarcane was in demand in its natural
form. However, this development is outside the ,scope of the present,essay.
42 Ain-i-Akbari (Tr. H.S. Jarrett), vol. I (Calcutta, 1891), p. 69; Noel Deerr, A
History of Sugar, vol. I (London, 1949),pp. 51-2; S.M. Hadi, The Sugar Industiy
of the United Provincesof Agra and Oudh (Allahabad, 1902), p. 4; W.C. Benett
(ed.), Gazetteerof the Provinceof Oudh, vol. II, p. 161.
4 3 Buchanan-Hamilton, 'Statistical Account of Gorakhpur' (1811-15), Mss.
Eur. G-23, table 14, India Office Records; Statistical,Descriptiveand Historical
Account of the North-Western Provinces, vol. V1 (Allahabad, 1881), p. 325
[Hereafter NWP Gazetteer,1881];Hadi, op. cit., ch. II.
44Hadi, op. cit., p. 8.
SMALL PEASANT PRODUCTION,,C. 1880-1920 / 97
excellent gur•making potential. Indeed, if the following proverb

from Azamgarh is to be taken literally,, the village maidens
would rather lose their lovers" affection than steal a mangocane
from their father's fields:,
Yaarmera pyara, ukh meri mango;
·aadhi nahin doongi, poori kyon maango?45
Although .my sw~etheart you ,are dear to me, why should

you ask for a whole ca,ne?,l am. not prepar.ed to part 1-Y.tthev~n
a.half of it because,it is mango(~nd therefor.e so valual?le)~
Of all his various crops sugarcane demanded the time, la-
bour and attention of the U.P. peasa:t;1tmost. It .was believed in
Azamgarh that it toqk 'pr~tty nearly t})~.w;bole labOtJ.J'of two
men and four bullocks for five months to cultivate a beegah
satisfactorily. 'Unless a man has seven sons and twelve grand-
sons he should not cultivate sugarcane', went a Bengali saying
in a slightly exaggerated vein. 46 Lacking the requisite bullock
power for the repeated preparatory tillage for cane, the .A'.zam-
garh peasants clubbed their meagre' resources under the har-
sajh47system. Another variant of this arrangement was the tijara
system, whereby peasants without bullocks"worked two days
for another cultivator and got the use of his. plough fa·exchange
for the third. 48
Despite the use ·of organic manure and the penning of
sl;,.eep,49 land for sugarcane required consider~bl,e periods of
fallow to regain.its productivity. ·TheJdeal system of-crop rota-
tion was· where cane was preceded by aifull year's fallow. 50
However, as this meant a compl~te loss of both the 'kharif and
the rabi, this was a rare practice confined perhaps to the most
,45 Ibid., p. 16.

46 'Report on the Revenue Rates Proposed for Pergunnah Mahoul, Azam-
garh, 17 April 1873 by H.M. Rogers', RevenueRepo1'fe1·,
vol. II, p.'158; Wynne
Sayer, 'Sugarcane Cultivation in Non-trbpi~al Parts of lndia', Agricultural
Journalof India, vol. VIII (1916),p. 365.
47 Har-plough, sajhiya-partnership, Cf. DumonJ, op: cit., p. 91, for a brief
but suggestive discussion of such a system am9qg aJlied,kin in South India.
48 Azamgarh SettlementReport,1881,para 350. (Hereafter Azamgarh SR.1881.)
49 Ibid., para 357.
50 Hadi, op. cit., pp. 29-30.
98 / CREDIT,MARKETSANDTHEAGRARIANECONOMY
substantial cultivators. A more common practice was to take an

early kharif (bhadairice, manrua, kodon,juar) in early September
and let the land rest for the next five months before planting it
with sugarcane. 51 A much more intensive use of land, which
affected both the immediate yields and the fertility of the soil,
was resorted to by the ordinary peasants of east U.P. As their
meagre grain stocks did not last the long fallows a succession
of quick harvests was necessary. 52 And as their size of holdings
was small (see Table below), an intensive exploitation of their
lands in which sugarcane played art important part was the
usual practice.
The small size of the holdings in Gorakhpur is brought out
by the following data collected in 'the mid-1880s:53
TABLE 3.1
AVERAGEHOLDINGSOF LANDIN U.P. REGIONS,1882 (IN ACRES)
Type of Tenancy Upper Middle Lower Trans- Rphil- Bunde[-

Dpab Doab Doab ,Ghaghra khand kltand
Occupancy
Tenants 8.6 6.7 3.7 3.9 5.2 6.2
Tenants at Will 7.2 5.7 2.6 3.1 3.6 4.9
NOTE: Upper Doab=Saharanpur, ¥uzaffarnagar, Meerut,

Bulandshahr, Aligarh.
Middle Doab=Mathura, Agra, Etah, Mainpuri.
Lower Doab=Farrukhabad, Kanpur, Fatehpur.
Trans-Ghaghra=Gorakhpur and Basti.
Rohilkhand.=Bijnot, Moradabad, Bareilly, Pilibhit, Shahjahan-
pur, Baduan.
Bundelkhand=Hamirpur, Jalaun, Banda, Jhansi.
Gorakhpur division covered the trans-Ghaghra districts of
Basti and Gorakhpur together with Azamgarh, south of the
river.
SOURCE: J.F. Duthie and J.B. Fuller, Fieldand GardenCropsof the North
Western Provincesand Oudh (Roorkee, 1882), pt. l, p. iii
5l Ibid., pp. 37, 41; Azamgarh SR, 1881, para 408; U.P. Distinct Gazetteer:
Basti, by H.R. Nevill (Allahabad, 1907), p. 42; NWP Gazetteer, vol. VI, 1881,
p. 325.
52 Cf. below sec. VIII.
53 Gorakhpur Settlement Report 1891, pt. I, p. 203. (Hereafter Gorakhpur
In the region south of the river Ghaghra there was even less land
per head, 54: and this resulted in a more intensive cultivation.
Thus those with little land in ·Azamgarh sowed peas after an
early kharif.instead of keeping the land fallow. This. meant
planting'the cane crop a bit later, in the middle or end of Chait
(March-April) instead of Phagun (February-March), but this ar-
rangement yielded an additional crop of rabipeas. Others mixed
arh'ar(cajanusindicus) with the early kharif in Asarh Q"une-July).
The arharcrop occupied the land till February-March (Phagun)
or March-April (Chait), depending on the. variety, when it was
dug up and sugarcane planted. Some even put can'e after barley
and barley after an early kharif. But this was the most inferior
system of the"lot, and did not leave any time for.tne preparatory
tillage of cane fields.55 These crop rotations, in which sugarcane
figured in quick succession with other crops, were not peculiar
to Azamgarh.in the 1880s, .when1:he district was showing un-·
mistakable signs of overpopulation and consequent exploitation
of land. 56 These arrangements were also to be found .in an
instifutionalized form in the zamindari of,Banaras in the 1780s
as well in the sparsely populated tarai district of Sitapur in the
1870s.57
TABLE 3.2
SIZE OF HOLDINGS IN GORAKHPUR
Proprietary Holdings 3.18 ~cres

Exproprietary Holdings 2.76 acres
Occupancy Holdings 1.83 acres
Tenants-at-will Holdings 1.36 acres
Rent-free Tenants Holdings 1.91 acres
SR, 1891).
54 Cf. 'Revenue Administration Report, 1885-86', Dept. x'm Basta III,
Commissioner's Record Room, Gorakhpur.
55Azamgarh SR, 1881,para 408. •,
56 'Revenue Administration Report, Azamgarh, 1885-86'.
57East India Sugar:PapersRespectingthe Culture and Manufactu1ingof Sugar
in British India:Also Notes on the Cultivation of Sugar in Other Parts of Asia with
The importance of the fallow for the quality and outturn of

cane is underscored by its institutionalization in another form-
in its relation to rents. Considered superficially, sugarcane car-
ried a higher rental than ordinary, food crops .. In th.~ Kheri
district in Awadh tarai, land grown with sugarcane paitl double
in rent than the ordinary harjinsa.58Similarly, sugarcahe in
certain.tappas of Azamgarh district was 'taxed' in the 1820s at
Rs 10 a bigna,while the charge on harjins and rice lands was·Rs
3 to 5 and Rs 2 to 3-"'8respectively.59But it would be inaccurate•
to speak of differential rents on 'cane· lands' or on the sugarcane '
crop, In Gorakhpur as in the rest of .north India there was no
monoculture of sugarcane, ndr was the crop cultivated like
opium, vegetables or transplanted rice on specific plots ear-
marked for it.60 Evidently, references to 'cane rent' in the litera-
ture pertain· more to an enhanced rental on the capacity of
peasant holdings to grow sugarcane, than a special or differen-
tial rent on the crop or the·cane fit?lditself.61
It ·seems tempting to suggest that the real determinant of a
higher rent on holdings on which cane was grown ih,a definite
variety of crop-rotations was the nature of the fallow itselli.Both
yields and fertility seem to have been affected by the nature and
duration of the fallow. Yields were reported to have declined
by as much as a third if cane was planted after a kharif than if
no autumn crops had been gathered, and there is evidence from
Gorakhpur that indiscriminate cropping without proper fallow-
ing (or manuring) tended to affect cane outturn in the 1860s.62
The commercial resident at Banaras liad reported at length on
MiscellaneousInformationRespectingSugar (London, 1822), pp. 188 ff.; Sitapur

SR, 1875, p. 20.
58 Oudh Gazetteer,vol. II, 1871, p. 161.
59 J. T. Reade(?), 'Minutes on the Rights and Conditions of the Ryots of
Chakleh Azimgurh', para 19, Mss. Eur. D. 279, India Office Records.
60 For the monoculture of transplanted rice (jai·hanin Gorakhpur and Basti
villages bordering on the Nepal tarai, see BastiSR, 1891, pp. 20-1; BastiDistrict
Gazettee1~ 1907, p. 40.
61 See, for instance, Mss. Eur. D. 279, India Office Records; Sitapur SR, op.
cit.; RevenueReporter,vol. II, p. 189; AzamgarhSR, 1881, para 344.
62Reporton the Settlementof the Goruckpore-Bustee District,vol. I (Allahabad,
1871), p. 46.
SMALL PEASANT PRODUCTION, 0 '1880-1920 / 101
the connection between cane cultivation, fallowing, and rents in

a report at the tum of the eighteenth century. 63 Nearly a hundred
years later the settlement officer .of Sitapur district found four
well-marked ratE!Sprevalent in parganaMahul, 'regulated entire-,
ly by the season-at which the cane is sown, or more strictly by
the length of time during which the land is occupied by the ci:op
between preparation for sowing and actual developi:pent' .~
These rates moved inversely to the deterioration in cane
culture consequent on a shortening of the fallow and the intro-
duction of other crops in the cane harvest cycle.65 Thus the rate
was the lowest, if sugarcane was planted after the gathering of
gram in Chait (March-April), as this did not leave any ,time for
preparing the fields. If maash (a late kharif pulse) had been
harvested in November leaving Pus to Magh (late November- 1
early Feqruary) for tending the land for a late sowing in Phagun
(February-March) a higher rate was charged.· The rate was
hjgher still if the dispo-Salof early rice in Kuar (September-Oc-'
tober) allowed for a four-month fallow for the ensuing cane crop,
and the highest if sugarcane was preceded by- a full year's
fallow.66
The Sitapur example might suggest at first sight that the
poorer peasants who deviated from the ideal patterns of cane
culture stole a march on the richer peasants (who normally
allowed for long fallows) by not only having more crops but
paying lower rents as well. But such a conclusion would be hasty
for two reasons. First, this ideal dovetailing of rents and fallow
was not as neat in other cane tracts as in Sitapur district. 67
Secondly, as we shall presently see, for the poorer peasants of
Gorakhpur a quick succession of harvests could not compensate
adequately for the problems stemming from the nature of turn-
over in agriculture as such. 68
63 See note 57 above.

64 Sitapur SR, 1875, p. 20.
'65 Ibid., pp. 54--6.
66 Ibid.
67 Cf. Jinspher (lit. crop-rotation) rents in Azamgarh: Azamgarh SR, 1881,
para 345.
68 Cf. see VIII below.
Sowing, which involved planting foot-long cane pieces

(patanars)after intensive ploughing, as we have seen, took place
during February-April, depending on the previous crop taken
from the field. The number of ploughings varied ideally from
15 to 20 in the west of the province to 20 to 40 in Gorakhpur and
Azamgarh districts. It seems that one of the reasons why the
number of ploughings increased from west to east was because
the weight of the plough and the strength of the cattle decreased
in the same direction. The plough was the smallest and much
lighter in the rice tracts of eastern U.P. and Awadh, where it
weighed ohly about 17-18 lbs. The corresponding weights of the
plough in central and upper Doab were 28 lbs and 50 lbs
respectively. The western U.P. ploughshare had more iron con-
tent to it than its eastern U.P. counterpart. There was iron round
the edge of the sole, and instead of the short spike of the purabiya
plough, it had a long iron bar which projected behind and was
thrust forward as its point wore down. The,cattle of Gorakhpur
and Azamgarh were also by far the weakest, possibly on account
of the relatively lower nutritive value of rice straw as fodder
compared to that of the karbi of juar and bajra used in the west.
As the settlement officer sardonically remarked, even the abun-
dant grass in Gorakhpur did not seem to have been as good for
the cattle as the dub of Mathura and Agra!69 Planting could also
be delayed if the process of gur manufacture from the previous
year's crop kept the peasants busy beyond the optimal point. 70
An idea of the care and attention demanded by the crop can
be gauged from the following Gorakhpuri saying:
Ikh paundra bo le tu jo chahehua nihaal,
bhar bhar gaari khaaddaal de, kod de kudaal;
baar baar de paani usmen baandJibahut si suthri dhaal.
71
Meethi lakri sab koi kheve baitha defaurart rakhwa'al.
69 Cf. Duthie and Fuller, Field and Garden Crops, p. x; GorakhpurSR. 1891,
p. 80; Azamgarh SR, 1881, para 350; Hadi, op. cit., p. 37.
70 G. Butt, 'Sugarcane Cultivation in Shahjahanpur District', Revenue
Reporte,;vol. III, p. 118.
71'Harvest Calendar Register', no. 7 of 1885-8, Settlement Shelf, Gorakhpur
Record Room. Four cart-loads (about 60 maunds) were reckoned to have been
sufficient for a pakka bigha in Gorakhpur. See NWP Gazetteer, 1881, vol. VI,
p. 325.
If you want to be happy verging on the ecstatic, sow your

sugarcane aftet a year's fallow. Spread cart loads of manure and
hoe r~peatedly wit4 the kudali. Irrigate the field regularly, and
fence and shield·it with a hedge of Hibiscuscannabinus.Everyone
(man and beast) likes the sweet-stick; have a watchman ready.
The main time-, labour-, and money-consuming bperations
in the interculture of cane were the intermittent hoeings .fol,.
lowed by irrigation. In Gorakhpur 'three hoeings a:t'idJhirteen
waterings' were regarded as the norm. If rains were late then
the labour expended on interculture increased enormously; as
many as,twenty 'waterings' might be needed to keep the grow-
ing plant alivel 2 Even'if the rains were timely arid followed the
nakshatras(lunar asterisms) in which they were due, the labour
expended on kiyari irrigation and hoeingremained phenomenal
by any reckoning; 73 hoeing demanded more labour after irriga-
tion anyway.
,Harvesting spanned the months of Pu~ to Phagun (late De-
cember to early March), nearly a year after the patanarshad been
Buried in the ground. The juice of cane cut earlier on in the •
season, though,inore abundant, was inferior in sucrose.content
to that harvested in ,January and February. One wonders if,it
was due to the slowness of the. indigenous cattle mills that
the bar.vesting season was not confined to these two optimal
months, but was staggered fr.om Dec~mber through March. 74
Th,e cutters stripped the cane of -dty leaves on its side with a
hansia (an- unseirated sickle) anu also cut off .the green tops
which, when chopped with a gantlasi, served as fodder during
January-March. Throughout the province in the late nineteenth
'n Loe. cit.

'3Witness the two Gorakhpur proverbs:
1. Maagh kajaarajeth ki dhoop,barekaashtse upje ukh.
2. lkh karen sab koi,jo beechmein jeth na hoi.
1. '\-\'.hatwith cold and frost in the month of magh and the heat ofjeth,
it requires great cultivation to make sugarcane grow:'
2. 'Ev,ery Tom, Dick and Harry would grow sugan;ane, if the hot
month of jeth did not intervene.' _
74 Duthie and Fuller, op. cit., p. 59.
century and in some Basti villages,as late as the 1920s the cane
cutters received their remuneration at a set rate of five canes per
head together with all the green cane tops which had been
chopped off. These latter were seldom sold and their value as
fodder must have been considerable, for on the face of it this
remuneration seems to have been less than the four seers of
barley or rice, or 4 per cent of the harvested crop which fell to
the lot of the Azamgarh launihars(rice reapers),in the 1870s.75
There were two other features of cane cultivation in the
Gorak.hpur region, and in Gorakhpur district specifically, which
tended to modify the pattern and intensity of agricultural prac-
tices described above. One was the system of taking a second
crop (ratoon)from the previous year's plant crop, and the other
the less intensive culture of cane in the bhat sails of Gorakhpur
district. The second year's ratoon crop (peri in Gorakhpur) was
raised by leaving the stumps from the previous year's crop in
the ground and igniting the dry cane leaves. Flames spread over
the harvested fields without however injuring the stumps,
• which after a little irrigation emerged phoenix-like from beneath
the ashes which also served as manure. Considerable saving in
time, labour and money resulted from this process, but the
outturn was much lower and the crop susceptible to pests. 76
· The intensity of cane culture naturally varied with the soil
on which tb~ crop was planted. In Gorakhpur, the natural soils
co~l~.l;>e,and in fact were, classified by the peasantry into bangar
an,d.phat. Bangarwas the ordinary alluvial soil of the province,
stronger and more fertile than bhat, but less retentive of mois-
ture. In these relatively harder soils ploughing was difficult and
irrigation essential, but the yield of kharif, rabi and cane was
much higher than in the lighter bhatsoils. Bangarwith its variants
was the standard soil of the Deoria, Sadr, Bansgaon and Maha-
rajganj tehsils. Bhat-the soil of the valley of Gandak-was a
75 Hadi, op. cit., pp. 40, 59; RevenueReporter,vol. III, p. 122; IJ.P.Provincial
BankingEnquiry Committee(1930), Evidence,vol. II, p. 181; Royal Commission
on Agriculture in India (Lpndon, 1927), Evidence,vol. VII 1 p. 236.
76 Hadi, op. cit., p. 39; Revenue Reporter,vol. III,. p. 115. For a General
discussion, see, 'Note [on] Ratooning', ImperialCouncilof AgricultureResearch:
Sugar CommitteeEighthMeeting,1936, appendix iii, subject no. 16.
light calcerous soil, found on both sides ,of the river in North
Bihar and Gorakhpur district. In Gorakhpur it was the pre-
dominant soil of Padrauna tehsil which lay between the little
Gandak on the east and the great Gandak on the west. It ,was
also found in patches along these two rivers in other parts of
the 'district as well.
On the whole agriculture in bhat,tracts required less ..capital
and labour than in bangarlands. Less bullock power was needed
to till the land, ploughingwas relatively easier because of the
nature of the soil, and less of it was required than in bangar.The
amount of seed used per acre was also less because of the
superior germinating power of the soil, which was more reten"'
tive of moisture. And perhaps,what is even more important from
the point of view of cane culture, crops could be gathered even
in the drier seasons without recourse to irrigation. In fact,
irrigation was deemed difficult because of the faster rate of water
absorption, and hence not much resorted to.,Though the average
output from such lands was considered to be some 13 per cent
less than in bangarsoils, it was estimated that ,a peasant could
cultivate with the same stock of capital and seed about 15 te>30
per cent more land and manage to get the same results as in
bangartracts. 77
There is no conclusive evidence on differential rents between
these two.kinds of soils.78However, there is perfect unanimity
that cane culture-without irrigation and much less preparatory·
tillage-on bhat lands was less intensive than in bangar,tracts. 79
For this reason, the bhat soil dominated. Padrauna tehsil re-,
mained the premier cane growing region in the aistrict. Even
77 This discussion of bhat and bangeris based on Rent-Rate Report of the

Northern Portion of Padrauna, District Gorakhpur(1916), para 20; Rent-Rate
Report on the Southern Portion of Padrauna, Pargana Sidhua Johna,,Tahsil
Padrauna,District Gorakhpur(DeoriaPo1tion),1917, p. 10; G.A. Grierson, Bihar
Peasant Life (1885: rpt. Qelpi, 1975), p. 167; M.A.G. Faruqi, Shajra-i-Shadab
(Gopkhpur, 1901),p. 285. In neighbouring Saran district, cultivation of,c;:a~e
on bhat tracts cost 10 per cent less, but the output was also :,hort by 20 per
cent as compared to hangarlands. See Saran,SR, 1893-1901, p. 171.
78South PadraunaReport,op. cit, p. 9; Shajra-i-Shadab, ,p. 285.
79 North PadraunaReport, op. cit., para 25.
within the tehsil, bhat portions grew more cane than bangar
villages. 80
III WORKING 11-JEKOLHU
With harvesting only half the job was over; the delicate task of
raw sugar manufacture which involved a certain degree of
organization lay ahead for the peasants. 'A widow can sow
sugarcane, but it requires a householder to crush it'; went·a
Bhojpuri proverb: 8r As the sucrose content of harvested cane
declined if left uncrushed, cane sufficient to be pressed and
boiled into gur in a single day was taken immediately to the
'pressing factory' .82 The kolhuar consisted of a small court in
which the cane press (kolhu) was set up. The kolhu was a large
drum-shaped mortar, in which an almost upright timber beam
or pestle was made to turn by an arrangement attaching it to a
pair of circling bullocks (see illustration). As the wooden and
stone kolhus of the Gorakhpur region operated on tlte mortar
and pestle principle, it necessitated the chopping of the cane into
small bits; 'an expensive part of the operation, as Buchanan
noted in his Dinajpur report. 83 Kolhus in Azamgarh and the
cis-Ghaghra districts generally, were fabricated from blocks of
chunar stone brought up the Tons, choti Sar.ju and Gointi rivers.
The' cost of the stone kolhu was between Rs 38 and Rs· 62,
· dependil'lg on-size. No transport costs seem ro have been in-
curred once the limits of up-country riverine transport had been
reached. It is perh:l.ps an indication of .the peasant belief in the
importance of cane that to help in the transport of stone kolhus
free of charge from one village to another was regarded as an
act of punya.84 The cost of an average wooden kolhu in Gorakh-
80 Ibid., p. 18 (map) and appendix V.
81 'Rand bove shauharpere.'
82 There was a well-known injunction that no ti.me should be lost,between
the harvesting of cane and its manufacture into raw sugar. Cf. W.H. Moreland,
'Note on Sugar Cultivation' [in U.P.], in Report of the CommitteeAppointed to
Inquire into the Prospects of Cultivation of Sugar by Indigo Planters of Bihar.
(Calcutta, 1901).
83 Cited in East India Sugai~1822, appendix iii, p. 25. ,
84 Punya: merit in the religious sense of the term. Azamgarh SR; 1881, para
'
SMALL PEASANT PRODUCTION, C.1880-1920 / 107
The Gorakhpur Wooden Kolhu

SOURCE: S.M. Hadi, 'The Sugar Industry of the United
Provin~es and Oudh (Allahabad, 1902), p. 55.
pur is not available for the late nineteenth, century .. If the es-
timates from neighbouring Champaran district are any,guifie,
then the expenditure, including the fees of the I,arhai,would
come to some Ks 4 to Rs 5 per annum.BS
However, it is not very fruitful to arrive at the notional cost
of a kolhu; there was an element of peasant co-operation in its
worl.9.ng and even in its ownership, and this is difficult to
measure monetarily. As,a rule, three to six household~ clubbed
together and invested in a kolhu \Vhich they used fo,r crushing
thE:ir•respective crops under a complex arrangement, 'J:he,rea-
sons for thi.s sajhiya were fairly obvious. The smalLqcreage of
sugarcane per head, the inadequacy of cattle stoc;k;the desire to
finish gur manufacture before Jhe, onset of the hot weather and
in time to carry on with other,agricultural opE:rations like the
planting of the next year's cane crop are the reasons that come
436; Hadi, op. cit., p. 55; interviews with Dr V.B. Singh (of Azamgarh),
Lucknow, 17 January 1976 and Ramanuj Shukl, Deoria, 21 October 1976.
85 W.W. Hunter, A Statistical Account of Bengal (London, 1871), vol. XIJI,
p. 265.
readilyto mind. Besides, kolhuawan,or a tax on kolhus levied by

the zamindars, might have tended like the analogous hunda tax
in Sikh Punjab to discourage the accumulation of kolhus in
individual households. 86 Shares of the different peasant house-
holds, who owned the kolhu and pooled their labour and bul-
locks, were reckoned in units of 24 taos (amount of juice boiled
at one time) or in: the familiar 16 anna units. Under either
arrangement about one-third of the gur produce went towards
meeting the hire of the additional bullocks and the wages of the
specialized labourers. The' peasant whose cane had been milled,
received two-th!rs:ls of the gur produced. Similarly, there was
the tiraha system under which the hire of a kolhu by a peasant
having no share in it was approximately one-third of the total
produce. 87
The labourers employed were the katarwah (the bullock
driver) and two ghaniwahaswho chopped the cane into small
pieces, fed the kolhu, removed the khoiya (refuse) and drew off
the juice. Finally, there was the specialist gui boiler (the pakwa
or,jhokwa) who looked after the fire under the boiling pan and
superintended the preparation of gu1<. His was a specialized and
important job, for the value of gur would be decreased by some
50 per cent by excessive boiling and caramelization or·by the
failure·of the juice to solidify into gur. In neighbouring Saran
district the jhokwa was paid a higher rate than the other la-
bourers: 5 per cent of the gur or its sale value, a quarter ofa seer
of scrapings from the pan and five sticks of cane daily; th~ fresh
canes were used to buy the day's supply of tobacco and spices.
His remuneration would average just under 4 annas per day as
opposed to 1.5 annas in kind and cash paid to the other labourers
in Azamgarh in the 1870s. Normally when the kolhu operated
twenty-four hours a day the bullocks were increased to six and
the number of labourers was also doubled. 88
Cane juice strained of dirt and cane fibre was emptied into
86 Field Notes and Interviews, Deoria, 1976; Cf. G. Watt, A Dictionaryof the
EconomicProductsof India (London, 1890); vol. VI, p. 294.
87 Interviews with Ramanuj Shukl, Deoria, 21 October 1976; Babu Genda
Singh, Delhi, 11 November 1975; cf. RevenueReporter,vol. III, p. 126.
88 See Azamgarh SR, 1881,p. 129; SaranSR, 1893-1901,p. 172.
a boiling pan (karah),which was generally·hired for the season,

Khoiya,or .dried up cane fibre, .was used as :fuel. Jne juice was
boiled to one-fifth of its bulk, and on the instruction of the pakwa
the karahwas lifted off the fire and the substance kneaded with
a wooden mallet. When it was sufficiently stiff and cool, it
became gur.89 When the boiled syrup was poured into earthen
moulds, it became bheli(round lumps of gur weighing a quarter
of a seer each). This was'the usual practice in the Gorakhpur
region. The bulk of the gur produced in Gorakhpur went by the
name of chinihabheli. This was very rich in sugar content and
soft in texture, both qualities making it a suitable raw material
for sugar refining. In some parts of Azamgarh district, however,
another kind of ,raw sugar-raab---was made for the production
of refined sugar, though gur was the general commodity form
of sugarcane here as well.90
Before embarkitl.g on a discussion of the ·relationship be-
tween the gur-producing peasants of Gorakhpur and, the market
for their produce, we will make a 1short detour iritd the world
of raw sugar production in central and western U.P., in, o±der
to establish that the picture generally drawn of an independent
gur-producing peasantry does not apply td areas where.there is
a sizeable sugar refining sector. Gorakhpur, as·we shall-present..1
ly see, was one such region.
IV GUR AND RAAB
The distinction between gur and raabwas characteristic of crude

sugars produced throughout northern India. 91 Gur br bheli, as
we have seen, was a solid dry mass; it required little refinin'g
and was also used for consumption by the bulk of tlie popula-
tion. Raab(a semi-solid substance)was slightlymorerefined,md
was used primarily for manufacturing refined sugar. Unlike gur,
89 For details see Azamgarh SR, 1881, paras 435-54.

90Ibid., para 445. .
91 'Note on the kinds of Sugar which may be classified as "Refined".,' Oudh
Revenue File 1247 of 1879-84, U.P. Archives, Lucknow; Duthie and Fuller,
op. cit.; W.B. Birch, Reporton the ProductionandManufactureof Sugar in Certain
Districts of Bengaland the North-WesternProvinces(Calcutta, 1889), ·
the manufacture of raab is a much more elaborate process re-

quiring a larger capital outlay and a more careful supervision
by the moneylender-manufm:turer. 92 Thus, while only one karah
was needed for boiling juice into gur, the preparation of raab
ordinarily required 'two. 93
The raab-producing peasants, especially in Rohilkhand in
central U.P., were greatly dependent on the sugar refiners
(khandsaris). From the mid-nineteenth century the khandsaris
intervened much more directly in the production of raw sugar
by demanding ras or cane juice from the peasants. They con-
verted the fresh cane juice into raabin their temporary boiling-
sheds (bel) set up-in the villages for the season. This bel system,
emanating in Bareilly district. in the 1850s, sprea'd rapidly to
other raab-producing tracts of Rohilkhand. By the last quarter
of the nineteenth century the raab-producing peasants cf Rohil-
khand had by and large surrendered their control over raw
sugar production to the moneylender-manufacturers. 94 The
khandsaris had reduced them, in effect, to mere suppliers of
freshly pressed cane juice.
The close links between moneylending, sugar refining and
landlordism resulted here in the domination of the cane-grow-
ing p~asantry in its most developed form. Advances were given
by the khandsarisdirectly to the peasants or distributed through
the landlords. A' contractual' agreement to hypothecate the cane
produce to the khandsari's be[ was signed by the peasant who
received the advance. A penalty clause guarding against inde-
, pendenr gur production was erttered, and the miniqns of the
khandsaris toured the villages like the gumashtas of the Opium
Department unearthing clandestine gur production. 95
Some idea of the pseudo-contractuality and ornate legality
which buttressed the economic domination of the peasantry by
92 See B.C. Basu,' A Note on the Mapufacture of Sugar and its Improvement,
1890, para 11, in GOI, Rev. Agr. A File 89 of 1892, NAI, New Delhi.
93 Azamgarh SR. 1881, p. 130. This was the ca~e when the peasants them-
selves prepared raab.
94 Revenue Reporter,vol. III, p. 13-1;Hadi, op. cit., p: 67:
95 RevehueReporter,-op.cit., pp. 128 ff.
the khandsaris can be gathered from the following 'contract'

executed in 1905: 1, .,
CRasul Khan, s/ o Inayat Ullah Khah caste Pathan am a residept of

Burhanpur, Tehsil Tilhar, district Snahjananpur. Wheteas 1 have Bor-
rowed R's ·99 half of which is' Rs 49-$, from Abdul Qadir Khan
of Shahjahanpur ... as an advance (peslf'gi)in sugarcane and have
brought into my use. It is agreed that in lieu of the said sum 300
maunds of juice katcha weight without mixing any water, produce of
the year 1314 Fasli, will be delivered,at:the rate of Rs ?8 per hundred
maunds katcha weight from the month of Pus to the end of Phagun
1
of the said year, at the bel of village Burhanpur after pressing the same
during the day time and filling the matha to the brim and with free
bagcisse to the owners of the bel. if, however, 'there are rains or the bei
is out of order, the juice will not be pressed. If however I prepare gur,
rab or sell seed or the juice may be supplied tb the said'owners in less
quantity or not at all, then I shall pay damages to the said owners at
the rate of annas two per katcha maund. Whatever amount remains
due from me will be paid without. interest OQ c)lait badi panc~am of
the said year. If however the money is not paid then, I shall pari the
sum with interest at the rate of Rs 2 per mensem from the date oi the
execution of the bond to the owners of the bel. It is further agreed that
three big dolchis of juice will be, given to the said owners asibel
expenses. 96
Advances were made to a large.number of peasants in th~
same or adjoining villages, who. brough,t th~ir kolhus and fixe,9
them in rows of eight outside the khandsari'sbqiling she.cl.Here
.the cane juice was boiled under a rather elaborate process. ,A set
of five pans, varying in size and depth, were arranged on the
chulha and raabof the right consistency was prepar.ed un~er the
supervision of the khandsaris. In Shahjahanpur district in ,the
1870s expert halwais Guice boilers) were summoned from as far
as Mainpuri!
Under this system the khandsari and his men on the spot
reigned supreme. Every juice-filled mathp was taken.straight to
the boili11gshed, the khoiya (dried up cane fibre) went as fuel to
fhe bel; even the cane juice falling to the share of• the kolhu
operators as part wages was hypothecated to the manufactory!
96 Cited in Royal Commission on Agricultu1:e in India, Evidence,·vol. VII,
pp. 37-8.
There ·was no real market price for cane juice because there was
hardly a demand for it.97 Accounts were settled on the basis of
a p.otional I J?rice worked out at a panchayat at Baragaon in
Shahjahanpur and SlJ.a~nagar in Bijflor, which manipulaj:ed
prices to.the advantage of the khandsaris.The ch;cle of indebted-
ness to the khandsari and the pressing of cane juice for his
raab-making belwas self-perpetuating. 98 The case of a village in
Badaun district where in the t920s two-thirds' of th~ cane-grow-
ing peasan'ts were indebted to the tune of two years' rent and
where Rs 20,000 out of a total debt of Rs 21,000 was owed to
khandsaris,is a dramatic testimony to this fact.99 In neighbouring
Moradabad a11~xperimental,sugar factory in the early twentieth
century ground to a halt, as 'the indebtedness qf the cane
growe.rs to the local khandsarisenabled the latter to maintain a
firm grip upon them and largely to prevent the delivery,of their
cane to the sugar factory' .100
The relationship of the peasants to the kha71dsaris was de-
stj'ibed by a settlement officer a? follows: ·
Though convenient irl one way to the cultivator, as giving him the
command of few rupees just whe,n he wants them to pay his rent, yet
the system is ruinous to him in the long run. Once in debt he can
hardly extricate himself; for the price of rus in future is always fixed
by' the khandsaribelow the market price, and the rate of interest is
raised. The cultivatot must consent, or be sued in the Civil Courts for
th'e'balance due, sold up and ruined. I have Ienown as lo'w ~ price as
Rs 16 per 100 kutcha maunds entered in the.bonds, when the ruling
price in'the open market was'Rs 26 and 27 [emphasis in original]. 101
Uhder such conditions it was obviously more prbfitable for
independent peasant households to manufacture S}''r, and de-
97 Thus it was estimated in 1940 that less than 20 per s;ent bf the total raab
productioQ. was sold in the market. SeeReporton the Marketingof Sugai·in India
{'" H J
and Burma (New Delhi, 1943), p. 61.
98 See 'for instance, ShahjehanporeSR, 1874,pp. xv-xxiii; BareillySR, 1874,
pp: 1 94-8; MoradabadSR, pp. 47-8; Hadi, op. cit., pp. 67-75; RevenueReporter,
'vok III, pp. 128-60. ,
99 U.P. Banking Enquiry Report,Evidence,vol. II, p. 51.
100 Report of the Indian Sugar Committee,1920 (Simla, 1921), para 282.
101 BareillySR, 1874,p. 95.
SMALLPEASANT PRODUCTION,C. 1880-1920 / 113
tailed calculations from Shahjahanpur in the '1870s showed that

'profits' per'acre from gur manufacture were indeed 175 per cent
higher. But the integration of'the khandsar~with the -agrarian
economy was such that only a minority of cane growers-
zamindars unconnected with sugar refining, and substantial
peasants who did not take, advances-prepared gur.102 In this
context it is justifiable to make a sharp distinction between the
dependent ras/raabproducing peasant and the independent gur
producer. Drawing on this contrast an experienced official com-
mented in 1890: 'rhe cultivator is iri fact:not a free; agent. If he
is not in debt he will make gur, and the conditions.0£,a village
in Rohilkhand can be ascertairted, at ,once by, finding over
wh~ther.the cultivators,make gur or are under bonds to deliver
'sugar~juice'.103 The outturn of raab.was about 10 per cenfhigher
than that of gur, anci even where the prices of the two com-
modities were equal as in Shahabad (Bihar), there s1:emsto have
been a preference on thepaPt of the peasants to mal<egur rather
\han raab.104 r1
The archetype of the independent gur producerS,w~re the

substantial and prosperous peasantS1of Meerut and Muzaffar-
nagar districts in western U.P. Here cane was cultivated and.g-ur
rlianufactured without the characteristic system of usurious
advances. A high quality edible gurrwas protluced by thetpeas-
ants and exported to the gur markets of U.P. and Punjab with-
out any further refining. 105 Here the gur beoparidid •not figute
prominently because the peasants were independent enough to
market their own gur or sell it to the trader in an open markei.
The Meerut peasants·in the late nineteenth ce~tury had gained
a, direct access to the market; ,in the 1940s 60 per cent· of! the
marketable surplus of gur,in western U.P. was disposed of by
102 RevenueReporter,vol. III, pp. 129, 143-4. ,
, 103 See GOI, Agr. Noting in GOI, Rev. Agr. A F.ileof Juhe 1889, KW, NAI,
New Delhi.
104 Reporton Suga1·in Bengaland NWP, 1880, paras 63--4.
105 Raw sugar accounted for 98 per cent of all sugar stuffsexported from
Meerut division in the 1870s. Between 1866and 1891,64,000maunds of reflned
sugar was exported from Muzaffamctgar (by rail) as opposed to 6,78,818
maunds of raw sugar. See Duthie and Fuller, pp. 60-1; Muzaffarnaga1;SR,1189i,
p. 25.
the peasants themselves. 106 The equiyalent of the usurious sugar

manufacturer (khandsarz)of Rqhilkhand was absent here becau~e
hardly one-sbdh of the total output' of raw sugar was ever
refined. Most of the total marketed value of the sugarcane
produce therefore reached the pockets of the average Meerut
peasant without the gur trader or the sugar refiner being in a
position to.appropriate any substantial part of it. 107
It is perhaps this contrast between Meerut and Rohilkhand
that has led Levkovsky to regard gur production.as a 'feature-of
natural economy', and raabproduction under the bel system as
a 'superstructure built upon petty commodity production'. 108
But such a sharp distinction between gur and raab production
was valid only where there was substantial independent pro-
duoion of gur, as by the rich peasants of Meerut, or where most
of the peasahts laboured under the ras-demanding khandsaris.
Gur production,. in this context, appeared as an independent
preserve of peasant production, because the khandsatis-of Rohil-
khand did not require gur for their raw material. They went
instead for a specialized intermediate good-ras or ya'ab. In
Gorakhpur no such distinction existed between gur and raab in
terms of relations of production. Here gur itself was the inter-
mediate good used by the sugar refiner (karkhanedar).109 But its
·production was widely dominated by usury-capital, though the
direct in,tervention of the manufacturer was not as marked as ih
Rohilkhand.
V ADVANCES AND APPROPRIATION

At the turn of the nineteenth century Gorakhpur division; ac-
counting for 15.56 per cent of the province's cane acreage and
106Musgrave, ~Rural Credit i~ ·U.P.', in Dewey and Hppkins, op.'cit., p.

224; Sugar Marketing Report, 1943, p. 202.
107Duthie and Fuller, op. cit., p. 59; Hadi, op. cit., p. 111.
lOS·A.I.Levkovsky, Capitalismin India:BasicTrends in its Development(New
Delhi, 1966), pp. 198, 213.
109 Ha9i, op. cit., pp. 67, 101-6; Azamgarb SR, 1881,par 445; KhatauniBarhaj
Bazar and Rampur Karkhana, c. 1885, 1912, Muhafiz-khana, Deoria Collec-
torate; Interviews in Rampur Karkhana, 10 October 1976.
SMALL PEASANT PRODUCTION, C. 1880--1920/ 115
18.12 per cent of its raw sugar outturn and 29 per .cent of its
sugar production, figured prommently on .the sugar map of
U.P.110 Within the'region, it was in Azamgarh district'that cane
cultivation was highly tntegrated-with sugar refinlng while th-e
very reverse was tI't;,eof Basti.1~1 Gorakhpur distrift with,hqJf
th,t; total gur pro,duction devoted to sugar refining in the locM
karkhanas, but fVith a ~igajficqnt expqrt of raw suga~ to the
refineries in neighbouring Azaingarh, Ballia, and north Bihar
districts, stood halfway between.these two.11~ ·
Gur was collected at Padrauna, Shaibganj, Tiwaripatti,
Patherdewa, Kasiya, Captainganj, Lar, Rampur karkhana,Barhaj
~azar and ~ipr~ich in Gorakhpur district, and at' Menhdawal,
Dhani Bazar and Uska irt Ba~ti.A!l these except Rampur karkhana
w,ere collecting depots of grain,as well. Some.§q.ga,rr~fining took
place at all these places, but the amenability of gur; to long
distance transport had helped in the growth of sp~cialized
refining centres in Gorakhpur. Barhaj, Rampur and. Pipntich
accounted for one-third of all the karkhanas situateci in the
district. 113 Of these Barhaj-Gat1ra with 51 karkhana~and Ramp'ur
with 42 were·the two most important centres.
Gur was eitner hypothecated to the trader or'~;ugar refiner
below the market fate, or a high' interest :rarefor ~Ke
C<!-fh
~c.l":an~~
was c):,.argedif the market price was given. In the }IT\portant
cane-growing pargana of Mahul in Azamgarh c\istrict, ·interest
ofi cash advances, which varied from 20 to 25 per.cent for loans
taken. during the lean months of the· agricultural ,year, were
normally repaid ingur. It was reported in the 187cistlfat the bania
leht sums of money to the needy peasants 1irl1a'\tt~mn according
to the area planned h~de.r caQ.e.In.the sprin,.g\nipeasant x;epaid
the advance in gur calculated at the mai;ket rate, pl~s $,>pe-third
or three-eighth for interest. 114 In Azamgarh district as a whole
advances w~re invariably taken frotn the mahajan on a sawai
(twenty-five per cent) rate of interest. 'Ihe princip'lll and the
110 Hadi, op. cit., pp. 108--lL • ,1 .

1)1 Azamgarh SR, 1881, para 547 n; l'-fWJ?Gazefteer,'188i~vc;>l.VI, p. 696.
.112 G. Watt, op. cit., p. 161; BalliaDistrict Gazetteer,1907, p. 52.
113 GorakhpurSR, 1891,p. 73.
114 'Report on Pergunnah Mahoul', Revel'tueReporter,vol.'II, p. 176.
interest were repaid in gur, which was regularly undervalued

and underweighed by the moneylender-trader. In a long and
perceptive discussion,J.R. Reid, the settlement offic~r, describes
the essential features of the gur advance system:
The mahajan is indispensable to the Azamgarh agriculturist for the
latter's great money yielding crop is his sugarcane. His grain he keeps
as ,much as he can to hill)self, and the indigo and poppy yield
comparati~ly little cash to the general body of cultivators. But the
agriculturist must and will spend money at other seasons than in
which his sugar~ane produce is ready; and that money he gets from
his mqhajan. If he were ,wise h£;would sel~ his sugar produce in the
market for <;ashadvantageously, and keep his money by hi~ to spend
as he needs. But poverty, habit and sentiment are too strong for him,
and he remains the mahajan'sconstituent.
The rate of inter~st charged bythe mahajanis nominally twenty-five
per cent'or sawa.i,but it is in fact a good deal more: Accounts are settled
between him and his constituents in the summer or the autumn,
usually-after the refined sugar of the year has been disposed of. Any
balance then struck in his favour, if not paid off, is debited as a fresh.
cldvance tohis constituent. Upol\it anq upon cash payments made by
him during the succeeding season.he asses~es interest at tht; rate "Of
twenty-fiv~ ~er 1cent, cre?it of course b~in9 given by him at the s$1me
rate for the ~alue,9f all produce made over ~ohin~by his constituent.
The price rate, however, at which the mahajanvalues his constituent's
sugar produce is not the full price rat'e of the open market at the time
of its delivery. In that he makes a deduction of from five to ten percent
and moreover ,he underweighs the' produce at delivery .<:onsiderably
to his own advantage. His weight is known in consequence as the
laga1·hipanseri. TJlere are agriculturist~ of course who are able to sell
their sugar produce in tbe open market, but:they are probably them-
selves ,Inahajanseither in esse or in posse; ard.fhe great bulk of the
agricultural population loses part of the value of its sugar rroduce in
the manner above de'scribed.ns ' '
The situation was much the same in.Gorakhpur district in
the late nineteenth century. One of the karkhanedarsreportedly
informed the district officer that he did not care to deal with
independent gur producers as he did not have 'the same hold
over thelJl as over cultivators whohad bound themselves by
115 Azamgarh SR, 1881,paras 195--6. r,

SMALLPEASANT PRODUCTION,C. / 11'.A
1880-1920
taking his advances to grow a certain amount of cane' .116 The

collector found that in Deoria tehsil in 1880 'most of the mep
~ho had planted sugarcane had mortgaged tbe standing croP.
for seed and grain'. _During the cold weather, as he 'marchea
through the tehsil'_,he Sil\Y'clt nearly every cane mill agents Qf
the Barhay [Barhaj?] mahajanscoliecting the gur' .117This was nqt
very different from th~ syst~m in vogue in Rohijkhand. Jhe only
djfference was that whereas·ttie khandsarisset up their bels,in t}ie
villages and made t,h~ir own raabfrom the Jui~~, in Gora,khpqr
the karkhanedarsha,d no direct invplve}Ilent with the proc~ss qf
gur manufacture. The Barhaj karkf,.anedars advanced money tp
cane growers in Silhat and Saletnpur Majhauli parganas,deaJ.t
with banias and arahtiasin distant gur collecting centres,. ha~
Rurchasing agencies at Gorakhpqr, Menh,dawal up tJ-testr,am
from th'.e Rapti and a~,important gur marts like C~ptainganj,
l):asia and Rudarpur. 118(See map.) 1
At·each stage in these transactions,the guf~producing peas-
ant was denied his legitimate share of the market price. ,The
produce was hypothecated and bought at a rate 'below th;e
market price, gur was regularly underweighed, and even th'e
charge for the karah(boiling pan) that ~as hired by the ~e~fartt
was pitched at a very high level. 119Where c~ne cultivation an~
gur production tooJ<place withip a complex system of indebted-
ness and depepden~e, all aven1;1es-market,price, rate of interest,
weights and measures, and hire ol"implements of productjop
-were manipulated by moneylendu,.g traders and refiner? tp
flush out this important commodity at as low a price as pos-
sible.120
116 NWP Gazetteer,1881, vol. VI, p. 413.

117Cited in ParliamentaryPapers,1881, lxxi, pt 1, p. 281.
118NWP Gazetteer,1881, vol. VI, p. 465; KN. Singh, 1Barhaj: A StudY'in the
Changing Pattern of a Market Town', TheNationalGeographical Journalof India,
vol. VII (1961), pp. 28--9. l
119It was noted for Gorakhpur that the karkhanedar'takes an ample retutn
for the advances he makes and for the hire of the karahi'.In Azamgarh in the
1870s the cost of the karah having a life span of eight years was Rs 14 to Rs
20. H,owever, it was hired out to the peasants at a high rate-Rs 3,to Rs-6 p~r
season. Cf. NWP Gazetteer;1881, vol. VI, p. 413; Azamgarh SR, 1881,.para'4'4"6~
l20 Similar methods were adopted in the Naini Tal tarai for the pr9curement
"'
{ Thu;~,. GORAK;HPUR DISTRICT
j " "· ,. Circa I 909
(,_../ Nichl,-;;;:
,..igm1n,:1nj St.
/T,hsilBo11nda'7
JR;.,,,
'J Mttalled road J U"':''tall,d ,·oad '
Map of Gorakhpur District c. 1909
VI 'PRODUCTION TIME' AND.PEASANT AGRICULTURE
At a general level, the ability of moneylender-manufacturers ta

dominate gur production' in such a comprehensive way was
of fine quality rice. Cf. Ashwani Saith,: Agrarian, Structure, Technology and
Marketed Surp1us in the Indian Economy', appendix C (C.imbridge Ph.D.
thesis, 1978).
related to the specificities of small-peasant'agriculturt! itself-

the long duration of turnover and the .combination of ·a long
working period with, an ·even longer production period. 121 By
turnover we mean the time period which must elapse before the
cycle-of production can begin,anew. Irr the case of peasant
agriculture this relates to the" coinpletiol_l of an entire harvest
cycle connected with a given crop-rotatjon, rather than a mere
succession of harvests. In north fndia the turnover was institu-
tionalized,in the Fasli (or harvest) year commencing with the
month of Kuaror Aswin (mid-September-mid'..October), after the
early broadcast ,rice had been.·gathered. It was. the Mughal
emperor ·Akbar who made the agricultural year official by de-
claring 10 September 1555 to be the beginning of 963 Fasli, and
since then the term,Fasli has been applied.'to tlie era est{lblished
with reference to the harvests of' l::lindustan': 122 The British
continuecl with the practice by superimposing their fiscal de-
maRd on tol!:his agricultural year. Yet, despite theimposition of
the revenue/rent demand on to an.existing harvest year, small
peasants invariably had to borrow to meet their 'dues. In other
words there were in the long turnover· of peasant• agriculture
certain weaker momen~s which were crucial to the ordering'
of the relationship between tne, small peasant5" and merchant-
moneylenders. We shall come to its spe'cific manifestations in
Gorakhpur.in the next section. For the present it might be helpful
at a general level to rethink this problematic in terms'of Marx's
observations on working time and production time as given in
Capital,vol. II.
For Marx, 'working period' denoted 'the number of ~on-
;ieded working days required in a cert~in branch, pf industrx
for the i;nanufacture of a finished producf .123 Where the working
period is long, successive layers of labour pile .up on to the
product: a continuous outlay of.circulating capital (wages, raw
material, etc.) is requtred, no part of which is in a form capable
(
121 The following discussion is based on chs. XII and XIII of Marx's Capital,
vol. II (Moscow, 1957).
122 J. Beames, SupplementaryGlossaryof Indian Terms (London, 1869),vol. II,
p. 158; Asiya Siddiqi, op. cit., p. 6; Grierson, p. 274.
123 Capital,vol. II, p. 230.
of circulation and hence of promoting a renewal of the same

operation. Marx here draws the contrast between yarn manufac-
ture, with a short working period, and the manufacture of a
locomotive w;ith a longer working period. 124
Agriculture is characterized not just by a longer working
period-the labour expanded in the same operation (ploughing,
weeding, watering) is spread over days and weeks; what is more
important, it is also associated with an even longer production
period. The production period consists of the working period
plus a period__during which the form of existence of the com-
modity (an unfinished product) 'is abandoned to the sway of
natural processes, without being at that time in the labour
process' .125 Crops have their own life cycle and their growth and
maturity cannot be expedited by a greater expenditureuf labour
in the fields, but must await' natural processes', when the labour
process is in abeyance. Thus 'unproductive labour' has to be
somehow sustained over long periods of time. ·When the peasant
can do no better than wait for the corn to take its time, he is in
effect living either on his own saveo up working,eapital, or, as
was more often the case in India, on borrowed money and grain.
Thus in agriculture 'we have a combination of both a longer
working period and the great difference between working time
and production time' .126
".This relationship between the transformation of crops into
commodities and what could be termed aspects of agricultural
temporality, provided for Marx the backdrop for the operation
of merchant-manufacturers:
.... The divergence of the production period from the working period,
the latter being but a part of the former, constitutes the rtatural basis
for the combination of agriculture with subsidiary industries and
... these subsidiary industries in' turn offer points of vantage to the
capitalist, who intrudes first in the persori of the merchant. 127
These remarks of Marx offered aproposthe Russian coun'try-
124 Ibid., p. 231 ff.

125 Ibid., p. 239.
126Ibid., p. 242.
127 Ibid., p. 241.
side can be taken as points of departure for studying small-

peasant commodity production as such. In India ihe existence
of rural industry as auxiliary to agriculture and the operation of
merchants through it is to be found in the familiar dadan system
associated with textile production. What is often not realized is
that the hiatus between production and working time, when
accentuated by 'the:necessity of securing ready money as soon
as possible for instance to meet fixed ·obligations, such as taxes,
ground rent .. etc.', 128 creates the space for the operation of
moneylender-manufacturers. These. agents coajd be, as they
were in India, a? jnter.ested ip cornering agro-products as in
commodities produced by allied ,rural indu,stries.
The case of sugarcane is still µio,re interesting, for here the
crop it~elf iq converted into ~ commodity by being transformed
through a village industry-gur.or raab manufactur~. The dom-
ination of the ,money-lender manufacturer is reyealed in his
control ~ver .raw sugar prpductJon. Where t1l,is remained fl
p~asant activity this domination was manifested in the rec~¥P·
ing of all loans at unfavourable rates in terms of gur and in
variou~ other ways of shortchanging the kisans.129 Where the
domination of the moneyltmder-manufacturer existed in its
most developed form (e.g. in Rohilkhand) this resulted in a
direct intervention, a virtual takeover of raw sugar production
itself. 130
In certain cases working time and even production time can
be reduced by technological developments or a more elaborate
division of)abour. Thus, to quote Marx, 'mowers and threshers
reduce the working period required to transform ripe grain into
the finished product'. 131 But such improveµients generally re-
qui,re a greater investment of fixed capital and/ or an extension
of co-operation. The speeding up of railway c;onstruction by
mobilizing Jarge gangs of labour and tackling the job simul-
taneously at several places falls into the category of shortening
128Ibid., p. 235.
129 See above sec. V.
l30 See above sec. IV.
p:
131 Capital,vol. II, 234.
working time through an extension of co-operation. 132Today,

faster maturing grains can be cultivated, effectively reducing
both the labouring time (working period) and the productic:Jn
time (the life-cycle of the plant). A fascinating example·of such
a process which caught Marx's attention was an.innovation
introduced by Bakewell, an English sheep farmer in the mid-
nineteenth century. By careful selection Bakewell reduced the
skeleton of the sheep to an absolute minimum, with the result
that 'the breeder [could] now send three [sheep] to the market
in the same space of time that it formerly took to prepare one' .133
More developed high-speed 'breedets can turn out poultry at
still faster rates in comparison with the time it took earlier to
produce a chicken for the market.
What is interesting for us about Bakewell's New Leicesters
(sheep) and today's 'factory chickens' is that in both cases the
shortening of the turnover is effected by new dosages of tech-
nology and capitalization which do not leave the peasant or the
farmer untouched. Under Bakewell's system the English sheep
farmers moved on to the plane of capitalistic mode of produc-
tion, while their more peasaht counterparts across the channel-
prisoners oflhe natural production time-could not inal,<esuch
a dramatic switch in the mid-ninet~enth century. In India capi-
talist e'nterprises impinged on the 'peasants without absor,bing
them. When mechanized sugar mills came to dominat~ the cane
market in Gorakhpur in the 1930s,no abbreviation of production
time took place-as in the case of sheep and chicken farming in
England; the constraints associated'with a long production titne
continued, providing a structural basis for the domirtation of the
peasantry by the sugar capitalists.134
It could be argued that in the case of Goraklipur a quick
succession of harvests should have lessened the snialler peas-
ant's dependence on the gur trader/ karkhanedar,a dependence
which was associated with a crop having a very long' span of 12
to 16 months for its production time. As we shall presently see,
132Ibid., p. 235.
133Leonce de Lavergne, The Rural Economyof England, Scotlandand Ireland
{London, 1855), p. 20, cited in ibid,, p. 237.
134Cf. S. Amin, 'Sugarcane Cultivation'.
SMALL PEASANT PRODUCTION, C. lSro-1920 / 123
this was not the case. How and why did eve'n multi-cropping,
combined with the culture of high-valued cane, fail to lessen the
dep~ndence of the average Gorakhpuri peasant irr actual prac-
tice? An answerto this question would requirera closer look at
the system and process of dependent production in the region
in the late nineteenth and early twentieth centuries.
:VII HARVESTS, CANE, AND QISTS
It is not being suggested that sugarcane was an unremunerative

crop. Far from it. Gur grossed the largest 'income' pei:; acre.
Admittedly, for the peasantry of eastern U.P: in the late nine-
teenth century, sugarcane cultivation and gur manufacture were
very important activities indeed. In Azamgarh district sugar,.
cane in the 1870s occupied 11.9 per cent of the total cultivated
area and the·value of gur was 28.84 per cent of the total value
of agricultural produce. The notional value of gur produce was
either equal to or even a little higher than the attested, rental.of
the important' cane-growing tehsils of GQrakhpur district. 135
Clearly, if all the supposed profits from cane.cultivatipn and gur
manufacture were coming to the peasantry; there would not
have been any need to take advances from gar• traders and
moneylenders for the payment of rent, etc. on such unfavourable
terms.
At a general level, the· low absolute size of the surplus
remaining with the peasantry after the payment of rent may b'e
taken to explain why the full market value of gur did not reach
the pockets of the peasantry. Even in the in,flationary period of
World War I prices, illegal dues (nazranas) collected· by the
zamindars in addition to rent were substantial enough tO'ma-
terially reduce the peasants' profits fromgur. During this period,
according to the settlement -o,fficer, the average tenant in bhat
lands in Padrauna tehsil could just about pay his rent from the
sale of gur. In the more productive hangar tracts the situation
was slightly better, but only, it seems, for the occupancy tenants.
In northern Padrauna, the settlement officer in 1916 did not
135Azamgarh SR, 1881, appendix VIII; Gorakhpur SR, 1891, pp. 152---60,
73.
reckon debts to be serious, by which he meant that tenants

generally owed less than the value of their sugarcane crop.
However, in the same tract there were villages where the peas-
ants were frequently indebted to the extent of two to three times
the value of their gur produce. 136 It is interesting to note that
despite the slump in gur prices in 1912-13 to unremunerative
levels, the peasants of Padrauna were putting a large acreage
under cane to raise the necessary cash for rent payment. The .
rice crop was kept for home consumption, and with poppy and
indigo gone, wheat alternating with peas could not provide the
wherewithal for meeting the qists.13 7
Far from leading to surplus accumulation, sugarcane cultiva-

tion in Gorakhpur barely enabled the majority of the peasants
to reproduce their conditions of economic existence on a year
to year basis. It was this importance of sugarcane as a cash-rais-
ing and debt-se:J;Vicingcrop, rather than its value as a surplus
accumulator, that imbued it with a special role in the small-
peasant economy of Gorakhpur in the late nineteenth century.
The cane-growing peasant of Gorakhpur did not indulge in a
monoculture, nor were his economic obligations exhausted by
his relationship to the gur trader cum sugar-refiner, or the
payment of rent afterhe had marketedhis gur. Fixed rental instal-
ments had to be paid at particular times, foodgrains had to be
procured during the lean 111onthswhen stocks were depleted
and cash raised and spent even when money was not at hand.
The full significance of sugarcane in the peasant economy of
Gorakhpur emerges only in the context of the short-term dy-
namism and the long-term ·sluggishness of the majority of the
smaller peasant households. Excessive emphasis on the notional
monetary returns from gur,or the relationship between the
moneylender-refiner and the peasant, can at best resul, in a
partial understanding of the importance of sugarcane for the
multi-crop raising small peasantry of Gorakhpur.
136 North Pudrauna Rent Report, 1916, para 16; Squth Padrauna Rent Report,
1917, pp: 5--6.
137 D.O. Commnr, Gorakhpur; 18 April 1912, Rev. File 233 of 1912; Note
dated 22 April 1912, Rev. File June 1912, KW, U.P. Archives, Lucknow.
SMALL PJ;:ASANT PRODUCTION, C. 1880-1920 / 125
\
The principal crops grown mthe Gorakhpur division were
(1) bhadai(early kharif),consisting of manrua (eleusinecoracan'll),
kodon(paspalumscrobiculatum),juar (holcussorghum),early broad-
cast rice and other inferior grains. These WE;resown in Jeth-Asarh
(late May-early July) and harvested in Bhadoh-Kartik(Septem-
ber-October); (2) jarhan or aghani (late) rice, which was
transplanted in late June-early July and collected in late N ovem-
ber-early December; (3) sugarcane, which was planted in
March-April depending on the crop rotation and crushed from
January to Marth: (4) rabi:some wheat, but basically gram and
other inferior grains' which were sown 'in Kuar-Kartik(late Sep-
tember-early November), cut in the middle and latter half of
March, and threshed and storetl in April-May.
The harvest calendar of the· majority of the peasant was
based on the above crops. In this system of fasli production the
crucial role played by consumption loans, rental instalments and
gur loans, to quote the settlement officer of Azamgarh, was as
follows:
If the rice and the rabJ crops o~the preceding year had been'good, the
agriculturist has generally grain in his house; to feed-from Apri\ to
the middle of August-himself and his family; and if he employs
someone in watetj.ng his sugarcane, or in ploughing his land, to pay
in kind for the hired labour. He may have rice td use as seed, but is
not likely to have seed for the rabi crops, and will probably have to
borrow in addition to the rabi seeds grain for food during September.
When the bhadai crops are ready he is in need for grain' for domestic
use, and, little or noni:;of his_crop will be sold. Through poor eating it
will,somehow carry him a1,1dhis family on till the rice (Aghani) is cut
and' threshed. Meanwhilehe needscash to pay theJst and II instfllmentsof
his rent, _andthis he b01Tows.When the rice crop is rec1dy,he perhaps
repays part of the money an'd grain he has borrowed. But rice is a
favourite foodgrain, and it sells generally very cheap at harvest time.
Besides the crop must supply food for himself and his family for three
or four months at least. The cultivator therefore parts with as little of
his crop as possible. Then comes the sugarcane season. The price that
he gets for his gur is set against his old debtsfor grain ahd cash_andout of
it he pµys his rabi instalments, and his bankerreali;zesdebts that have been
causedduring the past year by ma11·iages, domestictrouble and the lik~.Out
of his rabi grain the cultivator saves as much as he can but part.of it
he will have to sell in order to pay the last instalment of his rent, or
square his account with his banker; for grain that he borrows the
agriculturist pays in kind 37 per cent, for cash and grain repaid 'in
cash, he pays interest at 2~ per cent. The,ordinary run of agriculturists
lay by very little. Anything they might from adventitious circumstan-
ces-such as exceptiornyly good harvests, high prices, rent rates below
average-be able to save, they spend in marriages and other petty
extravagances. As a rule they live from hand to mouth, and probably
always will do so.138
This lpng description of the season to season existence of the
Azamgarh peasantry gives us some idea of the entrenched
structur~ of dependence within which agricultural production
took place. It is wo:i;th noting that the bulk of the two rice
harvests was not sold but retained for domestic consumption.
Throughout the nineh;epth centm,y, Azamgarh was in fact a net
importer of foodgrains, but even.in Gorakhpur, where.rice was
an important export earner, the early rice was kept by the
peasants for domestic consumption. 'No tenant would allow his
early rice crop to pass into other hands', commented the land
records officer, explaining the reasons behind the peasants bor-
rowing for tlie payment of the first kharif rentaf i:qs,talment. 139 ·
This ·conscious choice of a particular cerea1, whi~h qas led
Fernand Brau\fel to 'venture the idea of fl dietary choice by
civilization', is" of crucial relevance in e?tiµrnting the cash-
generating potential of peasant agriculture in. eastern India.
BraudeYs remark that 'to stop cultivatihg rice [in,Monsoon Asia]
would be to lose caste', 140 may be ixttended as a literary flourish,
but it should make one wary about irriputing cash values to
crops that were meant basically' for domestic consumption. The
bulk of the early kharif was generally retained for food because
it was intended as such.Jn any case the early kharif crops--kodon,
dhan, manrua and sanwan-were all cheap' grains, which if sold
would not have yielded much cash, and would further have to
l38S.O.Azamgarhto Bd.Revenue,3 August1870, NWPRevenuet:,.Progs.,
May 1873, no. 12, India OfficeRecords.Cf. Whitcombe,op. cit., pp. 168-9
where this statement is also reproduced.
139Opinion of Kishan Chand, 7 July 1922, Rev.File 17 of 1922, Gorakhpur
RecordRoom. ·
140Femand Braudel,Capitalismand Matei·ialLife, 1400-1800 (London,1974),
p.103.
be bought or borrowed at much higher prices or rates of interest

in December-January.141
But even with the retention of the early kh.arif,food stocks
were insufficient to enable the peasantry to do without grain
loans, either for consumption or for seed requirements. Bisar-
'loan of seed upon stipulation of ample refund after harvest' -at
a high deorha rate, was an institutionalization of a standard
tendency for grain stocks to run short of peasant needs at crucial
moments in the agricultural year. Seeds for the rabi crops had
invariably to be borrowed, repayable at the next rabi harvest in
grain at 50 per cent interest. Under this system of grain loans,
even a 25 per cent rise in the price of rabi cereals did not really
help the peasant in paying his interest and retaining a large
enough surplus after meeting his rabirental instalment. In case
the peasant was unable to repay the grain and the price was
high, the debt was commuted into cash with interest, which
enhanced the burden for the following year. Describing this
system in the 1880s, the settlement officer to Gorakhpur pithily
remarked that 'the load of debt rolls up and the creditor shifts
the terms of the account from kind to cash as often as the state
of the market requires it' .142
The bisar system was not an isolated phenomenon; it was
symptomatic of the weak economic position of the peasantry
and its inability to survive from harvest to harvest without
losing a substantial portion of the market value of tne crops, be
they rabi grains or sugarcane. 'We must remember', stressed
A.W. Cruickshank in his 1891 Gorakhpur settlement report, 'that
we can not argue as if the ordinary cultivator always started at
any given time.as a free agent ... the very fact of tenant being
141 U.P. Banking Committee,Evidence,vol. I, p. 187.

14 2 Gornkhpw·SR, 1891;p. 210. Cf. 'Bisar' in J.Beam~s, SupplementaryGlossa1y
of Indiµ,nTerms, vol. I, pp. 230-2. A village survey. in Hardoi district in central
U.P. in the 1920s revealed that roughly 70 per cent of the peasants had to take
recourse to behsarduring the fasli year. See Mulqlerjee (ed.), op. cit., p. 51. The
analogous bisahloan in Bahraich district was actually a cash advance on the
crop, taken a month or two before tl}e harvest for the payment of the qist. Cf.
'Correspondence Relating to the Indebtedness of the Cultivators in Oudh', in
Selectionsfrom the Records of Government(Oudh), 1868-69, pp. 52-3.
compelled to have recourse to the grain lender argues his initial

want of capital.' 143 A tenant unable to repay his grain loan,
would be unable to possess the reserves to meet other cash
requirements like rental dues, expenditure for cane cultivation
and various ceremonial expenses on marriages, deaths, and the
like.
Where the bulk of the early kharif was kept for home con-
sumption, loans had to be raised for the payment of the first
kharif qist (rent instalment), which fell in November with local
variations. This connection was very explicit in the case of
Rohilkhand. As soon as the agreement between the peasant and
the khandsari was concluded in September-October, the cul-
tivator received Rs 5 per kutcha bighain cash, and a promissory
note for the remainder to be paid when his November, Decem-
ber, and February instalments of rent fell due. 144 Apropos this
system in Shahjahanpur, a knowledgeable official reported in
1870:
The rent is often received by the landlord in the autumn, some six
months before the cane is ;cut, the time when the ten;mt receives the
greater part of the advances on the crop from the manufacturer. In
fact the rent is, for his own security, commonly paid by the manufac-
turer direct to the landlord, and deducted from the advance to be paid
to the cultivator; thus the landlord, though not necessarily himself a
manufacturer, has an interest in encouraging the cultivation. By this
custom the tenant has to borrow in order to pay rent six months before
he can receive any return by sale of the produce. 145
Our discussion of the harvest calendar of the Azamgarh
peasantry and the dealings of the mahajan suggest a similar
connection;1 46 though not in the extreme form met with in
Rohilkhand.
It might seem that I am presenting the decalagebetween the
seasonality of peasant production and that of cash obligations
and stock of foodgrains as a necessary and sufficient condition
143 GorakhpurSR, 1891,p. 210.
144 BareillySR, 1874,p. 95.
145 G. Butt, 'Sugarcane in Shahjahanpur', in Revenue Reporters, vol. III,
p. 123. .
146 Ibid.
for the system of cash crop cultivation based on usury. It could

however be argued that if productivity was.double, or if rents
were half of what they were, then theoretj.cally there would seem
to be no reason ,for the peasants to pay .trlghr"tes of interest, or
lose a portion of the marJ<.etvalue of their cash crops by taking
loans for payment of rent.µ. instalm~nts. 147 But !he uniyerse
within which this decqla$ebetween the peasantry's 'liabilities
and assets' proved detrimental to their interests was o:cyedomi-
nated by low levels of incoll,1eand a pervasive rule of property
inJ<?,nd.In the late nineteenth and early ,twentieth century the
cane-growing peasant was losing a portion of the market value
of his crop to the gur tr~~er-suga~ fefiner because, among qther
things, he had to pay his :r~ntinstalment to the landlord when
the qists fell due. When during the.1930s a doubling of cane
acreage took place in response tq the demands o.fthe sugar mills,
landlords and moneylenders were still able to 111ediatebetween
the peasants and the sugar capitalists. 148 In a world dominated
by consumption loans, seed loans, and rental Joans, the rigid
e1,1forcementof the quarterly :System of qjst payment by the
colonial regime assumed a force of its own.
Where a market for cash crops was not sufficiently de-
veloped, as in tehsil Khalilabad i11Basti district, the system of
potai(from pot:rent) loans indicated that the peasantry was again
unable to meet its obligations without recourse to' a usurious
system of credit. Commenting on the financial position of peas-
ants in tappasMenhdawal, Bakhira, and UtrawaUn.Basti district,
E.A.H. Blunt, the settlement officer, observed in 1917:
He is deep in debt usually to his own landlord. He is in the•habit of
borrowing money for· seed, for his rent, even for his subsistence. All
these loans carry 25 per cent int,erest, and the intereA~forms the first
charge on the ensuing crop. A tenant for instance takes,potai rent loan
at kharif-a mere book transaction of course, for the creditor is)lis own
landlord. At the ens~ing kharifhe pays his mbi iAsta\~ent, and so on.
147 Even in labour scarcity situations, where rents were sub-maximal,

indebted tenants could lose a growing portion of the benefits of high value
crops to landlords and traders. For a case study of the Naini Tal tarai region,
see Ashwani Saith, op. cit. appendix C, cited in note 120.
148 Cf. Amin, 'From the Field to the Factory'.
By means of thesepotai loans,infact the tenant pays a moreor lesspermanent

enhancement of 25 per.cent on his recordedrent.149 (Emphasis added)
An interesting case; for here the peasants were burdened with
a further enhancement of their rents throu'gh payment of interest
to landlords for 'rent loans' which were never really given to
them. The Zan\ii:'l:'darsof tehsil Khalilaoad were insisting on their
property rights in a curious fashion: .. no loan was actually ad-
vanced but the peasants had in effect to pay 25 per cent interest
on the kharif qist because·they cou!d not pay it one time. The
date of the bebaq(final balancing) fell' at 'the end of September
for revenue purposes, and the zamindars were supposed to clear
off their revenue obligations by th'at date. But for the tenants the
actual qistswere very real indeed; eitl;lerthey had to raise money
carrying a high rate of interest or'theit' crops w~re hypothecated.
Wl\ere such was not the case the rent due itself carried a 25 per
cent rate of. interest. Wher~ a market for gur existed the loans
were to be rep~id in gur at a disadvantageous rate.
The revenue qists in Gorakhpur had b'een fixed in the 1880s
l I f I
for the 15th November, 15th January, 1st May and 1st June. At
tp.e 1916 settlement the May and June qists were amalgan;iated
int? one in June, but'the ddsturgehisof mauzas like Raml?ur
karkhanastill mentioned the' old quarterly system of revenue
collection. But what is perhfips more important than' the.resis-
tance at the village level to changes introduced by the Board of
Revenue is the-fa:ct1thatthe r'eri.tsoftenants feli due three to four
weeks Before flie dates of the reJenue qists. The dastu;del;isof
individual 1mauzas"zhade no mention of separate rent qists,:but
maintained nevertheless that occupancy tenants (dakhilkars)had
to pay their rents 21·days and the non-occupancy;tenants (ghair-
dakhilkars)30 da:57sl:Sef6rethe revenue qi§t9.15PThi~ was no doubt
meant to give the zamindars sufficient time to realize their rents,
but it also showed that the government was in collusion with
the landlords in asking for cash payments from the weaker
149 ParganaMaghar East Rent-Rate Report;District Basti, 1917, para 2L

150"Wajib-ul-arz'and 'Dasturdehi',mauzaR,pnpur, tappaPatna, tehsil Deoria,
1323 Fasli,Muhafizkhana.Deoria 'Collectorate; Revising Officer Gorakhpur t9
Bd. Revenue, 14 November 1940, Rey. File I-H/f of 1940,.torakhpur Record
Room. ' ' '
sections of the peasantry at a time when peasant agriculture' was

incapable of genetating a cash surplus. This was ac.rse of privatE;!
property in land impinging through the mechanism of rent on
the very basis of peasant agriculture: r~ts"inr cash tvere d~-
manded,when there were no agricultural commodities at hand,
crops were consequehtly hypoth~cated as the qist had to b'e t5aid
whatever the c6st. :,
No kharif dop in the district was'reacly•by the midtlle of
Octoberror if tipe, harvested and sold b'y that date to enable
peasa'nts to pay their early lcharifdue By the second or third week
of October: Earl~ 'rice was no doubt ripe b:Ymid-Oc't6ber but
most of it,-as already pointed out was cM.rse and cheap graitt,
kept by the peasahts for h"omeconsumption:'Thbse'who so'ld it
had to convert' dhan (rice in hu:sk) into,chawal(clean1rice): Wtticn
was not'brot.rght to the market before the middle bf November.
The late 'rice crop----jarhanor agliani-was nol' lfatVe's~d till the
end of November and was.not a commodity ready to efl.ter tlte
market until the beginning of December. Sugarcane was also
ripe by the midtlle of Novemoer or early D~cember, but in some
cases the preparation of gur<did'ftotcommence till late January;
the peasants waiting for the crop· td be fully maiure, ancl'also
taking time off to finish their tabi ·sowings. Caught up betweeh
the imperative's of theit harvest' calendar and tne pressing 'de-
mand for prompt·payment of rental on pain,of being sued'for
default and/ or ejected:from tenancy, the sinall peasants fell oad~
on the casµ-raising potential of their sugarcane. In Hata,
Gorakhpur, Padrauna, and Deo"tiatehsils, where sugarcane was
an important crop, they continued to'ratse loans on the security
of their cane fields in the 1920s,just'a they had done in the 1870s
and 1880s. Money was willingly advanced by the gur tradet and
the sugar refiner at high rates of interest. to enable'the peasant
to meet his qists, and gur was pledgedrin, teturn. 151. As 1lortg as
gur remained the predominant commodity form of sugarcane,
right d9wn to the 1920s, the gurai loa11survived.
151 Resolution re: Alteration of Payment of Land Revenue by Mr Ajddhya'

Das of Gorakhpur, Progs.of the LegislativeCouncilof the United Provinces,vol.
VIII (1922), pp. 436,439; Opinion.of land Records Officers/7 Joly 1922, Rev.
File 17 of 1922, Gorakhpur Record Room.
But why did the colonial state not mitigate the rigours-of the
qists by giving the peasants, as it were, some breathing time in
this regard. The question had arisen intermittently during the
nineteenth centu:r;y,only to be blocked by the financial expedien-
cy of the government. Without going into the details of the
arguments, 152 I shall just concentrate on showing how the ,spe-
cific question of altering the qists in Gorakhpur was dealt with
by the U.P. government in the early twentieth century. The
episode is of more than marginal interest, for som~ of the
officials who had noticed th~.problem of qists while in the field
revealed a different perspective when put in charge of provincial
finance at the L~cknow secretariat.
A resolution was introduced in the legislative council in 1922
by Ajodhya Das, a liberal barrister of Gorakhpur, to amalgamate
the November and December revenue qists into one in January,
and thus bring harvests and rental payments in accord.with one
another. Despite some support from, local officialdom the re-
solution fell through. In defence of the established arrangement
a hJgq-rankingbureaucrat in the U.P. secretariat noted that the
'reasons for postponing the kharif ki~t would apply equally to
the rept \<ist,the postponement of which the zamindars may not
ap,preciate' .153 For the landlords the lien on the peasants' crops
effectively built into the system of early kharif qists was yet
another institutional factor which helped. tl}eir domination of
the peasantry. It was reported from a Basti village in the 1920s
that the tenants burrowed for the first and the second kharifqists
'as the zamindar is hostile and.may bring a suit'. 154 No wonder
the Commissioner of Gorakhpur reported that there was little
desire on the part.of the 'revenue paying public' for any altera-
tion in qists.155
Even E.A.H. Blunt, who just five years earlier had analysed
so well.the problems that the early kharifqist posed for the Basti
152 Cf. Siddiqi, op. cit., pp. 124-39; Whitcombe, op. cit., pp. 155-60.
153 Note by G.B. Muir, 18 July 1921, Rev. File 301 of 1921, U.P. Archives,
Lucknow.
154 U.P. Banking Committee,Evidence,vol. II, p. 187.
155 Commnr., Gorakhpur's opinion cited in Note by S.H. Fremantle, 18
October, 1922, Rev. File 301 of 1921, U.P. Archives, Lucknow.
peasantry, 156,tooka very different stance when as finance secre-

tary he was faced with the same question in 1921. He was against
any changes in the qist system of Gorakhpur as it would affect,
he thought, the quarterly system of budgeting. The revenue of
the province came in large sums only at certain periods, and the
flow was reduced to a trickle for about six months in the year.
During this period the Central Government supplied the prov-
ince with ready cash from its general all-India balances to keep
the government machinery functioning. A postponement of the
early kharifdue from mid-November to mid-January would, if
applied to the entire province, withhold something like one
crore rupees from'the provincial exchequer for two months, thus
forcing it to borrow from the ce:r:i-t~e.
This sudden demand could
upset the Government of India's ways and means estimates, and
the centre would have to raise the one crore for U.P. by issuing
treasury bills at 97 per cent par for three months'. A postpone-
ment of the mid-November qist, Blunt concluded, 'would hit the
Government of India to the tune of 3 lakhs. It would not, of
course, hurt the provincial exchequer directly, but every bit of
expenditure that the Government of India would have to incur
postpones and reduces the decrease of their deficit and conse-
quently of our contribution, so that we are hurt indirectly'. 157
The interests of the landlords and the state reigned supreme.
The financial expediency of the government and the power the
early kharif qist allowed the· landlord to exercise over their
tenants, had combined once again to provide, as they had in the
1870s, an additional factor to the general indebtedness of ~he
peasantry. 158 The production of cash crops for exchange below
market rates was inextricably linked to it.
It is in the context of this complex relationship between the
peasantry and their harvest cycle-the low absolute size of cash
income, the recourse to seasonal borrowing to meet the require-
ment of foodgrains, seed, and cash for rent, and the general
depende~ce on the dominant classes in the village-that the
156 Ibid., p. 82.
157 Note by E.A.H. Blunt, Finance Member, 21 July 1921, Rev. File 301 of
1921, U.P. Archives, Lucknow.
158 Whitcombe, op. cit., p. 159.
system of cane cultivation based on advances had its true ra-

tionale from the point of view of the peasantry. The function of
money as a means of payment on a particular date was the
vantage point for the penetration of usurious capital.159 Where
the holdings were small and incomes low, as in Gorakhpur, the
reliance on usurious loans for the timely payment of qists was
very real indeed.
The gur trader and the sugar refiner, either directly or with
the help of.local moneylenders, were able to secure gur from the
peasantry at cheap rates and to do so not simply because they
dominated the market. No doubt the cane-growing peasant
hypothecated his gur under terms and cortditions laid down
when the loah was offered in October-November in' the first
instance. But the peasants accepted the usurious terms, because
their subordination to the landlord, accentuated by the pe-
culiarities of the harvest calendar and the nj;!edto p·ay the early
kharifdues was such that loans had to be raised at the right titne,
whatever the price. The element of 'unequal exchange' between
the peasant gur producer and the gur appropriator was fairly
clear. But this relationship between the small peasant commod-
ity producer and the usurer, whether, manufacturer or trader,
cannot be explained in isolation from other factors. Here J.ndeed
is an instance of usury-capital dominating a system of petty-
commodity production. But it ne~ds emphasizing that in the
case of gur manufacture in Gorakhpur, there was a very genuine
peasant basis for the -petty-commodity production which is cru-
cial to our understanding of.the character of this domination.
We would 'suggest that while this conclusion would tend to
have some general validity, the specific elements that have been
isolated here may vary in their significance from region to
159 Cf. Marx: 'The really important and characteristic domain of the usurer,
however, is the function of money as a means of payment. Every payment
of money, ground rent, tribute, tax, etc., which becomes due on a particular
date, carries with it the need to secure money for such a purpose. Hence from
the days of the ancient Rome to modern times, wholesale usury relies upon
the tax collectors, fenniers generaux,receveusgeneraux', Capital,vol. III, p. 599.
For a stimulating discussion of the link of usury to the rhythms of peasant
agriculture, see R.H. Tawney, op. cit., pp. 19-27.
region. If, for instance, the experience of the cotton-growing

peasantry of Broach in Gujarat may seem to diverge from the
pattern outlined above, it is perhaps because rather different
conditions prevailed in that region after the cotton boom of the
1860s. The qist phenomenon was unimportant• here 160 beca,use
like the 'wet' distrids of Madras an independent peasantry had
emerged in a big way by the last quarter of the ni:r:i,eteenth
century. This essay does not offer a rigid mould in which to cast
all peasant experiences; but aims rather at suggesting that our
analytical frameworks should be moulded by these experiences
themselves.
However, it should be clear from this discussion that no
serious student of small-peasant commodity production can
ignore such critical questions as the timing of the harvests, the
dates when money was generally needed and rents fell due. A
historian of the peasantry who forsakes the nakshatrasfor the
trader's graih pit is likely to fail in his;ner understanding not
only·of the peasant but also of the merchant-moneylender, for
the latter had a very good idea of the timing.s of his transactions:
The dealers who collected saffron in the Abruzzi·mountains [in the
15th century] on behalf of the great Nuremberg merchants knew, this
well: they timed their visits for February, the very moment when the
villagers had not only to scrape together to pay for the translwmance
of their flocks to Apulia, but also when they had to discharge the royal
taille.161
Nearer home in Gora,khpur, indebtedness and commodity
production proceeded along the paths charted by the exigencies
of agricultural temporalities,
l60 Cf. Shri Prakash, 'Towards Alt.emative Models of Commercialisation in

a "Colonial" Economy: A Study of Pi::asant Economy in the Broach District in
Late Nineteenth Century Gawaharlal Nehru University, M. Phil. thesis, 1979).
161 G. Duby, op. cit., p. 347. ·
Chapter Four
The Markets*
C.J.BAKER
THE MONEY-MARKET
In the period leading up to the first w9rld W!3-rthere was an

enormous growth in ,the volume and yalue o.f internal trade.
Foreign demand was the primE; mover of this fXpansion but
many other factors contribµted-th~ rise in populqtion, slo\Vbut
steady concentration in towns, the extension of the railway
network and steady reduction of railway rates (fr9m 54 pies a
mile around 1880 to 81/2pies a mile in 1920),1 the ·spread of
prosperity among the rural elites. The expansion of export
bl!siness and the improvements in transport, -stimulated local
commerce as well. The number of sh<!,ndiesin southern Salem,
for in~fance, increased from 80 at the turn of the .twentieth
century to 136 thirty years later. 2 Trade needed finance and this
rapid extension of trade required an equally rapid growth of
financial institutions. Of course external and internal trade were
not at all 'new, but there 'was no sense in which they had over
the years built up a firm institutional base. The European com-
panies which had been involved in the ports of the Tamilian
coast for over three centuries had done little to elaborate finan-
cial and commercial networks reaching into the interior. In the
• Extract from C. J.Baker, An IndianRural Economy:the TamilnadCount1yside,

1880-1955 (Oxford, 1984).
1 J.Hurd III and K.C. Young, 'The supply and demand for railroad services
in India 1882-1939' in Papers Presented to the Fifth European Conferenceon
Modern South Asian Studies, mimeo (Leiden, 1976).
2 Rev 1892, 23 September 1934.
THE MARKETS/ 137
seventeenth century they had,,used t);te devices of ·the 'chief

merchants' and dubashes to conduct business in the interior,
and in the eighteenth and early nineteenth centuries these in- .
stitutions had crumbled away. 3 When produce exports e.x~
panded in the second half of the nineteenth century,Jhe export
companies found that they had to impprt their .own funds to
finance the movement of goods from interior to port. Meanwhile
the major internal trade routes, stretching from the Tamilnadu
interior over the Ghats to Mysore and the west coast, seemed to
have even· less institutional provision. Goods were carried on
the bullocks of the gypsy-like Banjaras and Lambadis, and
Buchanan,, who·has left the most extensive account of this trade,
found no evidence of any, substantia\ financial organization. 4
Thus the extension of the market in the late nineteenth and earl,r
twentieth centuries prompted- a rapid expansion bf financial
institutions and financial networks. ,:,
_Theexchange banks which serviced Eliropean enterprise5$
and the s,tatebanks (the Presidency banks, amalgamated in 1920
into the Imperial.Bank, transformed into the Resen,:eaBank):did
not a~t,as a.primary source of finance fof'internal trade. They
provided loans,which reached the internal money, market but
then only by indirect routes and only through tµe mediatipn'. of
men whose personaHirtancial·standing was well assured. 5 The
initial sources of finance had ·to be foo.nd wittiout the exter-
nal economy's assistance. In this period there were only three
groups which·,were accumulating. savings on any significan!
scale-urban professionals, the ~lites of the countryside,.and the
bankers and merchants involved in trade. ·
The urban professionals .were the least important of these
groups, both in numbers and in volume of savings. Yet it is'clear
that .the rise in the number of government servants, and the
3 S. Arasaratnam, 'Indian commercial groups and European traders 1600-

i800: changing relationships in southeastern India', South Asia (new series)
1, 2 (1978).
4 F. Buchanan, A Journeyfrom Madras throughthe Countriesof Mysore, Canara
and Malabar(London, 1807), II, p. 261 and III,.pp. 4~, 465. .
5 D. Balaji Rao, MPBC, II, p. 27.1-2; P. :fhyagaraja Chetty, IIC Evidence,III,
p. 59; W.B. Hunter, IIC Evidence,III, p. 275.
expansion of the legal profession, did create some significant

stores of wealth. Much of this went into urban property but
some at least was used more flexibly. Generally speaking it
was stored carefully; in bank accounts and later in post office
savings, and the early joint-stock banks found a large share of
their investment among these groups. 6 Yet the apparent safety
of such investment was badly undermined'by the collapse of
Arbuthnots, a major finance house in Madras, in 1907. While
this crash suggested that the established banks were not as
secure as advertised, the rising trend of inflation simultaneously
encouraged urban professionals to find a more lucrative form
of investment. The rapid inflation of the first world war, coupled
with the ,evidence of speculative mercantile profits, pushed
urban savings ~nto new channels. Several Madras witnesses
before the Indian Industrial Commission of 1916-18 noted that
urban professional groups were really the only people- willing
toinvest in joint~stock enterprises, and several of the most noted
professiortaltfaniilies in Madr,as (notably the Vembakkam Iyen-
gars) 'were personally irlvolved in the founding of Indianjoint-
s.tocl<banks 'and Indian joint~stock trading and ·manufatturing
companies in the period between the Arbuthnot crash and the
collap·se of the post-war bobm.7• 1
Among the rural elite; wealth was cleatly,growing through-
out the period. A good deal went directly into consumption-
better houses, expensive ceremorlial, donations to temples,
pilgrimage tours--but even this was in some ways economically
instrumental: such spending could (as long as the gehtle boom
continued) earn status, and status was a prerequisite for credit.
Much more, however, went into·buying insurance or into ex-
panding enterprise. While sorrnt kept their hoard in a trunk
underthe bed, most found better w~ys,to cushion themselves
and their families against disaster. Buying land was, in some
senses, an expansion of enterprise, but it was also a useful form
6 D. Balaji Rao, MPBC, IV, p. 149.

7 Vidya Sagar Pandya, IIC Evidence,III, pp. 257-62; P. Thyagara.fa' Chetty,
IIC Evidence,III, p. 59; V.C. Rangaswami, MPBC, II,. p. 541; M.S. Natarajan,
TileCapitalMarket of the MadrasPresidencyw1fhSpecialReferenceto its Evolution
and IndigenousInstitutions (Calcutta, 1936), pp. 16-32.
THE'MARKETS/ 139
of insurance. It was an asset which seemed'to appres:iate regular-

ly, and it could be used as a security for raising funds up to fifty
or even seventy per cent of its value in some places. Inveshnent
in gold or,jewellery, meanwhile, was slightly less troublesome,
was equally good as a security fctr raising loans, and provided
even more of the characteristics of a life insurance policy:
There is ~lways an inclination t'o maRe large presents of silver and
gbld vessels and ornaments on mltrriage and other.occasions. This is
due to the fact that these articles i~ specie will be ear-marked as those
of.the person to'whom they are pr~sentE!dwhile presents in cash will
get merged in the general,assets of the family ... and ifthe family is
indebted the cash presented ,will pe applied to bring about relief to
the family fr9m its general indebtedness ... J;urt~er, owing to the
right of sm;vivorship obtaining under the lfl~ in Hindu jojnt families,
the only resources available to th~ widow of a )on_less ,deceas~d
co-parcener are her jewels and vessels and naturally the ,sonle,ss
husband and wife are ahxiotts to increase the investtnent in that form
to save something for 'the widow in easel of the husband's death
without diversion. Also, in cases where the husband is a tradet whdse
fortunes are uncertain, wife's jewels are a good ~avi{l~ bank i:>n")'hi~q
the family can fad back when the creditor has taken away everything
else of the trader's property.a
In this situation it is not surprisihg that as major agrictllftttists
became steadily more involved in marketing, so fovestni.ents in
jewellery increased. In the 1890s, Nicholson wrote abou't Coim-
batore:
The following statement of a Goundan's:mode of allotting his net
profit is interesting, not as an exact statement,, but as indicating the
objects of expenditure, viz., on~-eighth for charity, three-eighths for
gold and silver ornaments (a mode of hoarding), one-fourth for buying
land, and one-fotJrth hoarded. The recprds of trial$ and complaints
show that a good deal of silver is secret_edin the}vaps of.h'ouseJ etc.9
Many rich agriculturists placed their savings in productive
enterprises but the results often did not encom;<;Jgean~ ex'p~n-
sion in this form of investment. <;:ultivators involved,in growing
and trading commercial crops naturally. thought of investing in
8 W.S. Subramania Aiyar, MPBC, II, p. 215.

9 Nicholson,Manualof the CoimbatoreDistrict,p. 264.
processing factories but in many cases they found that their

knowledge of the market was imperfect and their calculation of
its stability was sadly misjudged. In only eight years around the
first world war some 7 lakhs of rupees were.sunk in the con-
struction of powered rice mills in the Kaveri delta, but before
long the rural entrepreneurs discovered that their enthusiasm
had been misp,laced; there were now too many rice-mi\ls, and
anyway the demand for milled rice.was falling away and being
· replaced by a demand for unmille<l paddy, and thus few of the
rice mills could be run at a profit. Those cultivators in the
far-south who invested in cotton gins in.the 1920s-,and~those on
the Arcots plain who invested in gtoundi\ut decorticators in the
1930s had similar experiences. Morebver, these were invest-
ments in processes situated close at hand and allied to the
agriculturists' own activity. The rural elites also put money into
urban-based businesses, and here the disillusion was even
greater. A Tirunelveli landowner and lawyer,' lo9king back from
1930, noted:
Like South Sea Bubble many short-lived and never-to-be-started-with
companies are started and people's money to a large extent has been
wasted if not actually swindled. The Arbuthnot, Alliance [another
company thaJ crashed], the sale of the Koilpatti and Mysore,Tanneries,
and scandals about the Tinnevelly sugar and failure of a Chettiyar and
the insolvency of the so many indigenous banking agen?es, rightly,
I think, make the people thin~ twice before they put their money in
the hands of unknown institutions with their headquarters in distant
places. Further the callousness of those who swindle and live a life of
waste deters any simple-minded agriculturist from having anything
to do with so-called banks and insurances, industrial companies and
indigenous banks.10
In these circu:rpstances most of the rural elites stuck to local
moneylending and dealing in commercial crops. 'As regards the
money-lending individuals', one'I<averi dwelleP told the Bank-
ing Enquiry, 'they do not form a separate·professional.class.
Roughly speaking all those who l\ave spare money~ryots,
merchants, retired officials, shopkeepers and vakils-lend it.' 11
10 N.P. Krishna Ayyangar, MPBC, II, p. 169.
11 K. Balakrishna Ayyar, MPBC, III, p. 908.
\ THE MARKETS / 141
In the prosperous ye~rs, many of the, richex cultivators who

dabbled in ·such moneyl~hding in the normal course of events
emerged as rather more elaborate local bankers; the same com~
mentator continued: 'It Hrnot unusual for a wealthy landlord to
receive deposits of cash from widows, orphans or poor relatives,
who have money to deposit and who require some trustworthy
person to·take charge oflheir money and also allow'interest.
The wealthy man receivesi these, deposits not because he has
need df them for his Qanking, onnore strictly lending business,
but ,because he,inspires trust in this class of depositors and
because it is ·more or less accepted in usage as a social ob-
ligation' .12 It was generally reckoned that if,the rich cultivators
'are not too avaricious and pay only art.ordinary amount of care
in choosing thejr customers, they can make higher profits in tniq
rural banking than in any other business' .13Certain landowllers
found it so congenial that they allowed money-lensling rather
than .cultivation to become their major activity. 'Fifty per cei;it
of big landholders', reckoned one observer of North Arcot, '•have
lent their savings to the other cultivators 'of the village and in
the surroundings, and eventually become the indigen6us
bankers of the-village.' 14 They lentishort-term to cover cultiva-
tion expenses, for· rctther longer-term •for the expenses of a
marriage or other family crisis, and they invested money in
buy.ing and hplding produce dest1ned for the market.
By .far the most important stock of' capital used in internal
trade was gathered ~ithin the commercial community itself. The
demand for-finance for internal trade was so strong that.those
who were prepared to take the risks of lending liberally and
flexibl:S,could earn a substantial profit. ,As a response to .t]Jis
demand, a·nurhber of banking groups severely.modified th'ein
mode·of operation. In th'e 'mid-n,ineteenth century the charac-
terh,;ticloan by an urban moneylender was a term-loan, secured
on property, and· earning between nine and twelve per cent
12Jbid i
l3 N.G. Ranga, Economic Organisation of Indian Villages, Volume I, beltaic
Village (Bezwada, 1926), p. 37.
14 V.S. Seshachela Ayyar, MPBC, II, p. 426.
interest. 15By the first world war, mortgages had been replaced
by pro-notes; borrowers did not wish to put their property at
risk while speculating on the produce market, and creditors
were not anxious to see their liquid capital solidify'into land and
thus preferred personal security. Term-loans had become more
or less open-ended, since traders preferred to be free to play the
market. In return for these facilities, the creditor could charge a
higher rate of interest. The rate on pro-notes was generally over
fifteen per cent and sometimes as high as thitty-six. 16The rise
had come about because the creditor was .now taking more risks,
because there was increasing demand for loans, and because, as
a result of these two things, the creditor was more likely to be
involved in legal proceedings to re<;oVerhis loans and the legal
process had not expanded in parallel. As one landlord and
trader observed: 'The dilatoriness of the Civil Courts shows no
signs of improving and it was said shortly after the War that the
openly agreed rate of interest in Salem district had riserr byno
less than three per cent as an offset to the creditor to compensate
him for this delay and added expense in .seekin@a decree and
in the difficulty in executing a decree when obtained'. 17There
were high profits to be made by bankers wl}o'were prepare'd to
take the risks involved in this system. A number of banking
communities had devised procedures for' Coping with the de-
qiands of this style of banking and had accumulated large
profits.
These groups had had to develop several specific dev-ices.
Firstly, they had to evolve methods forttansferring funds be-
tween different markets. 'Owing to the paucity of:bankirtg
organisations in many of.the muffass'altowns', noted one b'anker
as late as 1930s, 'the questi9n of transfer of funds from one town
to another is still a matter of gre~t, difficulty.'18 Except between
the few places which' had an office of t~ state bank, postal
lS F.A. Nicholson, ReportRegardingthePossibilities

of IntroducingAgricultural
Banksinto the MadrasP1·esidency(Madras, 1895-7).
16 M.S. Natarajan, The CapitalMarket;V. Krishnan, IndigenousBanking in,
South India (Bombay, 1959).
l7 G.F.F. Foulkes, LocalAutonomy (Madras, n.d. (probably 1937)), II, p. 81.
18V.C. Rangaswami, MPBC, II, p. 541. .
THE MARKETS/ 143
money orders and insured post were the only·official systems

available for remitting funds and these were very clumsy to
operate. 19 Secondly, they needed a procedure for fixing interest
rates, and adjusting 1them in tempo with the .fluctuations of the
market. And thirdly, they 'needed machinery to shuffle funds
between different individual bankers so that they could share
the risks involved in lending on such a fluctuating business as
the crop markets and dissipate the Hsks of individual failures.
Those banking communities which• evolved these procedures
soon did so well that they could, attract deposits an~ later_even
borrow money from the formal banking sector to expand thei:i;
business. An early bridgehead quickly opened .up into a major
territory.
T-here were a fair number of independent lianking.families
among such communities as the Labbai Muslims, Nadars,.pev-
angas, and Vaniga Chetties, but by far tl\e majority of, the
indigenous bankers of Tamilnad came from two-specialist bank-
ing communities-the Nattukottai Chettiars and \he- Kallidai-
kurichi Brahmans. There were many similarities in their growth.
Both, for instance, seem to have been inv.olved in the:cloth
trade in the mid-.nineteenth century and to have made a strategic
transfer into produce-broking, as the internal cloth market ,de..
dined. The Nattukottai Chettiars daim a commercial' history
that takes them back to medieval times, when they were,.ex-
pelled from the Chola country and settled in a remote corner, o{
Ramnad. 20 From then until the eighteenth century their history
is mysterious. In the'early nineteenth century they appeared as
cloth-traders who extended their business in the wake·ofBritish
expansion in Ceylon and southeast Asia, and moved into financ-
ing 'hlany. of the growth-points ,of the pew ,colonial economy
around the Bay of Bengal: tliey financed the tice:ttade to Ceyld'p.,
the expansion of the agricultural frontier in Malaya~ Burma and
Ipp.och~na,,lent on trade in export-produce ;ith~p. ¥adra,s, and
19 M. Subbiah Mudaliar, MPBC, II, p. 545; Waljee Kanjee, MPBC, IV, p. 210.
20 M. Nadarajan. 'The Nattukottai Chetty community and south-east Asia'
in Proceedingsof the First lntemational ConferenceSeminar1on Tamil Studies
(Kuala L,umpur, 1968),I, p,p. 252-3; C,H. Rau, 'The banking caste of southern
India', Indian Review, VIII, 8 (1907), p. 593.
found their way to the commercial heart of British India in

Calcutta. Their strategy was simple and remarkably effective.
They lent mainly orr the security of tangible assets Gewels,
property), they provided only working capital and never con-
tributed towards plant, and they chose businesses that were
clearly expanding. They generally lent in small amounts and for
short periods and because this meant a rapid turnover of busi-
ness they could afford to be accommodating to their debtors
over the exact.date and manner of repayment; for this attractive
service, they could charge a high rate of interest. They provrded
easy, but expensive, money. As they expanded, they·evolved a
suitable set of communal institutions. They had a council to fix
interest rates, and a tribunal to sort out disputes without re-
course to law. 'Phey evolved a system of ,agency which allowed
an apprentice (generally a kinsman) to work for three years on
the capital ofthe parent firm, in which time he either proved
his· unworthiness• or made the necessary profits to become ·a
banker (or partner) in his own right. They also developed a
system for citctilating money among Chettiar firms, both within
southern India and across "1:heBay of Bengal, through agents
known as adathis who worked as cleAring houses for Chettiar
bills in each ·of their major centres of business. 21
By the 1890s it was reckoned that the;Nattukottai Chettiar
community, which consisted of some twenty to thirty thousal).d
people, cotnmanded a capital of some 10 dorest\>{ rupees,
somewhat more than the annual revenue of the Government of
Madras. 22 ·In the.early twehtieth century,.they expanded their
business much more rapidly dutside India than withir\..it.23 This
21. C.H. Rau, 'The banking caste'; K, Ramanathan Chettia'r, MPBC, IV, pp.
15,8--65;O.R.M.M.S.M. Sevaga Chettiar,MPS<";,IV, pp. 243-,59;A. Savarinatha
Pillai, 'Monograph of Nattukottai Cheities' banking business', MPBC, Ill, pp.
1
p70-12)7; A. Savarinatha Pillal, MPBC, pp. j37;-45; Merriorandun:i of Nat-
tukottai Nagarathars' Associatidrt, MPBC,III, pp. 1105-I>;Wadsworth papers,
SAS Archive, pp. 26S-70.
,22 A. Savarinatha Pillai, MPBC, ur; p. 1174, quoting P.R. Sun'dara Ayyar in
The India Review, January 1906: · '
23 M. Adas, 'Immigrant Asians and the economic impact of Eurppean
imperialism: the role of the south Indian Chettiars in British Burma', JAS,
XXXIII,3 (1974). c
THE•MARKETS/ 145
was largely because of the better opportunities provided by the

expanding plantation.-economies and rice-deltas"in southeast
Asia, but it was also due to the superior legal protection for
lending that they found in countries outside south India. As one
Nattukottai Chettiartold the Banking Enquiry: "
Formerly we were doing much business here but owing to diffichlty
in recovery of,loi).ns'a'nd persons declaring insolvency, we have dfs-
coh.tinuedmot~ or less our business here and extended our business
there. The?e is' 'also great complexitywith regard to encumbrances,
inheritances, ~tc: here ... [In Burma] if you.file a suit you can be sure
of getting the decree within six months or at the most within eight
months you can realise the money. I know in ..Southern India cases
have taken ten years and .sometimes even centuri~s to.be finq,lly
decided. Even in the Mqnsifs' Courts cases are generally p.ecided npt
earlier than five y_ears.24
The fasfer rate of economic expansion and the better legal

protection offered in soutli'.east Asia as compared to Tamilnad
meant a better'rate'ofreturn: Nattukottai Cllettiars reckoned that
they could earn only eignt to nine per cent return on their capital
in south India, while in Ceylon the return was ten to twelve per
cent, in Burma twelve to fifteen per cent, and in Malaya fifteen
to eighteen 'per cent. 25 Naturally, by the end of the 1920s, most
of Chettiar capital had gone in search of the, higher rates; yet
wherever it was used, it was clearly delivering a high return.
Even at the south Indian rate, the capital could be doubled
within eight'years, and a'.tthe Malayan rate in less than five years.
No one, then, was surprised at the estimates of-the 'Chettiars'
gross capital by this time.
The Nattukottai community in the 1920s numbrrect•around
40,000, and according to tax returns thete wJn! 2,882'bf them
active in banking in south India' (with branches abroad) and
1,600 based solelyin Burma.Z6Es'timates of their capital'varied.
The Assistant Commissioner of Income Tax reckoned that they
had 50 crores of rupees invested in loans, 141h crores in houses
24 O.R.M.M.S.M. SevagaChettiar,MPBC,IV, p. 243;.M.RamanathanChet-
tiar, MPBC IV, pp. 160-3.
25 A. SavarinathaPillai,MPBC, IV1 p. 339.
26 A. SavarinathaPillai,MPBC, III, pp. 1172--4.
and jewels ('in Devakottai alone there are said to be 300 houses
costing not less than a lakh each ... ') and 15 crores in lands
and plantations. Beside.s their own working capital, they ,Had
another 25 crores of loans and deposits. Of the resulting 75
crores, roughly 66 were in liquid investment, distributed geo-
graphically as follows: 23 crores in Burma, 20 in Malaya, 5 in
Indochina, 10 in Ceylon and 3 in Madras. 27 Other, roughly
contemporary, estimates differed very slightly, and in particular
gave slightly higher estimates of Chettiar capital deployed in
south India. V. Krishnan esti111atedthe Chettiars had 75 crores
of their own capital, supplemented by 9 crores frofn the Imperial
Bank and 8 crores of other deposits and a total of 11 crores was
used in Madras. 28 M.S. Natarajan inflated their total resources
to 140 crores, with 75 in Burma, 25 in Malaya, 14 in Ceylon, 10
in Indochina and 16 in Madras. 29
They had been helped to this extraordinary wealth by s'ome
particular windfalls. A large number of Indo-Burma Petrol~um
shares fell into their hands (as security for loans) just before the
price of these shares rocketed in the years leading up to the first
world war. A number of rubber plantations, acquired similarly
as security on bad debts, multiplied in value up to ten times
during the short time that the Chettiars held them. And they
did very well out of financtng the black market in rice during
wartime controls in, Ceylon. 30
Although !l\9.~ of their business was outside India, in Tamil-
nad they continued, up to the early 1920s, to have a s4bstantial
stake in urban finance and also to lend a bit in the rural areas,
though that was mostly confined to their home~regio~ of Chet-
tinad. In the,towns, their activities ranged from the kandu.hand-
loans offered to shopkeeper~ and repaid on a daily basis at what
amounted to huge r~tes of ~terest, 31 to large-scale financing of
the trade in imported dpth. 32 They also lent considerably to
27 Ibid.
28 Krishnan, IndigenousBanlcini,pp. 37-8.
29 Natarajan, The CapitalMarket,p. 52.
30 A. Savarinatha Pillai, MPBC, III, pp. 1174-5.
31 Ibid., p. 1176; L.K. Tulsiram, MPBC, IV, pp. 302-5.
32 G. Palaniappa Mudaliar and V. Gopalakrishna Chettiar, MPBC, IV, pp.
292-3.
THE MARKETS/ 147
produce-merchants, and often dealt in,the hundis or•notes of

hand which traders used both as a pro-note for a simple loan
and as a crude bill of exchange to cover a commercial transac-
tion. 33 t
One or two of the Kallidaikuiichi Brahman bankers a\so took
their business abroad, yet most remained-in the province. They
driginated from an inam village in the Tambraparni valley;·and
up to the early nineteenth century had been !nvolved in the trade
over the Ghats to 1he west coast, particularly in cloth. Like the
Chettiars, when foreign demand for cloth deteriorated, ·they
moved across to financing the burgeoning trade iri agricultural
produce, and soon found this much more profitable. "{3y; the early
twentieth century, the number of Kallidaikuric'hi Brahman
banking firms was variously estimated at betw~en 100 and 175,
and their personal capital atbetween·S 1hand 7·crores of rupees~
They continued to do some lending in the villages of Tirunelveli
and R?mnad, but most of their business was in the larger
towns of southern Tamilnad-Madurai, Tuticorin, Tirunelveli,
Tiruchi. Here they lent mostly in the short-term to produce-mer-
chants, to allow the latter to acquire, hold and resell goods with
very little personal funds. Their business relied cm very fast
turnover, and, rather more than the Chettiars, they borrowed
heavily from depositors and from modern-style banks to inflate
their•own funds. 34 In 1930, S.N. Subba Iyer, one of the biggest
Kallidaikurichi firms in Madurai, had a•petsonal capital of just
3 or 4 lakhs of rupees, supplemented by6 lakhs of deposits and
2 lakhs of Imperial Bank:loan. Working with 11h lak4sin cash
and the rest'out on loan,.he reckoned to have, a daily turnover
of 2 to 3 lakhs of rupees, and to handle in a single year.hundis
valued up to a crore. 35
Most of the business 0£ town-based bankers.like Subba Iyer
consisted in lending money on the security of crops held in the
market (sometimes locked in godowns and the key handed to
33 0.R.M.M.S.M. Sevaga Chettiar, MPBC, IV, p. 24~.

34 D. Sankaranarayana, 'Industries and occupations of Tinnevelly district',.
JMGA, XV, 3 (1940), p. 267; Krishnan, Indigenous Banking, pp. 13--20;MPBC,
II, pp. 75-6; S.N. Subba Ayyar, MPBC, IV, p. 276-89.
35 S.N. Subba Ayyar, ibid.
the banker); lending out money to commission agents who went

out into the villages to collect crops; and transmitting funds from
town to town by holding running accounts with bankers in other
places. Most important of all, they discounted hundis or bills of
exchange; this facility, in which they lent short-term funds to
merchants against evidence that the merchant was expecting
payment on a prior transaction, enabled a large number of small
merchants, commission agertts and the like to operate on an
extremely meagre personal capital, or possibly none at all.36 The
fragmentation, novelty, and rapid growth of the market en-
couraged this position. Trade, both internal and external, in-
creased rapidly and gave opportunities for more and more
people to take a part in it'as forwarding agents, commission
agents, produce brokers, wholesalers, and retailers. Yet most of
these had to discover finance and thus had to go to the in-
digenous bankers. There was thus enormous competition for the
bankers' facilities, and because of this and the unsteadiness 'Of
the market in most agrarian produce, the bankers could charge
high rates. Loans, on crops locked in a go down mighl start at
nine per cent, but the kandu hand-loans ranged up beyond fifty
per cent, and most lending from indigenous bankers to ordi-
nary merchants and agents came in the range I of twelve to
twenty-five per cent depending on,the security of the deal.and
the time of year (rates rose significantly ,at 'harvest times),· In
other words, by providing the facilities'and the flexibility.which
would allowalmost anyone to take a part in produce-broking,
the indigenous bankers -ensured that competition among the
many agents and br~kers cut their m'argins of profit to a mini-
mum, and enabled the bankers themselves J:o take the lion's
share and grow steadily rich. Once their wealth and respect-
ability seemed assured, they.attracted deposits. Urban profes-
sionals and those wealthy landowners with extra funds to invest
often deposited with indigenous bankers. 37 Moreover, as the
lmperial Bank and new joint-stock banks ventured warily into
36 Survey of Madura town, MPBC, V, pp. 351-68; Waljee Kanjee, MPBC,
IV, pp. 355-65.
37 A. Savarinatha Pillai, MPBC, III, p. 1175; Natarajan, The CapitalMm·ket;
Krishnan, Indigenous Banking.
THE MARKETS/ 149
the business of short-term lending, they tended to lend only to

these indigenous-bankers, _and so increase the latter' s·hold. The
modern-style banks had neither the expertise nor the daring to
deal directly with·an. all1 sundry in the 15azaar.Instead they kept
lists of approved borrowers, and generally required signatures
from two approved persons before they would offer a loan. Even
mi1IJ.yNattukottai C11-et~iar b,ankers were not found to be suitable
customers for the lll}.p!;~al~ank, and·t!1isallowed one approved
Chettiar firm to make 'a colossal fortune by simply borrowlng
1
from the Imperial B~K(adding half a per cent to the hlt~rest,
and'then 'tlistributin~ the loan amongst other bankers in Chef-
tinad, 38 As one witrt'ess told the Banlahg Enquiry:
( '
Indigenous bankers can be said to be practically helping agricultur~,
trade and industry of the district [Tanjavur], say to the extenf of 60
per cent ... The indigenous bankers genetally start with a very small
capital. The ImperiaLBank 'of India and joint-stock companies [he
means banks] help them to a certain extent: They easily influence th~
public and get deposits wl;y.ch,in some cases, rise to several times the
capital. There are instances where private bankers started' l:iusiness
with a nominal capital of Rs 10 or 20 thousands and transacted more
than Rs 15 lakhs witnin a•period of fifteen years. Finally'Whefl the
accounts were closed, they had..a surplus of Rs 1,2 or even 3 lakhs in
some cases.39
In 1929, an income tax officer maae an attempt to calculate
the capital involved in indigenous banking, and the results 'are
shown in,Table 4.1. The division betwf!en urban and rural·seems
to refer to residence rather than to any qualitative differenc~in
the style of operation. Sine~ this is eviqence calculated fr,o]Il~a.x
records we can assume.th~t ihe estimates of capital and)nt,erest'
are :i;qtherlow; the figures show a net interest rate of arom}d
, J, f
five l
per 1~ent, which is, by all accounts, ll\Uch too low. 'Fhe nun;iber
of bankers, meanwnile,.is certainly overestimated, for it clearly
includes many 'intermediary' operators,,wli.o.v.,reremainly bor-
rowing and re-lending the assets of th.~pri'ncipal1bankers (this
is clear from other figtlres on 'expenses': which ititlude the
' 1
38 Slater, Southem India, p. 110; IIC EvidenCe1

III, p. 91.
39 K. Viswanathan, M_PBC,II, p. 124.
150 / CREDIT,MARKETS
ANDTHEAGRARIAN
ECONOMY
TABLE 4.1
INDIGENOUS
BANKERS
1928--9
Number of E'stimated Estimated Net

Bankers Capital Interest
URBAN
Madras 89 34,532,000 l,Oi(i,400
Chingleput 79 5,ooo',ooo 198,741
North Arcot 137 8,044,937 411,577
} '
South Arcot 117 3,596,996 ,400,6Q9
Salem 103 3,476,279, 302,401
Coimbatore 412 22,821,817 1,940,821
Tanjayur 125 8,632,129 664,874
:J'iruchi 70 10,833,686 442,292
Madurai 45 5,814,095 431,297
Rarhnad 139 21,541,212 683,727
Tirunelveli 22 i38o;ooo '140,000
RURAL
Chingleput 51 1,500,000 144,732
North Arcot 253 15,168,54.4 826,734
South Arcot 347 9,720,448 1,077,903
-Salem 505 16,730,329 1,657,573
Coimbatore 339 19,215,926 1,739,516
Tanjavur 252 11,489,037 988,511
Tiruchi 304 13,502,517 1,264,178
Madurai 18 7,255,626 400,749
Ramnad 572 9~,420,487 2,495,004
Tirunelveli .160 15,86},000 1,002,351
TOTAL 4129. 340,567,061 18,223,~90
NOTES: The original' data for North ·Arcot and Ramnad lacked full
details on estimated capital, but included estimates of interest,
I have used these estimates of µiterest, and the average capital:
interest ratio of the other districts to calculate an estimate of
capital for these districts.
SOURCE: Figures supplied by ,F.H: Sennick, Commissioner of Income
Tax, MPBC, Ilf, 1090-4.
THE MARKETS/ 151
interest paid out by the bankers themselves-this will of coutse

act as some corrective to any underestimation of total capital).
Besides the' indigenqus,bankers, there was also a number·of
independent merchants (or merchant firms) who traµep on their
own capital and were also drawn into financing other smaller
traders, taking deposits, dealing in hundis, and undertaking
other.banking fqnctions. A number of Nattukottai Chettiars who
still.foupd their 111.ainoccupation in dealing in cloth operated
like this, as djd a number of wholesalers in the larger cities and
some Indian export-.iJ.nportmerchants in the major ports. 40 What
mar}sed out these merchant princes, like the indigenous bankers,
was the size of their personal capital and the manner in which
they finance~ the operation of other dealers and agents. Where
they differed from the indigeno1;1sbankers ~as in the fact that
they alsq dealt in produce and, because of their extraordinary
commercial dominai;i.ce,carried on a wide range of mercantile
activities. A num.ber of them acted as wholesalers in such goods
as cloth, chillies, gram and other agricultural produce. Operat-
ing from the mid-point of a commercial chain stretching from
producer (or port) ,to consumer, they proffered finance both
backwards to the brokers, sub-merchants, .and commission
agents who supplied the goods, and forwards to the retail shops
that sold them.
The Cheftiar cloth wholesalers in Maaurai bought imported
cloth by advancing loans to import-firms in Madras City, and
then offered the goods to retail shops on credit. Retailers could
theoretically buy in much more cheaply if they dealt directly
with tlie import-house, but generally speaking that would have
forced them to operate on a much lower scale. The Chettiars
all9wed them thirty' days of cheap credit, and let th~m keep
running accounts. T,hus one cloth retail firm which had only Rs
100 of its own liquiq. capital had an annual turnover of Rs 20,000
and an annual profit that was equal to its own capital. 41
40 V. Gopalakrishna Chettiar, MPBC, IV, pp. 292-3; M.C. Muthukumaras-

wami Pillai, MPBC, IV, pp. 366--9; A.R.A.S. Doraisami Nadar, MPBC, IV,
355--65;S. Venkataswami Chetty, MPBC, IV, pp. 231-40.
41 V. Gopalakrishna Chettiar, MPBC, IV, pp. 292-3.
S. Venkatachelam Chetty, one of the biggest dealers in chillies

and other produce in Madras City, operated a similar system:
'We generally advance about seventy-five to eighty per cent of
the market price of goods to the commission agents who send
us the goods ... We sell mostly on credit ... We send our own
men to each of these bazaars for collection daily and sometimes
weekly'. 42Venkatachelam Chetty admitted that such a style of
operation tied up an enormous amount of capital, but pleaded
that this was the only way to keep things moving. A.R.A.S.
Doraisami Nadar, a big timber-import firm in Tuticbrin, went
into banking on the profits of the war-time boom 'and began to
finance the dealings of lesser local merchants:
Most of the merchants here have only a limited amount of capital in
cash, but a large amount of property, jewels etc., and the [modern-
style] banks here do not advance them money though they have
property. We know the value of their property and'their'standing and
we advance them, .. We watch over their business every day and we
do not often lose.43
Doraisami Nadar could borrow from the Imperial Bank and the
joint-stock National Bank at eight to nine per ce11;t,and he re-lent
large portions of this credit to other merchants at nine to twelve
per cent. In the same town, M.C. Muthukumaraswami Pillai
held a similar position, except that he had diversified his com-
mercial business as well as entering into banking:
We have been merchants for a long time past. We have both export
and import business brsides commission busix:iess.We have branches
at Colombo and Tuticorin and deal in onions, oil-cakes, chillies,
besides exporting into Colombo potatoes from Naples, Marseilles,
Malta and Bangalore; chillies from Calcutta; coriander, sugar and other
such commodities from various parts. We also deal in rice on a large-
scale. For our above said trade we have invested a capital of Rs 75,000
in addition to a borrowed capital of about the same sum ... There are
plenty of merchants who trade with a capital not worthy of being
called so; and there are many more whose actual investments and
borrowed capital stand in the ratio of one to ten. So, trade here to a
42S. Venkataswami Chetty, MPBC, IV, p. 231.

43A.R.A.S. Doraisami Nadar, MPBC, IV, pp. 356-7.
THE MARKETS/ 153
large extent is depended on the money lent to them and on the banking
facilitiesafforded to them.44
And, he added, much of this credit had to come from Nattuko!-
tai Chettiars, or other major merchants like himself:
Inland traders, however rich and honest they may be, are looked upon
with suspicion. The [modern-style]bank limits allowed to them are
very low ... these branches of the Imperial and other foreign banks
are not able to understand the local needs. They cannot know well the
status of the different merchants and also the nature of the several
trades.45
Thus the large and growing trade in the interior of Tamil-
na du was floated on the finance of remarkably few
entrepreneurs. The speed of the growth in trade from the mid-
nineteenth century, the accumulation of savings in the hands of
agriculturists and profe~sionals, the provision of extra funds by
modern-style banks, the profitability of produce-dealing anq
thu~ the multiplication of small traders, all tended towards the
concentration of finance in very few hands. For example in
Madurai, the largest town outside Madras City, it was estimated
in 1928-9 that the total capital in trade amounted to 140 lakhs
of rupees. Of this 46 lakhs were provided by modern-style
banks; of the remaining 94 lakhs, just' 64 were provided by six
banking firms. 46 By this time, the modern-style banks had not
penetrated far beyond Madras, Madurai, and two or three other
large towns, and thus in the rest of the province tlie dominance
of a ha11dful of firms was even more remarkable. The very
profitability of produce-dealing, both for the export market and
0
for the lo?:al bazaar.s, tended to attract funds away from any
other business. Indeed from the 1880s to the 1920s the realvalue
of registered mortgages on agricultural land in Madras did not
rise at all, and entrepreneurs wishing to start industrial
enterprises found it immensely difficult to raise capital. 47
44 M.C. Muthukumaraswami Pillai, MPBC, IV, p. 366.

4s Ibid.,
pp. 366-7.
46 Survey of Madura town, MPBC,V, pp. 351-68.
47 Figures in Reporton theAdministrationof the RegistrationDepartmentof the
MadrasDepartment;it is probable that only mortgage loans from professional
P. Thyagaraja Chetty, the premier handloom-weaving magnate

and city politician of Madras, tried in 1910 to start a company
to build a cotton mill but could only raise a third of the 12 lakhs
of capital needed; next year he floated the idea of a cement
company but only managed half of the requisite 3 lakhs; and in
1913 he proposed a match factory, requiring only 2 lakhs, but
again failed. 48 The problem was not some culture-bound
'shy,ness' of Indian capital; indeed the manner in which the
savings of agriculturists and urban professionals• found their
way into deposit accounts with indigenous bankers was proof
of the readiness of savers to invest in the most profitable manner
available. As Thyag~raja Chetty himself concluded:
There .is no flow of capital for industrial enterprises, and if there is
any, it is only for petty industrial concerns from the small savings of
middle-class population. The wealthy classes comprising the zamin-
dars, Guzaraties [mainly jewel dealers], Marwaris, Nattukottai Chet-
ties and the lawyers generally, look for what they consider safe
investments on mortgages of land, houses and jewellery. With tlie
rates 6f •interest that are easily obtainable, money-lending is a fa-
vourable occupationJl9
Indeed the period from·roughly tl\e 1880s to the .early 1920s
was an extraordinary time for the money market. The tnulti-
pli~ation of Chettiar capital (admittedly largely ou~?id~ India),
the expansion of the Kallidaikurichi firms, the ern'ergehce of
merchant princes- like S. Venkatachelam Chetty and A.R.A.S.
Doraiswami Nadar wer.e all evidence of the scale of expansion.
More and more institutions were drawn into produce;-broking.
After the first world war, the Imperial Bank and the joint-stock
banks were prepared to risk more of their funds in this business.
The Tanjore Permanent Fund, a mutual savings-~rid-loan as-
sociation begun in the 1880s and hitherto lending mostfy to its
largely professional membership, started lclying ··out loans on
produce in the early 1920s.50 Perhaps the most sensitive in-
dicator of the attractions of bazaar banking in this period is the
moneylenders were registered.
48 IIC Evidence,III, p. 55.
49 Ibid., p. 51.
50 W.S. Subramania Ayyar, MPBC, II, p. 207.
THE MARKETS/ T55
migration of bankers from other parts of India. In the Census of

1901, there were 571 Marwari-speakers listed in the Tamil dis-
tricts, and few of these.lived outside Madras City and its en-
virons. B)l 1931, 'the figure lJ.ad risen to 1252 and they were
spread rather more widely, through the province. The number
of Multani bankers also increased; these are rather more difficult
to trace through the Census, yet in 1901 there were only eleven
.Punjabi-speakers listed in the Tamil ·districts and in 1931 there
were 181 in Madr~s City, 743 in Chingleput district and 647 in
Trichinopoly. There were also significant rises in the numbers
speaking Gujarati, Hindi and Sindhi; although not all of these
need have been bankers, it is probably safe to assume that many
were.
These north Indian bankers were agents of firms with head-
quarters in Bombay. and other north Indian cities, and they
brought their capital from there, and rarely tried to attracflocal
deposits. Indeed, because of the size and security of,their parent
firms, they often fouhd it easier (and cheaper) to secm;e funds
from the Imperial Bank. In most ways, their operations re-
sembled tnose of the Chettiar and Brahman indigenous bankers,
but with some important differences. They tended to move int9
those areas that were newly attractive and thus did noth'ave an
established local bazaar banking sector. Fifteen or so Marwari
firms moved into Coimbatore and four others into Erode-around
the turn.of the century when the cotton trade was beginning to
pick up, and ten to twelve Marwafr firms began operati,ng in
the groundnut trade in-tl!e Arcots plain from around the tiine
of the first world war. lhe Shikarpur Multanis came rather'later,
were barely ,settled by the ,1920s, and tended to .u~e local sub-
bankers because their laclo of local knowledge place'd them in
some danger, By the early 1930s, there were forty-five Multani
firms in the province, with about 110 branches. There were also
six major Marwari firms and four major. Gujarati firms, as well
as a number of lesser Marwari and Gujarati entrepreneurs who
generally lent small amounts to shopkeepers and other members
of the urban lower middle class.51 One estimat~ put' the total
51 Waljee Kanjee, MPBC, IV, pp. 207-15; Krishnan, Indigenous Banking,

capital of these 'foreign' bazaar-bankers at 10 crores. 52 A lot of

their business was at the expanding and speculative edge of the
market. In the larger towns they commanded a lot of the busi-
ness in discounting hundis for small traders. Since many of their
clients were fairly small and speculative operators, these north
Indian bankers took considerable risks and charged high rates
of interest. The presence of such foreigners, charging twenty-five
per cent and more, was further evidence of the desperate search
for capital and the remarkable buoyancy of produce-trading.
The period also saw the elaboration of a pyramid of credit
which stretched all the way from the Imperial Bank to the lowly
strata of the countryside. The Imperial Bank and other modern-
style banks lent to substantial traders, prominent Nattukot-
tai Chettiars, and other indigenous ba'nkers. Thus substantial
bankers lent to their lesser colleagues in the bazaar, who in turn
lent to prominent rural-dwellers. The latter lent to their neigh-
bouring cultivators, tenants and even labourers. At each stage
of the pyramid, the creditor supplemented the loans coming
from above with at least as much capifal of his own, and made
a small, addition to the rate of interest. Tl:ie building of this
pyramid ensured that the finance of the urban sector and Euro-
pean ·business, of internal trade, and of cultivation were to a
considerable extent interconnected.
The machinery of bazaar-banking had been buiit quickly and
rather shoddily; by the end of the period, and particularly after
the spurt of the first world war, it was beginning to overheat. A
fairly small number of large cogs was driving an ever-increasing
number of small cogs at an evePincreasing rate and with ever-
diminishing lubrication'. Such a machine was bound to overheat.
The rapid development of the nidhis and cliit funds provided
the clearest evidence of the peculiar pressures placed on the
money-market, and the consequent growing insecurity that
marked financial dealings.
passim; L.K. Tulsiram, MPBC, IV, pp. 302-4; Lila Ram Narain Doss and
Pahalajani, MPBC, IV, pp. 262--7;S. Venkataswami Chetty, MPBC, IV, pp.
233--4;Seth Naraindas Radhakishenda Lulla, MPBC, IV, pp. 493-501.
52 Natarajan, The CapitalMarket, pp. 50-3, 58.
THE MARKETS/ 157
Both-nidhis ijnd chits began as forms of co-operative saving.

The <;hitswere funds subscribed. by members at the rate of one
or two rupees a month. and then distributed to each of the
J:P.~mbersin..turn by a variety-of systems, some depending on·a
simple rota, oth~rs on a lottery (in which those successfuf were
omitted· from later draws),. and. some by auction (in which
supscribers offere~competitive disfounts on the pay-out share).
They hatl. their origin in village saving funds, but in the early
twentieth. cent.UJ;y-be<;AJ:P.e a common feature of the urban
bqzaars.,.Bere they ~ere le~s. co-operative in character, and
reserpbled more a device for s:i;nall-timeentrepreneurs to raise
capital (usually ~row;iµ R~ 1,000) f9r som~ business tl.eal. Tl}e
po~~ib,ilitjes for ,swindlipg were imn;,.ense. People would be
prepar~d to inve~t tn these funds to find a place for spare savings
(anq:soll),etimes,·if p,roperly managed, these funds could yield
a.high return-particularly the auction chifs) and al~o to oblig~
thE; fund's promoter.53 But it became a ~ommon device' fox:
trad~rs and ban}<ers to ~se ~hits to try and pale themselves out
of finijncial troµble, ,,u;idthus failures were frequent. A Tirunel-
veli man, who in-.sisted that failures were not commoi;t in hia
area, dip nevertheless put the,ratiot>f chits that failed as.one in
ten. 54
Nidhi~ began in 1858 in a similar if ,slightly grander Wily, as
mutual loan societies based on monthlx subs~riptions stretching
over a ~Ql\l' to seven year period. Their assets were originally
lent onJy to members anq, at the en.d of tbe period, the fitnd was
wound up and profits :i;e-dlstributed. With the foundation of
the Mylapore Hindu Permanent Fund in 1872, the character
changed. This fund did not terminate; individual subscribers
could wind up their conrlection with the fund, but they were
then replaced anti the number of subscribers, and the capital
stock, remained roughly the same. From t}:le'1880s, su.cJ;l'per-
manent funds' spread throughout the Presid~ncy, but at first
53 Chit funds are described in Natarajan, The Capital Market; Krishnan,

IndigenQusBanking;MPBC, I (Report), pp. 33-4; C.D. Nayagam, MPBC, IV,
pp. 350--<2.
54 R. Sivarama Ayyar, MPBC, IV, p. 394.
remained as associations of merchants or professioflal men

helping one another out by this form of co-operative finance. 55
In the early twentieth century, there was a further development,
originating in Kongunad and connected closely to the expansion
of the cotton business there. In these nidhis, the subscriptions
were partly or wholly replaced by a share issue. The shares were
not returnable, but were negotiable and on top of the shares the
nidhis accepted short-term deposits. 56 Generally still they only
lent to members, on the security of land or jewels, but in the
over-heated atmosphere of the early 1920s they began;to lent!.
to non-members, and also to lend on the profitable and fashion-
able business of crop-dealing. 57 By the erld of the 11920s there
were two or three hundred nidhis in1Tamilnad, with a 'high
proportion in Coimbatore, and their gubscribed capital
amounted to around 100 to 150 lakhs of rupees. 58 Several of them
particularly in Coimbatore, were dominated by a handful of big
bankers, who ,clearly found this a clever device for expanding
their personal capital. Three of the big nidhis of Coimbatore
town, for' instance, were dominated by one man who owned
forty-eight per cent· of their total capital,· and one observer
suggested that 'in Madras Presidency there may be said to be a
new caste named "Fund-Office Caste" or "Directors Caste", for
the very simple reason that the' very 'same gentlemen, 'or their
relatives, and later on their descendants, would be found on. the
boards of several -directorates'..59 In some cases these directors
creamed off as much as seventy-five per-cent of the profits of
the nidhi and~only paid out the remaining twenty-five per cent
55 Nicholson, Agricultural Banks, pp. 242---4.

56 C.W.B. Zach,/1.rias,MadrasAgriculture (Madras, 1950), p. 195; Natarajan,
The CapitalMarket, pp. 123-9; N. Giriya Chetti<lr, IIC Evidence.III,ipp. 446-7;
B.V. Narayanaswamy Naidu, 'Nidhis or loan societies of Madras', l]E, XVIII
(1937-8), pp. 569-79; T.A. Ramanathan.Chettiar, MPBC, IV, pp. 426, 444; B.
Muthukumaraswami Mudaliar, MPBC, IV, pp. 480-1.
57 G.V. Ganesa Ayyar, MPBC. IV, pp. 309-10.
58 Natarajan, The Capital Market, pp. 50-8, 135; Narayanaswamy Naidu,
'Nidhis'.
59 M.S. Natarajan, 'A study of the capital market of Madras Presidency,
with special reference to its evolution and indigenous institutions' (Madras,
Ph.D. thesis, 1934), p. 129.
THE MARKETS/ 159
in dividends to the other shareholders. One k,nowledgeable local

banker reckoned that only four ,or five of the, 125 Coimbatore
nidhis were secure 'organizatjons while in many cas-es'the nidhi'
really helps one or two people to become office-bearers and is
started for that purp,ose. It is just to oblige a particular mah that
his :friends and other people join as shareholders'. 60 Another ·
Coimbatore nidhi.,manager confessed that the chief reason for
starting such a fund was 'to provide employment for relation!;
and friends'. 61 Yet the nidhis obviously provided a service.
They attracted considerable deposits, largely.from urban pro-
fessionals and from merchants anxious to firtd. a short-term
investment for funds in.slack periods. A study of twenty nidhis
(in Coimbatore, Madras, and elsewhere) found that of the 4,022
depositors, 1,837 were· either officiats or professional men,
another 520 were merchants and shopkeepers and the remaining
701 were agriculturists. They lent at nine per cent, which was
reasonably cheap, and had; between the twenty nidhis, 45,864
clients, mostly merchants (11,560) and agriculturists (17,415).62
Finally, the financial entrepreneurs liked them. Those few men
of the 'Fund Office Caste' who gathered control of several nidhis
were able to use them to great effect. Besides the advantage of
controlling the savings of others, the direction· of a nidhi had
other benefits. A shareholder could borrow back from the nidhi,
sometimes up to the extent of ninety per cent of the value of his
share, and if he was careful the difference.between the interest
on his lending and borrowing was minute; nidhis mcide most
of their profit by charging penal rates of interest on overdues
and thus were able to keep their normal deposit and loan rilfes
roughly equal. Besides that, the director could then use-his share
certificate, and his status as a director, crssecurity to raise extra
furrtls elsewhere, from indigenous bankers and even from some
of the modern-style banks. 63 In other words, the nfdhis provided
a productive investment for the savings of agriculturists, mer-
60 T.A. Ramanathan Chettiar, MPBC, III, pp. 426, 444.

61 B. Muthukumaraswami Mudaliar, MPBC,IV, p. 481.
62 Natarajan, 'A study of
the capital market', pp. 16~.
63 G.V. Ganesa Ayyar, MPBC,.IV, pp. 312-14; C.V. Venkatarama Iyengar,
MPBC, IV, pp. 453-5; Narayanaswamy r<:Jaidu,'Nidhis'.
chants and urban professionals; an additional source of loans

for many small produce-brokers as well as some growers and
others; and a useful field of enterprise for the merchant-finan-
cier.
The rapid rise of the nidhis thus exemplified the most sig-
nificai:,.ttrends in the money-market; the availability of savings,
the attractions of speculative lending on prodµce, the tendency
for the management of investment funds to concentrate in few
hands. They also showed another important characteristic, clear-
1y in evidence by the mid-1920s: the extreme insecurity of
financial institutions.
The nidhis had very meagre reserve funds. This was of
course a result of their historical evolution: they had begun as
joint-savings enterprises lending only to their own members,
and had only later come to resemble joint-stock banking con-
cerns. Yet while-they had made the transition to a banking
format in so far as they had achieved some form of permanency,
transformed the subscription funds into share capital, accepted
deposits and begun lending to non-members, they had not
acquired substantial reserves. The Tanjore Permanent Fund was
one of the oldest and most solid of the nidhis, yet even that
institution kept virtually all its funds in current circulation. Its
subscription capital (it had not fully ]Ilade the transition to share
capital) amounted in 1930 to 23 lakhs, and its deposits to 3 lakhs;
meanwhile itBQ!~l qmounted to 25 lakhs, its investments (lar-
gely in government paper) to 3112lakhs, and its reserve funds to
a meagre Rs 186,000.64 Many of the less prestigious nidhis were
reluctant to let· any of their funds drop out of circulation; they
listed a reserve fund in their accounts but then merrily lent out
the contents just like all their. other money. One estimate reck-
oned that the nidhis as a whole had tapital of 4 cro'res, deposits
of another 1.2 crores, and reserve funds of just 35 lakhs. 65• In
certain cases, the readiness of nidhis to accept large amounts·of
short-term deposits and then re-lend the entire sum, made them
peculiarly vulnerable to a run; one Coimbatore banker offered
64 G.V. Ganesa Ayyar, MPBC,)V, pp. 310, 317.

65 Narayanaswamy Naidu, 'Nidhis', p. 574.
THE MARKETS/ 161
an ·instance of a, niclhi which had share capital of:Rs-8000·and

deposits of 1 lak.h.66 C::onsideringthat the nidhis got their funds
from subscriptions or shares which could fluctuate, and deposits
which could be quickly withdrawn, and considering that they
lent'out as much as j,ossible with little thought for reserves, they
were clearly-sailing very close to the wind. 1 ,
While the nidhis were most obviously precarious irt this

respect, the rise of joint-stock banking in the ~arly twentieth
century had taken place under exactly the same conditions as
those affecting the rise of the nidhis-,and, though more carefully
regulated by the law, the joint-stock banks still had certain
wayward characteristics: By 1919-20, there were 223 joint-stock
companies involved in banking and loan business, with,, an
aggregate.paid-up capital of 247 lakhs. By 1929-30, the number
had risen to 343 and the paid~up capital to 430 lakhs. 67 Most
of these companies were either nidhis or partnerships of in-
digenous bankers, and only sixty-six might be considered 'a.s
'modern-style' banks, and only one, the Indian Bank,·was ofady
size. The Indian Bank had been.founded in 1907 (following the
Arbuthnot crash) on an allia1,.1ceof the premier professional
family of Madras City and the premier Nattukottai ·E:hetty
family. It found most,ofits capital from the communities headed
b)r these two families, served as: a deposit for the funds of the
p:rofessional people of Madras City, and acted mainly as the
reserve bank of Jhe Nattukottai Chetty, Multanii and other
indigenOU$ banking-fums. It grew steadily and evenly up to the
end of the W'1r,but then started to go a little away: Its paid-1;1-p
capiti\1-1
reached 12.79 lakhs.in,1923 and stuck; deposits however
gre.w.rapidly throughourthe 1920s. The law required the bank
to increase its reserves at a suitable rate, but they ros~ only from
6 lal<l)sin 1923 to 15 lakhs in 1931, while deposits climbed from
41 lakhs.in 1917 to 68 lakh~ in 1923 and 193 lak.hs by 1930. At
the same time, the cash bala11:cesof the. bank had gro"'7n, arn;l
also the need to find some productive outlet for funds. Inevitab-
. 66 C.V. Venkatarama Iyengar, MPBC, IV, pp. 457-60; ,L.W. Thompson,

MPBC, IV, p. 502.
67 Joint-stockCompaniesin Bl"itishIndiaand in the Indian States of My~ore,etc.
(annual).
ly, the Indian Bank was drawn into lending on produce. It

opened branches in the mofussil (notably at Coimbatore) and
began to lend on rice, groundnut, and cotton stored in the
market, as well as continuing the indirect finance through in-
digenous bankers. By the late 1920s, a large part of the bank
officials' time was spent visiting godowns to make sure that the
goods were not dete'riorating.68
Other local joint-stock banks enjoyed rapid increases in
deposits. While in the 1920s deposits at the branch of the Im-
perial Bank in Madras barely increased, and those with the
foreign exchange banks grew only slightly from 364 to 425 lakhs
between 1920 and 1:929,those with the joint-stock banks·rose
from 137 to 585 lakhs. 69Moreover most of these institutions had
evolved··out of indigenous banking concerns, and still operated
in a similar fashion. They lent in the produce market, they
discounted hundis, and they stretched their assets to the limit.
When the Banking Enquiry asked the director of the Nadar Bank
about the·contents of that bankfs reserve fund, he thought,for a
bit and then suggested the fixtures·and fittings. 70
Between 1926 and 1930, the produce market lost its extraor-
dinary buoyancy. Indeed, it sank. It took down with it most of
the final security on which credit had been supplied. Advances
against produce often extended up to eighty per cent of the
value, but as already noted, in years like 1929, 1930 and 1931
the drop in prices exceeded the twenty per cent margin of
allowance. Mortgages on landed property ranged up to seventy
per cent of the estimated value, but in the same three years the
price of land halved. Jewels had always been ,considered the
most rock-like of securities, yet-by 1930 they also suffered from
the sam'e trouble.
68D.R. Balaji Rao, MPBC, II, pp. 271-2 and IV, pp. 14~51; Vidya'Sagar
Pandya, IIC Evidence,III, p. 260; Natarajan, The CapitalMarket, pp. 16-20; C.S.
Srinivasachari, A Histo1y of the,City of Mad1'as'(Ma'8ras,1939), p. 316. Two
other substantial joint-stock banks in the Madras Presidency, the Nedungadi
Bank and Canara Bank, had their headquarters and most of their business on
the West Coast.
69Natarajan, 'A study of the capital market', p. 93.
70 Isaac Nadar, MPBC, IV, p. 399.
THE,MARKETS/ 163
There is always difficulty· in getting them valued. There are ·various

qualities of jewellfry afid ther~ is always fluctuation iQ.the,mar}<et
with regard to their prii:e. From the last few years the price of gold
has been going down· and we regard that business as
dangerous ... Certain jewels which'have been valued at Rs 1,000some
six years back are now valued only at Rs 400 or Rs 500.71
Once it was clear that the ,depression was not merely a
short-term cycle, there began a series of desperate and hopeless
attempts J:>yall those in tl\e credit pyratpid to retratt the funds,
lent to those be,low them and to get out of the produce market.
By 1929, the Imperial Bank had virtually ~topped providing•any,
credit to the Nattukottai Chetties 72 (who were one of the most
speculative elements in the market and were also more encum-
bered than other bankers because of their southeast Asian.con-
nections), and by 1931 when-the combined attempts of D~lhi
and London to deal with the international aspects of the finan-
cial crisis resulted in a rapid contraction of Indial). currency, the
Imperial Bank had,become very sticky about lending to any of
the bazaar bankers.,. The other ,mpdern banks quickly followed
suit and one of Madras's leading merchants, S. VeQ.katachelam
Chetty, complained that they were acting just 'like a panicky
private money-lender' .73 He went on to· describe the repercus-
sions in the bazaar:
The local money-lenders who g~nerally discount the h\mcties and bill~
of, their borrowers with the BankJ, had to withdraw their' credit
facilities froin the market, as those Banks would noffteely discount
their bills,•as previously. The pressure for repayment of loans Jlg-
gravated the trouble with each stage in the fall of'prices of com-,
modities. Properties ~pd jewel~ whid) had to be disposed of to mert
dues have come in a rush into the mai;ket, which was alrea4y ~hort
on money, could not s~cure the purchasers even at a depreciated value
of nearly 50 per cent. In tlie result the extent of secprity which these
investments offered for loans againM tl~embecame considerably con-
tracted.74
71 ~- Ranganayakulu, A!PBC,IV, p. 198.

72 Krishnan, Indigenotls Banking, p. 47.
73 Report ef the, Economic Depression Enquiry Committee, in BP 1662, 28
May 1931, p. 28.
74 Ibid., pp. 28-9.
At first the indigenous bankers were hesitant about calling

in their own loans. They were used to riding out temporary
financial crises and anyway with their heavy deposits, slight
reserves and ayer-extended credits' they could not afford to
precipitate a run on deposits. B4t whe~ the crisis lasted l~nger
than initially expected the strain became too great. By mid-1930
there were sporadic repo_rtsoUailt.tres among indigenous,bank-
ing firms. 751:'ocal investors did start-to withdraw their deposits
and bazaar banking firms were obliged fo resort to the law in
an attempt to maintain their own liquidity. In parts of Tamil-
nadu the number of cases of lands distrained to realize
mortgages doubled in the early 1930s and in the civil courts
there was a rapid rise in the number of·deb't strits ahd insolvency
petitions. But' this recourse to law was not very large and not
very effective ..The number of mortgages called in was still very
small compared to the total number; and the rush to the courts
' merely clogged the machinery. While the number of suits filed
rose rapidly, the number satisfactorily concluded was comp1ete-
ly stationary, and by 1932 it was reckoned that 400 days was the
minimum time necessary to bring a debt suit to any conclusion
at all. 76
Given these difficulties and the importance of (onfidence,
most indigenous bankers did not try the courts. Some simply
tried to achieye som~ sort of turnover which would fillow them
to continue in........
business.
- ..,....~.- One Ramnad Nadar who had 2 lakhs
'
out on loarrwas prepared to ignore interest and just take repay-

ments towards the capital, in order to·achieve some sort of flow
of funds; if this failed he negotiated private purchase of lands
mortgaged to him and then' set about leasing these lands as
another way to achieve some liquid returns.7 7
But not all indigenous bankers.were so accommodating and
further down the credit pyramid, there were merchants and
75 T.S. Sabapathi Pillai, MPBC, III, p. 777.

76 GOM: Report on Agricultural Indebtedness, by W.R.S. Sathyanathan
(Madras, 1935), p. 44; Rev 989(C), 5 June 1933; B.V. Nara)'anaswamy Naidu
and V. Venkataraman, The Problem of Rural Indebtedness (Annamalainagar,
1935), p. 4.
77 Report on Agricultural Indebtedness(1935), pp. 16--17.
THE MARKETS/ 165
sub-lenderS' who depended to a greater extent on borrowedi

funds and on the confidence of their customers, and here col-
lapses were more common. As one merchant said of the in-
digenous bankers in 1930: 'Their overvigilance to guard th'.eir'
interests'proves-a thorn in the sides of merchants. Even a slight
rumour of loss is sufficient to disturb their mental equilibrium·
and they will insist upon immediate payment and thus pre-
cipitate matters to a crisis. Merchants failing thus is a common
feature. 178 Those who borrowed from the modern-style rather
than the indigenous bankers were often in much greater trouble,
for the modern-style banks were less flexible and rather more
sure of their own status. L.K. Tulsiram described the fate of the
Chinnia Komba merchant family.
They were a,noble family and had a very good business for years
together. The man who was conducting the family business was not
able to meet the aemand one day and all the officials [of the bank]
went to him and demanded payment. Naturally he could not meet all'
their 'demands and they locked his shop and one of the biggest.
families, the owners of the Chintadripet market ·m Madras, was
ruined.79
The Nattukottai Chettiar firms in general felt the pressure of
the downturn in the market right from tltE:.middle of the 1920s.
The Chettiars had suffered an earlier crisis around 1910, when
a number of firms suffered from a bad speculation in Burma oil;
and when firms working in Calcutta were enticed into the
management of zamindari estates, got caught with too much of
their capital locked in land, and were ruined. 80 Becau,se of the
close relations' and mutual accommodations between Chettiar'
firms, such crashes were liable to have widespread effects, but
in'tne conditions of i910"tHe matter was soon forgotten. From
1926, however, the Chettiars faced a more serious crisis. It began
with \he failure of the Chettiar company that managed the
Choolai cotton mill in Madras, one of the few Chettiar industrial
78 M.C.Muthut<umaraswami Pillai,MPBC, IV, p. 367.

79 L.K. Tulsiram,MPBC IV, p. 303.
SoO.R.M.M.S.M. SevagaChettiar,MPBC, IV, p. 254; Slater,Southern India,
p. 110.
concerns. The trouble was that, as the produce market turned

down, this firm, like the unlucky Calcutta firms, found too many
of its assets tied up in a solid form, and had to put itself in the
hands of a receiver. 81 Two years later, an9ther Chettiar firm
which had speculated in landed property, faced the difficulty
of meeting its normal day-to-day obligations when a large
number of the merchants who .had borrowed from th~ finp
could not repay on time. Once again, it learnt to regret its fixed
investments. In fact the Imperial Bank was persuaded to bail
out the firm, but the damage to Chettiar prestige was substap.-
tial.82In the next couple of years, a number of smaller Chettiar
firms failed because of the lack of confidence, and the level of
deposits in Chettiar concerns dropped sharply. The reaction of
the Chettiars was simply to withdraw even further from deal-
ings in south India. In the mid-1920s they h~d sensed the coming
crisis in the Kaveri rice-trade and had stopped supplyinp work-
ing capital to the rice mills. 83By 1928 they were moving, com-
pletely out o£rural finance, even in their home area of Chettin~d;
twenty-eight firms in Chettinad were winding up their business
and preparing to transfer funds to southeast Asia.84 They had
also eased out of Ramnad and Madurai cotton traq.e and thus
had most o'f their south Indian business in urban finance. Here
too they got into difficulty when the onset of the depr~ssion
made their business debtors 'very slow to pay' and. caused a
string of Nattukottai Chettiar failures. There was a 'consequent
heavy loss incurred by a variety of capitalists here' who had
invested with the Chettiars and this had 'resulted in the with-
drawal of the money invested with them by the capitalist public
and its deposit with the'joint-stock banks' .85The withdrawal of
the Chettiars from south India to conce11trate on the foreign
8l A. Savarinatha Pillai, MPBC,IV, p. 345; S. Mathuranayagam Pillai, MPBC,

II, p. 119.
82A. Savarinatha Pillai, MPBC, IV, p. 344.
83V. Krishnan, IndigenousBanking, p. 86; A. Savarinatha Pillai, MPBC, IV,
p. 1178.
84 A. Savarinatha Pillai, MPBC, IV, pp. 1176, 1184.
85G. Balasubrahmanyam, MPBC, II, p. 423; see also D.R. Balaji Rao, MPBC,
IV, pp. 158-9, 165; M. Balasubrahmanyam, MPBC, II, p. 423.
THE MARKETS / 167
concerns proved of course to be extremely short-sighted. When

the crash came in Burma, Malaya and Ceylon they found them-
selves in severe political as well as economic difficulties. 86
Other indigenous bankers fared no better. There were re-
ports of crashes among the Kallidaikurichi Brahman first oper-
ating in the Tambraparni valley, and among the Kallidaikurichi
Brahman firms who had moved into the Kaveri rice business
when the Chettiars had withdrawn. 87 The Marwaris; mean-
while, simply quit the region. Wl)ereas there had been only 571
Marwaris_in the Tamil districts in 1901, the number had risen to
1,252 in 1931, and fell to ninety-seven by 1951 (see Table 4.2).88
TABLE 4.2
MARWARJS IN TAMILNAD 1,901-51
1901 1931 1951

Madras City 455 919
Chingleput 86 191 48
North Arcot 13 35
South Arcot 25 3
Salem 8 3
Coimbatore 9 33 32
Tanjavur 6
Tinichi 24 8
Madurai 19
Ramnad 3
Tirunelvrli
TOTALS 571 1252 97
SOURCES: Census of India 1901. Volume XV-A, Pt ii, 115; Census of India
1931. Volume XIV, Pt ii, 282; Census of India 1951. Volume III,
Pt ii-B, 104.
The nidhis were particularly badly hit. Because of the fly-by-

night character of these institutions the rate of failure had always
86 0.R.M.M.S.M. Sevaga Chettiar, MPBC,IV, p. 254.
87 Krishnan,IndigenousBanking,p. 15, 86.
88 The 1941Census had no details on mother tongues.
been high. Yet until the late 1920s, the number of new nidhis
formed continued to exceed the number collapsing. Yet in the
first year that the produce market slipped (1926) there were
twenty-three failures, and from 1928 the steady increase in nidhi
profits turned down into a loss. 89 By 1930, the nidhis (including
those that had virtually become joint-stock concerns) were in
exactly the same position as the indigenous bankers. One Coim-
batore banker noted:
There is always a feeling of insecurity in the minds of qepositois, I
can refer to two or three cases in the district that ended in failure
because they were not able to command public confidence.The Erode
BankLtd. is doing only collectionwork. The Ratna Deepika Nidhi Ltd.
is in a similar condition. Joint-stock enterprises which started with
high trumpets have not been able to successfully appeal to the im-
agination of the people.90
When, in the middle of these difficulties, the High Court ad-
judged that the liability of nidhis was unlimited and extended
even as far as past subscribers who might have ceased their
connection with the nidhi for many years, there was visible
alarm among banking and investing circles in Coimbatore. 91
A large number of nidhis failed between 1929 and 1933, and
those which remained were substantially changed. A few be-
came trading companies and rather more transformed themsel-
ves into joint-stock banks. This gave them rather more status
and rather mo~~protection under the law than they had had as
nidhis, but it also required them to conform to the Compani~s
Act and in particular to build up decent reserve funds. In several
cases a number of nidhis merged together, amassed a 'reserve
fund, adjusted their rules to conform to the act, restrided their
speculative lending, raised their lending rates above their de-
posit rates, and became joint-stock banks. Several indigenous
banking firms pursued the same course and as a result the ranks
of the joint-stock ban}<sswelled in the middle of the 1930s.92
89 C.V. Venkatarama Iyengar, MPBC, IV, p. 460; L.W. Thompson, MPBC,
IV, p. 502.
90 T.A. Ramanathan Chettiar, MPBC, IV, p. 444.
91 G.V. Ganesa Ayyar, MPBC, It p. 128.
92 Zacharias, MadrasAgriculture, p. 110; Narayanaswamy Naidu, 'NidH.is';
THE MARKETS/ 169
TABLE 4.3
DEVELOPMENT
OF JOINT-STOCK
BANKINGIN TAMILNADU1900-51
Banks listed as in operation in 1952, classifiedby year of incorporation

Year Number Year Number Year Number
1900-9 7 1933 10 1943 2
1910-19 13 1934 1 1944 2
19Z0-5 11 1935 9 1945 4
1926 5 1936 10 1946 4
1927 1 1937 1 1947
1928 1 1938 1 1948 1
1929 1 1939 1~49
1930 1 1940 1950
.
1931 6 1941 1951
1932 3 1942 1
SOURCE: Reserve Bank of India, Banking and Monetary Statistics of
India, (Bombay, 1954), Table'22, pp. 279-:81.
The carnage in the money market had different repercus-

sions for the urban and rural ends of the business. After 1929
the rich cultivator-traders found it much more difficult to secure
urban finance to complement their own resources. A number of
them were bankrupted when local depositors lost confidence in
them sind tried to withdraw their funds, while at the same time
their urban creditors were pressing for repayments and their
own debtors cpuld not find any cash.93 In late.1931,,following
the British government's retreat" from the gold standard, there
were enormous .sales of gold from India. Between 1932-3 and
1934-5,,Madras made a net export of treasure to the extent of 8
crores: Much of it undoubtedly came out of the hoards of
bankers, trade~s and cultivators involved in the pyramid of rural
credit. The retre,at from the, gold standard meant tliat the sellers
made a considerable profit on the sum which they had paid for
KT. Ramakrishnan, 'Joint-stock banking in India' (Madras, Ph. D. thesis,
1949), pp. 77-87.
93 For instance, R. Sivarama Ayyar, MPBC, IV, p. 401-2.
the gold in recent years, but this immediate profit-taking dis-

guised a long-term loss of security. Gold had always formed
one of the most important forms of security offered in the rural
money-market and thus the sale of gold meant a loss of capacity
to borrow. By 1933, there were frequent reports about the to!por
of the rural money-market and government was forced to take
notice. It made a gesture of assistance by giving 10 lakhs for the
co-operative societies to channel into rural credit, but this was
rather like throwing a bucket of water onto a drought-tidden
field. 94 A series of books, pamphlets, speeches and intercessions
in the legislative council told government that it was part of
their responsibility to help unglue the money-market. 95 Grad-
ually government lumbered into action; but it took so long to
formulate and enact legislation, and was so unskilled in such
delicate matters, that its debt acts were almost certainly coun-
terproductive. Legislation did not become effective until 1938,
by which time prices had begun to rise, internal and external
trade were growing, and the money-market showed <\11 the signs
of recovering some of its old buoy~ncy. Under such conditions,
government intervention made creditors wary, and thus in-
hibited the revival.
The first legislative move came in August 1932, when gov-
ernment published the Madras Moneylenders Bill. This measure
merely obliged all bankers and·moneylenders to' keep accounts,
and imposed a ceiling of eighteen per cent on the rate bf interest.
A. Select Committee tampered with the provision about the
interest ceiling, and then the bill wa-s put ·oft'the shelf on the
grounds that the Government of India was thinking abbul!-an
all-India bill on interest rates. When this latter m"ea~mresfailed
94 Rev 948, 11 May 1934; Rev 989(C), 5 June 1933; Rev 282, S'February 1832;
Rev 360, 25 February 1933.
95 N.G. Ranga, Agricultural Indebtednessand RemedialMeas'!res(Tenali, \931);
Narayanaswamy Naidu and V. Venkataraman, The Problemof Rural Indebted-
ness; P.J. Thomas, The Problem of Rural Indebtedness (Madras, '193,ij; R.S.
Vaidyanatha Aiyar, A Memorandum on the Ryotwari Landholdersin Madras
(Madras, 1933); K.S. Venkatarama Aiyar, 'Agricultural indebtedness', MAJ,
XXIII (1935); The Indian Commerce,1, 2(1933), pp. 33-6; see also The Mirasidar,
a journal published for a short time in the 1930s, a few copies of which are
decaying in the attic of the Madras University library.
THE MARKETS/ 171
to materialize, the bill was taken down, off the shelf, given to a
Select Committee weighted heavily with financiers who,tore up
the provision on the interest-ceiling, and emerged in 1935 as the
Madras Debtors Protection Act. This Act obliged all money-
lenders io keep-•a'ccounts, but suggested no sensible way of
enforcing this strictur~, and gently passed into the dusty, inert
pages of Madras legislative history.96 In 1933, a prominent
Coimbatore banker wrote a bill to set up conciliation boards to
scale down the arrears of debt which were blocking up the cre~t
system. Government officials did not like the bill, partly because
it was a priv'ate bill rather than a government one, partly because
(they suggested) there. was no evidence of demand for the
measure and largely because they were worried about embroil-
ing the machinery o'f administration so deeply in the entrails of
the local economy: 'The Board·[of Revenue] is inclined to believe
that the debtors and ,creqitors might rese!)t t,his sort of inter"."-
ference., The landholders and the ryots may be expected to settle
their differences between themselves without the intervention
of Government.' 97 They were particularly worried about the
provision that an arrear of debt, after it had been scaled down
by a conciliation·board, shtmld be collected by government on
behalf of the creditor.
Two years later, however, the g9ver11JI1entfelt obliged to
adopt the bill; it was passed in April 1936, yet only came into
action, district by district, in the later months of 1937. J'he Act
establish.ed, in each district, a Debt Co,nciliation Board consisting
of a deputy collector, and ~o non-officials appointed by gov-
ernment;98 one of the latter was usually a retired judge or
government. officer,· and,tpe other-a major landowner. These
b0c,rds were to interview ,tho;;e· debtors and creditors who
brough~ their cases up for arbitration, and suggest a reasonable
settle}Ilent. Since the agricultural and financial future looked
much rosier in 1937-8 than it had jn 1931-2 when both p.ebtors
and creditors had b~en clamo4ring for such~anAct, it was hai;dly
96 BP 4185, 22 November 1934.
97BP 391, 2 February 1934.
98BP 3616, 23 November 1937; BP 3926, 21 December 1937; BP 533, 21
February 1939.
surprising that the response was very cool. Government had

been careful to remove from the Act the provision in the original
bill that made government responsible for collecting the con-
ciliated debts and therefore few creditors could see any point in
coming for arbitration. The Act had been drafted in such a way
that creditors who had mounted the loan on some sort of
security (fand or jewels) were quite at liberty to reject the
settlement of the board and go to law. Of course, some such
creditors did agree to come before the conciliation boards, in the
hope that this would help them collect from their debtors, and
when they found the settlement not to their liking, they went to
law. Other cases brought to the boards were mainly attempts
by debtors to complicate legal proceedings that were already in
motion. All but one of the eighteen cases filed in Coimbatore in
the first six months had been brought up by debtors
solely with a view to defeat proceedings in the Civil Court and to
delay execution petitions, sales for attachment of decrees, confim1ation
of sales already held etc. Even an adjudged insolvent came up with a
petition after all his property had vested in the official Receiver anq
he was no longer qualified to enter into contracts. The Act at present
is abused by cantankerous debtors to gain time and if possible keep
their creditors out of their dues.99
The activities of the Debt Conciliation Boards however changed
substantially in 1938 when government passed some new legis-
lation, the Agrid.tlturists' Relief Act.
This measure, by far the most important piece of all the debt
legislation, was contrived to scale down the arrears of interest
that had been accruing during the depression. It ruled that all
arrears of interest dating from 1932 and before shouH:lbe wiped
out, that all interest from 1932 until October 1937 should be
calculated at five per cent and all interest thereafter at·six and a
quarter per cent, and that any debt on which the interest paid
already amounted to twice the original loan should be deemed
discharged. This was a serious measure. fa the first fourteen
months of the Act's operation over 100,000 cases were filed,
relating to more than Rs 200 lakhs of debts. Government ar-
99 BP 3926, 21 December1937.
THE MARKETS/ 173
ranged that the Debt Conciliation Boards could act as tribunals

to.hear cases under the Act and this gave the Boards ernew lease
of life.100
In the business,of simple conciliation, the Boaras were an
enormous failure. Between 1939 and their abolition in 1944,
24,464 conciliation cases were submitted to the Boards (in all
Madras Presidency) and only 3,113 reached any conclusion. 101
But as a tribunaHor the Agriculturists' Relief Act, the Boards
were rather more active and successful. In 'l:he ninety-one
months of its operation up to the end ot the second world war,
there were 203,874 cases involving 955_lakhs·of. debt, and the
resulting court decisions reduced the ·total .dues by 52.1 per
cent-wiping away almost 5 crores of accumulated interest. 102
This represented a cohsiderable legislative success, out it of
course created its own problems. Moneylenders were not
anxious to do business when their. profits, were liable to be
reduced by this (or future) legislation, and when the officiallimit
on the rate of interest was 6 1/4per cent. As prices began to rise
in 1939,and then rocket in 1941,thisi:eiling on the rate of interest
became somewhat stupid. Very soon after the Agriculturists'
Relief Act came .into operation, the professor of economics at
Annamalai University made a survey of the local credit market
in the University's hinterland. Lenders were generally appre-
hensive about lending; after the succession.of four pieces of
legislation on debts they were worried where the next act would
lead, and despite rising prices and rising internal trade the credit
market was as slack as at any time since 1930.103It was a measure
of the shortage of,rural credit that the number of application for
government's taccaviloans (which were meagre, hedged about
100V.V. Sayana, The Agm,ian Problemsof Madras Province (Madras, 1949),

pp. 163--6; B.V. Narayanaswamy Naidu and P. Vaidyanathan; The Madras
Agriculturists' ReliefAct-A Study (Annamalainagar, 1939).
lOl ISrishnaswamy, Rum/ Problems,pp. 371-5; Sayana, 163; Narayanaswamy
Naidu and Venkataraman, Rural Indebtedness,p. 52.
102 Krishn~swamy, Rural Problems,pp. 373--4; Sayana, 163--6; Narayanas-
wamy Naidu and Venkataraman, Rum/ Indebtedness,p. 53.
103Narayanaswamy Naidu and Vaidyanathan, MadrasAgriculturists' Relief
Act, p. 23.
with regulations, and thus usually unattractive) had risen to

twice the normal level. 104 Government had been aware of this
difficulty since its first consideration of debt legislation in J.932,
and in 1935 had passed yet another debt act, the Agriculturists
Loans (Madras Amendment) Act, which made provision for
more substantial supplies of credit from government agencies.
In 1938, they put the final touches to the measure and put the
final touches to the measure and put it into operation; the results
speak eloquently for themselves. In four years of operation from
1938-9 to 1941-2 there were a total of 5089 applications for loans
out of which only 640 were approved, and while the budget
provisions for the scheme totalled Rs 142.5 lakhs only Rs 2.98
lakhs was actually spent. 105 The trouble was the rules under
which these loans were granted. They were offered only to
agriculturists, who had been through the machinery of the E>ebt
Conciliation Boards, and who still wanted, loans to discharge
debts' to moneylenders which they had contracted before 1937
and for which they had offered security valued at two-and-a-
half times the value of the loan.
It was, in fact, Catch 22. To get one of'these loans, one ·had
to be both, a virtual bankrupt, and possessed of propei:.ty worth
two-and-a-half times the value of· the loan. As the Board of
Revenue concluded:
The system is completely machine-like, demanding officialand public
enquiries into the ryot' s private affairs. Often he is at the mercy of the
local officers who take no personal interest ih his welfare. Months
lapse before loans are sanctioned and even when received he remains
constantly subject to official supervision. The slightest default results
in summary recovery, where no personal consideration is allowed or
shown ... If a loan is granted with what proves to be later inadequate
security the official is held responsible. Government have never ad-
mitted the principle that in lending money there must be 'some bad
debts. 106
Thus debt legislation had contrived to reproduce, in the
104 Jbid.
105 BP 622-S, 5 March1942.
106 Board of Revenue resolution dated 27 February 1942, in Ibid.
THE MARKETS/ 175
potentially ·buoyant conditions of wartime inflation, the ·prob-

lems of 1931, ~or again lenders were reported to be 'recovering
dues and keeping them.safe'. ~Asin 1931, lending had of course
not completely stopped; the rural economy of Tamilnadu simply
could no.t work withbut some redistribution of funds, but it
required'considerable-ingehuity and registered a considerable
change in the character of lhe money-market. One young econ-
omist reported-in 1939:
But it is not as though private moneylending vanished from tlie
villages ... In order, however, to escape the effects of the regulatfoi\
of rates, creditors get deeds of sale on land for moneys lent but promise
to reconvey the land to·the borrowers at the"old price on payment
of interest stipulated. Meanwhile they are supposed to be tenant&,
paying re!}t to the fictitioq~ landlords ... Mone)' is .also lent'on mortT
gage with possession, and ~nterest is s~cured in kind 1 as usufructuary
mortgages are not brought }'Vithinthe scppe of the.Act. !"1oneyis lent
on gold with or without documents; if former, the higher rate of
interest demanded is deducted from the.principal in advance ... It is
on unsecured loans that the gi;eatest ingenuity has been exercised: the
borrower is an accomplice. Short-term loans are given on pro-notes
for one or two years; the interest agreed to orally is taken in advance
for the stipulated period ... the legal rate of61/4 per cent is of,cot1rse
found on the pro-note.107
The need for such ingenuity had important consequences. It
represented a return towards the conditions in which the only
reliabl.e security for a loan was the creditors' s personal know!!
e'dge of the debtor, in other words, a position where cre~it not
only oper31tedas an important element of social power, but also
would not be offered outside a context of social power. Lending
substantiated dependency, but was also not p9ssible without
dependency. Since the 'late nineteentl\ century, _withthe exten-
sion of trade in ,agricultural pi:odu_pfi
and the~eenness of entre-;
preneurs to offer loans in the countryside to secure prpduce,
this· characteristic of tli.e rural money-lllarket Had be~n being
gradttally eroded; now the uncertainty created by the depres~
sion and legislative interference pushed matters ,backwards.
107K.C. Ramakrishnan, 'Debt legislation and rural credit in Madras', 1JE,

XIX (1938-9), p. 644.
Lending continued, but it was more of the character between

neighbours, than between entrepreneurs and producers.
This meant that although the conditions of the second world
war were,·in many aspects of trade and finance, similar to those
of the years of the first world war bnly in a more extreme
measure, the reactions of the rural money-market were very
different. Between the mid 1930s and the early 1950s, the prices
of food grains roughly quintupled. Yet while debts had grown
during the inflationary period which preceded the depression,
in the 1940s they s\lrank in real terms.'
All statisti<:alestimates of the q.ebt of rural Madras must be
treated with some caution. Each of the estimates below. was
calculated in a different way, and in the middle of all these
calculations there were 'correction factors' of quite frightening
proportions. Yet as indicators of general trends, they may be
accorded some respect. The first was the work of Frederick
Nicholsoi\ in 1895, and relied on an abstraction .from offici~l
records on mortgages, and some rather cursory sampie surveys.
It yielded a figure or Rs 45 crore§ as \he total deflt.108 The ijanking
Enquiry in 1930 relied on a roughly similar method of estima-
tion, though.using rather larger and well-investigated samples.
It reached a figure of Rs 150 crores, 109 though a·later student
thought this too low. Zacharias pointeq out that sa!Ilple surveys
in settlement reports in the early 1920s had shown a debt per
head of Rs 51,-and -the sample surveys of the-Banking.Enquiry
itself showed a figure of Rs 61-and these hyo calculations
would have yielded figures for the total debt of Rs 214 crores
and Rs 256 crores respectively.11° Two studies in 1?34-5-one
by the economist P.J. Thomas and one by a government com-
missioner, W.R.S. Sathyanathan-both working basically from
the material in the Banking Enquiry,. reached.a figure a;ound
Rs 200 crores. They argued that there had been little repayment
of debt during the depression, and that the rise had been largely
due to the accumulation of interest. 111 Another economist,
108 Nicholson, Agiicultural Banks, pp. 237-41.
109 MPBC, I (Report),pp. 54, 76.
110 Zacharias, MadrasAgi·iculture,pp. 160-9.
111 Thomas, Rural Indebtedness;GOM, Report on Agi·icultural Indebtedness.
THE MARKETS / 177
B.V. Narayanaswami Naidu, reckoned that for similar reasons

the total debt by the end of the 1930s had risen to 271 crores. He
then went on to conduct a very rigorous survey of a sample of
one thousandth of the Presidency's population in 1945 and came
to the conclusion that the total had fallen to 217 crores. His
surveys showed, with some considerable conviction, that larger
landowners in particular had prospered on wartime inflation
and had devoted much of their profits to purchasing land and
reducing their burden of debt. 112 Zacharias objected to some of
Narayanaswami Naidu's arithmetic, and reduced the totals
for 1939 and 1945 to 210 and 175 crores respectively, but he
launched no objection against the general argument. 113 Even
allowing for these differences of calculation and also large mar-
gins of error, the figures pointed to a large reduction in the real
value-of rural debts. Comparing 1935 and 1945, prices had more
than tripled, and the value of debts had possibly shrunk slightly.
Even comparing 1930 and 1945, the statistics suggest that the
real value of debt had at least halved.114
&.V.Narayanaswami Naidu' s 1945 survey went into consid-
erable detail. It suggested that there had been no reduction in
the proportionof the rural population that was in debt, and it
argued that the debts of the lower strata of rural society (small
tenants and landless labourers) had increased in absolute terms.
The major change had come among landholders, and particular-
ly those with more than five acres. Few of them had annulled
their debts, and it was still generally the case that the richer one
was, the bigger was the debt and the bigger also was the ratio
of debt to income. Yet Naidu's survey suggested that~ large
number of landowners had partially reduced their debts, with
the result that for large landowners (over_twenty-five acres) the
per capita incidence had fallen by forty per cent, and for slightly
smaller landowners (five to twenty-five acres) it had fallen by
112 Narayanaswamy Naidu and Venkataraman, RuralIndebtedness,especial-

ly Fif.35-7.
Zacharias, MadrasAgriculture, 110-11, pp. 159-63.
1
114
Ibid., pp. 165-7; Narayaniiswamy Naidu and Venkataraman, Rural
Indebtedness,pp. 35---42.
twenty-five per cent.115 The next investigation of rural debt was

the All India Rural Credit Survey in the mid-1950s. This survey,
conducted in 1952-3, produced a figure of Rs 483 for the average
debt of each rural family in the Madras Presidency_which com-
pared to Narayanaswamy Naidu's figures of Rs 255 in 1945 and
Rs 319 in 1939; and to the Banking Enquiry' s figure of Rs 194 in
1930. The estimate of debt had thus risen eighty-nine per cent
between 1945 and 1952-3 while the Reserve Bank's price index
had moved up sixty-seven per cent, and this comparison sug-
gested that debt was once again increasing. Yet the level of debt
was still below the estimates made in the 1930s in real terms. 116
Given the rise in prices and demand for food crops during
the war, and given the expansion of commercial cropping in the
post-war period and the Korean war boom, this sluggishness on
the part of rural credit suggested a clear, difference from the
pattern at the turn of the century. The figures suggest that while
during the war trade, and prices recovered, the pi;ovision of
credit did not rise on the same scale. The rupture o"fthe money-
market was to some extent permanent; and in particular it meant
less lending from town to countryside. Capital still circulated
fairly freely within the close confines of rural society, but less
was being advanced from the commission agents,.brokers, in-
digenous bankers and professional sowcars. The boom of
the 1914-18 war had found recent immigrants from Bombay
wandering around the village.s"OfKongunad.recklessly handing
out rupees. There was nothing comparable in 1939-45.
The loss on the part of the rural money!market was to a large
extent .a gain for urban finance. The collapse of the institutions
which had chartnelled finance from the towns into the country-
side meant a build-up of capital in the towns. Even by 1930,
observers were noting a shift in the location of s&vings. Two
witnesses before the Banking Enquiry--one a rural and one an
urban banker-saw matters in roughly the same"light:
115 Narayanaswamy Naidµ and Venkataraman, Rural Indebtedness, pp.

44-7.
l16 GOI: All India Rural Credit Survey. Volume I, The Survey Report, Pa1i I
(Rural Families) (Bombay, 1956),pp. 180-1.
THE MARKETS/ 179
On the one hand we find a large number of moneyed men and

institutions in cities who are at a loss to know where to invest their
moneys and how to get a fair return by way of interest on such
investments. Nattukkottai Chetti firms which used to take in large
depo~its at what is called" the nadappu rate of interest" which general-
ly worked -out to 9 per cent per annum have latterly been unwilling
to accept depo~ts, at any rate it is difficult tp get firms of established
reputation and credit to fake dep9sits in the usual course. The banks
in Madras have been steadily lowering the rate of interest at which
they are prepared to accept deposits from the'public. Loans on first
mortgages of immoveable properties in Madras have proved to be a
disappointing source of investment, as in most cases the lender had
to take the immoveable properties himself as no purchasers are avail-
able to take them in auction. Further, owing to the fall in the value of
these properties after the war, persons who lent on this kind of security
and'even institutions like'the Mylapore Hindu Permanent Fund [an
unusually good and prestigious nidhi] which is well known for its
cautious valuation of houses have found to their cost that the security
has failed to satisfy the loan in full. Insurance companies which always
have large funds on their hands and rich temples and mutts are also
finding the same difficulties with respect to the investment to their
large surpluses.117
Till recent times the indigenous banking fim1s of Chettis or of hundi
mer~hal)ts of Tinnevelly have been c9mmanding immense credit in
the market\ Investors-preferred to leave their moneys on deposit with
tttese bankers b~cause of _their high reputation and secondly of the
liberal terms offered by them. The'moneys wer~ gerierally taken by
the indigenous bankers payable 'on demand'. Such moneys were
earning as much as nine per cent. However, during tne past five years
there have been two crises amongst N:attukkottai Chetty firms. These
have led to failures of some well-lmown banking firms. Consequently,
the public have lost confidence in the stability of these firms. This has
led to withdrawal of large deposits froip.other indigenous bankers as
well. These moneys have found th~ir way into two channels. Large
depositors have preferred to put their savings on fixed deposits with
reputable banks. The middle-class and small investor in his anxiety to
make his savings earn as much as they were doing while on deposit
with indigenous bankers has turned his attention to stock excbange
securities. During the past few years this tendency has become pro-
nounced.118
117 W. Subramanai Ayyar, MPBC, II, p. W7.
118T.N. Krishnaswamy, MPBC III, p. 723.
Bank deposits were increasing rapidly during the late 1920s.

There was a slight fall-off in 1930and 1931because of the general
international uncertainty, the failure of banks and bankers to
recoup their recent outlays, and the overall financial stringency
caused by the attempts of Delhi and London to preserve the
stability of both pound and rupee through the international
crisis.119 But by early 1932 the urban end of the money-market
began to ease. The Imperial Bank of India bank rate reached its
highest point, at eight per cent, in December 1931 and then fell
away rapidly to four per cent by the following July and 3~ per
cent from February 1933 onwards. 120By December 1932 the
exchange banks in Madras had cut their interest rates because
of the embarrassing flood of deposits which they found difficult
to use. 121The flow of gold from the rural areas to the export
market also helped to transfer creditworthiness from country-
side to town. The gold passed upwards through indigenous
bankers and pawnbrokers to the jewellers and specie-brokers in
Madras and Bombay. As the 1934-5 Income Tax Report noted,
the funds which these urban dealers realized from the sale of
golf often went into gilt-edged securities-assets which urban
operator's could used as security for loans from the modern
banks. 122'The loss of confidence in the indigenous bankers',
noted a Kaveri valley man in 1930, 'has resulted in the with-
drawal of the money invested with them by the caei\alist public
and its deposit with the joint-stock banks who as a consequence
suffer from the glut.'123
The main sources of urban savings had prospered from the
conditions of the depression. Big merchants who survived the
rationalization of the produce markets were if anything in a
stronger position than before as a result of the carnage among
their lesser colleagues. Government officials and professional
ll9 KT. Ramakrishnan, 'Joint-stock banking in India', pp. 87, 195.

l20 B.R. Tomlinson, The PoliticalEconomy_of the Raj 1914-47:The Economics
of Decolonizationin India (London, 1979), pp. 36--7.
121The Indian Commerce,1, 2 (1933), pp. 33-6.
122Reporton theAdministrationof the IncomeTax in the MadrasPresidencyfor
1934-5.
123 G. Balasubrahmanyam, MPBC, II, p. 423.
'THE MARKETS / 181
men, many of whom were on fixed (or nearly fixed) incomes,

became richer in real terms as prices fell. At the same time, rural
savings began to gravitate more towards urban institutions. One
economist noted that cultivators' and moneylenders' nervous-
ness about produce prices and about government debt legisla-
tion had by 1938
to some'extent diverted savings into the purchase of land and houses.
But here again fear of tenancy legislation on radical lines checks the
tendency to invest in lands. Some of the prosperous joint-stockbanks
and the well-established co-operativebanks, Provincial, Central and
Urban, have attracted deposits even from the villages at low rates of
interest. There is indeed,a glut of money and the problem is to find
safe outlets.124
Largely because the depression also saw a spurt in urbaniza-
tion, one investment that still seemed secure was urban 1and.
The scheme to expand Madras City, and 'particularly to build a
new middle-class suburb in the west in Mambalam, attracted
investments not only from·city landholders and financiers, but
also from upcountry bankers•and landowners. 125 Much mote
capital than before was, however, diverted towards joint-stock
enterprises. The total numoer of joinf'-stock companies regis.-
~tered in Madras rose from 679 in 1925-'.6to 1577 in 1939-40, an'.d
their paid-up capital from Rs 1,233 lakhs to Rs 2,209 lakhs. 126
This was, of course, not really a revolutionary transformation,
and even these figures tend to over-estimate the extent of
change. A large proportion of th~ capital (about a quarter) was
in banking institutions, and mucK of the rest was in small trading
companies-mostly old family business which had been fitted
into the legal framework of joint-stock enterprise. Yet there was
a significant increase in speculative; institutional investment in
urban rather than rural enterprise. From the early 1930s the
124 K.C. Ramakrishnan, 'Debt legislation and rural credit in Madras', p. 644.
125 See the correspondence about buying land in Mambalam'in the early
1930s in the R.K. Shanmugham Chetty papers, Nehru Memorial Museum,
New Delhi.
126 Figures from Joint-stockCompaniesin B1itishIndiaand in the Indian'States
of Mysore etc. (annual); see also Report on the Working of the Departmentof
IndustriesJn the MqdrasPresidency(annual).
major newspapers catering for an Indian readership began to

carr,y advertisements for share-issues in new public companies.
These were most commonly for cement agencies and electrical
supply companies 127 (both an offshoot of urban growth), cotton
mills (on which,more·below), and banking companies, 128 but
there were also flotations to start sugar mills, steel plants, paper
mills, and cinema companies. 129 Some indication of the different
interests that combined to float these enterprises can be had from
the lists of their. directors. Madras Sugar Ltd, whj.~h planned to
build a large sugar mill in the Arcots plain, included a major
zamindar from the region, two principal merchants from
Madras, and four retired government officials.130 The Srimati
Sugar Mills Ltd which planned to build a similar mill in Ti.ruchi
district, had three of the biggest landholders of the district, a
Nattukottai Chettiar banker, and two M4slim merchants. 131 The
directorate of the East Ramnad, Electrical Supply Corporation
included two local landlords, six professional men, two local
merchants from the produce-market, and one banker from each
of the Chettiar, Marwari, and Kallidaikuricpi, Brahman. com-
munities; each had subscribed Rs 3,000.132 Madras Pictures Ltd,
set up to make and distribute cinema films, was led by one of
the biggest Vellala landowning and professional families of the
Tambraparni valley, and had two other local landlords, a
127 See for example: South Arcot Electricity Distribution Company, The
Hindu, 14 October 1933; Vizagapata,m Electrical ~upply Company t The Hindu,
4 September 1933; Karaikal Electrical Supply Company, The Hindu, 27 October
1934; Cuddapah Electrical Company, The Hindu, 15 October f935; East Ram-
nad Electrical Supply Company, The Hindu, 9 January 1937. '
128 See for Example: Carnatic Investment;frust, The Hindu,,18 January 1937;
Jai Bharat Insurance Company, Th~ Hin4u 7 February 1931; Madras People's
Bank, The Hindu, 12 December 1933; Bank of Hindustan, The Hindu, 23
December 1933; Indo-Carnatic Bank, The Hindu, 17 November 1934; South
India and General Insurance, Justice, 23 March 1931.
129 Indian Steel Rolling Mills, The Hindu, 10' t,.pril 1934; Hindustan Tobacco,
The Hindu, 12 October 1935; Vizag Sugars, The Hindu, 5 October 1935; Movie
Co., The Hindu, 6 October 1933; Madras Pictures, The Hindu, 6 May 1936; Star
of the East Films, The Hindu, 11 November 1932.
130 Madras Sugars, The Hindu, 3 December 1934.
131 Srimati Sugar Mills, 71,eHindu, 2 February 1937.
132 East Ramnad Electrical Supply Company, The Hindu, 9 January 1937.
THE MARKETS/ 183
lawyer, an engineer, and a produce metchant-on its directorate,

and had already attracted i11.vestmentsamong the landholding
community of the far south. 133National Movietone Company
Ltd represented an alliance between some of the l?igge,stland-
holders of the Kaveri an~ Kol)gunad areas, a Chettiar banker, a
:M;arwJlriban!<er, and two small-town merchant~: 134
'The year 1933--4',recorded the report of the Madras Depart-
ment of Industries, 'witnessed the highest number of new regis-
trations [of companies in Madras] since the Indian Compa:nies
Act came into force, namely 167, as against 152 in the previous
year.'1 35The number of registrations continued to be high in
subsequent year: 196, 185, 23!>.Th.e increase of investment in
joint-stock companies soon led to the formation of a sto~k
exchange. Earlier an exchange had been ,formed in Madras
during the speculative boom following the first world war, but
it had qqickly stumbled to a halt and been closed dmyn in
i924. 136 One Indian and two European broking firms contim,1.ed
to operate in Madras after the exchange closed, but business was
slow. 137However, as the pace of investment im;reased in .the
mid 1930s, four new broking firms were founded and several
other small firms began to deal in shares. Without regulation
and with a lot of ~oney chasing investment outlets,,the wa:y
was paved for a rather unruly market. As a government official
noted on .the subjE;ctof the smaller brokin~ compani'es, 'their
means are,pieagre and they cannot be relied upon for regular
~eliveries and fulfilment of, pbligati9ns' .138In September 19?7
the major firms established a stock exchange association as a
tactical P,loy to force the less substaf!tial anp. wayWard firms out
133Madras Pictures, The Hindu, 6 May 19~6.

134 NationatMovietone, The Hindu, 4 April 1935.
135Report on the Working of the Department of Indusfries in the Madras
P1·esidencyfor 1933-4; p. 14.
136 Natarajan, The CapitalMarke~,p. 17; S. Narayvnaswamy, 'History of
Madras Stock Exchange' in E'.R. Krishnamurti ted.): Madras Stock Exchange
Silver JubileeSouvenir 1937-1962 (Madras, 1962), pp. 33-5.
137.
Dvt 1518, 13 June 1939.
138B.V. Sri Harl Rao Naidu, Registrar of Joint-stock Companies, 13 Decem-
ber 1938, in ibid.
of business. The Association dealt little in exchange and transfer

of funds, and functioned more as a channel for initial invest-
ment:
The business on the Madras Market is 90 per cent investment as the
type of investor in South India is more conservative th<1nelsewhere
and desires to invest money only hoping to obtain regular returns
against uncertain returns he used to get on his private loan and
mortgage investments. His anxiety has also been to invest money in
a manner he can easily liquidate into ready cash should need arise.139
The bullish character of the market enabled the small firms to
continue in business, outside the new association, and to con-
tinue to operate rather waywardly. As the Madras Mail re-
ported: 'Then there is the flotation racket. It has been stated that
there have been a large number of companies promoted during
the boom, and the public have invested in these companies and
lost money by heavy depreciation' .140 There were a number of
accusations that smail broking firms aded as the paid agents of
companies anxious to raise capital, and that the naive investor
was consistently in danger. 141
Much of the footloose capital in the mid 1930s gravitated not
towards industrial or trading enterprises but towards new sorts
of financial institutions. One set of institutions which profited
from this trend, and did help to channel finance back to the
countryside, was the co-operative movement. From 1905 to the
depressionrthe-Madras government put a lot of money into
forming cq-operative credit societies, which it hoped would
replace the perfidious moneylender in the business of rural
finance. There was, of course, no such benevolent transforma-
tion; the co-operatives were by and large taken over by money-
lenders and. dominant landlord-cum-lenders in the villages, and
their mode of operation began to approximate to th.ose of local
moneylenders despite the panoply of regulations designed to
force them to operate otherwise. Several reports noted that the
co~operative societies had not become communal societies of
l39 Note from Madras Stock Exchange dated 25 February 1939, in ibid.
140 MadrasMail, 22 October 1938.
141 Dvt 1518, 13 June 1939.
THE MARKETS/ 185.
independent growers, but rather 'l'ings of moneylenders, who

found the !endings from central banks to local co-operative
societies a useful way to swell their own capital. 142 In one of
Gilbert Slater's surveyed villages, for inslance, the head of the
co-operative was also the biggest local Jandlord-cum-mm:;i.ey-
lender and the village headman. 143 Co-operative loans fitted
well into the pattern of local finance. While they were supposed
to be fixed term for productive purposes, more and more they
became, in effect, long-term'loans to keep small landholders and
tenants afloat. By the mid 1920s, forty-eight per cent of all
borrowings were to cover old loans, in other words, to sustain
an existing indebted position. 144 The result was that when the
depression struck, they suffered in the same way as other credit
institutions. Government discovered that the expansion of co-
operative credit (such as it was, and it was n'ot yet a significant
figure in overall terms; the Banking Enquiry reckoned seventeen
per cent but this was certainly an overestimate) 145 reflected not
a steady increase of enthusiasm among landlords for the co-
operative principle, but a growing dependence of certain deb-
tors on the co-operatives; interest rates were low so debtors
rarely repaid, but re-negotiated their loan at a higher level. When
the depression forced the co-operatives to restrict the gross
expansion of loans, there was immense trouble. The proportion
of overdue repayments to total loans outlaid roseirom twenty-
six per ceritin 1919-20 to forty-seven per cent in 1929-30 and
seventy-one per cent in 1933-4. Between 1929 and 1937, a fifth
of the credit societies had to be wound up, reducing the number
from 12,478 to 10,041, and even among those that remained.it
was reckoned.that only one quarter were really at work, while
142 R.M. Hood and K. Devasikhamani in GB: Royal Commissionon Agricul-

ture in 1ndia,Vol. III, Evidencetakenin MadrasPresidency(London, 1927), p. 647.
Dr P. Subbarayan in ibid., p. 549; B. Sitarama Rajµ, MPBC, II, p. 47; K.S.
Seshachela Iyer, MPBC, II, p. 428..
143 Thomas and Ramakrishnan, Resurvey, p. 113 (Gangaikondan).
144 B.V. Narayanaswamy Naidu, The Co-operativeMovement in the Mttdras
Presidency(Annamalainagar, 1933); Annual Repo1·ton the Workingof the Madras
Co-operativeCredit SocietiesAct.
145 MPBC, I (Report), pp. 81-2 .•
the others were hide-bound by a total of 5 crores laid out in

loans that had.become frozen.146
But while the idea of Raffeisen-style co-operative credit
societies had apparently proved a great failure, in the 1930s the
co-operative movement devised institutions which proved use-
ful because they filled gaps created in the_credit-market by the
peculiar strains of the depression. One was the co-operative
marketing sodeties, which we have already noted. Advocates
of the principle of co-operation disliked these institutions, be-
cause they were 'impure'. They provided, in effect, a way for
grower-traders to market their crops, and find the finance for
marketing, when the indigenous bankers had withdrawn from
the market and the urban merchants were reluctant to make
advances against crops. They worked on funds that were raised
partly from local, deposits, but mainly from the modern-style
banking sector. These societies began in the mid 1930s and by
1942-3 they had 61,118 members, made loans of Rs 196.76lakhs
against stocks of goods and handled 5 crores worth of pro-
duce.147 They were still only a small part of the marketing
structure, but in some places (particularly the cotton area of
Coimbatore, and sugar-growing areas in Coimbatore and the far
south) they were of considerable local importance. 148 The other
rtew co-operative institution was the Land Mortgage Banks.
These were set up to provide larger, longer-term loans than
those offere~_by_t!te ordinary credit societies. For the investor,
they provided a means to lend money, essentially on the security
of land, but with the added attractions of greater institutional
s'ec'urity than was usual and, in the first year of their operation,
a government ~arantee of the rate of interest. Land Mortgage
Banks were started in the districts from 1925, but made little
progress because of their failure to attract deposit and share
capitaf. In 1929, however, a Central Land Mortgage Bank was
146 Figures from Annual Report ·on the Working of the Madras Co-operative
C,·edit SocietiesAct; P. Sri Raman, Resuscitation of rural credit societies in
Madras', IJE,XXII (1941-2).
147 Zacharias, Madras Agriculture, p. 218.
148 P.V. KrishnaAyyar, 'Cq-operation in agriculture with special reference
to sugarcane crops in Coimbatore district', MAJ,XXVIII,p. 12 (1940).
THE'MARKETS / 187
established. This central agency, raising money on.debertores,

proved rriuch more successful; particuJarljdn the conditions·6f
easy money in the towns in the' 1930s: It sfc\rted out offering a
rate of interest of .6"or 6h per cent,· but after :1934 this dropped
rapidly and by 1936-7 was at the very·low-le..vel oi ~h,per.ce:ht.
By 1940 the Central Land Mortgage Bank debentures.had;.at-
tracted 168 lakhs. Roughly half of. tllis came frortt"shdrt-term
deposits oflocal government boards and another 38 lakhs cam'e
from within the cq,-operative n'rovement. However· 12 lakhs w«;re
from individual deposit9rs and 22 lakh~ were -channelled
through joint-stock banks and insurance companies. It·was:still
a small institution in the context of the overall money-market of
the province, but.it had grown quicl<ly and successfully against
the background of the depression.l~9,.
I
Meanwhile, by far the biggest expansion among financial
institutions came in the business.of joint-stock banking. The new
joint-stock banks grew directly out oHhe wrecl$ageof the.bazaar
money-market. Local· joint-stock bar\ks were not entirely new.
The Indian Bank dated .from 1907, and by 1925 ftrere were eleven
other small joint-stock banks with.paid-up capitals ranging U:p
to Rs 3 lakhs apiece in the upcountry towns of Tamilnadu. 150
These banks expanded in the 1930s and several new ones were
founded. The first· and biggest of these new flotations was. the
work of the-leading member of the. Nattukkottai Cnettiar.-com-
munity. The Chettinad Bank began in 1929:with one' crore of
paid-up capital and immediately became the second biggest.of
the joint-stock banks based. in the Tamil districts. In 1929 it
attracted deposits of 109 lakhs. 151 It was quickly followed by.the
Bank .of Hindustan, formed by the leading north Indian in-
digenous banker of Madras City, in association with sbme
professional colleagues, to take over the work of the Madras
branch of the Central Bank of India. Its ,paid-up capital of 10
lakhs, while much less than that of the Chettinad baI\k, imme-
149 Syed Sha Ali Hussain, Co-operativeLand Mortgage Banks in Madras

(Madras, n.d. (probably 1941)).
l50 StatisticalTablesRelatingto Banksin India,1925(Calcutta, 1927),pp. 12-18.
151 MPBC, I (Report),p. 28; Natarajan, 'A.study of the capital market', p. 93.
diately made it the third biggest of the joint-stock concerns. By

1939 it had attracted deposits of nearly half a crore.152
Each year of the mid 1930s saw the flotation of a large
number of joint-stock banking enterprises. In 1933-4 there were
sixty-four (this refers to banking, loan and insurance), in 1934-5
there were forty-four, in 1935--6thirty-five and in 1936-7 forty-
seven.153While some of these were associations of nidhis or
indigenous banks transformed, others offered shares on the
open market. These included the Indian Relief Bank, whose
directorate consisted of landowners, lawyers, and jewellers; the
Inda-Commercial Bank which was essentially founded on the
capital of the Kallidaikurichi Brahman community; and the
Indo-Carnatic Bank which included lawyers, landlords from the
Kaveri delta and the northern portions of Andhra, and mer-
chants from Madras and Bangalore. 154Some of the companies
floated were very small and others simply did not succeed, but
forty-one new joint-stock banks were founded in the Tamil
districts·between 1931and 1938.Most of them were small affairs,
with paid-up capital and reserves of between half and 5 lakhs.
Only eight of them were in Madras City itself while twenty were
in Kongunad and the remainder were scattered through the
other mofussil towns. The number of bank offices,including the
various branches of each bank, in Madras City had grown from
seven in 1916 to twenty-two in 1931 and then spurted to eighty-
six in 1946.Meanwhile the number in other parts of Tamilnadu
grew from seventeen in 1916to forty-five in 1931 and then raced
ahead to 276 by 1946.155Moreover, while the investment in
banks' joint-stock capital thus increased, the volume of deposits
rose even faster. Merchants, moneylenders, and rich agricul-
turists were clearly now placing their short-term savings with
152 Vidya Sagar Pandya to T.R. Venkatarama Sastri, 9 August 1938,

Venkatarama Sastri papers, Nehru Memorial Museum, New Delhi; Natarajan,
The CapitalMarket, p. 17.
l53 Figures from Reporton (he Workingof the Departmentof Industriesin the
MadrasPresidency(annual).
154 The Hindu, 8 February 1933, 23 March 1934, 17 November 1934.
155Reserve Bank of India, Bankingand MonetaryStatistics of India (Bombay,
1954), espedally Statement 29, pp. 357-61.
THE MA~ETS / 189
the banks rather than with the local moneylender or· Bazaar
banker. On an all-India scale, the total volume of deposits in the
Imperial, e~hange, joint:,5tock, co-op_erative,.and post-office
savihgs banks rose from Rs 292.66 lakhs in 1930 to Rs 427.03 in
1939.156
This flood of capital into intermediate financial institutions
-insurance companies also enjoyed a boom and several of th~
were floated on the open market by similar alliances of direc-
tbrs157-.suffe1ed a set-back in 1937-8. As with the rush to the
produce-market in the pre-depression days, the rush to the
security of banks, shares and insurance policies proved too
erratic and uncontrolled. The crisis was sparked off by the
failure of the Travancore National Bank with its headquarters
in Trivandrum, the capital of the. princely state of Travancore
on the west coast. The failure of this bank was to a large degree
the result of a feud between the Dewan of the State and a group
of Syrian Christians which included the owners of the bank. 158
Yet whatever the proximate cause, the failure was to some extent
the result of the eccentric expansion of investment in Travancore
National as in other banks. A handful of new, small banks in
Tamilnadu, including A.K. Shah and Kamala Vilas,159and one
o{ the major broking compar'iies in the Madras Stock Exchange
Association (Hudson, Tod and Co.),160went down in the same
crisis of, confidence. And there was a general, run on bank
deposits that threatened to undermine even the prestigious
Bank of Hindustan. Eleven lakhs of deposits. were withdrawn
from this bank in three months in the middle of 1938. Four
directors resigned when it was discovered how reckless the
bank's officers had been in lending out, and how many bad
debts the bank had acquired.161
156K.T. Ramakrishnan, 'Joint-stock banking in India', pp. 87-95.
l57 For instance, Jai Bharat Insurance Company, TheHindu, 7 February 1931;
South India Fire and General Insurance, Justice 23 Mar. 1931.
158C.P. Matthen, I Have BorneMuch (Madras, 1931); S.L.N. Simha, Hist01y
of the ReserveBank of India (1935-51) (Bombay, 1970), pp. 183-6.
159Vidya ,Sag';'lrPandya to T.R. Venkatarama Sastri, 28 August 1938,
Venkatarama Sastri papers, Nehru Memorial Museum, New Delhi.
160Dvt 1518, 13 June 1939.
l61 Vidya Sagar Pandya to T.R. Venkatarama Sastri, 9 August 1938, 25
This crisis completed the process of attrition which had

begun in the depression. Many of the nidhis and indigenous
banks which had only shakily made the transition to the joint-
stock format at the onset of the depression now staggered into
failure. The number of banks which had closed their doors each
year had been growing since 1931 and it reached a climax in
1939 when banks with paid-up capital totalling Rs 1112million
joined the ranks of the failures.162
The collapse of the bazaar money-market had paved the way
for the growth of a modern banking sector in ·Tamilnadu ....
This not only assiqted the growth oh:rrb·an industry but also
helped to mould the shape of the industrial sector. Meanwhile
it also had a bearing on rural credit and the business of produce
trading. The co-operative societies channelled funds back into
the countryside and a few of the joint-stock banks specialized
in lending in the commercial crop markets; the Nadar bank in
the far-south tract and a number of restructured nidhis in Kon-
gunad were active in financing the cotton trade: But most of the
joint-stock banks, even most of those which had recently
evol\l'ed out of the bazaar tfade, were much more careful-than
before about lending on agricultural goods. They preferred to
lend working capital to industrial concerns and provide turn-
over facilities for the urban retail trade. They would generally
only lend on produce when it had advanced fairly far through
the marketiIJ.g prQcess, and then only through trusted inter-
mediaries. Rural money-lenders l:lnctcultivators who wished to
play the produce market now found it much more difficult,
though 6f course not impossible, to command credit from urban
'sources. The rural money-market had been thrown back more
on its own devices.
August 1938, 17 January 1939, 31 January 1939; Venkatarama Sastri to Pandya,

26 January 1939; Veni<atarama Sastri papers, Nehru Memorial Museum, New
Delhi.
162Reserve Bank of India, Bankingand CommercialStatistics 1954, Table 22,
pp ..279--81.
THEMARKETS
/ .191
TABLE 4.4
BANKFAILURES
INMADRAS
PRESIDENCY
1921-45'
Mmfras Presidency ,
1 • '.!.
Rest of India '

(_j
' .
Number Paid-upc'apit'al Number of Paid-upcapital
of banks (Rs 000), ' banks (Rs 000)
1921 1 11 6 114 I
1922 2 17 13 313
1923 3 203 17 46,143
1924 6 26 12 l,10~
1925 17 1,876
1926 5 323 9 75
1927 _, 16 '311
1928 2 52 11 2,260
1929 2 6 9 813
1930 1 3 11 4,057
1931 4 83 14 1,423
1932 9 300 14' 492
1933 6 108 20 192
1934 9 245 21 '378'
1935 10 153 41 6,443
1936 11 99 77 401
1937 21 839 43 313
1938 19 698 54 2,302'
1939 45 1506 72 985·
r,
1940 19 555 88 1,835
1941 17 369 77 ~r, 870
1942 11 239 39 1,168,
1943 10 232 49 ·517
1944 3 175 25 452
1945 7 277 20 197
SOURCE: Reserve Bank of India: BankingandMonetaiyStatistics,Table 22,
pp. 279-81.
CONCLUSION
Tamilnadu' s agriculture became significantly more commercial

during the period of high colonialism from the late nineteenth
to the early twentieth century. Yet Tamilnadu' s accommodation
to the expansive world economy was not simple, but complex
and varied, and the variations matched closely· with regional
differences. The plains produced for the markets of Europe in
the classic fashion, but Kongunad produced increasing! y for the
home market, while the valleys evolved a little 'sub-colonial'
relationship of their own in the eastward trade. The system of
production in each of the three regions was closely intertwined
with the mechanics of marketing. Indeed the organization of
production and the organization of marketing are best viewed
as two parts of the same process. The character of both depended
crucially on the leading groups in local society in each re-
gion and how they reacted to the opportunities and difficulties
created by increasing demand. The mirasidars of the valleys
faced the least promising market for agricultural produce owing
to the competition of southeast Asian producers in agricultural
tracts with considerable natural advantages. The mirasidars
tended,to ignore the· lures of the market and neglect the possi-
bilities of transforming the local production system. The leading
men of the plains made a much more substantial adjustme~t.
Demand for groundnut and cotton was growing rapidly and
tney eagerly-'Used-their command over labour and the local
surplus to fulfil this demand. But in their case the market was
the most obviously 'colonial' in <;:haracter;the products were
destined for foreign consumers, the local buying agencies were
chiefly foreign either in ownership or capital provision, and in
the case of the far-south cotton tract one foreign company dom-
inated and dictated to the local marketing machinery. In such a
situation, the cultivators saw little point in penetrating the mar-
keting structure. Cultivators were insulated from the buyers and
exporters by a layer of intermediaries, who cushioned agrarian
society· against the transformative potential of commerce. In
Kongunad, however, the cultivators were increasingly gro~ng
for a local urban market which they could pay to their own
THE MARKETS/ 193
advantage. Their more wholehearted immlvement i~ the busi-

ness of commerce·was reflected into their strategies;of labour
organization, into the local flourishing of credit institutions, and
into the local growth of a proper market in land.
Rural commerce proved to be very unstable, and the ~tate
did little to check this instability or to create and sustain institu-
tions which would help farmers and traders to withstand:the
shocks. Commercial law and commercial institutions were
badly underdeveloped and.this underdevelopment encouraged
instability. Between.1880 and 1950there were major rem::ganiZ<\-
tion of the marketing structure in each of the regions. Each
reorganization saw startling shifts of geographic location and
large changes in the peitonnel involved. The early phase, when
foreign demand was growing for the first time in a substantial
way in.the late nineteenth century, saw the emergence of a loose
and scattered marketing structure in which foreign companies
played a large direct part and to which virtually only the
privileged elites of the countryside had any independent access.
The second phase, during the extraordinary growth·of price and
demand in the early twentieth century, saw ·the multiplication
of marketing centres, the multiplication of financial institutions
and financiers, and the appearance of strings of commission
agents and other intermediaries. While of course this swelling
of the ranks of businessmen was evidence. of the success of the
market machinery in engrossing much of the value of agricu1-
tural produce, the end result of this proliferation was to make
the market more transparent and eventually to allow a. wider
section of the rural population to make a profit from commercial
agriculture. In the third phase of contraction and rationalization
after the depression, many of the smaller marketing towns were
by-passed, many of the intermediaries were cut out of the
marketing chain, many speculative financial institutions and
operators were swept away by the cold wind of competition.
This latter phase pushed the cultivators and locatdealers of the
valleys and plains back into a more remote, circumspect, and
subordinate relationship with the marketing machinery; but at
the same time it dragged the Kongunad farmers stumbling
forward into a greater involvement. ·
Moneylending ·and banking were intimately connected with

the growth of rural commerce. Just as it is. difficult to separate
.the business of selling the crop from the business. of producing
it, so also it is difficult to separate the business of financing the
crop as well. In many cases, of course, thethree,roles of grower,
trader and financier were concentrated in a single man or family.
This did not necessarily mean that a-few prominent individuals
had a stranglehold over land, trade, and credit. There certainly
were many big 'bosses' of this sort, particularly in the chy,parts
of lhe plains, but they were not unqualified despots and they
were not without a good number of lesser rivals. Virtually
·everyone who realized a surplus from agriculture tried his hand
at trade and moneylending, and thus there were many appren-
tice despots who created a competitive commercial environ-
ment, particularly during the expansive phase which preceded
the depression.
Inra countryside· such as this it makes no sense to -view
agriculture through the theoretical retina of the individual,
independent peasant, toiling away in the fields and wrestling
hopelessly with lhe externalforces oHrade and moneylending.
It does not really make sense to seize on the-individual landhold-
ing, or individual cultivating family, as the-crucial unit of pro-
duction. Few farms enjoyed any ch'ance of, economic and
political. independence. It would perhaps be best to view in-
clividual holdings...as.work units in a complex production sys-
tem.• The principal ·unit of organization was· an 'agrarian
manager' -a landlord, •trader, arr.creditor who provided the
:facilities (credit, anci]J.ary resources, perhaps land, decisions)
,necessary for production and who encoutagecLor forced other
,farmers to,provide the-labour. But.then that view·is too simple,·
•for these units of agrarian management themselves were not
discrete. Farmers .migh~.take. tenancies, loans, assistan.ce from
several, different •patrons, and might produce for several dif-
ferent marketing chains. Intricate patterns of money lending and
clientag~ traced out these interwoven netw.orks ,of agrarian
management. Moneylending was an intrinsic part of the system
of, production. Of. course it served to ~oncentrate control over
wealth, over the surplus, but in doing so it was reflecting the
THE MARKETS/ 195.
fundamental inequalities of,local society, not:creating them. To.

under~tandJhe full import of money we need to know not only,
how wealth was concentrated, b~t -also,•how itJWaS'disp~rse,d
again. To 11nderstand the role. of credit, we need·tafook at the
circuits of agrarian. capital, 'not just at the predations ~9f the
moneylender. This can, however, only be done 'in a veryimpres·
sionistic way.
The expansion of demand for rural produce required an.
expansion of liquid capita}..i._both·to finance a larger annual
turnover in the market, and to expand productive·facilities. In
the early years, much of this. extra capital was provided in
annual advances from foreign, banks and companies. As time·
went orr;more was accumulated among local traders, financiers
and growers •from the·profits of previous years' transactions.
I'
Certainly the control over this local capital was exceptionally
concentrated in the hands of the landed and commerciat elites.
Even so, very little of the accumulated tapital was allowed to
leak out (I am, of course, 'discounting here the profits made by
foreigl\ banks and export houses). Some was undoubtedly'<li-
verted into hoarding, as the rising stocks of ·imported gold
clearly showi· yet as has already been :pointed out the value:.of
gold st&ks was not necessarily· removed from the circuit .of
active capital since it was substantially replaced by credit instr.u-
ments. Some was undoubtedly spent on .consumption goods
and luxuries, but again there seems to be little· ·evidence of
profligate spending'On conspicuous items. Most-of the profits
of production, trade and finance seem to have been ploughed
back into the local economy. Much of this remained in the form
of merchant capital, but some also went into sustaining and
expanding the productive base of the agrarian economy.
Acreage was extended, wells sunk, more expensive seeds used,
more acres double-cropped, and these and other forms of exten-
sion and intensification required increased spending on fixed
and working capital.
The tremors of the depression broke open the circuit, and
occasioned a considerable shift of capital resources. A large
amount of accumulated capital was simply wasted-lost in the
slide of prices, stranded by the shifts in market-location, by-
passed by the changes in market demand, consigned to the

scrap-heap after the speculative booms in rice-milling, oil-press-
ing, and other investments in processing. The swing in the terms
of trade between rural and urban goods, the attrition of money-
lending and bazaar banking, and the uncertainty about the
future of demand for agricultural produce, destroyed much of
the machinery which had redirected such a large proportion of
the local profits of agriculture back into the cycle of production.
In the aftermath of the depression there was almost certainly a
decline in investment and reinvestment in agriculture which
caused acreage to slump and acreage under commercial crops
to slump even further. The decline of investment may very well
have encouraged the move towards increased fallowing as a
technique to maintain productivity without heavy fina~ial out-
lay. Meanwhile, from now on capital was drained away from
countryside to town much more erµphatically than before. In
much of the region rural marketing came more under the ul-
timate control of urban financial institutions which channelled
much of the returns into the urban sector. A rentier economy,
staffed by speculators in good-quality land and investors in
joint-stock banks, started to take a much firmer hold. At the
same time the rural economy was becoming steadily more
dependent on the demand issuing from the local urban economy
rather than directly from the overseas market. The future of the
countryside now rested on the success with which the region's
urban economy transformed the value extracted from agricul-
ture into a generator of prosperity.
Chapter Five
Lenders and Debtors: P~njab

Countryside, 1880-1940*
NEELADRI BHATTACHARYA••
Peasant indebtedness in Punjab was more pervasive than in

most other parts of India. In.1930, the total debt ofthe province
was estimated to be Rs 135 crores, half of 'it in usufructuary
mortgage. 1 According to surveys in 1929-30, only 13 per cent of
the proprietors in Punjab were free from debt: the corresponding
proportion in U.P. was 46 per cent, in Bihar and Orissa 35 to 50
per cent, and Central Provinces 41 per cent.2 Average debt per
cultivating family was also high in Punjab: Rs 628 compared to
Rs 189 irl:Bihar and Bengal, Rs 199 in t~ntral India ar\t:IRs i04
in East U.P.3 What does this imply? Is this evidence of the
common view of colonial agriculture:-thatusury being profitable
diverted capital away from production, that a mass of im-
poverished peasants ~as inextricably integrated into a cycle of
" Extract from Neeladri Bhattacharya, Studies in History, 1, 2, n.s. (New

Delhi: Sage Publications, 1985).
•• I wish to thank Sabyasachi Bhattacharya, Sumit Guha and Chitra Joshi
whose comments and editorial help assisted me in preparing this article for
publication. 1
r1ne PunjabProvincialBankingEnquiry Com'mittee(hereafter PBEC)Report,

1929- 30, Chapter IV
2,Surveys of ProvincialBankingEnquiry Committees(hereafter PBEq ·sup-
plemented by Malcolm Lyall Darling's enquiries in Punjab. M·.L.Darling. The
PunjabPeasantin Prosperityand Debt,1929,fourth ed., 1947,reprint New Delhi,
1977, p. 5.
3 All IndiaRural CreditSurvey, Reportof the Committeeof Direction(hereafter
AIRCS), Vol. I, Part I, Table 5.5, p 193. The figures relate to1951-2.
forced ·commerce, subordinated to the power of trader-money-

lender?4
The volume of debt as such tells us little about the internal
conditions of the rurql economy unless we know who was
lending, to w,hom, and for what purpose. Loans mediated dif-
ferent types of relations between debtors and lenders. In the
Punjab countryside, as elsewher~ tn India, 5 moneylending was
not restricted to any caste or group. Apart from the professional
sahukars,one could find peddlers and vendors, big landlords
and rich peasants, village drummers, Mochis, Tarkhans, Jhi-
wars, even faqirsand widowed women lending out mo,ney..Later
we also had the institution of co-operative society. But all types
of lending obviously cannot be assimilated to each other. It is
necessary t0 distinguish the forms of loans in terms of their func-
tipns, <\ndthen assess their implication and relative significance.
Such a separation of forms is a logical one; historically they were
often inter-related. After a discussion 0£these issues, one can
return to the ques\ion of the volume of debt.
FORMS OF LOANS•
An initial distinction can be made between the usurer and
1 For a discussion on credit' re,ations in other regions of India see B.B.

Chaudhuri, 'Rural Credit Relations.in Bengal, 1859-85', Tl;eIndian Economic
and SocialHistory Revfew (hereafter IESHR), Vol. VI, No. 3, September 1969;
'The Process of Depeasantization in Bengal and Bihar, 1885-1947', Indian
HistoricalReview(hereafter IHR),Vol. II, No. I, July 1975, P.J. Musgrave, 'Rural
Credit and Rural Society in the U.P., 1850-1920', in C. Dewey and A.G.
Hopkins eds., The ImpeiialImpact:Studies in the EconomicHistory of Africa and
India (London, 1978); S. Amin, Sugarcaneand Sugar in Gorakhpur:An Inquiry
into PeasantProductionfor CapitalistEnterpriS(:in ColonialIndia (Delhi, 1984).
For opposing theoretical frameworks of characterizing credit relations ~ee A.
Bhaduri, 'A Study of Agricultural Backwaroness under Semi-Feudalism',
EconomicJournal(hereafter EJ), March 1973; J. Banaji, 'Capitaijst Domination
and the Small Peasantry: Deccarf Districts in the Late Nineteenth Century',
Economicaud Political Weekly (hereafter EPW), Special No., August 1977.
Amongst official accounts on ,the problem of debts and debtors, S.S.
Thorbum's, Mussalmansand Moneylendersin the Punjab (Edinburgh,-1886),
and Darling's The PunjabPeasant,op. cit., remain classics.
5 Musgrave, op. cit.; Chaudhuri, 'Rural Credit Relations', dp. cit.
LENDERS AND DEBTORS: PUNJAB COUNTRYSIDE/ 199
merchant-moneylender. 6 The object of the usurer is to earn a

high rate of interest. He is indifferent to the specific use made
of his loan. He is prepared to operate in the most insecure
impoverished tracts, amongst the most distressed classes, and
often without security. Conditions which account for the ex-
treme precariousness of lµs operations also provide the basis for
the ..exorbitant rates he charges.,In Punjab, the Pathan money-
lender perhaps personified ust.Uy. He was to be found every-
where, doling out small sums at rcftes of interest ranging from
24 to 200 per cent.7 No security was demanded. Advances were
on pro-notes. For security he relied on his. own reputation. He
was known as·a bully, and feared as a Pathan. And the danda
(the stick) came· to signify the ,Pathan vyay of recovery.s
But usury was not restricted to any distinct class. Small
dealings amongst various sections added ,to the operation of
usury capital within society. Petty usury, for instance, was
common amongst women. They gave out their little savings
from ho~Sehold expenditures, or meagre earnings from labour.
Rates of interest charged were high: usually 1 to 2 pice (i.e., 18.75
per cent to 37.5 per cent per annum), and at times 1 to 2 annas
(75 to 150 per cent per annum). 9 Amounts of loan varied from
Rs 25 amongst poorer classes to Rs 300 or so amongst others.
The security was usually jewellery. I~is impossible to form an
estimate 9f the vo\ume of such transactions amongst women,
for they were kepf a secret, often even from their husbands. 10
But the practice was widespread amongst all classes and com-
munities, and provided an independent source of women's
earning. Many such small transactions at high rates of interest,
amongst poorer classes and communities can be classed as
usury.
While this form of lending was common everywhere·the
6 K. Marx, Capital;Vol. III (Moscow, 1971), Part IV.

7 A. l!Jllah, Co-operativeMovement in the Punjab (London, 1937), p. 55;
PPBEC,Ev., Vol. I, p. 179.
8 PPBEC,Ev., Vol. I, p. 179.
9 Ev. Ahmed Shah, Inspector, Co-operative Societies, Gurdaspur, ibid.,
p. 425.
10 Ibid.
professional usurer flourished in the most insecure backward

tracts, partic:ularly in south-east and south-west Punjab. In
regions of expanding cultivation of commercial crops
moneylending became more directly linked to production and
marketing.
The object of the merchant-moneylender was not to earn
interest as such, but to control prices of purchase and sale, and
ensure regular channels for the supply and disposal of com-
modities. Since rural traders could not always determine the
price at which they sold their stocks to wholesalers in mandis,
they attempted to exercise their control at the points of supply
in the village. How far were they successful? To what extent
were peasants caught up in the familiar cycle of debt and
hypothecation of produce?
This evidence appears apparently contradictory. In 1936, a
survey of a Gurgaon village noted:
As soon as the crop is threshed, the creditors come aroun4 with their
accounts and take away (at their own expense) as much of the produce
as will cover approximately what has been advanced to the zamindar
during the previous year. The price of the grain thus taken is not
settled at the time of removal, it is only later that the account is
balanced and anything still outstanding carried forward. Thus the
zamindar is deprived of his produce without even knowing what price
he is likely to get for it, and is an almost certain loser ... The whole
system is obviously vicious and with the main portion of the harvest
going into the hands of the creditors there is little left to sell in the
ordinary sense of the term. 11
Similar evidence could be multiplied. Kamal 1909: 'The zamin-
dar is rarely able to await the turn of the market. He qsually
disposes off his produce as soon as it is reaped to the bania
middleman, and receives not cash but a book credit against an
old, but rarely diminishing debt'. 12 Rohtak 1880: 'The owners
are never free from dealing with the village bankers. The entire
produce of the harvest is consequently made over by the 9wner
to the banker' .13 Deprived of his produce 'the next day the
11 Village Survey (hereafter VS): Bhadas,1936, p. 101.
12 Settlement Report (hereafter SR): Kamal: 1901, p. 17.
l3 FamineCommissionReport:1878-79, Appendix III, p. 241.
LENDERS AND DEBTORS: PUNJAB COUNTRYSIDE / 201
cultivator goes again to him [the mahajan] and begins a new

credit account' .14 The system appears in a way, self-perpetuat-
ing: cycles of debt and hypothecation of produce being mutually
reinforcing. 15
Alternative evidence is equally plentiful. 'The Moga Jat' we
are told in 1913, 'is an excellent cultivator. He markets his
produce himself, and is always reacly to make a bit of trade.' 16
Transactions with zamindars were in ready cash. As early as
1861, Captain McNeile heard the moneylenders of Ludhiana
complaining that 'the Jats had paid off all their.debts and taken
the grain trade completely out of the hands of regular mer-
chants' P And around 1880 Gordon Walker reported from Lud-
hiana:' A Jat would not part with his grain on the spot even if
it were the custom for the merchants to go about the country,
for he expects a better price at Ludhiana; and his cattle would
be idle if he did not employ them in carrying' .18 According to a
survey (1930) of nine mandis in some important wheaMracts of
Punjab, the bulk of the wheat carried to the mandi was brought
by cultivators rather than professional traders:.e.g., Ferozepur
cantonment 68 per cent, Moga 81 per cent, Fazilka 77 per cent,
Lyallpur 60 per cent, ChakJhumra 72 per cent, Tpba Tek Singh
95 per cent, Jaranwala 78 per cent. 19 As for the place of disposal
of the marketed wheat, 84 per cent in Ferozepur, and 48 per cenf
in Lyallpur was sold in the mandi.w In Jullunder only a fourth
14 VS: Gijhi, 1928, p. 158.

15 The mechanics of this pattern of mar~eting have been discussed by many
scholars. See S. Mukhetji, 'Imperialism tn Action through a Mercantile
Function', in Essays in Honour of Professor S.C. Sarkar'(Delhi, '1976); Bpaduri,
'A Study of Agricultural Backwardness', op. cit.; E. Whitcombe, Agrarian
Conditions in North India, Vol. I, The United Provinces under British Rule,
1860-1900 (New Delhi, 1971); Bahaji, op. cit.; Amin, op. cit.
16 Government of India, Land Revenue and Agriculture Department (Rev-
enue Branch) (hereafter cited as Land Rev. & Ag. (Rev.)), April 1913, A, 32
(A).
17 Quoted in SR: Ludhiana: 1878-83, p. 124.
18 Ibid. .
19 Finance and Marketing of Cultivators' Wheat in the. Punjab (hereafter
FMCWP, Publication of the Board of Economic Inquiry, Punjab (hereafter
BEIP), No. 38, 1934, Part II, Statement II, p. 52
W Ibid., Part I, Statement XI, p. 18.
of the sales were in the village, the rest at the mandi.21 One village
survey shows 70 per cent of the marketed toria being taken by
peasants to'the central market. 22
The apparent contrariness of our evidence reflects different
aspects of the real situation. Any effort to build a general model
of marketing-credit network on the basis of one type of evidence
alone, is bound to provide a one-sided picture.
Different classes of peasants obviously marketed the pro-
duce in different ways. Indebtedness, hypothecation, disposal
of produce after harvest, and domination of the merchant-
moneylender were characteristic of the way poor peasants were
integrated to the market. Those who were not helplessly in-
debted, and owned bullocks and carts, could carry their produce
to the mandi or wait for'the prices to rise. 23 When the officials
lauded the enterprising Jats of Ludhiana, Moga or Jullunder,
they were actually referring to only one class amongst the
Jats-the more substantial peasants. Linked to this was a re-
gionai variation in the mode of marketing. In tracts where the
middle peasants and rich peasants managed to consolidate
themselves of insecure cultivation, and baniadomination.
The monopolistic control of merchant-moneylenders over
the disposal of agricultural produce was also a function of the
fragmentation of rural markets, their relative isolation. The
hold of merchant-moneylenders could persist in regions remote
from the mandis. In district Sheikhpura, where mo~t cultivators
living near the mandi marketed their own produce, tahsil Shah-
dara provided an exception to the general pattern. Here: 'For
want of regular mandis and poverty. of communications about
21 Land Rev. & Ag. (Rev.).

22 VS: Karla Gaddi Thamman, 1932, p. 88.
23 Cart-owning rich peasants marketed their own produce as well as that
6£ others, but they preferred to market on their own account and to restrict
trade as an activity s$ordinate to production. In Moga: 'The Jat markets his
own grain, and frequently a man will buy to fill up his earl'. Land Rev. &
Ag. (Rev.), April 1913,A. 42;in Ludhiana: 'The grain carried almost invariably
belongs to the man who own&'and drives the cart, for the Jats will not work
for hire, or carry for dealers. The cart is filled partly with the grain grown in
the holding to which the cart belongs, and the load is made up by purchase
in the village, or in others about', SR: Ludhiana: 1878-83, p. 139.
LENDERSAND DEBTORS:PUNJAB COUNTRYSIDE/ 203
eighty per cent of the produce is marketed locally through

"beoparis" who are agents of big arhatiasof Amritsar' .24In most
districts there were such tracts: 'which are far away from the
· large· centres and the people do not know about prices, and are
in the hands of village·banias'.25 Elsewhere, the proliferation of
mandis,the e~tension of the transport network, and competition
between purchasing agents, created a situation within which a
section of cultivators could struggle against the hold of village
sahukars.26
Many, peasants continued to dispose their produce with-
in the village because of various practical problems linked to
production and marketing. Possibilities of trading could be
restricted by the cropping pattern and the nature of labour
demand ort peasant family farms. Wherever dofasli harsala
(double cropping) was the norm, after harvesting was over,
fields had to be prepared for the secon9-crop. Ploughing and
sowing could engage all the.available familyand bullock labour
of most peasant households, forcing even those not-too-poor to
sell part of their produce immediately after the harvest, when
revenue kists ha.d to be paid and various accounts settled. 27 Busy
with cultivation, they often had no time to make a trip to the
mandi 20 to 25 miles away. Holding up of stocks could mean
loss in the case of some products. Cur had to be sold immedi-
ately after preparation since it lost weight with drying. Cotton
was likely to b~ damaged if held for too long. As the picking
24 PPBEC,Ev., Vol. II, p. 491.
25 Reportof the Indian Cotton Committee(hereafter ICCR), Calcutta, 1919,Ev.,
Vol. I, p. 147: .
26 As late as 1927,Milne reported: 'in the South-East of the Punjab ... the
village banias receive practically all the produce from the farmers and sell it
in the market', Royal Commission on Agriculture in India (hereafter RCAI)
London, 1927-8, Vol. VIII, p. 217.
27 By the twentieth century revenue was payable at the treasury in two
instalments: around 15 July for rabi and 15 February for kharif. Lambardars
collected the revenue about two weeks before these dates. Wheat 1md gram
were ready only four·to five weelss before the rabi kist. In many places
there were two kharif kists: one around)5 December and the second.around
15 February.- Cotton picking began in December and continued through
February. Since timing of the kist coincided with the busy, period of cultiva-
tion, the payment had t9 be often made through sales within the vjllage.
continued from September to January, there was a temptation

'to hand over the small amounts (to the village shopkeeper) as
they come in, rather than to collect them and then take them to
market' .'2BThe amount was daily entered on a chit handed to
the peasant, and accounts were settled at the end of the month.
The whole process of marketing was troublesome. Roads to
mandiswere bad, and distances could be long. In addition to the
octroi tax, octroi officials in the towns invariably charged petty
bribes before allowing carts to pass. At the mandi,market deduc-
tions were many, and there was always the possibility of fraud. 29
A visit to the market town could become fruitful when there
were things to purchase and goods to take back. It is in fact
surprising that despite the many problems, such a large volume
of the marketed produce was carted directly to the mandi by
peasants.
However, the real measure of the power of merchant-
moneylenders was not the proportion of produce they mar-
keted, but the nature of control they could exercise over the
process. Here a general weakening of their position was evident
by the twentieth century. Loans did not necessarily secure
marketable stocks at lower price for the creditors. At harvest
time there was no dearth of eager purchasers. So peasants
avoided selling to their creditors when they offered a low price.
'The cultivator', we are told, 'is not bound to sell to the local
shopkeeper with wl!9m he may have a running account, and if
such a sale does take place no disadvantage is expected to accrue
to the cultivator on this account.' 30Debtors frequently sold:grain
to their sahukar even in a commercially developed district like
Amritsar. But these sales were reported to be' as a rule absolute-
'2BPPBEC,Ev., Vol. I, p. 133.

29 N. Bhattacharya, 'Agrarian Change in Punjab: 1870--1940'Oawaharlal
Nehru University, Ph.D. thesis, 1985), Chapter V.
30 VS: Suner, 1936, p. 103. In Jullunder, 'Cases in which a grower sells to
his family creditor are not common ... Delay in payment. tends to make
producers seek those who are more prompt', VS: Tehong, 1931, p. 166. Even
in Rohtak: 'A cultivator in debt who sells to his creditor usually gets as good
a price as a cultivator who is not in debt. All sellers, whether in debt or not,
obtain the same price for their produce sold by them on any particular
day ... ', VS: Gajhi, 1932, p. 146.
ly free contracts' .31 The possibility of alternative modes of mar-

keting could change the nature of relationship between zamin-
dars and sahukars:
In a 'large part of'this rich district, the agriculturi;st ... is seldom so
deeply in debt as to be forced to accept the price offered. It is quite
common for a well-to-do zainindar to refuse to accept the sahukars
rate. In this case he either holds up his grain until a better price is
offered, or else takes it himself to the nearest market and subsequently
pays his creditor in cash ... 32
Direct sale at the mandi might have been occasional, but it
was always a real possibility.
In 'this context, ruling prices at the mandis became more
meaningful for peasants, in particular for the richer sections.
Information about prices spread rapidly. Santokh Singh, Presi-
dent of· the Sugar and" Grain Assbciation in Amritsar, com-
plained of the growing strength of the cultivators:
They seem to have a sort of wireless amongst themselves. If you pay
a higher price say in Patti than at Kairon : .. they will all go to sell
there the next day. If the next day the price is higher at Kairon they
will flock there .... The markets are not very far from each other and
as they go along the road they tell others. 3:i
Conditions were not very differei:;i.tin nearby Moga tahsil:
'the people take a great interest in tlwrates ruling in various
markets, and there is no doubt that they dispos«: off ... ptoduce
in the most favourable of the tracts' .34 Similar reports came from
Multan: 'The cultivator has become intelligent.enough to keep
himself acquainted with the prevaijing market rates by visits to
the central market and enquiries from his fellow cultivators' .35
By the 1920s, in many places, the practjce of the creditor-
shopkeeper fixing prices long b~fore the ripening of the crop, to
the disadvantage of the cultivator, was :,;eferred to as an 'old
31 'Note on commutation prices to be adopted in the assessment of Amritsar

district', para. 11, Land Rev. & Ag. (Rev.), Januaty 1914, 21.
32 Ibid.
33 PPBEC,Ev;, Vol. II, p. 761.
34 Land Rev. & Ag. (Rev.), April 1913, A, 42.
35 VS: DuiTanaLangana,1938, p. 161.
practice' which had 'practically'died out'. 36 The new system in

vogue was that of 'settling prices when the crop is ready for
sale'. 37The rate was said to be 'the market rate on that day less
the cost of carriage, octroi dues and other charges incidental tp
sale in the central market'. 38Generally, the price to be paid by
the shopkeeper was now fixed before delivery. Being in touch
with the market price, the cultivators were 'in a position to see
that the price is not unreasonable'.39
There was an intermediate practice, not widely prevalent:
The shopkeeper acquired the produce in advance, but the rates
were fixed around the 15th of Har (early July) for rabi and the
15th of Poh (early January) for kharif.The average of the different
rates prevailing during the harvest season was the basis of
produce valuation. The object of t,he creditors was obvious: 'to
get hold of the produce at the earliest possible date for fear of
its being sold to somebody else .. , .. ' '4oThe metnoc;lpf averaging
reduced the disadvantages of a fluctuating market price bui:
allowed the shopkeeper to use the system to his advantage. The
average was calculated in a way as to clear off whatever was
due to the creditor-shopkeeper. The amount of interest could
be pushed up and the produce undervalued. The cultivators,
we are told, refused to sell on such terms. And the method was
'giving way to that of settling prices at the time of delivery'. 41
Yet, low prices after harvest, were inevitably a disadvantage
to cultivators who_were forced to sell at this time, even if they
received the market price. Seasonal fluctuation of prices always
ensures a profit margin for traaers. This margin depends on the
amplitude of seasonal variation-the difference between the
annual peak an'd the trough.......::...determined by the amount of
produce sold after the harvest, the extent of competition
amongst purchasing agencies and the relative elasticities of
36 Ibid., p. 160.
37Ibid.
38Ibid.
39VS: Kala Gaddi Thamman, 1932, p. 88.
40 VS: Durrana Langana, 1938, p. 160.
41 Ibid.
LENDERS AND DEBTORS:PUNJAB COUNTRYSIDE/ 207
demand and supply of particular crops.42 Since poor peasants

mostly sell th'.ebulk of their produce after harvest and the rich
peasants tend to hold their stocks, the amplitude of price fluc-
tuation will be more pronounced in areas where-the former
supplied a bulk of the marketed surplus, than in regions domi-
nated by rich and middle peasants. In Punjab, the crystallisation
of rich and middle peasants, an integration of the market and
increasing competition amongst purchasers, tended over the
years to narrow the range of seasonal fluctuations in prices and
limit the potential income of merchant-moneylenders. 43
The relationship between peasants and merchant-
moneylenders thus varied. Poor peasants most often handed
over the crop without ever knowing the price it fetched, while
rich peasants frequently carried the produce to the mandi. The
mass of middle peasants, still selling within the village, strug-
gled against the domination of merchant-moneylenders. The
awareness of market prices and proliferation, of purchasing
agencies acquired significance in this situation. The price offered
to the debtor in the village, while definitely lower than market
price, could not always be arbitrarily fixed. Zamindars expected
and struggled for a 'fair' price. The acceptable price difference
between the mandi and the village would be based on a certain
estimation of the problems and costs of marketing. To secure
supplies, traders were forced to increase the procurement price
-a fact reflected in the narrowing price differential between the
mandi and village, and a trend towards a decline of trading
profits per unit of marketed produce. 44 The monopolistic control
over prices and the entire system of marketing exercised by the
merchant-moneylenders in the early colonial period was no
longer a generalized phenomenon: in the twentieth century. .
The system of advances continued. In fact, in the twentieth
century, the marketing network above the village was increas-
42 K.N. Raj, 'Keynesian Economics and Agrarian Economics', in C.H.

Hanumantl.a Rao and P.C. Joshi (eds.), Reflectionson EconomicDevdopment
and SocialChange:Essaysin Honourof ProfessorV.K.R.V. Rao (New Delhi, 1980).
43 On seasonal fluctuations see Bhattacharya, 'Agrarian Change', op. cit.,
Chapter VII.
44 Ibid.
ingly enmeshed in a complex network of advances and hy-

pothecation. For the export trade in agricultural produce the
Imperial Bank, Exchange Banks, and Indian Joint Stock Banks
gave advances to the grain merchants in big mandisclgainst the
hypothecation of stocks stored in the kothas of Commission
Agents and export-houses. 45 Advances could amount to about
80 per cent of the value of pledged produce; the rates of interest
charged varied between 6 to 8 per cent per annum. The arhatias
in the big mandis gave advances to those in small towns who,
in turn, financed the rural traders at a rate of Re 0--12--0per
mensem (i.e., 9 per cent per annum). 46 The producers received
part of their finance from the rural traders or directly from the
arhatiasagainst a contract to deliver produce after the harvest.
Transactions at each stage depended on advances. Yet the sys-
tem of advances was very different from those which operated
in the case of opium, indigo or jute production in Bengal or
sugarcane in Uttar Pradesh. No comparable monopolistic con-
trol over.production and marketing of agricultural produce was
to be found in Punjab. The system of advances functioned
primarily as a mechanism for ensuring regular supplies and not
for regulating prices. It became a system of forward purchase.
Within the class of merchant-moneylending transactions we
have to also consider vendors' and peddlers' credit. Here th~re
was no loan, but advance supply for future payment. The
primary object a_gginwas not to earn interest as such but to
ensure the sale of the produce, and at the highest price possible.
Peasants depended not only on the credit of the village shop-
keepers for their supplies of vario~s requirements, through the
lean season and bad years, but also on credit purchases from
peddlers, cattle-dealers and goatherds. 47 The purchase of bul-
locks was a major expense for any peasant household, and
invariably an important cause of their indebtedness, It was
difficult to buy cattle without credit. The nariwals(cattle-dealers)
45 On the system of remittance and advances see PPBEC, Ev., Vol. l,.pp.
178 f, 496 f; Vol. II, pp. 668 f.
46 Ev. of Lala Mool Raj, Manager, Punjab Provincial Co-operative Bank,
Lahore, PPBEC, Ev., Vol. II, pp. 496 f.
47 Bhattacharya,' Agrarian Change', op. cit., Chapter V.
who purchased cattle from the south-east of Punjab and went

around selling them all over the province never demanded
immediate payment. They appeared in the village twice a year,
usually after harvest. And we are told:
The sales are generally made on a credit basis, the price being entered
in their bahis,or account books as due to be paid in three instalments,
six, twelve and eighteen months after purchase. If the instalments are
paid regularly, no interest is charged, but if a zamindar fails to pay
any instalment he has to pay interest on that amount for the pepod it
remains in arrears. In these transactions the price fixed is generally
much above the market value of the animal. 48
In this village, 20 per cent of a total outstanding debt of Rs 19,686
to non-agriculturists (in 1925)was due on account of such cattle
purchases. In a village in Amritsar, for which we have figures,
it accounted for 35 per cent of the debt owed to non-agricul-
turists.49
How could the nariwalsbe ultimately paid? Loans had to be
taken from sahukars.But in many regions advances were avail-
able from halwaisand milkmen from nearby towns. 50There was
a system of contract known as bandh. Gujars and gwalas con-
tracted to supply milk to the halwaith'roughout the year. The
rates for the whole year were fixed, and the amount to be
supplied daily was -specified-.Against this pledge of regular
supply, the halwaiadvanced money varying (in the 1920s) from
Rs 100 to 350 per paccaman of milk to be supplied daily.51 No
interest was charged separately; prices being fixed in such a way
as to incorporate the interest. Contracts werE; ~ene:wed every
year in the first week of Maghar.
An alternative system was followed by some halwais.Instead
of a cash advance, the halwaispurchased the cattle which tJ-te
Gujar then)ooked after. The milk from the~e animals ~as to be
given over to the halwai.Part of the price of milk, at a stipulated
48 VS: KalaGaddiThamman, 1932,p. 76; see also VS: DurranttLangana,1938,
p. 134; VS: GaggarBhana, 1928, pp. 83, 115.
49VS: GaggarBhana,1928, p. 84.
50 VS: Durrana Langana,1938, p. 134; BEIP, The Milk Supply of Lahore,1933,
p. 68.
51 Ibid., pp. 68 f.
rate, was paid to the Gujar; and part credited to his account.
When the debt was paid off the ownership of the cattle passed
fully to the Gujar.52
Loans could be given to acguire (;ontrol over land. Since the
late nineteenth century mortgage debt increased steadily. By the
1920s if accounted for 50 to 60 per cent of tlie total debt, most
of the mortgages being usufructuary (80-90 per cent), i.e., with
possession. 53 ,
TABLE 5.1
MORTGAGES OF LAND IN PUNJAB (PERCENTAGES)
Years To Agriculturists To,Non-Agriculturists

1875-79 46.2 53.8
1880-84 52.4 47.6
1885-89 63.0 37.0
1890-94 70.4 29.6
1901-05 70.2 29.8
1906-10 75.5 24.4
1911-15 75.86 24.1
1916-20 81.16 18~8
1921-25 77.7 22.2
'
1926-30. 75.5 24.45
SOURCE: Rev:'&· Agt (Rev.),· October 1895, A, 72,73; I.And Revenue Ad-
ministration Reports (Annual).
Linked to this process was the emergence of the agricultural

classes as important lenders. Most mortgages were being ac-
quired by 'agriculturists':in'the 1870s about'45'per cent, and by
the 1920efas much as 75 pet cent (see Table 5.1)".These figures
as usual have their problems. The definition of 'non-agricul-
·52 Ibid.
53 PPBEC, Rep., Vol. I, Chapter IV. A«ording to the estimates of this
committee the net decennial increase of usufructuary mortgage debt (i.e.,
mortgage money advanced, less mortgage money dJscharged) was as follows:
1890-9 = Rs 9.95 crores, 1919-29 = Rs 5.6 crores, 1909-19 = Rs 10.42 crores,
1919-29 = Rs 34.22 crores.
LENDERS AND DEBTORS:PUNJAB COUNTRYSIDE / 211
turists' before 1900was vague and subject to varying interpreta-

tions. Moneylenders, with land, recorded as landowners in the
first settlement, were' classified as ',agriculturist' in the returns;
while anyone who had no land within a village but was a
cultivator elsewhere becamg a 'non-agriculturist' in the village
papers. 54 Efforts were made to clarify distinctions, but notuntil
1900 did the returns improve significantly. However, any srs;-
tetnatic bias is difficult to trace. Given the sharp differences of
opinion over the passing of the Land Alienation Act, the Pm:{jab
officials found it convenient to interpret the bias of the figures
in their own way. Those who favoured restrictions on aliena-
tions found the figures understating transfers to moneylenders;
while those who were opposed to government intervention
emphasized the reverse. 55 Considering the nature of the fig,ures
one should be wary of any definitive generalization about the
magnitude of change between the late nineteenth and. early
twentieth century. Yet, a few general points can safely be ma9~.
(i} Much before the Land Alienation Act, agriculturists had
started mortgaging-in land on a significant scale and the Act of
1900 strengthened their position.
(ii) The displacement of professional moneyl~nders W<JS
most marked in central Punjab (see Table 5.2).
(iii) 'Agriculturists' lent money primarily on mortgages.
Most of the unsecured loans even in the twentieth century were
taken from traditional moneylenders and arhatias.According to
one survey in 1930, landowner,s accounted for 10 per c;:entof the
cash debts in Lyallpur, 37 per cent in Ferozepur and 0.2 per cent
in Attock, while sahukarsand arhatiastogether accounted for 44
per cent, 49 per cent and 75 per cent respectively. 56
54 Reportof the Land RevenueAdministration of the Punjab (hereafter LRARP),

1876---7,pp. 206---7;4 January 1889, Louis Dane, Settlement Collector ~ur-
daspur, to Sr. Sec.Jo Fin. Comm., Punjab, Land Rev. & Ag. (Rev.), December
1891, A, 10-11;,M~rch 1889, Anderson, Depty. Comm. Hissar,.tp Comm. &
Sup., Delhi Div., Ibid.
55 For a discussion of the official debates see P.H.M. van den Dungen, The
Punjab Tradition:Influenceand Authority in Nineteenth Century India (London,
1972).
56 FMCWP, p..42.
212 / CREDIT,
MARKETS
ANDTHEAGRARIAN
ECONOMY
TABLE 5.2
MORTGAGES
TO'NON-AGRICULTURISTs'
PERCENTAGE
OF
TOTALMORTGAGES
1874-5 1884-5 1920-1 1930-1

SOUTH-EAST
Hissar 95 61 13 20
kohtak 46 54 14 12
Gurgaon 88 56 9 22
Kamal 49 55 22 31
SUB-MONTANE
Ambala 63 58, 24 23
Hoshiarpur 63 56 11 8
CENTRAL
Jullunder 71 61 8 9
Ludhiana 63 42 5 8
Ferozepur 68 39 12 16
Lahore 60 44 17 10
Amritsar 27 44 10 9
NORTH-WEST
Shahpur 91 69 38 31
Jhelum - - - 68 84 19 24
Rawalpindi 75 70 21 19
WESTANDSOUTH-WEST
Montgomery 89 57 51 44
Lyallpur 24 37
Jhang 75 64 60 64
Multan 30 61 62 74
SOURCE:Report of the Land Revenue Administration of the Punjab for
relevant years.
One may argue that such a distinction between' agriculturist'

and 'non-agriculturist' is spurious. For after all, money-lenders
who acquired land earned an agricultural income whether from

rent or cultivation; and conversely zamindars had non-agri-
cultural earnings from trade and moneylending. Are these cate-
gories then merely a part of colonial official language and their
use a failure to break out of colonial stereotypes? Yes and no.
Clearly the groups cannot be considered internally undifferen-
tiated, each representing a homogeneous economic interest and
deriving their income from distinctly separate sources-one
agricultural the other not so. Such implications make any
blanket use of the categories inappropriate. But the official
figures which make a distinction between the two groups, par-
ticularly in terms of caste, as after 1900, may give a broad
indication of their original source of accumulation. The distinc-
tion also acquired a certain basis in the way that perceptions
and social-political conflicts crystallized, a point I have dis-
cussed elsewhere. 57 And if one suggests that the function of
mortgages to 'agriculturists' and moneylenders differed, then
the distinction between the two is not entirely spurious.
The object of most cultivating landowners was not to invest
in usury and earn 'interest' but to acquire land for expanding
production:
Agriculturists in general and Muslims in particular, prefer to invest
money in mortgages rather than lend at interest. Those who practice
cultivation and have insufficient land of their own are glad to invest
money in mortgages as it gains them more land to cultivate wit~out
payment of rent. If the mortgages is likely to continue for a long time
they are in a more assured position to put forth their best efforts than
if they took land as tenants.58
Here mortgage was a form of lease. In' a context where competi-
tion for land purchase was acute and tenancy insecure, pos-
session of land on usufructuary mortgage was convenient.5 9
57Bhattacharya,' Agrarian Change', op. cit., Chapter X.

58 VS: Gajju.Chak,1934, p. 127.
59 For cultivators giving out a loan, mortgage was not just a security against
possible default. Hence their reluctance to lend on mortgages without pos-
session. As eatly as the 1870s Gordon Walker noted:
Mortgages without possession are, I may say, very uncommon. One agriculturist
214_/ CREDIT,
MARKETS
ANDTHEAGRARIAN
ECONOMY
Against the loan, the landowner received no 'interest' but a

secure lease without rent. The loan by itself was not the basis of
his income; the productive use of the land acquired on mortgage
was crucial.
What is significant is the fact that most agriculturist mort-
gages did not lease out but themselves cultivated the land they
took on mortgage (see Table 5.3).
TABLE 5.3
Village/District Mortgages Pei·centagesof Mo1·tgages

Registeredin Cultivated by
the Yeai·s ~ ....
I
.;i
<::I
~ ....
I
.; <I)
i::.
1::1- j
s: 0....
I--
~
$:! !';:
~ ~
1. Bhadas 1927-1928 79 2 18 1
(Gurgaon)
2. Tehong 1907-1924 63 7 29 1
Gullunder)
3. Gaggar Bhana 1894-1928 73 0 25 2
(Amritsar)
4. Gajju Ch,ak 1916-.1926 60 38 0 2
(Gujaranwala)
\
5. Kala Gaddi Thamman 1912-1925 87 13
(Lyallpur)
6. Durtana Langana 1919-1938 0 50 50 0
(Multan)
7. Bhambu Sandila 1930-1931 7 25 46 22
(Muzaffargarh)
SOURCE:Village Surveys.
In the villages of Muzaffargarh and Multan districts, self-
will not advance money to another unless he gets land into his possession
sufficient to get a fair return; while the money-lending classes give credit on
running accounts, or, if the borrowers' credit is good, on land transferred to them
(i.e., without possession).
SR: Ludhiana:1873-83, para. 194.
cultivating mortgagees were few. This is important. The contrast

with the ·other villages shows the difference between,
'agriculturist' and 'non-agriculturist' mortgagees. In Bhambu
Sandila, an'd Durrana Langana with predominantly Muslim•
agricultural population, moneylenders held most of tfie mort-
gages: in the 'former 70 per cent, in the latter almost all.60 And
the survey of ·Bhamba Sandila repdrts: 'There is no class of,
moneylenders which prefers to lend on mortgage in preference
to recovery of debt in cash. When recovery is otherwise impos-
sible land is taken on mortgage and the attempt is made to take,
it for the longest permissible time'. 61 Wlien a mort_gage was.
acquired by a moneylender heeithe'r re-mortgaged it at a higher
value and invested the money.in moneylending; or leased it out.
Frequently, the mortgagor continued. to cultivate,'but now,as a
tenant paying high rates of rent. Tucker wrote from Dera Ismail
Khan: 'Hindus [i.e., professional moneylendersJrarely take over
cultivation of mortgaged lands as· they find that lhe old pro-
prietor makes the best tenant and his affection for'his old field
makes him submit to harder terms as regatds rent than would
be accepted by an outsider.' 62 Louis Dane, the Collector of
Gurdaspur reported: 'his [baniamoneylender's] favourite plan
is tcr1.eave the old proprietor, ... as he knows that to .avoid
expropriation. the owners will pay a higher renf than a. new
tenant who will only pay the customary rent prevailing in the
neighbourhood' ,63
Thus an 'agriculturist' mortgagee was most oft~n a self~cul~
60 VS: Dun-ana Langana, 1938, Chapter VIII; VS: Bhambu Sandila, 1935,
Chapt~r vnf.
61 Ibip.., p. 90.
62 SR; Dera Ismail Khan: 1872-9,'J '
para. 706.0
63 4 January 1889, Louis Dane, Sett. Col. Gu'rdaspur, to Sr. Sec. to Fin. In
Multan and Muzaffargarh where baniamoneylenders dominated: 'the mort-
gagor almost always remains in possession paying almost ruinous terms to
the mortgagee, who thus gets a willing slave, who knows all about the lan'cl.;
in addition to thl! land itself', LRARP: 1882---3.'It pays the non-agriculttiris,ts
better to hold' on mortgage as he can keep on the proprietor .as his tenant and
so strong is the attachment to ancestral holdings that the proprietor will
probably pay more than an outsider,' Assessment Reporter(hereafter Ass.Rep.):
Shaka1·garh, 1891, para. 30.
tivator, while the 'non-agriculturist' mortgagee was not. So the

increasing hold of the former group over the mortgaged area
meant a shift in the function of mortgage; as a form of lease they
were becoming more general. This shift was most marked in
central Punjab where 'agriculturist' mortgagees controlled be-
tween 85 to 95 per cent of the mortgaged area by the 1920s (see
Table 5.3). In western Punjab the context was different: religious
restrictions prevented any extensive growth of moneylending
amongst Muslim agriculturists; and in the Canal Colony areas
pressure on land was lower. Land grants were large, and leasing
in land was not as difficult as in central Punjab. Officials com-
monly said that the demand in central Punjab was for land and
in the Canal Colonies for tenants. In south-east Punjab the hold
of non-agriculturists over the mortgaged area was greater than
in central Punjab, but much less than iri.west Punjab.
There were .also loans to secure a regular supply of labour,
if possible at low rates of pay. 64 Advances were given out usually
in the month of Har, and the debt was considered body-debt,
(sarir-ka-karza).The debtor had to Work for the creditor tiff the
loan was paid off. In the nineteenth century, such labourers were
referred to as ji-ka-sajjiin south-east Punjab and ji-de-sanjihiin
central Punjab. Further west, around Shahpur, we have evidence
of samobligations which appear to be essentially similar. Literal-
ly sam, or saham,meant one-fourth of the produce of.a plough
taken in lieu of interest. Those. who were utterly destitute,
without land.and bullocks, could get sam loans against their
labour:
a debtor without bullocks may give his labour such as ploughing,
building of a well, ,etc., as interest on his debt; sometimes a debtor
makes over his son or brother to his creditor as a serv"°t in lieu of
interest. A sahukar sometimes lends out the services of his debtor to
friends or relatives.65
64 For a discussion of the nature of such labour relations see Bhattacharya,

'Agricultural Labour and Production: Central and South-East Punjab, 1870-
1940', in K.N. Raj ed., Commercializationof Indian Agriculture, New Delhi,
forthcoming.
65Land Rev. & Ag. (Rev.), November 1898, A, 11, Appendix II, p. 36. See
also Ev. of Maya Das, Khatri of Bhera, Shahpur, ibid.
Sam debt, reported to be•known in Sikh times, was not commo~

till the late nineteenth century.
The nineteenth century evidence suggests that such debt
obligations were often hereditary; by the twentieth century,
'interest-free' loans to siri labourers, employed on large hold-
ings, took on the form of advanced wages without any implica-
tion of prolonged bondage. Now the function of such loans was
to ensure the necessary labour supply during peak season de-,
mand, when wages were high and labour scarce. The system
Was regulated through yearly contracts. 66
Finally, there was the type of loan, often referred to as 'social
loan'. Amongst acquaintances---kin, affines or close friends--
mutual exchange of 'interest-free' loans was common. 67 A per-
son in dire need of money went to his relative before going to
a bania.Any one with a capacity to lend was expected to help a
relative at a time of crisis. If the sense of honour obliged one to
lend, it was the same ethic which. was to act as security for the
loan. For tne debtor to repudiate such a debt would be an act of
bad faith, an act likely 'to earn social censure within the com-
munity and eliminate the possibility of future 'help'. The loan
also carried the obligation on the part of the debtor to reciprocate
when the lender was in nee~. When no interest was charged
amongst kin relations, immediate return was foresaken in the
expectation of future reciprocal action.
Interest-free loans from landowners to their tenants and
labourers, at times of festivity or crisis, had a different rationale.
Involved in the exchange was no expectation of reciprocal ac-
66Bhattacharya, 'Agricultural Labour', in K.N,Raj ed., tommercializa[ionof ·

IndianAgriculture, op. cit.
67 'A good deal of borrowing was from fellow cultivators, relatives and
kamins and consisted of friendly advances on instalments -on the price of
cattle or grain taken from them. The transactions were all oral and no interest
was charged,' VS: DuiTana Langana,1938, p. 127. The' detailed case histories
of mortgages show how attempts are first made to raise the money from
relatives. See for instance the following cases: Mortgage No. 5, Jarib circle,
Jarib village, Nakodar tahsil; Sale No. 4, Malsian 'village, Nakodar tahsil;
Mortgage No. 6, Dosanjh Khurd village, Phillour tahsil; Mortgage No. 3,
Kultana village, Sampla tahsil; Mortgage No. 1, Kandu Rangar village, Kasur
tahsil, Land Rev. & Ag. (Rev.), December 1891, A, 11.
tion, but submission and subordination. Gestures of 'benefi-

cence' could bring social respectability, power and authority. 68
In the case of such 'social loans', the relationship between
the creditor and debtor is established hot through and during
the transaction but prior to it, and beyond it. The transaction in
fact cannot take place without prior relations--andits function
is to consolidate this social relation. Yet, it would be wrong to
characterize loans amongst relatives as' social loans' as opposed
to others which are 'economic'. For one, no loan is purely an
economic transaction-they all establish in varying degrees
relationships of power a.nd social authority. And as we shall see
later, such loans were not always amicable exc,hanges between
acquaintances nor devoid of calculations of economic gain. 69
THE QUESTION Off PROLETARIANIZATION
In the earlier section, I focused on the lenders: the object and

function of·v(\rious types of loans. Now I turn to the debtor.
Central to this discussion is the question of proletarianization.
What happened to those who took loans and mortgaged land?
Brandreth wrote in 1869-70:
The land is merely assigned to the creditor by a regular deed, and the
debtor remains in possession, but it is no longer really his own land.
He is merely a villein tenant of the money-lender, he hands over to
him the whole crop,.except the cultiva'tor's share, which he-retains for
himself and the family ... The screw is gradually tightened till at last
the, worn out proprietor takes Rs 50 or Rs 100 to leave the land for
ever. 70
Was proletarianization and dispossession part of the inevitable
logic of indebtedness and mortgage? I will argue two points
68 Bhattacharya, 'The Logic ofTenancy, Cultivation: Central and South-East

Punjab, 1870-1935', IESHR, 20(2), 1983; 'Agricultural Labour', in K.N. Raj ed.,
Commercialization of IndianAgriculture,op. cit.
69, See section entitled Rates of Interest and fn. 108 below. See also the
following case histories of loan transactions amongst relatives: Mortgage No.
5, Jarib yillage, Nakodar tahsil; Mortgage No. 5, Matri village, Nakodar tahsil,
Land Rev. & Ag. (Rev.), December 1891, A, 11.
70 LRARP,1869-70, Sel., pp. 73--4.
here. First: proletarianization did not necessarily imply dispos-

session, but the constitution of a cla,ssof :peasant proletarians'
with a nominal hold over land yet depeqdent on wage labour
for sustaining family consumption. The hold over the land, even
if nominal, was ef significance to the peasant proletaria11and to
an extent could be maintained for prolonged periods through
the mechanism of mortgage transactions. Second: indebtedness
did not always mean complete subordination and prolonged
bondage to any particular creditor as is often assumed. The
nature of relationship between the mortgagor and mortgagee
depended on who was mortgaging the land and for what pur-
pose.
The typical mortgager was not always the poor peasant. In
the villages surveyed, only a small proportion of mortgagers
had holdings of less than 2.5 acres. In some villages as much as
35 to 40 per cent of the mortgagers owned land over 10 acres
(see Table 5.4). •
Reasons for mortgaging out land could·be v..a.ried.Migrants
to colonies or peasants in the army preferred to mortgage rather
than give land on rent: 'Men on service, sometimes mortgage
their lands for the only reason· that it is a conve~ient way of
securing to themselves the profit' on it without any trouble of
coliectlng rents or"settiing accounts with their brethren' .71 Thi,s
form of lease was important in all villages of ce'ntral Pu~jah
'which supplied large numbers of colonists ap.d armymen. A't
times through a mortgage transactioh a distant plot was ex-
changed for on'e nearby. J:A.Grant reported from Amritsar: An I
owne~ will sometimes mortgage an outlying part of the ,Iarid

simply'as a matter of convenience. I have even observed cases
where a man has mortgaged part of his fand and has heid at the
same time land of others in mortgage' .72 Tp.os~who mortgaged
out part of their land could also acquire land on pt9.rtgage .
•
71No. 553, 15 February 1889,J.A. Grant, Sftt. Coll. ~mritsar,_to the Jr. Sec.
to the Fin. Comm. Punjab, Land Rev. & Ag. (Rev.), December 1891, A, 11.
72 Ibid. In Hoshiarpur: 'it is a common thing in this district for an agricul-
turist to mortgage part of his ~olding with the,deliberate intention of taking
other land on mprtgage for cultivation. In, othei; words, in many parts
AND THEAGRARIANECONOMY
TABLE 5.4
CLASSIFICATION
OFMORTGAGERS
ACCORDING
TOTHE
CULTIVATEDAREA OWNED(PERCENTAG.E
DISTRIBUTION)
Area Owned Tehong Suner Gaggar Bhambu Bhadas

Bhana Sandila
(Acres) (1926) (1932-3) (1925-6) (1931-2) (1927-9)
Less than 2.5 11.2 25.8 12.6 75.2 4.2
2.5-5 7.5 16.6 18.1 13.5 11.3
5-10 52.8 22.2 29 9.8 22.6
10-20 28.2 29.5 36.2 1.2 36.1
Over20 5.5 3.6 25.8
100 100 100 100 100
SOURCE:VillageSurveys.
Most cultivators needed loans for any cash expenditure like

construction of weJls, purchase of bullocks, carts, land, payment
of revenue and other dues. Even the rich peasants did not
accumulate capital in the form of liquid cash, Purchase of land
had become a form of accumulation. So whe:11liquid cash was
needed, loans had to be taken by mortgaging a small part of the
holding. Land was an asset whose value could be temporarily
capitalized if necessary' .73Some could of course borrow from
relatives and raise mol).ey on personal security, but f9r larger
amounts and long-term credit mortgages became more common
in central Punjab.
Mortgage of land was not unknown in the Doab during .the
reign of Maharaja Ranjit Singh. But till the late nineteenth
century there was a general prejudice against this form of loan.
mortgages take the form of agricultural leases'. No. 384, Hoshiarpur, 29 April
1889,ibid. In Ludhiana: 'Mortgages are very often not due to any real pressure
of debt, but merely a method of raising money temporarily required, and
sometimes too they are a mere form of tenure', SR: Ludhiana:1878-83,p. 180.
In Gohana: 'in most canal villages land is mortgaged as a convenient form of
lease. 2,000 acres may be attributed to this cause' (out of a total of 5,102 acres
under mortgage), Ass.Rep.:Gohana:1873-79, para. 28'.
73 Bhattacharya, 'Agrarian Change', op. cit., Chapter IX.
, LENDERSAND DEBTORS:PUNJAB COUNTRYSIDE/ '221
Mortgage was seen as a sign of destitution. And if loans were

made public through mortgage, it affected one's izzat,lowered
one's social standing, and could even create problems in mar-
rying off one's daughter. Only under severe stress were mort-
gages made, a fact which reinforced existing social attitudes. By
the twentieth century mortgages had become more common
amongst all sections of zamindars. Particularly in the Doab, the
social attitude was changing. 74For long-term loans most cul-
tivators now preferred to mortgage, since the loan was at low
rates of interest (i.e., only the return from the land was ap-
propriated by the lender in the case of usufructuary mortgage)
and debts could not grow through the system of compounding.
Those wh~ mortgaged their land always hoped to recover
it. And redemption was not uncommon.75 According to the
official figures, the area redeemed every year was in fact often
in excess of the area mortgaged: in years prior to 1904-5·the
anqual area mortgaged was more than tpat redeemed, betw~en
1904-5 and 19il-2 the area redeemed was greater, after that
again the net area under mortgage increased (see Table 5.5).
Remittances from the Canal "Colonies, and foreign countries
provided a regular source of money for investment in land.76
We have also reports of army men coming back to their villages
to redeem their mortgages and buy up new land. 77 But a much
74l'PBEC, Ev., I, p. 309.

75 Redemption did not mean a recovery of the land for self-cultivation. The
land was often re-mortgaged.
76'The (emigrants) come back to redeem their mortgages, acquire mort-
gages or buy land if .they can get it and usually build a masonry house', tahd
Rev. & Ag. (Rev.), September 1916, A, 15. We are told of seven Jats from
Nawanshahr who went to Australia, worked as agricultural labourers and
returned in se,ven years with Rs 58,000. This may be an exceptional case but
all emigrants 'usually had cash to.spend. A large proportion of this money
from foreign countries was remitted through the Imperial Bahk of India. The
Jullqnder city branch of this bank apparently received on an average Rs 5,000
every day in the 1920s--mostly sent by zamindar emigrants from Hoshiarpur,
Jullunder ancj.Ludhiana, PPBEC,Ev., Voi.'Il, p. 702. See also,Land Rev. & Ag.
(Re-y.),January1914, A, 37, para. 38;Darling, 1925,repri~t 1977,p.'229; PPBEC,
Rep.,Vol. I, p. 362.
77BEIP, Soldier'sSavingsand How TheyUseThem,Pub. No. 68, 1940;,PPBEC,
Rep., Vol. I, p. 151.
larger number of mortgages were redeemed without external

sources of income: some with the income from agriculture and
others through the mechanism of re-mortgage.
TABLE 5.5
CULTIVATED AREA UNDER MORTGAGE
(000 ACRES: ANNUAL AVERAGES OF EACH .QUINQUENNIUM)
1 2 3 4 5 6
1897-1901 339 234 + 105 NA
1902-1906 180 179 + 1 3,358 12.3
1907-1911 211 274 - 63 3,300 11.6
1912-1916 226 251 - 25 3,239 11.6
1917-19?.1 233 277 - 44 3,131 10.9
1922-1926 259 191 + 68 2,926 10
1927-1931 272 164 + 108 3,214 10.7
SOURCE: Report of the Land Revenue Administration of the Punjab for
relevent te_ars.
Since land prices were rising rapidly, old debts could be paid
off by redeeming the land and re-mortgaging it at a higher price.
Inflation of the value of mortgaged land was mu~h faster than
the accumulation of debt, even when interest was cha:rned on
it. So emergency loans could be repeate,dly raJsed throu&h co:11-
tinuous re-mortgaging without necessarily .t loss of land. Often
after redeeming the land only a part was re-mortgaged: with
increased value a smaller area could now cover the old debt. If
the old creditor demanded payment, refused a n~w loan, or
threatened a suit, there were always alternative sources of loans
--eager cultivators wanting land on mortgage. The volume
of debt of an individual might increase with each mortgage
without always reflecting a corresponding loss of solvency, or

deeper subordination to the dictates of his creditor. ,Precisely
because it allowed this ever expanding volume of credit, and
helped the mortgagor tide over,times of crisis, that land ,was
such a valued property.
The above argument assumes that indebtedness of house-
holds, in real terms, was not growing over time. This assumption
is valid not only' for that section of rich and middle peasant
households-Whose normal income could cover their production
and consumption expenditure; but also for a large mass of petty
producers caught in a recurring but constant cycle of indebted-
ness.78Seasonality of income inevitably meant a seasonal cycle
of loan transactions: debts were contracted in the lean period
and repayments made after the harvest. If debt brought dis-
honour to the richer zamindars, perpetual indebtedness was
considered norma\ in the case of petty producers. 'We get along
by my paying my father's debt, my son paying mine, his son
paying his,' said Kima, a poor weaver of Khurbu village in
Sonepat tahsil.79 Payment of ancestral debt was an obligation
everyone was supposed to discharge but for petty producers it
defined their very existence. 80Despite this constant dependence
on loans for survival, such households were not utterly insol-
vent. But there was always a possibility of the stability of cycles
of debt being· disrupted. Any shortfall in production, or an
exceptional expenditure could lead to an irreversible cycle of
ever increasing indebtedness. Accounts of life histories of petty
producers all show the significance vVhicha scarcity, or the death
of cattle could have in determining the fate of their family. 1
Yet, if one studies case histories of loan and.mortgage trahs-
actions two points become clear: (i) Dependence on loans meant
78 For adiscussion of such stable cycles of indebtedness in which peasants
borrow year after year without their debt growing cumulatively see KN. Raj,
'Keynesian Economics and Agrarian Economics'; in Reflectionson Economic
Developmentand SocialChange,pp. 119 ff.; A. Bhaduri, The EconomicStructw·e
of BackwardAgriculture (Delhi, 1983), Chapters II and III.
79 Home Rev. & Ag. (Fam.), December 1888, A, 12.
80On the religo-cultural link between debt to fathers and transmissibility
of profane debts see C. Malamoud, 'The Theology of Debt in Brahmanism',
in Malamoud ed., Debtsand Debtors(Delhi, 1983).
a structural subordination of the petty producers to money

capital in general, not their individual bondage to particular
creditors. (ii) The mechanism of re-mortgaging often enabled
them to resist dispossession for prolonged periods and retain a
nominal hold over their land. Let me illustrate my points by
referring to a few cases.
Bohar yillage, Rohtak tashil: In 1862 Mussammal Bhago
mortgaged 19 acres for Rs 240 to purchase bullocks and pay a
fine. By 1875 the total debt had mounted to Rs 430 and money
was again needed. So the land was redeemed and re-mortgaged
for Rs 700. The old debt was paid off and the rest spent on
current requirements: Rs 60 on purchase of bullock, Rs 40 for
repayment of miscellaneous loans, Rs 150 for repair of house
and Rs 1& on payment of revenue. In thirteen years debts
increased by about 63 per cent but the value of mortgage by 192
per cent. 81
In the same village Tokh Ram owned 11 acres which was
mortgaged to Bal Ram for Rs 25 in 1881. 'Fhe money was spent
on kist payment and purchase of grain. \Vhen by 1888 his debt
increased to Rs 45 he re-mortgaged it to Jhabar for Rs 45. The
old debt was cleared but within one year Jhabar pressed his
claims: the debt had increased to Rs 59. So the land was re-
deemed again and re-mortgaged to Ind Raj for Rs 98 of which
Rs 59 was given to Jhabar. In eight years debts increased by 136
per cent and the value of mortgage by 292 per cent. 82
The dealings of Bakhta, another peasant in this village, were
more complicated. When his son got married he had to take a
loan of Rs 120 to pay the bride price. Not long after, Bhura Jat
who had given the loan, demanded repayment. Bakhta now
hypothecated his land (14 acres) to Umrao Ali for Rs 130, repaid
Bhura and used the balance to purchase grain. In 1886 h~ again
needed money: the revenue kist had to be paid and grain pur-
chased. Ind Raj and Behari agreed to give the necessary loan of
Rs 50. By 1889 the outstanding debt with interest against the
81 Mortgage No. 2, Bohar village, Rohtak tahsil, Land Rev. & Ag. (Rev.),
December 1891, A, 11.
82 Mortgage No. 16, Bohar village, Rohtak tahsil, ibid.
LENDERSAND DEBTORS:'PUNJABCOUNTRYSIDE/ 225
second loan amounted to Rs 160 and the third Rs 75. So Bakhta

re-mortgaged the lahd to another sahukar,Jag Ram, for Rs 250.
After paying off his earlier debts he had Rs 15 left to meet the
revenue instalment. 83
From Bohar village in south-eastern Punjab let us move to a
village of central Punjab. Daulatpur village, Nawashahr tahsil
of Jullunder: In 1874 a poor peasant mortgaged 1 acre of land
to a zamindar for Rs 120. Both his son and daughter were being
married. Income from his reduced holding was hardly enough
to meet his consumption. In 1878 we find him borrowing 40
ntaunds of grain from a sahukarfor household consumption, and
Rs 40 for the purchase of bullocks which, with compound
interest, swelled to Rs 120 by 1884. Pressed by the sahukar,the
poor peasant redeemed the earlier mortgage from the zamindar
and gave it over to the sahukarfor Rs 240,but without possession.
Against the right to cultivate he was to pay an annual amount.
By 1887, this annual due had accumulated to Rs 60 because of
non-payment. The peasant borrowed again: now Rs 300 from
another sahukar. The earlier creditor was paid off, the lana
redeemed and re-mortgaged.84
'Village Jarib, Nakodar tahsil; Jullunder district: a peasant
mortgaged· 4 acres to a sahukarin the 1880s. The·loan of Rs 255
was spent on the marriage of his two daughters. Some years
later he borrowed Rs 255 from another sahukarrepaid his earlier
debt, redeemed his land and re-mortgaged only·half of ,it (2
acres) fo·the second sahukar.The mortgage value of land had
doubled but the first loan; being a usufruc(uary mortgage, had
not.BS
Mahmud Btiti village of Lahore: an' Arain cultivator bor-
rowed Rs 15 by mortgaging a small lot of land-only 2 bighas.
When the mortgage value doubled, he borrowed Rs 15, re-
deemed the 2 acres and re-mortgaged one, retaining the other
for his own cultivation.86
This process of continuous re-mortgaging of land in the
I
83 Mortgage No. 33, Bohar village, Rohtak tahsil, ibid.
84Mortgage No. 5, Daulatpur village, N,awai;ishahr tahsil, ibid.
85 fyiortgage No. 2, Jarib village, Nakodar tahsil, ibid.
86Mortgage No. 2, Mahmud Buti village, La~ore tahsil, ibid.
context of a rapid rise in land values and possibilities of alter-

native sources of loans was thus significant. It allowed peasants
to raise emergency loans on -the same plot of land without a
complete loss of hold over it, and it gave them a certain bargain-
ing power vis-a-vis individual creditors. But in the long run, the
small holders and large holders were obviously affected in quite
different ways. For the latter, a mortg<;1-ge 6f. a small part of the
holding did not ,affect their '.necessary intome' and lCreate a
condition of distress. And they could hope to redeem their land
with ·greater ease. For the former, mortgage of even a part of
their small plot could seriously redu·ce their income from land,
..and force.a greater dependence on loans and wage employment,
thus constituting a mass of 'peas~nt proletarians•.
Where production cycles were stable, a larger section of
peasants, over a longer temporal span, was.,able to reproduce
the conditions of production on the ,basis of a given, level of
indebtedness. In regions of insecure cultivation and recurring
scarcities, the process of expropriation was more rapid. Every
bad year meantlarger loans to pay revenue kists, meet consump-
tion requirements and replace dead-cat.tie. Old debts remained
unpaid, and interest'piled up more rapidly than the rise in land
prices.87Fresh loans became difficult and wage earnings increas-
ingly necessary.
Consider the conditions of debt, mortgage and expropriation
in Kot Ghumman village of Sialkot. Founded in the late-sixteenth
century by GhummanJats, the village was an impoverished tract
in the late nineteenth century. It was initially assessed at.Rs 800,
a revenue demand that even the officials found exorbitant. The
demand was reduced to Rs 68'.l at the time of the first Regular
Settlement in 1855. But it was still too high for a tract like Kot
Ghumman. Around 1855, the time of the first Regular Settle-
ment, rto land had been alien~ted in this village. By 1884-5 about
171 acres were under mortgage. SahukarDiwan Chand of Sialkot
had reportedly appropriated most.of the land. Many of the old
proprietors were n~w labourers. 88
I
87Faced with such problems even co-operative societies could not function
in the insecure tracts. Recoveries were at times impossible.
88 Land Rev. & Ag. (Rev.), No. 1898, A, 11.
Shahna was four years bid wnen his father died around
189~. To sustain,the famil:Y> Shahna's motheihad·to work as.
a labourer. They had no land.'Yehhirt~ryectrs-earlier the family
owned 22 acres. The origin of the debt could be traced back
to 1862 when Shahna's 1 grandfather begart'his dealings with
sahukars.'Then in 1882, to purchase plough cattle and clear off
old debts the gtandfathet mortgaged 12 acres for Rs 400 to ohe
stihukar,and 6 a.ates fdr Rs 150 to another. Compelled.by mort-
gagees to settle the account, in '1886-7 he re-mortgaged 12 acres
to another. sahukat for Rs 600. Part of the earlier.,debt was paid
off ·and the balance of Rs 40, spent on the household. When
Shahna' s:father got married in 1889, half-an-acre had to be sold.
The remaining .3.5 acres of land were 1 appropriated by adult
agnates sbori after the death of Shahn-a's father, forcing the
mother to manuaMabour.89 <
Illahi~s father-owned 6.38 acres.,ln 1889',hehad to mortgage
1,75 acre for Rs 168 to a sahukarfor purchasing cattle and·paying
off rent arrears of a small plot which he had leasetl. Whe'h his
father died in 1890 Illahi was still left with 4.63 acres. But within.
a year he.Had to mbrtgage 1 acre.for Rs 40 to replace cattle which
had died, and purchas~ .grain.,The recurring need for' consump-.
tion loans ·and repayment of old·<;iebtsforced him to, mortgage,
another acre in 1892 and'then the-rest of the 2~63acres. By 1893
he was a pauper; tlie Report stat~s: 'entire holding having been,
mortgaged, owrter anct' family;, 4 lnouths, tlesetted 'village for
Gujaranwala,, where- he lives by daily labour'. 90
Jalal ,and ·his two brothers wprked,.as labourers on 'the'
Chenab Canal. Their fatherbwned 1825 actes in Kot Ghumman.
Most of-the holtling was mortgaged. Reasons for debt"were the.
same:· revenue payment, replacement -0f cattle, bad ,seasons,.
marria~e"in the:family. Their father mortgaged 6.25 acres for Rs
225 in 1883, and 9.88 acres for Rs 1,043in)886. The remaining
plot was too small to sustain a 'family of seven. So Jalal and his
two brothers emigrated in search of work, leaving the rest of tµe
family behind. 91
89Ibid., p. 69.
90 Ibid., p. 70
91Ibid., p. 67.
228 / CREDIT, MARKETSAND THE AGRAIµAN ECONOMY
Mokham's father held 12.25 acres. To pay'off his debts, the

latter mortgaged his entire holding to sahukarsin J882-3 for Rs
400. He died a pauper in 1885 leaving his sons to work as
labourers. 92
The story of-Hayat was the same. His father whQ had 11.63
acres, took loans froin sahukarsin 1873 and mortgaged his entire
holding in 1877 for Rs 458. The earlier debt was paid off but
when he died in 188Cr7, no land was left for family cultivation.
Hayat and his brother became labourers. 93
Mokham,. Jalal, Hayat, and Illahi were all 'peasant prolet-
ariamf. They had a nominal hold over land, and they would
continue to consider themselves zamindars-after all they all
belonged to the original proprietary body, GhummanJat or their
co-sharers Gora ya Jats, who settled the village-and this attitude
affected the census enumeration of occupations. In real terms
they were all labourers. The formal continuity· of landholding
therefore cannot be made the basis of any argument against the
thesis of proletarianization and social change under colonial.
rule.
On the other hand, all too often, the simple fact of debt and
mortgage is produced as definitive evidertce of the mass im-
poverishment of the peasantry, and their complete domination
by the moneylender. As we have seen, there were different.types
of debt and mortgage and different classes of debtors and
lenders. Th~ n~~re of their relationship varied, so did the
implication of debt. While some were proletarianized others
were not. The latter mortgaged their land while simultaneously
lending money on mortgage; they redeemed their mortgages
frequently, shifted to new sources of credit, made .their own
production decisions, and attempted to determine the terms on
which they marketed their produce. As we shall see in t}:lenext
section, the rates of interest and the modes of repayment were
also depended ort the nature of relationship between debtors
and creditors-their relative power to define the terms of re-
lationship.
92 Ibid.
93 Ibid.
·LENDERS AND DEBTORS: PUNJAB COUNTRYSIDE / 229
RATES OF INTEREST
Rates of interest varied widely between regions, and within the
same village. There were interest-free loans and loans with 225
per cent interest per annum (see Table 5.6). Such variations were
not random.
TABLE 5.6·
UNSECURED LOANS AT DIFFERENT RATES OF INTEREST
(PER CENT OF TOTAL AMOUNT)
Tehong Sunder Gajju Chak

Rate of Interest From From From From From Fmm
(Per cent) Agr. Non-Agr. Agr. Non-Agr. Agr. Non-Agr.
Without interest 25 21 4 2 75' 32
6 46
9 7
12 2, 13 21
15-18.75 15 61 21 27 3
24-25 7 2 26 31 25 35
28-30 3 2 33 27 3
' .
36-37.5 1 1 4 8 4
Over 50 4 2 2
Others 7 3
SOURCE: VillageSurveys.
In the face of criticism of usurious rates, sahukars always

pointed to the problem of risk and bad debts. 'Let the govern-
ment change uncertainty into certainty and invariably sell up
defaulting debtors, and sahukarswill lower their rates of inter-
est ... ' said the sahukarsof 'Shahpur sometime in the 1890s.94
With security of repayment they would be happy with a lower
rate of interest, _they said.95 Interest rates would then fall to
94 Ev. of sahuka1·s,
Hill Circles (Shahpur), Land Rev. & Ag. (Rev.), November
1898, A, 11, Appendix II.
<JSIbid.
230 / CREDIT, MARKETSAND THE AGRARIANECONOMY
Rs 18-12-0 per cent per annum instead of ranging up to 75 per

cent. 96 ·
The security of a loan was estimated not just in terms of
debtor's property. The character of the person was an important
consideration. A man of honour, who could always get loans at
low rates, was usually a man with property; but not everyone
with property was considered a goo·d payer. 'He may be a man
of property but if his character is not right that. person is not
considered a safe debtor', said Lala Nihal Chand, a sahukar of
Ferozepur. 97 A 'man of character' kept his word, was a punctual
payer. And men of honour, particularly those with influence
and power, could not only command credit and at low interest,
but they could extend their personal security to others who were
not 'cregitworthy'. 98 To command credit on personal security
was in fact a social recognition of one's position. When a sahukar
refused a loan without the pledge of jewellery or other property,
it was considered a sign of beizzati.99 On security of jewellery
rates of interest were much lower (about 18.75 per cent) than on
personal security (25 to 37.5 per cent). Yet in many regions the
96 Ibid. Commenting on the prevailing high rates of interest (Rs 12 to Rs

75 per cent per annum) Pandit Ram Narain, tahsildar of Shahpur tahsil said:
'One reason why sahukars have to charge high interest is to recoup themsel-
ves for bad debts from decrees having run out .... If repayment were securer,
rate of interest would certainly fall to say, Rs 6 to Rs 12 er cent per annum',
ibid.
97 Ev. of Lala Nihal Chand, sahukarFerozepur, PPBEC,Ev., Vol. II, p. 786.
We are told: 'In the village.personal credit was considered a better security
than one of cattle, etc. If the debtor was a punctual repayer the money-lenders
did not bother much about security', V:S:Durtana Langana,1938, p. 126.
98 'Generally a man of standing is taken as surety ~nd his signature taken
on account book as if he were the borrower.' Ev. Ass. Comm: Mbntgorrl.ery,
PPBEC,Ev., Vol. I, p. 125. 'The' poorer class; such as tenants 'and menials,
have to produce a personal security, i.e., a landholder', Ev~ A~J.Daring,
political probationer,.Montgomery, ibid., p. 130. 'Persons of pqor credit have
to pay high and sometimes very high ratea of interest .... Such persons often
have to get others of good credit to stand surety for them, or pledge ornaments
or house as security', VS: Dun-ariaLangana,1938, p. 115.
99 'When a sahukar asks a person that- he can get loan by pawnlng his
jewellery, it is considered that he had got very low credit, and it is considered
a sign of beizzati', Oral ev. of Nawab Ali, Asst. Reg., Campbellpur, PPBEC,
Ev., Vol. I, p. 466.
zamindars were reluctant to pawn. Pawning jewellery was seen

as an admission of dire poverty, a disgrace. 100 .
Social and reltgious norms mediated loan transactions. In
peasant societies which had not broken up under the pressure
of market economy, loans amongst kin were supposed to be
without interest-a prohibition which was' a counterpart of the
imperative of solidarity'. 101 Islam prohibited riba (usury) in the
same way as Christianity did. 102 And we do have evidence.of
interest-free loans (see Table 5.6), particularly in areas with large
Muslim populations. In Gajju Chak village, where 75 per cent
of the-unsecured loans were interest free (Table 5.6), Muslims
constituted 91 per cent of the population. Like the Jews in the
Christian world, Hindu moneylenders controlled money deal-
ing in the Muslim areas of Punjab. They far out numbered the
Khojas and Pathans.
This point about exchange relations being conditions by
social and cultural constraints should not be overstretched (a la
Polanyi). The norms themselves tended to change, accom-
modating various pressures. While religious taboos ~affected
economic behaviour, there were ways of legitimizing forbidden
actions. 103 Payment of interest was explicit only in the case of
cash transactions. And lending was sinful if prompted by the
desire for material gain. But a notion of common good and
mutual help could equally provide a justification for loans.
Those who had the capacity were obliged to 'help' those who
needed it.-Along with the repayment of the principal, an addi-
tional amount of pr9duce was returned to the lender afte:r the
100 ' ... if they take loans on the security of their ornaII]ents, they think
themselves degraded in the estimation of others .... ' Oral ev. of Kartar
Sin&:h,Asst. Reg., Co-operative Society Amritsar, ibid., p. 415.
1 1 P. Bourdieu, Alge,ia 1960 (Cambridge, 1979), p. 21. See also F. Braudel,
11,eWheelsof Commerce(London, 1982), pp. 559-65.
102 M. Rodinson, Islam and Capitalism(Harmondsworth, 1977),))p. 139-46;
Braudel, op. cit.,pp. 559-65.
l03 On modes of legitimating tabooed practices with'in Christianity see J. le
Goff' 'Licit and Illicit Trades in the Medieval West', Time, Work, and Culture
in the Middle Ages (Chicago, 1982); Braudel, op. cit., pp. 559-65; and within
Islam, Rodison, op. cit., pp. 139-46. These discussions relate more to urban
credit.
harvest-as a recognition of the 'help' in a time of crisis. The

extra payment was a mark of respect to the shah. We are also
told that 'investment in mortgage is considered less objection-
able (amongst Muslims) than taking of interest'. 104 Here the
earning appeare-d as the product of land use, not riba, and such
loans were stated to be' free of interest'. When Muslim landlords
gave loans to tenants, they charged some dues (habubs)in lieu
of interest. 105 And if they advanced seed, its current price was
debited to the tenants' account, and the amount was realized
after the harvest when prices were low. 106
Usually only petty loans were genuinely interest free. A
kinsman may offer a more substantial amount in a period of
crisis or pay off an outstanding debt to prevent the appropria-
tion of ancestral property by an 'outsider', and retain the.land
within the community. 107 But on such occasions interest charges
were not waived and the offer of help was tempered by calcula-
tions of material gain. We have extensive evidence of conflict
and of the process of intra-family expropriation which followed
such loan transactions. 108
104 Ev. of Nawab Ali, Asst. Reg., Co-operative Societies, Campbellpur,

PPBEC,Ev., Vol. I, p. 461.
105 Oral ev. of Nawab Ali, Asst. Registrar Co-operative Societies, Camp-
bellpur, ibid., p. 467.
l06 VS: Durrana Langana,1938, p. 133.
107 From Gurgaon,.J. Wilson, the·Sett. Officer, reported in 1833:
Should any of the brotherhood ... be in a position to advance the money required,
he is generally willing to do so, rather than let the land get into the hands' of
outsiders. Thus in times of trouble the wealt):tiermembers of the community make
advances from their savings to help their poor relatives, and take in exchange
some of their fields to be held by them under mortgage, and generally cultivated
by them. In some villages mortgages of this nature are numerous, and generally
of several generations standing.
Land Rev. & Ag. (Rev.), May 1891, A, I. From Ludhiana Gordon Walker, the
Sett. Officer noted: 'The Jat of the uplands at all events seldom allow an
outsider to acquire permanently any land in a village community. The right
of pre-emption is generally claimed and insisted on; and it would also be the
case of mortgages, if the law allowed of this', SR: Ludhiana:1873-83, para. 194.
·10s This can be seen in the case histories of mortgaged holdings. Cf.
Mortgage No. 5, Malri village, Malri circle, Nakodar tahsil; Mortgage No·. 5,
Jarib village, Jarib circle, Nakodar tahsil; Mortgage No. 6, Dosanjh Khurd
LENDERSAND DEBTORS:PUNJABCOUNTRYSIDE/ 233
The nominal rates of interest do not reflect the actual returns

from moneylending or the gross value of what the debtor had
to pay to the creditor; it was possible to increase the level
of appropriation simply through a manipulation of the form
of repayment and mode of accounting without inqeasing the
nomlnal rate of interest. And this the moneylender attempted
in many ways. 109
(a) When a grain debt ·account was made up; the sahukar
debited the amount in cash if prices were high at-the time
of the loan, but left it as a grain debt if prices were low.
Similarly the mode of repayment was not decided in
advance but only at the time of repayment in accordance
with the level of prices. Debiting a grain advance as a cash
loan at the time of high prices could ensure the money-
lender a substantial gain, "Tegardlessof whether tht!'repa y-
ment after harvest was in cash or kind .
. (b) Often in the case of grain loans, bajra or maize was ad-
vanced between January-March but wheM was demanded
in repayment at the rabi harvest (April-May) with the
addition of the state rate of interest. 110 There were many
variation in this mode of manipulation. Shahpur 18'90s:30
sers of unhusked rice worth a rupee.is lent on'bond, the
debt is made repayable in 38 sers of bajra, valued at a
higher retail rate; failing repayment by 1 Magnar (15 Nov-
ember) payment is to be made in unginned cotton within
a month at 16 sers to the rupee for the money value of bajra.
In this way the sakukargets within six mo11thsRs 2 interest
for every rupee lent. 111
(c) When the money equivalent of a loan in kind was debited,
village, Atta circle, Phillour tahsil. Land Rev. & Ag. (Rev.), December 1891,
A, 10-11.
109 Much of.the material here is drawn from the· statements of zamindars
aJ:,outthe methods of sahukai'sappropriation. Cf. ev. of zamindars of Gharkhri
Gujaranwala, ofBhE!ra-Jhelum (Shahpur), of Hill circle (Shahpur), of Charkhri
Sialkot, Land Rev. & Ag. (Rev.), No. 1898, a, 11, Appendix II.
110 Ev. of Lala Ganga Ram, tahsildar of Khushab tahsil, ibid.
111 Ev. of zamindars, Bhera-Jhelum (Shahpur) ibid.
the entry was at a rate 25 per cent higher than the current
rate, while repayment was credited at a ·rate 25 per cent
lower.
(d) Discounts (kadha/gandchoka/chilkana)of 5 to 10 per cent
were deducted from loans. For a loan of Rs 100, the debtor
actually received about Rs 90 to Rs 95.112
(e) Fraud was used more directly. Repayments were short
credited and loans overdebited, specially when loans were
doled out in small amounts. Interest was frequently
tharged twice over, and the same decrees were realized
over and over again. Blank spaces kept in bahikhataswere
filled up with fictitious accounts and false balances. 113
Even with a low rate of interest, debts could pile up to

enormous sums when the principal was inflated through the
addition of interest. Before British rule there were certain cus-
tomary limits to the total interest charged. The norm was : 'Dam
duhe, jins dune'.114 The total debt including interest was not to
exceed double the principal for loans in kind, and half the
principal for cash loans. But by the 1870s accounting methods
were different. Poor peasants found their outstanding debts
mounting to several multiples of the petty sums they borrowed.
Note for instance the following cases of compounding of inter-
est. A Jat small landholder in Jarib village 0£ Nakodar tahsil,
Jullunder district borrowed Rs 81 in 1879 for the purchase
of bullocks, and other household expenses. By 1885 this debt
amounted to Rs 560, about seven times the original sum bor-
rowed. When the sahukar obtained a decree for Rs 600, the
peasant had to sell off his own small plot of land (2 acres for
112 Ev. Pandit Ram Narain, tahsildar of Shahpur tahsil, ibid. Oral ev. of
Khan Bahadur Malik Fateh Khan, Dep. Registrar, Co-operative Societies.,
Lahore, PPBEC, Ee., Vol. I, p. 285.
113 See fn. 83 above.
114 'Cash half as much, grain twice as much.' See memo by Justice P.S.
Melvill, Officiating Judge, Chief Court, Punjab, Selectiorz.s
from RecordsofPunjab
Administration (hereafter SRPA), New Series, No. XIII, pj:,. 9.:..11.Most nine-
teenth century revenue officials referred to the past existence of this norm in
the district under their survey. The norm was later codified into a law in 'The
Punjab Relief of Indebtedness Act, 1934', Part V, para. 30.
Rs 400) as well as that of his nephew in another village (for

Rs 200).115
Channu and Chirag had a larger holding, aoout 284 acres,
but in an arid tract of Bhera Jhelum circle of Shahpur. Against
an outstanding debt of Rs 160 they mortgaged their land to Tulsi
Das and Thakur Das on 17 December 1878. On the same mort-
gage they borrowed Rs 775 again on 19 April 1883. Out of this
total debt of Rs 935, on Rs 680 they had to pay interest at the
rate of Rs 35.50 per cent annum. Accounts were to be settled
annually and compound rates charged .. By 1895, interest had
accumulated to Rs 39,983, thirty-two times the original sum.
Tulsi Das bought off 270 acres of the holdiflg in part liquidation
(Rs 360) of the debt. Gradually Channu and Chirag lost all their
lands. 116 .
Thus the rates of interest quoted often continued to be
customary: for cash, paisa,ru'piyamahwar(i.e., 18.75 per cent per
annum) or do paisarupiya (i.e., 37.5 er cent per annum}, but this
mode of calculation (i.e., compounding) appears to have become
generalized only under British rule.
The accumulation of outstanding debts did not reflect the
actual returns to the moneylender. His income was dependent
on his capacity to realize his loans and force a defaulting debtor
to pay. For this, the bania moneylenders had to rely on the
support of their community and class. 'In the larger villages,
where sahukars are numerous, some sahukarsform themselves
into mutual aid confederacies and support each other in court,'
said Lala Ganga Ram, a tahsildar of Khusab tahsil in Gujaran-
wala, himself an Arora and the son of a sahukar.117 Sher Singh
Bajwa, a Jat munsiff of Shahpur, stressed the same point: 'Sahu-
kars always support each other in court: it is a point of honour
and common interest with them to help each other .... ' 118
115 Mortgage No. 3, Jarib village, Jarib circle, Nakodar tahsil, Land Rev. &
Ag. (Rev.), December 1891, A, 10-11.
116 Civil suit No. 128,,Bhera Jhelum circles, Shahpur, ibid., Appendix V.
117 Ev. of Lala Ganga Ram, tahsildar of Khushab tahsil of Gujaranwala,
Land Rev. & Ag. (Rev.), November 1898, 11.
l18 Ev. of Sher Singh Bajwa, Musif of Shahpur, ibid. The·zamindars of
Chakhri Sialkot said: 'Sahukars stick together like one fraternity and help
Munsiffs were friends of sahukars,and civil peons were retained

by them in many places. There is no dearth of evidence about
the ways in which sahukarscould get their kinsmen to give false
witness, or as munsiffs, pass exparte judgements in favour of
fictitious claims of the creditors. 119 When defendents pleaded
that the bonds were forged, the Khatri plaintiff could always
produce a Khatri witness who attested to the execution of the
bond. 120
But the court decrees were not so easily carried through. The
District Judge of Jullunder reported in 1889: 'It is generally the
case that they [zamindars] avoid resistance to court officials, but
no sooner they are out of their sight they resort to undue means
and if necessary to violence in order-to recover possession and
turn out the decree holders .... '1 21Within the village the zamin-
dars had their own community network, always operative in
any situation of need. Friends and relatives helped the default-
ing debtor conceal his movable property as soon as the infor-
mation about the decree for attachment reached the village. 122
To prevent attachment, false claims to the debtor's property
were made by other relatives, claims which were not easy to
disprove. When the property was attached, it had to be kept in
the safe custody of a sapurdar, usually the lambardar of the
village, before it was brought to the court and the warrant of
attachment issued. And we are told that 'in many instances the
judgement dfbtor .got the custodian (who belonged to the pro-
prietary community) to make over the property (grain or cattle)
removed one way or another, doubtless with the connivance of
each other in the law suits as witnesses in court and at home when accounts
are made up', ibid. The same'Complaint came from the zamindars of Chakhri
Gujaranwala' ... Sahukars stick together as one fratemizy, helping each other
by giving false evidence, by striking false balances and witnessing execution
of false bonds and deeds of all sorts', ibid.
l19 See report of J.R. Drummond, District Judge, Gurgaon, Report of the
Administrationof Civil Justicein the Punjab(hereafter CivilJusticeRep.),1890.
See the histories of various debt cases at the munsiff court. Abstract of Civil
cases, Land Rev. & Ag.·(Rev.), November 1898, 11, 'Appendix V.
l20 See for instance, suit nos. f3 and 53, Bhera-Jhelum (Shahpur), ibid.
121.~eport, District Judge, Jullunder, CivilJusticeRep., 1889.
122Cf. Report G. Lewis,·District Judge, Ludhiana, ibid., 1890.
LENDERSAND DEBTORS:PUNJ!,.BCOUNTRYSIDE/ 237
the custodian ... ' 123 Cattle which disappeared from custody
were reported to have strayed.124
Within the villages the sahukars increasingly liveq. with a
sense of fear-a fact which in some ways deterred the aggressive
assertion of claims. The murder of extortionate moneylenders
had social sanction. In many instance!? a collective oath was
taken to withhold evidence and the police found·it impossible
to detect the killers. 125-An exasperated "district magistrate of
Jhelum wrote:
The real cause of our failure in the case of murder is what may be
called the esprit-de-corps of the ,villagers, particularly the Awans of
the salt range. The usual practlce is for all concerned to take the oath
of Dua Khair to suppress evidence before the' case is reported. I ·am
convinced that nothing short of some communal responsibility will
break down this custom.126
Such collective solidarity amongst the propertied groups was
evidenced in most regions.
In this context, how significant were 'bad debts'? The late
nineteenth century returns oHhe civil courts show that less than
30 per cent of the disposed cases were 'completely executed'
and about 50 per cent were 'wholly infructuous', the rest being
partially executed. 127In the 1920s, only about 25 per cent of the
amount decreed and sued for recovery was actually recovered
through the courts. 128In many cases settlement between the
lenders and debtors was reached out of court. But other 'infruc-
tuous cases' represented bad debt. According to some, bad debts
constituted less than 1 per cent of the capital invested in urban
l23Report,DistrictJudge,Lahore,ibid., W89.All the districtjudges made

similarcomplaintsabout the 'dishonest laxity' of sapurdars.See for instance
reports of DistrictJudge, Montgomery,ibid., 1889,1897;S. Clifford,District
Judge,Delhi,ibid., 1890;G. Lewis,DistrictJudge, Ludhiana,ibid., :J.890.
124Report,T.J.Kennedy,DistrictJudge,Montgomery,ibid., 1889.
1~ Reporton theP.olice
Administrationof tl]ePunja(i(hereafterPR),1898,p. 18.
126Ibid., 1907,p. 4.
127The,proportiol)of \yholly infructuous'caseiifluctuatedbetw.een45 to
55 per cent of the total disposed cases. See Civil JusticeRep., 1885,to1200,
annual.
128Ibid., 1920s.
moneylending, 129 for rural money lending it was said to be

around 5 to 10 per cent of the capital. 130 These were no more
than impressions. But we have no better estimates.
Ab9ut the-long-term trends in rates of interest, it is difficulty
to say anything definitive. We have some evidence on the urban
bazaarrates (see Table 5.7); but this shows no significant pattern.
Possibly the fates decline~ in the late nineteenth century, rose
in the second decade of the twentieth century, when the money
market was tight and declined agai!l towards late 1920s. In any
case, bazaarrates were only of indirect significance for peasants.
They did influence the rates at which rural traders· made their
advances. But peasants only h~d restricted access to the urban
money market, either for loans,or investment.
TABLE 5.7
BAZAAR~ATES OF INTEREST(1861-1930)ON DIFFERENTFORMSOF

SECURITY(PERCENTAGES: DECENNIALAVERAGE)
Years Pro-note Ornament Bond Hundi. Banker's Rate

1861-1870 10 11
1871-1880 11 8 i
1881-1890 9 11
1891-1900 8 14 7
1901-1910 9 9 10 6 6
1911-1920 -1i- 12 12 7 6
1921-1930 11 11 11 7 6
SOURCE: Based on evidence collected by an income tax officer from, the

records of a firm in Amritsar. The Punjab Provincial Banking
Enquiry Committee Report, pp~ 264--6.
129 Oral ev. of Lala Ram Lal Bhalla, Income Tax Officer, Lahore, PPBEC
Ev., Vol. I, p. 176. He estimated that in 1927-S the total capital invested by
urban moneylenders in Lahore was Rs 109 lakhs, their net income Rs 9.04
lakhs, and total expenses Rs 1.31 lakhs of which Rs 70,444was on account of
bad debts.
130 Oral ev. of Sardar I<ishen Singh, Income Tax Officer, Multan, ibid.,
p. 222.
The pressures influencing urban bazaarrates were different

from those which affected rural rates of interest,· and their
short-term movements were often opposed. In bad years,.when
commodity stocks for export were low, bazaar rates fell; but
the incre~sed demand for loans amongst distressed peasants
pushed up rates of interest in the countryside. As for seasonal
movements, the highest rates of interest in the countryside
usuaUy prevailed between January and April before the rabi
harvest, when a large section of peasantry, depleted of all reser-
ves, required consumption loans. The demand for loans in rural
areas eased after the harvest; but bazaarrates, with increased
pressure on money supplies to make advance purchases, now
moved towards their annual peak. In Amritsar, sahukarscharged
6.5 annas per mensem (5 per cent per annum) up to April, 8
annas (6 per cent) between May to July, and 10 annas (7.4 per
cent) around October and November. From mid-December the
rates declined again.131
Rates of interest in rural areas are often higher than urban
areas. Some economists have exp,lained the high rates of interest
in terms.of the rates of default. 132In this framework, the normal
rate of interest in the organized money market, is seen as the
opportunity cost of rural finance, and the mark-ups over, t}v.s
rate represent the risk premium which covers the loss of prin-
cipal due to default. The effective rate of interest realized by
rural lenders or their total capital is thus the same as the urban
market rate. This whole argument is again based on the false
assumption of an integrated rural and urban money·market. 133
In the non-institutionalized money market in rural areas
there is never one standard rate. Transactions.are mediated by
relationships of power-social, political, economic. Terms of
13l Oral ev. of indigenous bankers of Amritsar, PPBEC, Ev., Vol. II, pp.
852-3.
132 U Tun Wai, 'Interest Rates Outside the Organized Money Markets of
Underdeveloped Countries', InternationalMonetaryFund Staff Papers,Vol. VI,
No. 1, November 1957;A. Bottomley, 'Interest Rate betennination in Under-
developed Rural Areas', AmericanJournalof Ag,iculturnl·Economics,June 1975.
133 For a critique of such a framework see,Bhaduri, The·EconomicStructure
of BackwardAg,·iculture,op. cit., Chapter V.
exchange are defined by the relative strength of debtors and

lenders. In the determination of these differential rates of inter-
est, the question of risk was not unimportant. 134 The credit-wor-
thiness of a borrower defined the amount of loan he could get
and the rates of interest that would be demanded from him.
Lenders not only attempted to raise rates of interest in accord-
ance with their risk rating of borrowers, but also rationed the
amount of loans advanced. 135 However, the degree to which the
rate of interest could be effectively raist:!ti depended on the
borrower's bargaining position. Rich peasants could resist the
manipulations of lenders and secure long-term loans on mort-
gage without being bonded to the creditor. The interest on
mortgages amounted to about 6 per cent, and debts did not
grow cumulatively. The indispensibility of consumption loans,
a more constricted availability of alternate sources of finance,
and a weak bargaining capacity, forced poor peasants to accept
134 Amit Bhaduri has suggested that in backward agriculture the lender's
risk is an untenable concept1 for the lender can transfer the risk to the
borrower. By pushing up rates of interest, the lender induces default, and by
undervaluing collateral securities sufficiently the lender can not only cover
the capital loss of default loan but also make up a capital gain through transfer
of collaterals in case of default Hence the situation was char~cterized not by
lender's risk but borrower's risk in case of default (ibid). The premise for
Bhaduri' s argument is the monopoly of power of the lender over peasant in
an isolated and personalized credit market': The contl!xt we are discussing is
different.· The nature of relationship between lenders and borrowers varied.
The former could not always exercise a monopolistic control over the latter.
In any case, security is defined by a particular socio-political context. Even
when lenders had power over individual debtors, they feared collective
retaliation by peasants. The threat of deliberate default, physical violence and
resistance to transfer of collateral increased the sense of insecurity amongst
professional moneylenders. State legislation, restricting land transfers to
non-agriculturists, deepened such feelings.
l3~ Anticipated risks could not be covered simply by raising the rates of
interest. Beyond a point, high rate of interest can itself become a factor
increasing the probability of default. K.N. Raj, 'Keynesian Economics and
Agrarian Economics' in Reflectionson EconomicDevelopmentand SocialChange,
p. 113. Moreover, in the countryside there was a certain notion of legitimate
rates of interest within given situations. Physical attacks on extortionate
usurers were common. Exorbitant rates of interest could in a way intensify
the insecurity of a lender.
higher rates of interest. They had often to· borrow before the
harvest when the rates of interest on cash loans were high. And
when the loan was in kind, the rate might be deori(50 per cent),
but since it was to be paid within three. months (accounts were
settled in Har irrespective of the timing of the loan) it would
imply an interest of 200 per cent per annum: They usually hag
to pay chilkana(a preliminary discount of about 2 pice per rupee
on all cash advances) . .Since the petty producer could rarely
avoid default, the volume·of debt piled up as a result of com-
pounding. They always lived in debt but were oblivious of
accounts. When Ram Sukh, a Chamar of Sonepat, got married,
his father, Bhag Mal, borrowed money to pay the bride price
and feed the biradari.After his father's death Ram .Sukh con-
tinued to pay the bania·against this debt, but he showed little
awareness of the terms of transactions: 'I do not know how much
interest I paid. I do not know how much my father borrowed.
My uncle told me Rs 70 was spent on the marriage' .136 Hei:e any
reference to the rate of interest was notional; the actual amount
paid was different.
The calculations involved in borrowing and lending in the
countryside were different from those of the bazaar.Peasants
could borrow at rates which traders in urban areas would rarely
pay. Poor peasants were forced to take loans to meet consump-
tion demands, and the more substantial peasants required loans
for ceremonial expenses, or for purchase of land and bullocks--
all considered absolutely essential for sustaining "production,
and for the reproduction of households. Their perceptiori of the
value o( loans was not determined by any estimated rates of
return from re-:investment of the money-that was the trader's
concern. On the other hand, when rich peasants and landowners
gave out loans to acquire mortgages, the expected rates of return
were not compared to the average bazaarrates. In calculating
options, landowners never equated investment in landed pro-
perty with any possible alternative a~ailable in urban areas. 137
136 Home Rev. & Ag. (Fam.), December 1888, A, 12.

137 I have discussed this point elsewhere, see Bhattacharya 'Agrarian
Change', op. cit., Chapter IX.
Mortgage values in fact rose so rapidly that rates of return fell

over time. 138 Landowners continued to mortgage-in land; but
trader-moneylenders, more careful of' opportunity costs', were
gradually marginalized in the 'mortgage market'.
There were then two opposing tendencies in the countryside.
· On the one hand, a compulsion or willingness to borrow at rates
much higher than bazaarrates; on the other, ~ tendency among
landowners to lend at rates which could be lower than bazaar
rates. In the long run this feature sustained the fragmentation
of rural 'credit market', and perhaps produced opposing trends
in the movement of rates of interest. According to the Provincial
Banking Enquiry Committee, rates of interest in rural Punjab
generally declined in the twentieth century. But trends were not
the same at all levels. For the rich and middle peasants the rates
were declining: loans on usufructuary mortgage and from the
co-operative societies were available at an interest rate of 6 to 9
per cent. But, for the large mass of poor peasants who borrowed
without security and who had no access to co-operative credit,
the rates of interest were going up. Living in increasing in-
security and the fear of deliberate default, baniamoneylenders
pushed up their rates of interest and attempted to _impose
stringent terms of repayment.
CONCLUSION
Before I cons:].ude,let me return to the question of volume of

debt. I mentioned at the outset, that compared to other regions
of India, the total debt in Punjab was large, and so was the debt
per household. Of what significance are such facts?
The scale of moneylending operation, as much as the terms
of transaction, depends partly on the relative significance of
different forms of loans within the agrarian economy. In a
context where pure usury holds sway,,where the usurer de-
mands little security but high rates of interest, the volume of
total debt expands within limits set by the system. Given the
high rate of default in lending to the poor who had no security
138 Ibid.
to offer, the usurer functions by rationing credit.;_giving out

only meagre amounts to individuals, spreading the risk thin
over a large number of heads--and pushing up rates of interest
to exorbitant levels. If the risk of default limits the amount
loaned out by the usurer, high rates of interest deter large
borrowings. When the object of loans is to acquire land on
mortgage, then the limits of borrowing and lending expand, It
is t.J.1evalue of land which now defines the extent of total
debt-th.e amount which a debtor could secure and a lender was
willing to give. This would logically imply that in any region
where mortgage debt is importaqt, the rate of increase in land
prices will inevitably be.reflected in a similar, ,if not propor-
tionate, increase in the volume of secured debts. When loans are
linked to the production,of commercial crop, when advances
are given out to control-prices of purchase and sale and to ensure
regular channels of commodity supply, the limits to lending
expand aJong with the growth of ,commercial agriculture, and,
the rise in the value of produce. The greater the volume and
value of production, the larger the total debt will tend to be. 139
Similarly, the amount of money advanced to secure permanent
labourers may also increase with commercialization of agricul-
ture.
It is then not surprising that debt per household was much
higher in Punjab than in the more 'backward' regions like Bihar
and Orissa, Rajasthan or Central India. The scale and incidence
of indebtedness increased in Punjab along with'the phenomenal
rise in land prices and the expanded volume and value of
production. If one compares debt-land value ratios of different
provinces, the point becomes clear. Although average debt per
household in Punjab was higher than most other regiop.s of
India, debt as a percentage of the value of land owned was by
139 Darling's analysis of peasant indebtedness in Pl.fnjab,ahd his perceplive

comments on how debt followed credit were flawed by his general con-
clusions, repeatedly stated in the book, that increase of indebtedness was a
sign of prosperity. In his framework, prosperity was a necessary sequel·to
commercialization. And the growth of trade, cash crop production and rise
in the value of land were taken as indices of.prosperity. Darling, The Punjab
Peasant,op. cit.,·see in particular Chapter XII.
°
far the lowest. 14 For similar reasons, in all regions of India, debt
per household increased with size of holding, while debt as a
percentage of land value declined. 141
Within.Punjab, the south-east (or south-west) can be con-
trasted with the central region. The former was largely an
insecure barani tract producing inferior foodgrains like bajra,
jowar, gram; while the latter was a more fertile, irrigated inten-
sively cultivated region-one of the major wheat producing
zones of°India. The price of land per acre in Gurgaon or Rohtak
was Rs 150 to Rs 300, when in Jullunder it could fetch over Rs
1,000 and in Ludhiana approximately Rs 650.142In the incidence
of debt, there was the expected variation. In central Punjab, debt
per he;id of rural population was about Rs 51, and per acre Rs
36; the corresponding figures for the south-east was Rs 31 and
Rs 15.143
The volume and real burden of debt varied over time with
the movement of prices. During periods of rising prices are
140 DEBTASA PERCENT

AGEOF VALUE
OF OWNED
LAND(1951-2)
UpperStrnta Cultivato1·s UpperStrnta Cultivato,·s
Region Average Debt Debt as a% of Average Debt Debt as a%
per Family Value of pe,·Family of Value of
(Rs.) Owned Land (Rs.) Owned Land
Bihar-Bengal 228 3.2 151 9.2
EastU.P. -129 9.2 80 49.4
WestU.P. 226 7.8 176 23.5
Punjab Pepsu 829 5.5 427 9.1
Rajasthan 643 28.9 495 57.2
Central India 269 13.4 129 34.2
All India 425 7.5 207 14.9
SOURCE:AIRCS, 1951-52, Vol. I, Part I, p. 134.
NoTE: The first five·deciles of the cultivators in the survey data have
been categorized here as the 'upper strata', and the lower five
deciles as 'lower strata'.
141 See fn. 140.

142LRARP, 1929, statement on land transfers.
143 Darling, The Punjab Peasant,op. cit., p. 223.
LENDER,5AND DEBTORS:PUNJAB COUNTRYSIDE/ 245
expansion of production, credit transactions increased enor-

mously. Borrowers were optimistic of their capacity to repay
and lenders quite confident of their returns.· The expansion of
production was partly sustained through an extended system
of advances. Conversely, in periods of depression, credit con-
tracted and the volume of debt remained stable or declined. Yet,
in real terms, the burden of indebtedness often fell during rising
prices and went up when prices collapsed.
The long boom in agricultural prices since the late nineteenth
century, and particularly after 1905, was accompanied by credit
expansion. With the-onset of the Depression, credit dried up and
money became scarce in the rural areas. Failing to sell their
produce, ·peasants were in desperate need of loans to pay
revenue and meet other cash obligations. But moneylenders
refused new loans and demanded repayment of old ones.144
Even co-operative credit societies restricted ·their operation. In
1927-8, a total of Rs 237 lakhs was loaned to members of
co-operative societies in Punjab; in 1931-2 only Rs 80·lakhs were
given out. 145 Loans per member fell from Rs 57 to Rs 16. Central
Banks refused loans to co-operatives;.the working capital"of-all
societies dwindled; many of them were liquidated, and others
lost their members in large numbers 146 In general, debts in rural
areas could not be paid back during the ,Depression and ac-
counts remained frozen. 147 Peasants sold whatever hoarded
144 For an excellent description of the conditions in Punjab villag~s during

the Depression, see Darling, Wisdomand Waste in the Punjab Village(London,
1934).
145 Report on the Working of Co-operativeSocietiesin the Punjab (her~after
RWCSP), relevant years.
146 Loan~ from Central Banks to co-operative societies in Punjab fell from
Rs. 192 l_akhsin 1929-30 to 49 lakhs in 19,31-2. Tjle working capit?l of the
Central Co-operative Society shrank from Rs 379 crores in 1926 to 6.8 crores
in 1934. A,.large number of societies were pushed into the lower classes (i.e.
classes C & D). In 1926 about 30 per cent societies belonged to classes A and
B; in 1931 thei,i:proportion had fallen to 12 per cent, ibid., p. 396. Percentage
of recoveries collap~ed. In the south-east it was no I\lOre,than 3 to 5 p.er cent
(in )931-2); ill Jullunder and Ludhiana it ranged between 18 to 20 per cent,
ibid., p. 431. A very large number of societies were liquidated.
147 In the post-Depression years a number of legislative measures ·were
jewellery they had, and waited for a rise in prices. 148 With little
hope of recovery, moneylenders fled the countryside. But the
opportunities of investment and earning in towns offered no .
better prospect. 149
War-induced inflation changed the context in the early
1940s. The volume of loan transactions again expanded enor-
mously, and frozen accounts were re-activated. Surveys in
1945-6 showed that those who had.considerable surpluses to
sell were able to pay off old debts while incurring new ones. 150
Poor peasants, with little to sell and more to buy, were hard hit.
Their old debts remained unpaid, and to these were added new
ones, swelling the volume of their total debt.
While the scale of moneylending expanded, the position of
professional bania lenders was weakened in the rural areas.
'Agriculturists' established a firm hold particularly over mort-
gages. Rich peasants and landowners, as I have argued, gave
out loans not so much to earn a high rate of interest.·Lending
was a complement to production and marketing: it allowed a
control over lartd, and agricultural produce. Expansion of pro-
duction in a way necessitated lending.
The co-operative movement found many zealous official
advocates in Punjab. And despite the usual problems it en-
countered, the- movement here was generalized to a greater
extent than in most other Indian provinces. 151 For the poor,
particularly in the insecure tracts where the movement was the
weakest, co-operatives never provided an alternative to the
introduced in response to these problems: The Punjab Relief of Indebtedness

Act, 1934; The Punjab Debtors Protection Act, 1936; The Punjab Restitution
of Mortgaged Land Act, 1938.
l48 Note on Sales of Gold and Ornaments in 120 Punjab villages(October1931
to December1933), BEIP, Pamphlet No. 1, 1936.
149 Bhattacharya,' Agrarian Change', op. cit., Chapter X.
lSO Agricultural Legislationin India (Vol. VIII): Relief of Agricultural Indebted·
ness, Dept. of Ag. GOI (1958), p. viii. The surveys were carried out by the
Agricultural Finance Sub-Committee, under the chairmanship of D.R. Gadgil.
lSl On the problems faced by the early co-operative movement in western
India, see I.J. Catanach, Rural Ci·edit in Western India (Bombay, 1970). For
Punjab see Ullah, Co-operativeMovement in the Punjab, op. cit.; Darling, The
Punjab Peasant,op. cit., Chapter XIII; PPBEC,Ev., Vol. I, pp. 308, 316, 371.
LENDERSAND DEBTORS:PUNJABCOUNTRYSIDE/ 247
vicious 'money-lending system' which existed. But it allowed

the rich and middle peasants a certain bargaining power in their
struggle with the bania lenders. In most places, co-operatives
were dominated by landholders and lambardars and helped
them consolidate their hold over the .rural 'money ma'r\<et'.
The position of baniamoneylenders was weakened, but they
survived. Rich peasant's and co-operatives lent primarily to
those who had land. Professional village lenders continued to
provide the poor their maih source of loans. The competition in
the 'credit market', like all other 'markets', was fragmented.
Within rural areas, as we have seen, there were different types
of loans, each with its own terms of transaction. Since the object
of these forms of loans differed, they did not always represent
alternative spheres of investment: they could co-exist as well as
complement each other. Such fragmentation did not exclude
competition; it defined the limits within' which competition
could operate. Terms of exchange tended to converge within
each sphere, but continued to vary between spheres.
Chapter Six
The Peasantry in Debt:

The Working and Rupture of
Systems of Rural Credit Relations*
SUGATA BOSE
lI_learly twentieth-century Bengal, the debt relation worked

simultaneously as a mode of surplus-appropriation and as a
vital factor in the reproduction of existing agrarian structures.
Rent itself had by now become less important as a means of
surplus-appropriation thanthe credit mechanism. At the same
time, borrowing in cash and in grain for both cultivation and
consumption purposes had come to play an integral role in
sustaining production in the peasant economy and in its re-
production over time.
The reproductive function of the credit relation through the
annual replenishment of working capital and a consumption
fund of peasant families can be observed in relation to each of
the types of agrarian social structure that predominated in the
different regions. 1 The social composition and character of the
creditor groups and consequently the nature of the creditor-
debtor relationship varied, of course. As for the surplus ap-
propriating function, the relative importance of the rental and
credit markets and the links between the two need further
clarification. In the strongly market-oriented economy of east
Bengal where raiyati rent was low and difficult to collect, the
• Extract from Sugata Bose, Agrarian Bengal:Economy,SocialStructure and

Politics, 1919-1947 (Cambridge, 1986).
1 See chapter 1 in ibid.
THE PEASANTRY IN DEBT / 249
interlinked product and credit markets had,developed into far

more important channels of the drain on the peasantry. Some of
the rentiers of old had learnt, however, to play the credit market.
In west Bengal, rates of raiyati rent continued to be relatively
high. The rent-collectors were involved to a,much greater extent
in the landholding and credit structures~ and it was discovered
in some districts in the 1930s that rental arrears formed a major
portion of debts. In north Bengal, by contrast, the revenue-
collecting structure, was indeed divorced from possessory dom-
inion over the soil and the production process. I_nthis domain
of the rich farmer, debt interest was inextricably intermeshed
with the crop share that was exacted as rent from the tiller.
No aspect of Indian economic history has been more written
about and none left in more confused state than the subject of
rural moneylending. Lamentations that 'utter improvidence'
and 'fondness for litigation' led to peasant indebtedness, which
became part of British district officer culture, are not taken
seriously: any more. Yet, many issues relating to the social setting
and social implications of borrowing and moneylending remain
obscure. To this day, the mahajan of Bengal has eluded precise
identification. There has been a recent tendency amongs~ his-
torians to describe the interlacing of village landlordship, credit
and trade in catastrophic terms. The 'jotedar' is variously de-
fined as village landlord, big farmer or rich peasant, as well as
the chief moneylender in the countryside. 2 This is not a valid
generalization. The point of departure in this respect stiU re-
mains B.B. Chaudhuri's cautious and somewhat pessimistic
remark. 'It is nearly impossible to ascertain which of the dif-
ferent groups dominated the rural credit scene. It is perhaps
futile to look for a uniform pattern throughout eastern India.'.3
This does not mean that a generalization based on an identifica-
tion of the major patterns that prevailed in the different.regions
cannot be attempted.
2 R. and R. Ray, 'Zamindars and Jotedars', pp. 81--4;Abu Ahmed Abdullah,
'Landlord and Rich Peasant under the Permanent Settlement', CalcuttaHis-
to1icalJournal,5, 1 (1980), pp. 116--18.
3 B.B. Chaudhari, 'The Process of Depeasantization in Bengal and Bihar,
1885-1947', Indian HistoricalReview,2, 1 (1975), p. 129.
The analysis of rural creditrelations in this ... [essay] seeks

to consolidate further the typology of agrarian social structure
and the links with the wider economic system that were formu-
lated ... [earlier]. The operation of systems of rural credit en-
tailed an unequal symbiosis in social relations, which served to
hold together the agrarian structure in Bengal. This ... [essay]
assesses the impact of the depression on credit in the different
sectors of our agrarian typology, and examines how far and in
what ways the symbolic relationships were ruptured. The study
of rural credit relations in the slump is in fact a study of the
impact of the great depression on petty commodity producing
peasantries in the colonial periphery of the world economy. The
rupture that occurred-in the 1930s is of critical importance in
understanding the subsistence crisis of the 1940s as well as the
nature of the social and political conflict th'M gripped agrarian
Bengal (and much of agrarian Asia) in the final decades of
colonial rule. 4
DEBT RELATIONS OF PEASANT SMALLHOLDERS IN EAST BENGAL
Who were the Moneylenders?

A Bengali tract, KrishakBilap,published in Mymensingh in 1921,
describes the genesis of two groups of moneylenders sadharan
mahajan (ordinary; moneylenders) and bhuswami mahajan
(landlords who vyere also moneylenders). 5 The writer, Shah
Abdul Hamid, suggests that until the turn of thE;century, there
was a separate class of 'professional moneylenders' or µsurers
who ran a profitable business by lending at high rates of inierest.
These mahajans lent out money on bonds (karjapatra). The great
majority of their debtors would be peasants, who in most cases,
were Muslims.
4 On the social and political iinpact of the depression, d. James C. Scott,

The Moral Economyof the Peasant,pp. 114-56; Michael Adas, The Bunna Delta
'PP· 185-208; Baker, An Indian Rural Economy, chapters 3 and 4; also, see
chapter 6 and Conclusion below.
5 Abdul Hamid Shah, KrishakBilap(Mymensingh, 1921), pp. 4-17.
THE PEASANTRY IN DEBT/ 251
The debtor w:horegularly made his interest payment from the year's
income from agriculture, the mahajan loved more than his eldest son.
And since the principal lay with him, the mahajan blessed him saying.
'This time too the amount of my interest lies in your plot; may God
provide a _good crop, and may you live a hundred years' But be
damned that debtor, the poor wretch who in three years would Have
been unable to pay a pice towards interest or principal. After three
years, having impatiently waite.dthrough the period of limitation, he
would eventually calculate the compound interest and put in a claim
in the court for more than ten times the principal, and obtain a decree
towards principal, interest and costs amountip.g to fifteen times the
original outlay.6
For a brief period in the later nineteenth century, the mahajan
was able to siphon off the peasant's surplus simply through
usury interest, while the landlord was unable either by law or
the lathi, to collect the full rent. It was at this stage that the
zamindars and talukdars of east Bengal decided to enter the
credit market in a big way. According to KrishakBilap, those who
had liquid cash at hand were the first to take this step. The raiyat
was tempted to enter into this new debt relationship with his
rentier landlord in the hope of gaining temporary relief from
the exactions of the 'professional moneylender', as the
landlord's refusal to recognize a new purchaser could save him
from being ultimately sold up for default.7 The initial.'Success of
the.pioneers in getting some return from this new business at
harvest time encouraged other to fol1ow their,e'xample, even if
they themselves had to borrow to enter the field. Shah Abdul
Hamid mentions a big zamindar in his locality who had,Rs. 3
lakh invested in the mdneylending business. He also not~s with
displeasure that even his neighbour,-a Muslim talukdar, whose
rental assets amounted to less than ~s 75 per annum, had
obtained a loan of Rs 2000 from a Hindu rriahajan by mortgaging
the whole of his property and had distributed the stim in small
amounts among his prajas at very high rates of interest.
This tract provides a plausible and intimate, albeit somewhat
{'6 Ibid., pp. 4-5.

. ..ftThe right of free transfer of raiyati holdings was not legally recognized
until 1928.
over-simplified, account of the emergence of an important sec-

tion of the moneyiending class in early twentieth-century east
Bengal, viz, the talukdar-mahajans. The Bengal Tenancy Act of
1885 had given legal recognition to the shift in the political
balance against rentier landlordism, and placed important curbs
on enhancements. From the turn of the century, realization of
rent, especially by the smaller gentry, became increasingly dif-
ficult, and, if figures from Wards' and Attached Estates cart be
taken as an index, after 1907 there was scarcely a year when
collection reached 50% of the total rental. 8 A section of the
bhadralok, who had taken to service and the professions, were
able to detach themselves from the land, and in the political
arena broke with the landed interests and led the radical stream
of nationalist politics. Those who remained on the land tried to
adapt to the changing means of surplus-appropriation. The rates
of returns from alternative sources of investment, especially in
urban areas, held little promise. It was, therefore, a question of
playing the old game, but according to the new rules of the credit
market. This adaptation was made possible in the context of a
widening market for the peasants' produce.
Shah Abdul Hamid's use of the category 'ordinary money-
lenders' or 'professional moneylenders', however, obscures the
growth of the other important section of the moneylending class
in this period-the trader-moneylenders. It had been common
even for the traditional village mal'tajan to be involved in shop-
keeping and in trade in agricultural produce. The expansion of
the jute economy from 1906-7 enlarged the credit needs of the
peasantry and increas.ed manifold the importance of the form
of credit known as dadan or advances on the security of the
crop. As merchant capital flowed in to extract the valuable
· commercial crop, many country traders became commission
agents of the purchasing companies in an elaborate marketing
chain. Some also employed their own small capital. The vast
annual flow of funds from the financial superstructure that was
8 Annual Reports on the Wards' and Attached Estates, cited by Rajat Ray,
'Social Conflict and Political Unrest in Bengal, 1975-1908' (Cambridge, Ph.D.
dissertation, 1973), pp. 113--15.
THE PEASANTRYIN DEBT / 253
distributed irrthe form of dadan tied up with the smaller lagni

or usury capital that circulated in the countryside,
Although the term' professional moneylender' conveys little
about the social background and precise economic function of
the creditor, the only figures that we have on the number of
moneylenders in the different districts come under this category.
The number of moneylenders in proportion to the population
was much greater in the principal jute-gi:owing districts.of east
Bengal than in other parts of the province. Their number to every
100,000of the population in the late 1920s was 280 in Dacca, 175
. in Mymensingh, 150 in Faridpur and 134 in Tippera, as against
the provincial average of 70.9 Did the proliferation of the number
of creditors and the existence of different elements within the
moneylending class enable peasant debtors to play one off
against the other and bargain over the terms of their credit? For
a smallholding peasantry with heavy credit needs and little
security to offer, this was not possible. As the settlement officer
of Mymensingh reported, 'The mahajan has always as many
demands on hand as his capital will sustain'. 10 Usurious rates
of interest were commonly charged in all the districts, but the
rates were even higher in east and north Bengal than in west
and central Bengal.11 Among the causes.of usury, the Banking
9 Banking Cmt. Report, vol. 1, p. 194.

10 Mymensingh SR (1908--19),p. 27.
11 This was the Banking Committee's general view, though it is not entirely
clear from the figures it supplied. The rates of interest charged in the different
districts in the late 1920s were of the following range:
West Bengal(per cent) East Bengal(per cent)

,Burdwan 24-175 p.a. Dacca 12-192 p.a.
Birbhum 15-37112 p.a. Mymensingh 24-225 p.a.
Bankura 15-25 p.a. Bakerganj 24--100 p:a.
Midanpur '12-75 p.a. Faridpur 15-150 p.a.
Hooghly 12-37112 p.a. Chittagong 15-75 p.a.
Howrah 12-75 p.a. Noakhali 24-75 p.a.
Tippera 24-75 p.a
Rajasthani 18V4-75 p.a ..
Committee meritioned 'low credit position of borrowers, ab-

sence of suitable financing agencies, limited resources of
moneylenders, insufficiency of accommodation provided by
co-operative societies and loan offices' .12
Although the debtor may initially have been tempted to
switch to the landlord for credit as a bulwark against the de-
mands of the non-landlord moneylender, it is clear that the
talukdar-mahajan interested in reasonably regular interest pay-
ments and the trader-mahajan interested in the crop at a low
price worked.in effective, through not formal, collaboration. The
talukdar-mahajan was usually not directly involved in the prod-
uct market; but he could tum from declining rental income to
us.ury only because of increased market penetration in east
Bengal agriculture. The bepari involved in dadan karbar was on
his part aided by .the simple usurer, who made his interest
demand at harvest time and deprived the primary producer of
any freedom in marketing his crop.
It is sometimes wrongly suggested as part of the broad
'jotedar' thesis that the debt relation was mainly one between
richer and poorer peasants. 13 There is no evidence that the
predominently Muslim peasantry of east Bengal were involved
in moneylending on a wide scale in the early part of this century.
Registration Department reports showing that land transfers in
Central Bengal(percent) East Bengal(per cent)

Nadia 37~-75 p.a. Pabna 37~300 p.a.
Jessore 183/4-75 p.a.
Khulna 25-37~ p.a. North Bengal(percent)
Murshidabad 18--120 p.a. Dinajpur 24-75 p.a.
Malda 10¥4-75 p.a. Rangpur 37la--66V4 p.a.
24-Parganas 15--150 p.a. Jalpaiguri 10-50 p.a.
Darjeeling 30-60 p.a.
SOURCE:BankingCmt. Report,vol. 1, p. 198.
12 Ibid.
l3 See R. and R. Ray, 'Zamindars and Jotedars', pp. 81-4; Abu Abdullah,
'Landlord and Rich Peasant under the Permanent Settlement', pp. 109-38.
the later nineteenth<:entury took place mostly between 'raiyats'

is no proof that the purchasers were the chief moneylender. The
Banking Committee's observation that there ~as 'not much
loaning among agriculturists therriselves' 14 is substantially cor-
rect for east Bengal in the period prior to the great depression. 15
The two major sections of the moneylending class in this
period in east Bengal can be defined as trader-mahajans and
talukdar-mahajans. In 1929-30 the Banking Committee's report
on Bengal as a whole showed most mahajans were Bengalis, but
a good many Marwaris had also taken to the business with
conspicuous success.
Some, of the mahajans are rich people and have acquired landed
properties and rank among the territorial aristocracy, but the majority
both in towns and villages are small people owning small capitals, on
the income of which they manage to maintain themselves and their
families. Mahajans are chiefly Hindus, but a very few Muhammadan
money-lenders are also found in r'1ral areas'. 16
A great majority of the talukdar-mahajans of east Bengal were
high-caste Hindus while the small trader-mahajans were mainly
drawn from the intermediate Nabashakh castes-Sahas, Telis
and Baniks. These categorizations should not, however, be taken
too rigidly. It was not unusual for a talukdar-mahajan to have
bought some raiyati rights in land, or for a trader-mahajan 'to
have acquired some talukdari as well as raiyati rights.
14 BankingCmt. Report,vol. 1, 65.

15 Some degree of differentiation and forms of exploitation within the
peasantry had indeed emerged. The favoured means of surplus-appropria-
tion, however, of those peasant families who possessed more land than could
be brought under self-cultivation was under-raiyati rent and, in some cases,
a share of the crop. By the early twentieth century, the intensification of
population pressure in east Bengal meant that there was sufficient competi-
tion for the equivalent of a landlord's rent to emerge. Tenancy legislation
having produced a category of occupancy tenants protected against rent
increase, the competitive rent, often double the rate of raiyati rent, made its
appearance only on that portion of raiyat land that was subject to under- ·
raiyats.
I6 BankingCmt. Report,vol. 1, p. 195.
Debt in East Bengalin the Early Twentieth Century

Evidence on the extent and burden of debt among the peasantry
is somewhat scattered and the different sources are not easily
comparable. Nevertheless, it is reasonably clear that indebted-
ness was widespread and that its volume steadily increased
· during the first three decades of this century. Annual interest
payments were certainly a much heavier burden in this period
than annual rent payments.
The first attempt at estimating the volume of indebtedness
was made during settlement operations in Faridpur between
1904 and 1914. The average indebtedness per family of cul-
tivators worked out at Rs 55 per family, but as 55 per cent of the
families were said to be free from debt, the average per indebted
family was Rs 121.17 According to a survey of a Faridpur village
carried out on .similar lines in 1927, the corresponding figures
were Rs 128 and Rs 203, and 37 per cent of all families were free
from debt. 18 Another survey of 424 sample families of cultivators
with permanent rights in land showed that in 1933 the family
average of the total principal debt was Rs 217; the average per
indebted family was Rs 262, and only 17 per cent of the families
were found' to be free from debt. 19 The figures from these
surveys 20 should not be tak'e too literally as the sample sizes and
17 Jack, EconQmic
LifeoJa BengalDistrict,pp. 77-8.
18 Note on Economic Survey of Talma Village by L.B. Burrows, Collector
of Faridpur in RCA Report,vol. 4, p. 498.
19 Bengal Board of Economic Enquiry, Bulletin Distiict Faridpur(Alipur,
1934), p. 4.
20 ExrENTAND VOLUME OF DEBT IN FARIDPUR
1916 1927 1933

Percentage free from debt 55 37 17
Persons indebted
(~)up to one year's income 43.5
(2)up to tw6 years' income 63 46
(3)more than two years' irtcome 1.5 37
Average debt per family Rs 55 Rs 128 Rs 217
Average debt per indebted family Rs 121 .Rs 203 Rs 262
modes of enquiry varied widely, but they are a rough-and-ready

indicator of the general trend in the volume and pervasiveness
of indebtedness.
Surplus-appropriationThroughDebt Interest
The Dacca Settlement Report (1917) provides both an estimate
of the amount of indebtedness as well as a comparison of debt
interest and rent. The cultivator's 'payments to his landlord in
rent, premiums and abwabsform [ed] but a small percentage of
his gross earnings; the only danger, and that a vital one, [was]
the result of his thriftlessness--his burden of debt and the
consequent domination of the moneylender' .21 The average in-
debtedness per family (or more accurately per homestead plot)
was Rs 121, which the settlement officer thought was an under-
estimate, and the figure per indebted family worked out at Rs
256. An average rate of interest of 45 per cent necessitated the
annual payment of Rs 2,1420,000 to the moneylenders, which
was: approximately a fifth of the value of the total produce bf
the soil and five.:.and-a-half times the total amount paid as rent
to the landlords. Every person supported by agriculture, while
having to make an average rent payment of Rs 2.50, was ex-
pected to make an annual interest payment of Rs 12, or slightly
less than a quarter of his average share in the produce. 22 The
massive increase in indebtedness was believed to be a recent
phenomenon:
Knowledge of past agricultural conditions is not sufficient to indicate
the period when the tide of indebtedness commenced to flow, but it
appears to date roughly from the passing of the Bengal 'renancy Act,
the·period when the value of the produce of the soil commenced to
rise rapidly and the security afforded by the Act gave the cultivator
a greater security for his thriftlessness.23
The Mymensingh settlement officer in his report (1919) doubted
21 DaccaSR, p. 50.
22 Ibid.,pp. 47-8.
23Ibid., p. 48. The 1885 Act ensured for the occupancy tenant moderation
of rent and security of tenure.
whether tne situation in his district was as bad as in Dacca, but

acknowledged that 'interest is so high in this country that its
payment constitutes a severe drain on the resources of the
agricultural population, especially as only a small fraction of the
total indebtedness can be considered as capital employed pro-
ductively. Apparently it has jumped from an insignificant sum
to its present proportions in the last thirty years'. 24 The same
observer believed 'the ryots's rent proper' to be 'the least im-
portant factor in' his budget' .25 During settlement operations in
Pabna between 1921 and 1924, indebtedness was reported to be
'widespread and crushing'. 26 Two family budgets of the 'aver-
age typical cultivator' in the paddy-growing Sadar and the
jute-growing Serajgang subdivisions gave the following figures:
Number of Cash Cash Expenditure-

family income expenditure on account
members of debt
Sadar 4 Rs 76.75 Rs 84.25 Rs 9
Serajganj 8 Rs '166.50 Rs 208.00 RsA5·'
•i .. )~ _;;'
The first estimate of the total agricultural debt in ;Bengaliwas
made by the Provincial Banking Enquiry Committee~and .it
suggested a figure of Rs 100 crore in 1929, and an average·,pey
agriculturist family of Rs 160.27 The report referred;:,J:otth'e
undoubted-increase in the volume of indebtedness in1reeent
years' but sought to dispel the notion that it could be1asorib\!p.
to anx genuine expansion of credit of the agriculturiz\f».5}p9,-
quent to high prices. It pointed out the adverse terms,pJ;;!f<l~e
for agriculture and that real value for jute obtaine,chii;i-..the
postwar period of high prices was probably lower than.in i9iG.
It held that 'agricultural indebtedness is a mark of dis~es& in
most caJes'. 28 This point is not difficult to grasp if we reniem"h>er
24 Mymensingh SR, p. 27.

25 Mymensingh DG, p. 64.
26 PabnaSR, quoted in Bengal Board of Economic Enquiry, Bulletin Dist1ict
Pabna (Alipur, 1935), p. 6.
27 Banking Cmt. Report, vol. 1, pp. 69-70.
28 Ibid., p. 65.
that the introduction of a high-value and labour-intensive cash-

crop on peasant smallholdings was itself a mark of distress. 29
The high rate of interest was correctly recognized by the Com-
mittee as not merely the cause of indebtedness but also its effect.
The Bengal Board of Economic Enquiry produced a figure of Rs
97 crore as the total capital debt in 1933, anc:ta family average
of Rs 187.30 The samples from east Bengal districts showed
family averages of capital debt in 1933 to be Rs 286 in Dacca, Rs
280 in Tippera, Rs 265 in Chittagong, Rs 156 in Pabna and Rs
150 in Bogra. 31 By 1933, however, the system of debt interest as
the principal mode of surplus-appropriation was already break-
ing down.
Between the wahing of the landlords' rent offensive in the
later nineteenth century and the dramatic acceleration in the
velocity of the land market in 1938lies the heyday of the creditor.
The trader and moneylender (often the two roles were com-
bined) were well in evidence in the nineteenth century, but it
is in the period from about 1900 to 1930 that appropriations
through the credit market in east Bengal completely over-
shadowed those through the rental and·land markets. Some of
the creditors were, as we have seen, agents of the product
market, and the operation of dadan or advances to,secure the
· crop has been described ... [earlier]. Others operated within the
context of the market, but were chiefly concerned with collecting
usury interest. Mahajans advanc~d paddy as well as cash. The
ordinary rate of interest on loans in kind was derhi or 50 per
cent per transaction but as the loans were given for periods of
a few,months between sowing and harvest, the annual interest
rate was much higher. In Serajganj it was as high as 300 per
cent. 32 Most money loans were issued against bonds (karjapatra)
without any security.
The Banking Committee found that in the province as a
whole, 80 per cent of the loans advanced by moneylenders were
29 See Chapter 2 in Bose, Agrarian Bengal.

30 Bengal Board of Economic Enquiry, PreliminaryReport on Rural Indebted-
ness (Calcutta, 1935), pp. 5-6.
31 Ibid., p. 13.
unsecured, but the value of secured loans to unsecured ones

were in the ratio of 9:10.33 Some loans were granted on promis-
sory notes and on hand notes called hat-chita. Repayments
towards the principal and the annual interest were entered by
the moneylender on the back of the bond or in the hat-chita, and
separate receipts were never given. Loans were also given on
pledge of jewellery or other moveable property, such as brass
utensils. Where land was offered as security, the usual form was
simple mortgage with the mortgager retaining possession, the
period usually not exceeding one year. Other arrangements,
such as kat kabala (conditional sale) and the so-called.English
mortgage (with an ostensible clause of reconveyance) were not
unknown. But as the mahajan in most cases did not have
cultivation of his own, the incidence of any form of usufructuary
mottgage, most commonly known as khai khalasi, was not very
widespread. The periods of limitation of these kinds of mort-
gages tended to be six years or more. The bulk of rural credit
was, hm:Vever,a year to year circulation and expropriation of
funds. Most mahaj&ns insisted on punctual and fairly regular
payment of interest as this was their main source of li~uid
capital. ,In spite of the usurious rates of interest charged, the
Mymensingh settlement officer found in 1919 that 'the ryot is
not inclined to regard the mahajan as his enemy. As lon"gas he
can pay the interest, he is in no hurry to pay off the capital, and
he has no fear of being sold. up',.34 Ten years later, the Banking
Committeeooserved that 'although by reason of usury or,harsh
treatment, an individual moneylender may be disliked in the
locality, there is seldom any expression of public opinion against
his conduct' .35
The Role of Credit in the Processof Reproduction

Appropriating the surplus was only one aspect of the money-
lender's role. The credit system was also closely integrated with
33 Ibid., p. 197.
34 Mymensingh SR, p. 27. For the politics of peasant-debt'brs, see chapter 6
below.
35 BankingCmt. Report,vol. 1, p. 198.
the process of reproduction in the small peasant economy of east

Bengal. It helped to keep the peasant family alive over the lean
period in each production cycle and from one productioI\ cycle
to the next, and replenished capital for cultivation expenses.
There was extensive borrowing in cash and in kind for
subsistence needs between the end of the Bengali year in Chaitra
(mid-April) and the autumn and winter harvests. In some areas,
trader-mahajans exacted a maund of jute at harvest for a maund
of paddy lent in the lean months, but this practice died out as
the margins of profit from jute cultivation diminished in the later
1920s. Another method was to undertake, on sattapatras, to
deliver a fixed quantity of the produce in return for a subsistence
loan granted during the difficult months before the harvest. The
Banking Committee explained:
Apart from the nec;:essityof,food and see?s, which J?akes borrowing
on such unfair terms possible, the agriculturist has frequently to
borrow for hire of labourers during the cultivation season,' specially
for jute, which requires careful weeding and washi_ng. In fact, the
dadan or advance system is as much required by the necessity of the
bepari to procure a sufficient quantity of jute as by the·cultivator'for
weeding etc. Temporary loans lead to permanent debts. 36,
Litigation and social extravagance were certainly not major
causes of indebtedness. In the village of Karimpur in Bogra; in
1929, 52 agriculturist families had a total debt of Rs 9,132 in cash
and 159 maunds of paddy. The loans in kind had been necessary
to meet annual food deficits. Of Rs 2,715°bbrrowed in cash in
1928-9, Rs 1~087were t~ken for capital and perma~ent improve-
ments including purchase of cattle,'l\s ~73 for land-revenue and
rent, Rs 434.for cultivation, Rs 389 for. repaytpel\t of old debts,
Rs 150 for social and religious ceremonies, Rs 15 for litigation
and Rs 66 for unspecified purposes.37
Impressionistic testimony of observers in other east Bengal
districts also suggests that rural credit was avital factor in the
reproduction of the peasant _smallholding structure. The D?cca
settlement officer found it impossible in 1917 to determine the
36 Ibid., p. 70.
37Ibid.
exact constituents of the mass of indebtedness, but he could

discern a certain pattern:
After a successful harvest the average cultivator will spend the whole
of his proceeds; he will doubtless add a weight of corrugated iron to
his homestead; ne will purchase the best cattle available and"the
remainder will qd.ickly be spent on feasts or litigation. When the
sowing season approaches, he is compelled to borrow; as the flood
rises, he is compelled to sell his cattle owing to lac}(of fodder at a
price that is seldom l/4 of the original cost; that is the only return of
his harvest expenditure; to reap the crop he is ordinarily compelled
to borrow again. There is little inclination to repay. This indebtedness
is practically of a permanent character and is treated by the cultivator ·
as his capital.38
Feasts and litigation excepted, repairs to the homestead, pur-
chase of cattle, cost of labour, must all be regarded as integral
to the functioning of the peasant farm as an economic enterprise.
The ecology of east Bengal and the intensification of p,ressure
on the land made purchase of cattle a burdensome recurring
expenditure. This particular item is stressed as one of the chief
causes of indebtedness in a report from Tippera in 1926 which
also highlights the connection between production and con-
sumption needs.
cultivators require much money for cultivating expenses and for
subsistence until the crop can be harvested and sold by them. The
purchase of cattle is one of the heaviest items in the cost of cultivation.
In some areas where cattle cannot be kept in the rains or when paddy
crops are standing, cattie are purchased solely for ploughing and then
sold to dealers who graze them in more suitable areas. In most areas
there is heavy mortality from epidemics among cattle and replace-
ments require capital. ·Many cultivators have exhausted their means
of subsistence before the harvest. 39
Borrowing connected with a reproductive process of a slightly
different sort-marriage-was also of some importance. There
was certainly a rush to take loans for this purpose just before
38 DaccaSR,p. 47.
39 Collector,Tipperato Registrar,Co-operativeSocietyBengalin Reporton
Marketingof Agiicultural Producein Bengal.1926.
THE PEASAWTRY'IN DEBT / 263
the slump. This was to marry off minor daughters before the
Sardah Act, which raised the age of ctmsent, took effect in 1930.
By and large, the credit system served an important,role in
reptoducing the peasant smallholding structure in east Bengal
in the ,early twentieth century, while exploiting it ever anew.
The Rupture in Credit Relationsin East Bengal

During the 1930s, the system of rural credit relations that had•
evolved over the past decades came apart. The Land Revenue,
Commission declared in 1940: 'it would not be too much to say
that at present rural credit is virtually non-exis\ent'. 40
From 1926 the product market had begun to wobble; by 193(\
it had collapsed. The credit pyra.mi<;I.that had been erected on
it lost its foul\dation. With the cataclysmic drop in crop prices,
the primary producers, especially the jute-growers, were ex-
tremely hard put to find the cash to meet their obligations and
their necessities of lif~. A report from Tippera des<;ribes their
predicament as well as that of their creditors:
In normal times they would have tided over' the crisis by resorting to
the village mahajan, but on this occasion this'source of supply was
practically dried up. The village money-lende'rs,scarcely have much
accumulated balances; they deal in fluid •cash, lending, realizing and
lending again. In 1930 the arrangement. was•reversed; they realized
little, their debtors could not pay and prospectiv~ borrowers coµld
not get relief.41
The talukdar-mahajans were sharply affected by their debtors'
inability to pay. The better-off stopped lending-it was simply
bad business to lend. The trader-mahajans occupied a somewhat
different position in the causal circuit of the drying URbf rural
credit. Most of them operated as commission ~g~ts of the
ultimate purchasers of the peasants' produce. The flow of funds
from foreign firms and tl\eir banking agencies had formed, a
critical element in augmenting the annual money supply.,Their
40 Report of the Land Revenue CommissionBengal,Vol. 1,, p. 76.

41 D.M. Tippera to Under-Secy Poll Dept, 26 December 1931, GB, Home
Poll Dept Conf. File 849/31 (WBSA).
withdrawal in the face of Bengal's gloomy export prospects

resulted in a major liquidity crisis. Governments' policies in
Delhi and London to deal with the international dimensions of
the crisis further reduced funds available for agrarian trade,and
credit in the regional economy. 42 As the financial superstructure
stopped disgorging vast amounts of liquid capital down the
marketing and credit pyramids, the. intermediaries wei:e left
high and dry. Not only did they lose their urban source of
finance, but they also came under pressure from urban creditors
who sought to recover what they could before getting out of the
agrarian sector. The domestically supplied money market lar-
gely held its capital in bullion. From the autumn of 19.31,fol-
lowing the delinking of the pound sterling from the gold
standard, there began a massive outflow of gold from· Bengal
(as from other parts of India) together with an almost complete
cessation of the inflow that was characteristic of the earlier
decades. 43 Much of the gold and silver that came on to the
market in this period must have emanated from the hoards of
bazaar-bankers and trader-mahajans, and some was probably
sold by talukdars and the better-off among the cultivators. The
move away from the gold standard meant that profits were
made on sales of gold that had been acquired in recent years.
However, these were clearly not channelled into the unprofit-
able business of rural moneylending, but went to pay for the
now more expensive imports and various forms of urban invest-
ment. The loss of gold also implied a long-term loss of credit for
the rural sector as a whole ..Biuring the flight of capital from the
countryside, some initial attempts were made to foreclose on
mortgages. But these were effectively resisted. 44 Unsecured
loans were largely to be lost.
The impact of the liquidity crisis on the credit market in th~
highly monetized economy of east Bengal is not difficult to
comprehend. The flow of PlOney credit was reduced to a trickle.
But the impact on the smaller yet significant grain sector of the
42 See chapter 2 in Bose, Agrarian Bengal.

43 Ibid.
44 Ibid.
credit market is more- complex. The period of expansion of the

jute economy hadseert a change in the currency of lending from
grain to an increased use of cash, but the transition was far from
complete. There were production and consumption aspects of
the credit needs of a smallholding peasantry which had turned
to cash-cropping in -an environment of shrinking resources, and
the latter were in part.met by the issuing of grain loans in the
months before the harvest. During the depression the fairly
elastic and informal nature of 'grain-lending' was replaced by
a much more rigid system of 'selling grain on credit'. Indeed,
the mechanism of redistribution of grain which kept the peasant
family alive over the lean months and in bad years largely
shifted from the domain of the credit market to that of the
product market.
In July 193p, the district magistrate o( l,3akarganj found
during his tour in the interior that two groups of people were
seeki~g eaddy-~he landless people living on labour or charity
for whom grain doles had to be ,arr.anged and cultivators with
land who had no money to purchase rice. The latter were
anxious to buy rice and had approached the leading mahajans
for credit. The mahajans were willing to advance rice,, the pre-
sent price of which was Rs 4 per,maimd, at rates varying from
Rs 7 to Rs 13 per maund to be paid in December. Locatolfi~ers
were trying to to obtain rice from the merchants at a reasonable
rate, around Rs b to be paid in December. This they hoped to
sell to peqple who wanted it on bonds, but the merchants were
not ready to co-operate. The distri~t magistrate wrote indignant-
ly in his diary: 'the Mahajans whjle still holding out for their
last pound of fl,esh are intimating to us that they are afraid of
locit[ing]. We are doing what we can to reassure them but they
.., 'f (( .J r
are certainly provoking the danger-themselvef: ..45 1nthe prin-

cipal jute-growing districts of east Bengal as well, together with
the stoppage of money credit, there was an initial reluctance to
hand out paddy loans. Over the decade, the character of grain
redistribution, insofar as it continued, changed from lending fo
45 Bakarganj Collector Donovan's Tour D_iary,July 1930, Donovan Papers

(SASC).
selling, on condition of deferred payment fixed for the next

harvest at a much higher pri"ce. ·
There were two aspects of the immediate political response
of the peasantry to the dislocation in the product and credit
markets. On the one hand, the indebted peasants combined to
refuse interest payments to the moneylenders. The commis-
sioner of Chittagong division wrote of the situation in Tippera
district in 1931:
In ordinary economic conditions I do not think propaganda against
paying rents to landlords and interest to mahajans would be possible
in this district because nearly every cultivator goes to a money-lender
for a loan each year. This year the money-lenders recovered nothing
and so have had no money to give out.46
The main purpose of the numerous instances of agrarian protest
in this period was the qestruction of debt bonds. At the same
time, in the first two years of the deRression there were cases
where moneylenders, especially those who had stocks of paqdy,,
were besieged qy people who produced bonds and begged for
loans. Refusal, which was the usual response, provoked anger;
moneylenders' property was. often damaged and a.number I
of
moneylenders were murdered. 47
After the initial spurt of anger, the economic response df the
peasantry to the rupture in r4ral credit relations had lo be one
of adjustment to the new situation. This involved both readjust-
ment of consumption patterns at a lower level and less rigour
in the choice of inputs for carrying on agricultural operations.
Given the small size of most holdings and the primitive techni-
que of cultivation, there were not. many instances of l~md going
out of cultivation in east Bengal. There is considerable evidence,
however, of the use of fewer and'podrer cattle and"tKereluctance
to resort to hired labour unless absolutely i;iecessary.48 Fiiures
46 Cmsner Chittagong Dn to Ch. Secy, 28 May 1931, GB, Home Poll Dept,
Con£. File 105/31 (WBSA).
47 See chapter 6 in Bose, Agrarian Bengal.
48 It was reported from Bogra: 'In spite of this dearth of agricultural credit,
the agriculturist have been able to bring all their lands under cultivation partly
by leasing out part of their lands, partly by exchange labour and to a small
extent by pledging their still remaining ornaments and by sale of their lands'.
THE PEASANTRYIN DEBT/ 267
from six mauzas in Pabna showed that between 1928-9 and

1932-3 the average<family income fell by SS·per cent, while
-expenditure fell by 45 per cent.49 The reduction in expenditure
on consumption items would partly be explained by the fall in
the prices of th~ commodities bought, such as cotton clothes,
.but there was also a real drop in living -standards. The degree
of lowering of standards was much greater for the peasants who
had turned to jute, as the figures in Table 6.1-from a paddy-
growing village, Rangalia, in Sadar sub-division and a jute-
growing village, Barabil, in Serajganj sub-<;livision of Pabna
-demonstrate.
TABLE 6.1
FAMILYAVERAGESOF INCOMEAND EXPENDITURE

IN PABNA
1921-4 1928-9 1932-3

Sadar (non-jute)sub-division
Income 76.75 88 51
Expenditure 84.25 72 54
Serajganj(jute-growing)sub-division
Income 116.50 147 57
Expenditure 208 144 61
SOURCE: Bengal Board of Economic Enquiry, Bulletin District :pabna
(1935), p. 9.
Resort to the rural moneylender, which· had been a fun-

damental fact of life for the majority of east Bengal peasants in
the early part of the century, steadily became a thing of the past
during the depression decade. A random survey of 14,959'agri-
culturists' all over Bengal by the Registration Department indi-
Collector Bogra to Jt.Secy. CCRI Dept, 8 October 1~37, GB Rey.•B. May 1940
Progs. 14-571(BSRR). In Dacca, 'about 10,000 tenants went to the Subdivision
Officer's bungalow and complained that they could not g~t any credit to carry
on agriculture'.' Evidence of Dacca B'ar Association, Land Rev. Cms. Report,
Vol. 1, p. 136. In Bakarganj, the collector found cattle in miserable condition
being offered at low prices, but there were no buyers. Donovan's Tour Diary,
Ma; 1930, Dono'van Papers (SASC).
4 Bengal Board of Economic Enquiry, BulletinDistrictPabna,p. 7.
cated that during the years 1931-2, 1932-3 and 1933--4,there had
been less and less borrowing and a slow rise in repayments. 50
Figures on the number and value of registered deeds of mort-
gages and bonds from Pabna (Table 6.2) show a marked decline
from 1928 to 1934. The number of mortgages fell by 50 per cent
and the amount borrowed on registered ,mortgage by 77 per
cent, while the number of bonds registered fell by 81 per cent
and the amount borrowed on that count by 69 per cent. The
credit market continued to languish throughout the slump. Even
towards the end of the decade'when the depression began to lift
and trade and prices picked up, government efforts to deal with
the debt problem ensured that no positive response was felt in
the realin of rural credit. It is therefore, important to study the
impact of government intervention in the rural debt problem
during the 1930s.
TABLE 6.2
DECLINE IN THE NUMBER AND VALUE OF REGISTERED
MORTGAGES AND BONDS IN PABNA
Year Mortgages Bonds

Number Value Rs Number Value Rs
1928 19,503 2,902,496 789 139,026
1929 18,692 3,059,964 595 103,616
1930 18,939 2,852,848 760 143,132
1931 i6,164 1,806,382 282 60,473
1932 12,861 1,266,356 343 !00,304
1933 9,900 1,007,362 237 70,461
1934(to Oct) 8,203 566,398 126 35,690
1934• 9,8M 679,678 151 42,828
Adding on for November and December on the average of the
first ten months.
SOURCE: Bengal Board of Economic Enquiry, Bulletin District Pabna
(1935), p. 15.
50 Bengal Board of Economic Enquiry, Report on the Activities of the Board

During the Years 1934-5 and 1935-6 (Alipur, 1936), p. 14;
.Effectsof LegislativeInterventionin the Debt Problem

'During the 1930s, goverpment effort consisted of a series
of delayed debt legislation. These aimed principally at provid-
ing relief for the peasant debtor and dampening the anti.-
moneylender agitations,. A few hopelessly inadequate executive
measures to provide institutional credit were also attempted.
The first legislative move, the Bengal Moneylenders Act
1933, was not a response tQ the new crisis of the depression, but
an attempt to implement the Banking Committee's recommen-
dations to stop usurious interest rates that had been found to
prevail in the 1920s. As the Usurious Loans Act 1918, modelled
on the British Moneylenders Act of 1900, had proved to be
inoperative, the Bengal Government in 1933 took inspiration
frpm the (British) Moneylenders Act of 1?27 and tried to limit
compound interest, suggest maximum rates of interest recover-
able in courts, and made registration compulsory for non-resi-
dent moneylenders. 51In 1932, a bill had been brought before the
Legislative Council by an· individual member who intended to
give relief to the agriculturi:st, not by interfering with the interest
rare but by providing simple machinery to settle debts through
Co-operative Credit Societies. This, the author believed, would
also have the indirect effect of popularizing these soci~ties, but
the governor had refused to sanction the bill.52
It was not until January 1935 that the Bengal Board. of
Economic Enquiry produced the draft of a bill thatcwas put OJ}
the statute books 12 months later as the Bengal Agricultural
Debtors Act.53It provided for the establishment of debt 'settle-
ment boards to scale down debts according to the debtors' ,
ability to pay. The express purpose of the legislation,.!"as to
relieve the burden of the debtors. But it was felt that it would
be of advantage to the creditors as well, since in recent years
5 1 'TheBengal Moneylenders Bill 1933', GB Rev. LR Br.,June 1933, B. Progs.
116-18, File 2A-7, of 1933. (WBSA).
52 'The Bengal Agriculturists' Relief Bill by Maulavi Saiyid Jalaluddin
Hashemy, MLC', GB Rev. LR Br., April 1932, Progs. 11-13, File 2A-14 of 1932
53 For tlJe draft, see Bengal Board of Economic Enquiry, PreliminaryReport
on Rural Indebtedness;for the Act, GB, CCRI Dept, RI Br.,,February 1942, B.
Progs. 53-9, File 2A-0/37.
'the moneylenders as a whole had failed to collect any interest,

much less any part of the capital of their outstanding loans' .54
' .
If amicable conciliation between debtor and creditor could not
'
be achieved; the boards were empowered to make an award
payab\e in yearly insta!m:ents on the basis of a reasonable offer
from either party. If after an award 'any instalment became
overdue, it was recoverable by a compulsory certificate proce-
dure. As a deterrent to future borrowing, debts incurred after
the award could not be sued for un~il <Jllthe certificat~d debts
had been realized. The civil court had no jurisdiction while
proceedings were pending befort; a debt settlement board, nor
could it interfere with an award. Arrears of rent were to be
regarded as debts. There :was some il)itial confusion whether a
decree obtained for the money value of the share of the crop
under 'any barga system was a debt within the meaning of the
Act until* it was·
I
clarified in October 1938 that it was not. 55
l ~
Debt conciliation boards were tried out as a pilot measure

in 1935-6 in the Chandpur subdivision of Tippera district with
encouraging results. There were 1996,.casessettled by 39 boards.
The principal involved was Rs 213,919, creditors' claims
amounted to Rs 506,234 and the boards awarded Rs 244,795,
effecting a reduction of 52 per cent. It was claimed by local
officers that the boards hap°' (1) killed the agrarian agitation; (2)
improved relations between debtors and creditors; (3) led to a
drastic reduction of debt; (4) f~cilitated recovery of dues which
the agrarian agitation had· made almost impossible; (5) led to a
reduction of crime and litigation brought to the notice of the
courts and (according to matbars and Union Board members) of
54 Bengal Board of Economic Enquiry, PreliminaryReporton Rural Indebted-

ness, p. 5.
55 B.B. Chaudhuri states, citing a letter from GB to the collector of Mymen-
singh of 19 May 1938, that a decree obtained for the money-value of the share
of produce under any adhi, barga or bhag system was regarded as a debt
within the meaning of the B.A.D. Act. 13.B.Chaudhuri, 'The Process of
Depeasantization', p. 121. Another letter of 25 October 1938 contradicted the
view put forward in the earlier letter, and declared such claims to be excluded
from debt within the meaning of the Act. See Jt Secy, CCRI Dept to collectors
of Bogra and Mymensingh, 25 October 1938, CCRI Dept, RI Br., July 1947, B
Progs. 215---18,File 21-6/38 (WBSA).
THE PEASANTRYIM DEBT / 271
petty crime which is not reported'. 56 The passing of the Agricul-

tural Debtors Act caused some panic am~ng the creditors. From
Kishoreganj subdivision in Mymensingh, Chandpur in Tippera
and Sadar, Noakhali, there were reports of a rise in the number
of execution cases brought by moneylenders early in 1936 in an
attempt to obtain decrees before the Act came into force.57 After
Fazlul Huq's ministry took office in April 1937, debt settlement
boards were set up district by district all over the province. The
scale of their operations was, however, much greater in the east
Bengal districts which provided the chief political impetus for
debt reduction (see Table 6.3). By December 1938, the boards
had judged creditors' claims amounting to Rs 367 lakh and
scaled them down in their awards to Rs 179 lakh. 58 Although a
majority of the applications were filed by debtors, in a very large
mJmber of cases, creditors had taJ.<enthe initiative with a view
to salvaging what they could of their outlay. But March 1945,
the debt settlement boards had received applications from 34
lakhs (3.4 million) debtors and creditors, disposed of 29 lakh
cases (mostly by the end of 1942) and out of these had made
awards in 13 lakh cases. The creditors altogether claimed Rs:~2
crore, Rs 32 crore were determined to be the debt (under Section
18 of the Act), and the boards made awards to Jhe n:;tagnitude
of Rs '19 crore. 59 Table 6.3 gives a comprehensive picture of the
amount of debt reviewed by the boards in each of thr districts
from 1937 to the end of September 1945, and the extent to which
debtors and creditors respectively made use of the debt-settle-
ment facilities.
In September 1937,the Co-operative Credit and RuralJndeb-
tedness Department of the Governmenf of Bengal asked district
officers to investigate and report on the fears being expressed
about the effects of debt settlement operations on the flow of
credit. Mahajans had reportedly stopped lending and this past
56 'Introduction of Agricultural Debtors' Act', GB, CCRI Dept, RI, Br.,

February 1942, B. Progs, 53--9,File 2A-9/37 (WBSA).
57 Ibid.
58 H,µque, Man behind the Plough,pp. 169-70.
59 KM. Mukerji, 'The Problems of Agricultural Indebtedness in Bengal',
Indian Journalof Economics,29 (1948-9), p, 382. ·
N
TABLE 6.3 j;j
........
OPERATIONS
OF DEBTSETILEMENT
BOARDS:1937 'FOSEPTEMBER
1945
Q
District Applications received Forall casesdisposedof:
g
:,1
Filedby creditor FiledbJJdebtor Total amount ofdebt Creditorsclaims Debt determined E::
>
:,:,
shown in applications X
CT1
East Bengal ul
Bakarganj 77,162 160,208 69,826,601 28,621,605 15,851,770 >
~
Bogra 66,607 57,491 26,17$,747 26,178,747 17,051,078
~
CT1
Rajshahi 65,721 48,638 17,015,249 15,133,030 8,977,866 >
C)
Tippera 108,430 131;532 70,968,7~8 50,264,354 28,895,457
~
Dacca 69,952 133,024 79,239,644 34,371,538 21,879,472 1:!
>
Clµttagong ~4,604 96,481 15,583,894 16,653,221 9,099,613 z
Mymensingh 193,800 229,596 150,864,334 136,498,147 108,250,676
Faridpur 61,972 110,349 20,785,010 58,927,664 15,786,378
Noakhali 49,912 119,559 ~
36,933,746 27,043,958 14,418,085

Pabna 79,921 67,833 18,769,268 19,433,455 13,866,213
West and Centi-alBengal
Birbhum 25,953 43,389 ,. 18,305,188 8,748,323 6,186,696"
Hoo_g_hly 22,525 23,752 6,728,007 5,439,309 3,592,7,,Q9
District Applications received For all cases disposedof:
Filed by creditor Filedby debtor Tota.I.amountof debt Creditorsclaims Debt determi1.1ed
shown in applications
Bankura 16,907 35,849 9,772,814 8,184,716 5,403,189
Burdwan 19,300 31,113 14,661,277 10,4~5,877 8,048,849
Howrah 10,642 17,013 2,762,111 3,315,195 2,350,064
Murshidabad 5~,741 42,158 7,366,570 8,837,198 6,013,122
Nadia 50,941 45,509 9,873,800 6,099,781 4,692,022
Malda 32,831 25,358 20,767,258 6,961,362 4,992,494
Khulna 45,030 108,628 27,888,027 12,373,455 6,239,761
Midnapur 80,484 90,479 14,423,855 18,545,906 11,515,548
Jessore 77,585 37,290 14,605,968 7,057,165 2,811,962 o-j
The 24-Parganas 30,945 79,073 31,976,543 13,425,761 8,102,320 ::c

t%I
'1'
North Bengal. t%I
>
V,
Jalpaiguri 8,017 g,800 .6,J34,726 4,300,732 3,626,287 >

z
o-j
Dinajpur 74,235 56,452 20,492,519 17,612,876 12,130,137 ~
Rangpur 128,750 76,375 22,999,197 18,857,949 13,615,382 z
g
SOURCE: C.C. and R. Dept Credit Br., April 1947 8. Progs. 557-653 File lR-14/ 46 (WBSA). ~
NOTE: District wise figures of awards made by the Bo,ards could not be traced.~ .. ........
N
~
source of agricultural credit was expected to freeze at least for

a few years. The government had also heard that agriculturists
could now obtain cash only by pledging ornaments or by out-
right sale or lease of part-holdings, and they wished to know
how far this was true. The replies received from the districts
provide some of the best insights into the state of rural credit at
the time and the important changes that were occurring in credit
relations in the countryside during the slump. 60
District officers were u1.1-animousthat the flow of rural credit
had stopped much earlier at the onset of the depression. Some
believed that the Debtors' Act had aggravated the position;
others felt that the situation was already so bad that the boards
could hardly have made matters any worse. 61
The district magistrate of Mymensingh wrote in November
1937: .
60'Restriction of Rural Credit-Possible Effect of Debt Conciliation Board',

GB Rev.,Dept LR Br., May 1940, B. Progs. 14-57 (BSRR).
61 Dacca reported, ' .... for the last few years the professional money-
lenders have generally ceased to lend any new money to the agricu_lturists.
This has been primarily due to the economic depression which set in 1929,
but in recent years is partly accounted for by the Bengal Agricultural Debtors
Act'. Addl Collr Dacca to Cmsner Dacca Dn, 7 October 1937, loc. cit. From
Tippera came the opinion, 'There is no justification for the belief that the Debt
Settlement Boards have caused a cessation of loans by money-lenders. Maha-
jans were prevented from a'dvancing money in the usual way by the depres-
sion long before the boards were created,' and there is no reason to believe
that they woulcthave been in a position to continue operations to any very
great extent had the boards not been set up'. Collr Tippera to Jt Secy CCRI
Dept, 29 October 1937, ibid.
The report from Bakarganj went into more detail: 'Owing to adverse eco-
nomic conditions, there has been contraction of rutal credit before the intro-
duction of the Agricultural Debtors' 1ct. The cuitivators were finding it
difficult to repay their loans owing to the low price of gtairr and their own
improvidence, and the Mahajans were finding it increasingly difficult to realise
their dues even with the aid of the Courts owing to the fall in the value of
land. Money was therefore tight, and with the introduction of the Debtor's
Act, and the ill-informed criticism it aroused, the Mahajans restricted credit
still further. The debtors on their side took advantage of the introduction of
the Act to suspend repayment even of short term loans, and in some cases
seized land which had been given to Mahajans in usufructuary mortgage. The
result was that this season there was almost a complete suspension of cre~lit'.
Collr Bakarganj to Cmsner Dacca Dn, 22 October 1937,.ibid.
Enquiries seem to show that throughout the district, the village maha-
jans are less ableto knd mone)l' to agriculturists since the commence-
rp.i;nt of the depression of 1930-31 tha11previously and further that
the introduction of the Agricultural Debtors' Act has undoubtedly Act
has undoubtedly still further restricted their willingness to lend. 62 '
Actual figures from a couple of villages showed that it was
possible still for a few reliable borrowers to obtain short-term,
loans from mahajans. In one village of 59 householders, 18 had
no debt, 19 had applied to the debt settlell).ent board, 22 indebted
families had not applied and 6 had been able to borrow from
mahajans in the past four months. These loans v.:ere obtained
by pledging ornaments or other similar moveable and valuable
property. 'It is clear, however, from all.reports', the collector
added/that far from encouraging people to borrow, as they did
before the depression, mahajans are very careful to le11donly to
those who can give security which can be easily realised.' He
had no definite information that mahajans were insi:sting on the
sale of lands when people approacJ;ted them to obtain money;
but he made a very interesting ob,servation on. the nature of
usufructuary mortgages: 'There seems to be little'borrowing at
present on the basis of usufructuary mortgage from .genuine
mahajans though I have found it going on between simple cul-
tivators who have never done any.,money-lending business beforeand
abofiginals'. 63 As the older creditor groups-,the traders and
talukdars distanced from effective possession and use of the
land-withdrew from the lagni (moneylending) l:5usiness, cuh
tivators in a position to lend stepped into the breach. When in
1938, econo"mic and legislative changes gave a ·spurt to land
transactions, these better-off moneylending peasants were best
placed to make the most of the transition from 'surplus-appro-
priation' in east-Bengal agriculture to actual seizure of the prin-
cipal means of production.
Reports.from other east-Bengal districts confirm the general
trend found in Mymensingh with some interesting variations in
62 Collr Mymensingh to Jt Secy CCRI Dept, 27 November 1937, ibid.

(emphasis added).
63 Ibid. (emphasis added).
detail. According to the collector of Tippera, while mahajans

were unable to advance loans extensively, they could still pro-
vide small loans on short terms. There was also a 'certain
amount of mutual assistance rendered amongst the cultivators
without interest'. Moneylenders had generally demanded sale
or lease of lands for the advance of immediate cash. Ornaments
were 'now-rare' since most.of them had been already pledged
and disposed of in the early years of the slump. 64 In Dacca,
except for urgent and pressing necessities, borrowing was un-
common. Agricultural borrowers did not get any loans, however
small, without pledging their•ornaments or mqrtgaging or leas-
ing their lmtds. 'It is not often', the collector wrote, 'that agricul-
turists have to sell off small parcels of their land in order to raise
money for the cultivation of the rest of their holdings. The most
common practice now is to borrow money on the usufructuary
mortgage of lands.'6 5 Once the 1938 amendment to the Bengal
Tenancy Act set a limit on the period of usufructuary mortgage,
credit on the security of land woµ_ldalso no longer be available.
The only way then to obtain ready money would be outright
sale of moveable property and l,and.66
The contraction or even extinction of rural credit was reflec-
tion in the demand for the meagre institutional credit the gov-
ernment could provide. There w~re three main sources from
which the Government could disburse credit-its own agricul-
tu:raUoans, the co-operative credit societies and the land mort-
gage banks that were set up in the 1930s. The ·yearly allocation
of agricultural loan's showed no appreciable increase until the
ministry elected under the 1935 Act took office in 1937.67In 1938,
64 Collr Tippera to Jt Secy CCRI Dept, 29 October 1937, ibid.
65 Ibid. (emphasis added).
64 Collr Tippera to Jt Secy CCRI Dept, 29 October 1937, ibid.
65 Addi Collr Dacca to Cmsner Dacca Dn, 7 October 1937, ibid.
66 On the political backgrou~d to the 1938 amendment of the, Bengal
Tenancy Act,.see chapter 6 below.
67The amounts advanced as agriculturists' loans were as follows:
Year Amount Year Amount
1919-20 Rs 2,163,661 1921-2 Rs 125,842
1920--1 Rs 114,433 1922-3 Rs 852,644
TH~ PEASANTRY IN DEBT / 277
Rs 50 lakh were issued in the form 6f agriculturcil loans agfilnst

a normal grant of Rs 6 lakh. 68 The' outstanding amount on
agricultural loans increcised from Rs 32 lakh in April 1937 to·Rs
137 lakh in October 1942.69
There were some 25,000 agricultural credit societies in Ben-
gal covering 6 per cent of the rural population. When the
Depression struck, many of these went into liquidation. 70 Even
after discounting reports in the nationalist press at tendentious,
the governor and his cabinet conceded in April 1939 that 'ordi-
rl.ary sources of credit are clearly now inadequate and that
borrowers are not finding facilities for the short-term loans they
require to cover the sowing sea~on i.n many Districts' .71 The
Co-operative Department now produced a scheme to inflate
rural credit. It involved government guarantees to the Provincial
Co-operative Bank to the-extent of Rs 35 lakh, which was to be
rapidly distributed in short-term Joans through revived or·
Year Amount Year Amount

1923--4 Rs 155,935 1933--4 Rs 368,889
1924-5 Rs 141,971 1934--5 Rs 751,924
1925--6 No great demand 1935-6 Rs 811,052
1926-7 Rs 392,420 1936-7 Rs ?
1927-8 Rs 340,697 1937-8 Rs 352,3!9
1928-9 Rs 1,444,2(}6 1938-9 Rs 5,648,619
1929-30 Rs 572,099 1939-40 Rs 3,378,315
1930-1 Rs 875,943 1940-1 Rs 87~489
1931-2 Rs 1,289,085 1941-2 Rs 10,311,514
1932-3 Rs 320,821 1942-3 Rs. 8,529,242
SOURCE: Annual Reports on Land Revenue Administration of Bengal.
68 The Revenue Minister cited these figures at a cabinet meeting in arguing

his clise that district officers should be more careful'in issuing agricultural
loans, else government would be called upon to make good the shortage of
loans caused by the contraction of credit. Gov. to Gov., 19 April 1939, L/P &
J/51144 (IOR).
69 Gov. to Gov. Gen., 22 October 1942, L/P & J/5/149 (IOR).
70 Land Rev. Cms. Report,vol. 1, p. 157.
71 Gov. to Gov.-Gen., 19 April 1939, L/P &J/5/144 (IOR).
quickly organized societies. To provide the Bank the liquid

assets, Rs 25 lakh, the balance of a long promised subsidy, was
to.be paid to it with a further cash credit loan of Rs 7 lakh from
the government. The plan came to nothing. It was decided that
the government would give no guarantee whatever, but would
provide a cash credit of Rs 5 lakh. The governor wrote with
relief: 'I think. Government, have escaped lightly from what
might have been a very dangerous commitment' :72 The five
Land Mortgcige Banks were an absolute fiasco. Up to 1940, they
advanced altogether some Rs 6 lakh. No loan could be granted
which exceeded 50 per cent of the security and the security had
to be land in which-the applicant held at least a raiyati right. 73
The neediest had obviously no substantial collateral to offer.
One last legislative effort to protect the debtor, the Bengal
Moneylenders Act of 1940, further reduced the possibility of an
upswing in the credit market with the changed economic con-
ditions of wartime. The main objects of this Act, introduced by
the government and passed without opposition from the Con-
gress, were to register moneylenders and reduce interest rate's.
No debt could exceed twice the original principal and interest
ceilings were fixed at 8 per cent bn secured loans and 10 per
cent on unsecured loans.74
During the slump, both the talukdar-mahajans and trader-
mahajans had disengaged themselves from the process of re-
production of !h~ small peasant economy of east Bengal. When
the depression lifted, the rupture in rural credit relations was
not repaired. To some extent, a whole succession of legislative
interference made prospective creditors extremely wary of ven-
turing back into the uncertain sphere of rural moneylending
even in the climate of the trade and price boom of the Second
World War. A more fundamental reason is that the jute economy
never really recovered its buoyancy. The relative price of jute
remained weak during this boom. 75Aggregate figures on indeb-
72 Gov. to Gov.-Gen., 6 June 1939, ibid.

73LandRev. Cms.Report,vol. 1, p. 157. Land values in the 1930s were very
low.
74 Ibid., pp. 156-7.
75See chapters 2 and 3 above, pp. 67-9, 84, 94-7.
tedness for Bengal suggest that, in marked contrast to the period

of the First World War and its aftermath, in the 1940s the burden
of debt tvas reduced in real terms. But before we consider the
available statistical estimates of this later period, we must first
turn to the systems of rural credit in the other sectors of the
agrarian typology and find out how they fared in the ·great
depression.
DEBT RELATION IN THE DEMESNE LABOUR-PEASANT

SMALLHOLDING COMPLEX IN WEST AND CENTRAL BENGAL
Who were the Moneylenders?

' ... the indigo disturbances' writes Blair B. Kling, 'mark the
transfer.of.power from plant~r to moneylender in Lower Ben-
gal.'76In 1920, 60 years <!fterthe Blue Mutiny, the collector of a
Lower Bengal District found:
The average cultivator is heavily in debt ..He hands over the' greater
part of his harvest to his mahajan to meet existing obligations and, as
he is usually unable to mai_ntainhimself with the balance till tl)e next
~arvest, l;tehas to borrow.again a few months ~fter. He pursues his
career of borrowing and repaying.from year's end to year's end,
always adding to his burden and never making any advance towards
release.77
Who, in tl}ese parts, wc1sthe mahajan? The Bankura settlement
offi~~r-tellsus on the ba~is of Ju&obs,!;!rvationsqetween 1917·and
192~ 1hat 'as a rule, the landlord is also,the. money-l-ander'. 78
The mass of evidence furnished before the Indigo ,Commission
suggests that in west:.Bengal, the. .zamindars <1-ndpatnidars
had.,devdoped extensive, usurious .interests long befor~ their
counterparts in east Bengal, who began to play a major role in
the cre~t market from only about the turn of this cenfury. 79
76Blair B. Kling. The Blue Mutiny (Philadelphia, 1966), p. 221.

77Quoted in Bankura SR, p. 17.
78Ibid.
79Report of Indigo Commission, cited by Ranajit Guha, 'Neel Darpan: The
Joykrishna Mukherjee of Uttarpara, a l;>i.gmagnate paying

Rs 90,000 in yearly revenue, told the Commission that he had
nearly Rs 100,000 'floating' in the moneylending business at
rates of interest from 12 per cent to 24 per cent. Srihari Rai of
Chandipur, a medium-sized zamindar holding revenue-collect-
ing rights over seven villages, was also deeply involved in
mahajani. His custom was to charge the raiyats interest at the
rate of 24 per cent on cash loans, 37.5 per cent on mixed cash
and grain loans and up to 50 per cent on grain loans. Then there
were the innumerable small owners of patni taluks for whom
usury was an important subsidiary source of income. The Basu
family of Swarapur, who are the focus of Dinabandhu Mitra' s
famous play Nil Darpan,are an example of this type. So far as
these moneylending landowners were concerned, the cultiva-
tion of indigo was a nuisance, as it interfered with the paddy
crop. It obstructed their realization of rice debts at a time when,
after a long sluggish period, grain prices had begun to rise. The
collapse 9f the indigo plantations represented, in terms of the
different forms of rural credit, the victory of theJagni form of
moheylending over dadni, and left the patnidar-mahajans the
ruling element in the west Bengal countryside.
The long, secular movement of rising grain prices that
stretched with minor hi~cups from the middle of the nineteenth
century to the 1920s, offered some scope for a process of internal
differentiation _among the peasantry and the emergence of a
peasant elite who, as junior partners of the moneylending rural
gentry, came to control a fair portion of the village grain heap.
Srihari Pal and Daulat Sheikh, prosperous ten'ctntsof the Babus
of Kankana, a Birbhum locality, in Tarashankar Bandyopa-
dhyay' s novels set in the early twentieth century, are examples
of such thrusting, grain dealing, rich peasants.so Scattered com-
ments in settlemertt reports•about 'agriculturist moneylenders
have led some historians to believe that affluent peasants were
Image of a Peasant Revolt in a Liberal Mirror', Journal of Peasant Studies, 2,

1(1974), pp. 36-7. f I
80 Tarashankar Bandyopadhyay, Dhatridebata,Ganadebataand Panchdgram,

Hansuli Banker Upakatha(Calcutta, 1971).
THE PEASANTRY IN DEBT/ 281
the chief sources of credit. 81 In Jessore, it was reported in 1925,

'the larger numbetof mahajans are agriculturists themselves'; 82
in Burdwan, in the 1930s, 'the bulk of the money-lending busi-
ness is in the hands of the richer cultivators who employ their
surplus funds in .this manner' .83 These comments would run
counter to the general picture of rural credit relations that tan
be gleaned from a wide array of sources unless the category
'agriculturist' or even 'cultivator' is meant to include the small
patnidars, who in most parts of west Bengal were more akin to
their peer in north I:i;idiaand did not keep the same distance
from actual cultivation processes as the upper-caste talukdars
of east Bengal. The Jessore report certainly speaks of the exist-
ence of 'gentlemen-farmers'. 84 In the Bishnupur sub-division of
Bankura, there were a large number of very small estates, 'many
oHhe proprietors being themselves the actual cultivators of the
soil'. 85 There can be little doubt that landlords-large, medium
and small~wning golas (barns) of various sizes, together with
a small segment of surplus peasants, were the chief rural
creditors in the early twentieth century. Rice-mill owners were
a recent competitor. In an economy where the subsistence crop
was also the principal commercial crop, paddy as the currency
of lending continued to be of considerable importance. It was
appropriated by the grain-dealing mahajans at rates of interest
usually ranging between 25 per cent and 37.5 per cent-for a
period of a few months between sowing and harvest. 86
Debt Relations in Early Twentieth-century West ~engal

The recipients of loans can .be classified into two broad cat-
egories-peasant smallholders belonging mostly to the·clean
81 See, for instance, B.B. Chaudhari, 'The Process of Depeasantlzation', pp.

129-31; Abdullah, 'Landlord and Rich Peasant, pp. 109-38.
82 Jessore SR, p. 72.
83 Burdwan SR, p. 17.
84 JessoreSR, p. 48.
85 Bankura SR, p. 66.
86Usually expressed as 10 or 15 seers per maund. See GB CCRI Dept RIBr.,
B. September 1941, Progs. 29, File 2A-0/38 (WBSA).
agricultural castes and low-caste agrarian dependents. A much

larger proportion of cultivable land was held khas in direct
possession by landlords and tenure-holders in west Bengal than
in the east. In the western tribal fringe, the best rice lands had
all passed into the hands of moneylending middlemen, the
original possessors continuing to cultivate on sanja (fixed pro-
duce) or bhag (share) rent. They were left in possession of strips
of inferior upland and their labour attached through'e'ffective
debt bondage to the cultivation of the extensive demesne. In th~
paddy lands in the rest of west and central Bengal, landlords'
khas was considerable, but peasant smallholding predom-
inated. The decline in soil fertility and the paucity of working
members of peasant families notwithstai:iding, in the cli~ate of
rising paddy prices of the early twentieth cen.tury, peasant
smallholding was still a viable proposition, albeit·with its. in-
evitable co_ncomitant of usury which annually siphoned off a
sizeable surplus.
'The real cause of the general indebtedness', wrote the
Bartkura settlement officer, 'is to be found in the narrow margin
which is left to the cultivator from the produce of his land to
set by in case of an emergency after feeding himself and his
family. 187 In west Bengal it was usual for a major crop failure to
occur once every three or four years. Peasant smallholders had
to borrow heavily to obtain food and seeds to survive these bad
year,s.:and to__p~:y_offtheir rents which were pitched high. A
survey in six Birbhum villages in the early 1930s attempted a
breakdown of causes of indebtedness. 'The chief cause .of in-
debtedness', the investigator remarked, 'is of course the general
poverty of the cultivating class.' 88 Of the total outstanding debt,
4.5 per cent were said to be for cultivation expenses, 23.7 per
cent f9r capital improvement, 24.2 per cent for payment of rent,
22.3 per cent for social and religious purposes, 1.3. per cent for
litigation, 8.4 per cent for repayment of old debts and 15.6
per cent for purposes 'miscellaneous'. 89 West Bengal districts,
87 Bankura SR, p. 20. .
88 Santipriya Bose, 'A Survey of Rural 'Indebtedness in South-West
Birbhum,Bengal in 1933-34', Sankhya, 3, 2, (1937), p. 158.
89 ThµI.,
'p. 159.
THE "PEASANTRYIN DEBT / 283
notably Bursfwan, Hooghly, Howrah and the Bishnupur sub'

di~ision of Bankura, had beep.rather highly ;:lSSessedfor revenue
at the time of the Permanent Settlement and levels or raiyati rent
.~ere correspondingly high in what was then a highly cultivated
area. The waning of the. rent offensive in the latei: nineteenth
century was predominantly l;).S east B,engalphenomenon. In west
Bengal, in spite of a ,demographic and agricultural decline;
lan~ords, by virt,ue of their more direct role in the landholding
and credit structures, were ·able to mai.rttain the original high
rent rates. Consequently, rents were much higher in west Bengal
than in east Bengal, even though the pressure of population was
greater and hence the competition for land much keener in the
east.90 In the Birbhum villages surveyed, rental arrears formed
as much as a fifth of the total outstanding debt. 91 Officers
connected with debt-settl~ment work were to discover in the
1930s that in Hooghly, Howrah and Burdwan, rental arre1lrs
constituted the major portion of debts and could not easily be
paid off even in instalments spread over many years. Social and
reljgious purposes, whi~h apparently accounted for a large
percentage of debts, were not simply ceremonial,expenditure,
but often an investment in vital life processes and social allian-
ces. Among the labouring classes of west Bengal, the institution
ofbridewealth was well established. In the early 1920s, the price
of a bride among the Telis ranged from Rs 50 to Rs 200 ad among
the Bauris and Santals from Rs 5 to Rs 20.92
Credit, a principal mechanism of exploitation in early twen-
tieth-century west Bengal, was, therefore, closely integrated
with the functioning of both ·the peasant smallholding and
khamar labour sectors of the agrarian economy. It attached
90 On higher rents in west Bengal compared to east Bengal, see Secy Bd of

Rev. to Secy Rev. Dept., 1.May 1925, GB Rev. Dept LRBr., A. September 1925,
Pr9gs. 14-24. (19). File 1-T-2. The average r~iyati rent in Hooghly.was Rs-7
annas 12 per acre against a rough average of all districts surveyed and settled
up to the early 1930s'of Rs 3 annas 2 pice 3 per acre ..The average raiyati rent
recorded in Dacca, for instance, was Rs 2 annas 13. The i}Veragevalue of the
produce per acre was also higher in jute-growing east-Bengal districts than
in west Bengal.
91 Santipriya Bose,' A Survey of Rural Indebtedness', p. 151.
92 Bankura SR, p. 20.
labour to sustain agricultural production on the landlords'

demesne and the rich peasants' surplus lands; it also fleeced and
at the same time, perpetuated, the smallholding sector which
could not reproduce itself without credit. The dwarf-holders in
this sector also needed small parcels of land from the surplus
sector. But it was equally common in malarial west Bengal to
find a poor labour-land ratio on many peasant smallholdings.
Credit would be needed by the small peasant families short of
labour power to underpin an unequal interdependence with the
agrarian labour sector.
The Impact of the Slump in West and CentralBengal

The onset of the slump occasioned a crisis for peasant smallhold-
ing in west Bengal. As paddy prices more than halved between
1928 and 1933, the burden of rental demands and money debts
more than doubled in real terms. This, as the Director of-Debt
Conciliation (West) pointed out, happened within the context
of a system of cultivation by which lands have to be cultivated
by hired labour or by bhagchasis':
...
Hired labour is engaged, almost invariably, working members of
families being so rare. Bhagchas unlike Eastern Bengal is resorted to
by even the poorer class of cultivators who have not the wherewithal
to pay for cultivation cost and, manure. The former adds to the cost
of cultivation and the latter tends to diminish the agricultural wealth
due to indifferent cultivation.93
While the prices of agricultural produce had fallen catastrophi-
cally, the cost of labour, at least in Hooghly, had not decreased
in the same proportion, being kept up by the mills in the
neighbourhood. The Director of Debt Conciliation of the region
was at some pains to explain to Calcutta that the conditions of
agriculturists in Hooghly, Howrah and Burdwan were quite
different from those in east Bengal districts. 'We are being
93 Note by Director Debt Conciliation (West) in 'Settlement of debts in

Burdwan, Hooghly and Howrah districts where rate of rent is very high and
rent arrears form the major portion of the debt', GB CCRI Dept RI Br., B. May
1938, Progs. 226, File 5R-5/38 (WBSA).
asked', he-wtote, 'to find a solution rega.rding tlte accumulated

debts of cultivators, the main item of wluch in most cases is
arrears of rent.' 94 At the same time, he showed, by means of a
comparison of Hooghly and Bogra, districts of roughly similar
size, the preponderance of bhagdars and agricultural labourers
in Hooghly as against occupancy raiyats with their working
dependants in Bogra and the consequent increase in the cost of
cultivation and deterioration in cultivation that this entailed. 95
It created 'a maladjustment in the systems of rent assessment
and cultivation, the accumulated result or which has been in-
debtetiness of cultivator~ without any ability for repayment
except by instalments spread over a number of years'. An
enquiry in a village in Memari thana of Burd wan in 1933showed
that the total expenditure in money of families of 'typical
94Ibid.
95Comparative figures from the Census of 1931 of Bogra and Hooghly
showed:
Cultivatingowners
Area Rural Earners Subsidiary
(sq. miles) Population occupation
Male Female Male Female
Hooghly 1188 910622 80808 3339 5093 170
Bogra 1384 1667321 143958 2140 11304 145
Tenant Cultivators Agricultural Labourers
Earners Subsidiary Earners Subsidiaiy Workilig
occupation occupation dependents
M F M F M F M F M F
Hooghly 30,158 1,881 1,499 50 85,816 26,349 6,450 266 3,897 500
Bogra 15,046 140 2,635 36 41,805 1,330 7,130 52 36,787 351
'Cultivating owners' are those classified as tenure-holders and raiyats with
a pepn~nent right in land. 'Tenant cultivators' are without permanel}t right
an~ generally sharecroppers, known as bargadars in east Bengal, and bhag-
chasis in the west, 'Agricultural labourers' are those without' any right, title
or inlerest in tne land but culti:.,ate merely for wages in cash or kind.
But 'working dependants', listed rather ambiguously undef agricultural
labourers include members of families of 'cultivating owners' and 'tenant
cultivators' who assisted in family cultivation and there were 1,802and ~5774
of such people in Hooghly and Bogra respectively. '
cultivators' had fallen by 32.per cent. Their expenditure on food

had fallen by 48 per cent, on,cultivation.by 35 per cent, while
expenditure on rent and taxes had, fallen by bnly 7.5 per cent
and in 1933 formed 18 per cent of the whole, Some -72per·cent
of the families were in debt, only a handful of them were
considered to be solvent.% The depression made it increasingly
difficult for peasants to command resources, even credit on
stringent terms, to continue smallholding cultivation; Lands,
formerly within this sector, began to pass into the managerial
control of more substantial men, small raiyats in many cases
being reduced to the status of bhagchashi on their own lands.
TABLE 6.4
DECLINE IN THE NUMBER AND VALUE OF REGISTERED
MORTGAGES AND BONDS IN BANKURA
Year Mortgages Bonds

Number Value (Rs) Number Value (Rs)
1928 12,126 2'~363,063 520 76,625
(
1929 9,456 2,035,751 460 77,026

1930 8,343 1,637,136 352 48,483
1931 6,083 1,217,030 240 53,978
1932 6,121 1,106,695 252 36,164
1933 5,768 1,042,493 235 36,156
1934 5,907 987,927 286 60,010
SOURCE: Bengal Board of Economic Enquiry, Bulletin District Bankura

(1935), p. 23.
The agrarian social structure in west Bengal, particularly the

increasing importance of the khamar labour sector, meant that
the impact of the slump on the system of rural credit would
be somewhat different from that in east Bengal. There was a
marked contrast in the impact on the cash and kind sectors of
the credit market in this weakly monetized economy. The li-
96 BurdwanSR, p. 17.
THE PEASANTRYIN DEBT/ 287
quidity crisis had a similar disrupting effect -on the flow of

money credit. Bankura reported that 'the money·lender-whc,
used to serve as a shock absorber in times of economic crisis is
no longer in a position to function in this capacity because he
has no ready money to lend' .97 Figures collected in that-district
show a fall in the number and value of registered bonds· and
mortgages (Table 6.4), though not to the extent, as in Pabna.
Informal, unregistered lending is likely to have been hit much
harder. Burdwan also withessed a sharp diminution .of mort·
gages deeds. In reply to the enquiry made by the Rqral Indeb-
tedness Department in 1937, the collector of Burdwan wrote:
There has bee'n for SOl]Jeyears past, a growing reluctance on the part
of Mahajans to grant loans to agriculturist on account of the overgrow-
ing indebtedness of the latter a'ndalso on accounf of the depleted purse
of the former brought about by the economic'depression of the last
years, from the effects of which the Mahajans have not yet had an
appreciable revival. The propaganda for establishment ~f Dept S.ettle-
ment Bo~rdsin the district during the last few month,shas resulted iq
some contraction of credit making it difficult for agri01lturists to ge~
loans from l\,jahajansexcept on solid securities in the sh~pe of lands
and ornaments.98
During the summer of 1937, however,. the agri~ultu,rists in the
district had not been faced with ,real difficulties, in finding
short-term grain loans, and for very good reasons:
a fairly large percentage of them who cultiva~efands as mere bar-
gadars, had no difficulty in getting loans from their landlords as
hitherto. Another factor to ease the situatidn i!r'the widely prevalent
system of bari-loan in the district by which agricultutists get loans of
paddy at high rates of interest,'Usually 25 per cent;and,there has not
beenary aP.Preciable contractionof this kind of creditfaciliti~sfor the reason
that the lendersof paddy:loansfeel that their b01,·oz'!.ers
are tap much unqo/"
their influenceto seek reliefto be afforded by D.S. Boards when estab-
lished.99
97 Bengal Board of Economic Enquiry, BulletinDistrict Bdnkura,p. 11.

98Collr Burdwan to CrnsnerBurdwan Dft, ·1 October 1937, GB Revi Dept
LR Br., B. May 1940, Progs. 14-57 (BSSR). ,
99Collr Burdwan to Crnsner .Burdwan Dn, 1 Qctoberl1937, GB Rev. Dept
LR Br., B. May 1940, Progs. 14-57 (BSRR) (Ernpha~is added).
Although agriculturists could obtain cash mainly by pledg-

ing of ornaments or by lease or outright sale of part-holdings,
instances of such loans were rare. F~w agriculturists had 'any
ornaments worth the name left to pledge' and there were not
many mahajans ready to advance cash on the security of lands.
Reports from other west and central Bengal districts cor-
roborate this picture of a contraction of money credit. But grain
loans which substantiated dependency continued to be made.
In Jessore, quite apart from the establishment of debt settlement
boards, agricultural credit was 'at [a] low ebb' and mahajans
were•reluctant to grant long-term loans except on security of
ornaments or on mortgage of land. Yet, it was reported, 'as
regards short-term loans, paddy loan which is th<;\chief kind of
credit in rural areas ... have net been seriously affected' .100In
Murshidabad, there had been a tendency among local Mahajans
'to wind up their transactions', and this was due, according to
the collector, to the economic distress of the past few years, not
the result of the proposed establishment of debt boards. How-
ever, in the previous summer as well as in the current two or
three months preceding the harvesting of the winter crop 'the
poor cultivators got paddy loans and consequently they were
put to no trouble for want of short-term money loans' .101It was
only after the Bengal Moneylenders Act of 1940 was put on the
statute book that creditors in west Bengal became a little wary
of making grain loans. In June 1941, large creditors with stocks
of grain were refusing to lend paddy, on the grounds that they
might be liable to prosecution under the Moneyle])ders Act. The
district magistrate gave assurances that no action would be
taken if paddy loans were granted to one's own bargadars or to
small trusted clientele. 102In July 1941, tpe Burdwan division
reported that a number of merchants were refusing to sell
stock and mahajans were refusing loans.103For some, the recent
100Collr Jessore to Secy Rev. Dept, 3 December 1937, ibid.

101Collr Murshidabad to Cmsner Presidency Dn, 6 October 1937, ibid.
102Burdwan Dn Fortnightly Report for period ending 26 June 1941, Conf.
File 13/ 41 (WB Home Dept).
103Burdwan Dn:Fortnightly Report for period ending 10 July 1941, Conf.
File 13/41 (WB Home Dept).
legislation may just have been a convenient excuse to hold up

stocks until prices rocketed in a year of wartime scarcity.
The east-Bengal talukdar usuaJ!y held feeble rent-collecting
rights over small tracts of land and, although he often had hi!?
own bit of khas khamar, could hardly· be said to have exercised
actual possessory dominion over the soil. His instrument of
control over the indebted peasant in a highly monetized econ-
omy was essentially through usury. Under the impact of th~
slump, the old bonds snapped. The greater degree of control
exercised by the bigger patnidars and zamindars of west Bengal
in the landholding structure meant that it still made sense to
advance grain loans for labour service directed on to demesne
land. It Was all the more important to maintain and expand this
sort of credit operations since there were gains to be made for
the landlords' personal demesne at the expense of a steadily
weakening peasant smallholding sector. While some of the very
small patnidars were snuffed out of the business, the bigger
operators were well able to ride out the crisis in money dedit.
In west Bengal during the slump, the influence of the money-
lending groups over smallholding peasants was' extended; the
existing ties of dependence in the khamar sector were
strengthened.104
DEBT RELATIONS IN THE RICH FARMER-SHAR~CROPPER

ARRANGEMENT IN NORTH BENGAL AND THE ABADI
AREAS OF THE SOUTH
The Creditorsand theirClients

Buchanan-Ha~ton's survey of Dinajpur and Rangpur in the
early nineteenth centqry and the excellent settlement reports 011,
these two districts in the 1930s have made the broad outlines. of
rural credit relations in north Bengal fairly familiar to the his-
torian. As F.O. Bell wrote:
The conception of a village 'bania', foreign to the cultivator in caste
104 See also Sugata Bose, AgrarianBengal,chapter 5, pp. 165--71.

and tradition, and sucking the blood of a depressed peasantry does

not fit the conditions Qf Dinajpur. If there is any blood-sucking, it is
done by the richer ~ltivators themselves: People of non-agricultural
tradition are few in the Di{ljapurcountryside. The Musli,mjotedar~
are all peasants and agriculturists,.and if ,a non-agriculturist lends
money, it is usually within 2 or 3 miles of his residence.f05
In the paddy-exporting north Bengal district~ of Dinajpm: and
J.;tlpaiguri, jotedars generally combined subs,ta,ntia.1landholding
of anything from 30 to ~ev.eral thqus.and aqes with money-
lending and grain-dealing.on corresponding scales. In the abadi
areas of the 24 Pc\rganas c1,.nd Khµlna in the soutp, credit ad,van-
ces tq <;lep,~ndentsmall te:,;tan,tst,o clear the ,fore?t in the early
tw~ntieth ceqtury were mainly provideq. by the holder;; of
sizeable ;lots'. It was in,the jut~-growin.g,noi;th-Bengal district
of Rangpur tp.at trade was ppncipally in t};lehands of imIT\igrant
~a~aris and east-Bengal Sgt.has,.who were involved tCJ~ome
extent iI\ d~dan. karl:>at.Even here, however, with the onset of
the slump, these 'foreign' elements would withdraw, leaving a
monopoly in the field to t}J.esubstantial jotedars. 106
The most widespreas;l f9rm of borrowing was paddy loans
at derhi (50 per cent) inteyest .by which the poorer cultivators,
adhiars and labourers were tided over the pre-harvest inonths.
These were taken primarily to provide subsistence for the bor-
rower, who might otherwise go hungry. Although loans were
meant to be repaid with interest at' the next harvest, there
traditionally had been an 'elasticity about repayment' .107 All
borrowing was by no means in kind, and b'efore'the slump and
even in the early days of falling prices, there was considerable
borrowing in hard cash. Many articles o{ di:lily,cpnsumption
such as oil, pulses and clothes had to be paid for in cash.
Before 1930: the bigger cultivat9rs also borr~wed latge sums
for marriage ceremonies, and it was usual for cultivators of all
s'ize groups to take loans for the purchase ·of cattI~· and other
°1 I
cultivation expenses. As enquiry into inoebtedneSs in Rangpur
in the mid-1930s showed that of the oufstanding debts, the
105Dinajpur SR, p. 25.
106Rangpur SR, pp. 13-14.
107Dinajpur SR, p. 25.
THE PEASANTRYIN Dlmr / 291
greater part had oeen borrowed in the three years 1928, '1929
and 1930. Since then, the amount of borrowing had' slackehea
off. Officers were asked to discover the caus~s 'Of the·original
loan. For loans totalling about'o'rre-eighth of the"1lominal vaitle
at tne time of investigation, the reason given was 1:o pay off old
loans'. Of tl,terest; more than a third was incurred for purchase
of food, clothing and household ·expenses and more than one-
fifth for.marriages. Purchase· of land or payment of nazar and
purchase of cattle were tne'next largest classes of deb~ and these
four groups together accounted for four-fiftlis of the total
deot. 108In Dinajpur, too, most of the borrowing was done before
tlte break in prices or at the beginning of the sluinp. Among the
reasons for borrowing, tl\e categories 'marria·ge', 'purchase of
cattle' and 'food or domestic purposes' were'at tne top of the
list. 'A major part of the bdrrowi~g under the last category w~s
in kind, expressed in cash value: 109
The Impact of the Slump in the Frontifr Regions

From '1931, lending in money declined dramatkally. In i930, a
jotedar;moenylender of CharR.aiin Dittajpur had about tls 40;p00
!
~ , ,, , i , _, A
!OB 'Notes on Economic Enquiry in, the R~ngpur Di,strict by the Settlement
Department' in Bengal Board of Economk En9.uiry, Prelimina1yRepor}on
Rura1'Incfebledness,Appendix V. The ehquiry covert!d 11 villages>of 508
families with 3,272 persons. The origiflal piincip:i1 of!outstanding loans was
Rs 66,000.
l09 Dinajpur SR; pp. 24, 27-8. ;I'he re,sulis of tJ;i.e.enq~iryinto \he causes of
borrowing in respect of the sum originally borrowed of Rs 15,618 in 'D' Block
o{ the settlement operations w~re as follows: ( '
"
Trans- Value
actions (Rs)
, Trans-
, actionij
. . Value
(Rs),
'
1. Marriage 73 8,134, ?- Pay old ,Q.~Qts 8 451
2. Food & domestic 126 2,562 7. Buy land 7 395
3. Buy plough and 46 1,868 8. pay rent 6 284
cattle
4. Business 8 929 9. Agriculture & 6 144
cultivation
5. Litigation 2 ,850
or 50,000 out on loan, but after then, he had lent only another
Rs 3,000 or 4,000. He was not lending because there was little
chance of getting his money back; after 1931 he had realised
almost nothing. 110 Another creditor, who held nearly 1,000 acres
in raiyati nght, had improved on the technique of the usual
jotedar-moneylender and together with others had produced a
joint-stock bank wiJh a capital or Rs 175,000. Times wer.e bad
for moneylenders and even this ba:i;ikshowed a loss after 1931.111
Before the depression, the jotedar-moneylenders made loans of
Rs 50 or 100 or 200 to cultivators, according to their resources,
for purposes of cultivation and subsistence. How did the cul-
tivators survive, now that no money was being lent? The com-
mon explanation. was that they had cut down expenditure in
various directions and had been living on savings by selling
ornaments. They had also stopped paying rent. In the early years
of the slump, officers of the Settlement Department had, indeed,
found large quantities of gold and silver being sold in Dinaj-
pur.112Weddings were now austere affairs and people bqught
fewer commodities at the hat. To some extent it was a matter of
a reduction in the sum spent, since prices had fallen, but there
was also a real drop in living standards. This was expressed
picturesquely in the comment: 'Many who used to buy good
milk and ghi, now live on rice and salt'. A man who was really
in need of grain would now often go and work for someone
who had a stock of grain. if it was essential for someone without
cash to buy cattle, he might perhaps be able to scrape together
Rs 5 or 10 in loans to get so~e sort of animals. The cultivators
maintained that the number of cattle being worked had de-
creased from some years ago and the quality was generally
inferior. This resulted in poorer cultivation and less manuring
with a consequent fall in crop yields. Lands had not been going
out of cultivation on a very big scale, but there would be the
occasional individual who had not cultivated a plot for lack of
bullocks.113
llO F.0. Bell's Tour Diary, Dinajpur, November-Decem~er 1939, Bell
Papers, Mss Eur. D 733 (2) (IOR), p. 79.
111 Ibid., p. 2.
112Ibid., p. 80.
113 F.O. Bell's Tour Diary, Dinajpur, November-December 1939, Bell
To .investigate the claim that 'credit had dried ·up', special

enquiries were made during 1937-8 in 15 villages•distributed
over 5 thanas in the west of Dinajpur district. It was found that
gr.ain loans had not stopped. Out of a total of 504,156 families
had taken derhi loaris in grain. Adhiars figured prominently.
among the borrowers, 42 per cent of the indebted families
holding more land ~n adhi than in raiyati right. These 156
families borrowed about 825 maunds of paddy in 1937 stipulat-
ing to repay 1,280 maunds. When further enquiries were made
in the spring of 1936, 668 maunds had actually been repaid, but
the amount might have been rather more if enquiries in one
thana had not been made as early as January. June andjuly were
the months of greatest borrowing, and January and February
generally stipulated for repayment. The 156 families were in-
debted to 99 different creditors of whom all except 3 were
describes as jotedars or cultivators.l 14
It might be expected that in a la~d of big jotedars and masses
of adhiars, some amount of lending would continue even.during
a credit squeeze, since returns could.be taken in labour service
and by app~opriating the bulk of the produce. In September
1937, the Press Officer of the Bengal Government described how
debts were being 'settled' in Rangµur:
What is a debtor to do when he has a large 'number of able-bqdied
youths in his family but not~uffic'ient hind fo keep them eniployed?
Of such a case we hear from Rangpur where the creditor has given
some of his own land to the debtor to cultivate and the entire crop is to
be delivered to the creditor;the half value of, the crop liquidates the
adjust~d debt !!Jl~ other half is rent)( wpile as an additior,qL
benefit (sic)
the dt;btor secures occups1,tionfor his own family.115
In cases such as these, the bonds of serfdom in north Bengal
were undotJ.btedly strengthened.
This,was, however, only a fragment of the north Bengal
story. The enquiry into derhi loans in Dinajpur revealed that
Pafiers, Mss Eur. D 733(2) (IOR), pp. 20-2, 64-5.

14 DinajpurSR, p. 25.
115Quoted intMemorandum by the Bengal Prtrvindal Kisan Sabha', Land
Rev. Cms. Report,vol. 6, pp. 51-2, (emphasis added).
only in 25 per cent of the cases was the lender in fact the jotedar
of his adhiar debtor. 116 In the export-oriented paddy and jute
economies of Jalpaiguri, Dinajpur and Rangpur, the jotedars had
taken the full brunt of the collapse in the product market. Unlike
the situation in west Bengal, there was hardly a significant
peasant smallholding sector left to prey upon, and consequently
only a limited scope for recouping losses within the rural sector.
In the abadi areas of the Sunderbans, however, where srnall
tenants were still involved in the process of reclamation, there
was a massive dispossession of occupancy rights by the jotedars
and rese~lement on bhag. 117 fn north Bengal, at this time, rein-
forcement of the adhiars' dependency was not the jotedars' chief
concern. In Jalpaiguri, Dinajpur and Rangpur, many more debt
settlement applications were put forward by creditors than by
debtors. 118 This was partly a reflection of the jotedar' s intention
to recover whatever he coulfl and forsake the countryside for
the now more promisihg urban pastures.
A good part of the grain advances that apparently continued
through the depre~ion was quite different from the grain loans
of old. As one jotedar of Dinajpur put it, alt~ough grain advan-
ces were made in the autumn of 1937 and 1938 at the instigation
of the subdivisional officer, was' not lending, but selling' .119 The
grain givt;n in autumn was paid for after the hai;ve~tin J:ebrvary,
mostly in cash and ~t the price prevailing in autumr;i. This was
obviously a very profitable form of sale, as the.,price of paddy
was much hignerin autumn than in the post-harvest period.
Unlike the old ntoneylending groups ,of east Bengal, the
north-Bengal jotedars werenofentirely pushed out of the agrar-
ian economy. But their role as creditors had been seriously
damaged. As landholders they could not, detach themselves
horn their unhappy rural existence until the land market picked
up towards the end of the deczpde. As in east BeJlgal, grain
l16 Dinajpur SR, p. 25.

117 See chapter 5 below.
118 See Table 4.3; also P.O. Bell's Tour Diary, Dinjapur, November-Decem-
ber 1939, Bell Papers, Mss Eur. D 733 (2) (IOR).
l19 P.O. Bell's· Tour Diary, Dinajp,ur, November-December 1939, Bell
Papers, Mss Eur p 733(2) (IOR).
THE PEASANTRY IN pEBT / ..295
redistribution had largely shifted.to the domain of the product

market, but there was one difference. Parts of north Bengal were
grain-surplus, relatively labour-scarce areas; east Bengal was a
densely inhabited, grain-deficit region, where jut~ had failed ~o
work its magic. This difference had an important bearing on the
relative intensity of the famine of 1943 in the different regions
of Bengal.
THE PERMANENCE OF THE RUPTURE IN RURAL CREDIT
Between 1935' and 1947 both the extent and' volume of debts were
definitely smaller than between 1929 and 1935. 120
Money credit which had dried up during the depre~sion
never really flowed again. In the early 1930s, news of unrest
among the peasant debtors of east Bengal had prompted, the
government to intervene. Its prescription, the Bengal Agriqll-
tural Debtors' Act of 1936 and the setting up of debt settlement
boards, helped an already ailing system of rural credit relations
to its demise. The Bengal Moneylenqers Act of 1~40 which
imposed limits on the interest and the amount of the principal
recoverable oh any loan put the last nail in the coffin. Agrarian
Bengaf emerged from the Depression to enter a period of war-
time boom. However, the jute economy, which had previously
rested on a massive inflow of finance capital, did not in relative
terms regain its vitality. 121 With famine looming on the horizon,
the government, worried about its finances, thought of calling
in its agricultural loans. Mahajans, if any remained in the vil-
lages, had long shut <theirmoney-chests. The supply of grain
had largely been taken out of the orbit of credit and subjected
to the qmvulsions of a wartime product market.
A comparison of the available quantitative estimates of the
rural debt in Bengal in the early 1940s with earlier estimates
from the late 1920s and early 1930s shows the decline. Thes~
estimates all have wide margins of error because of the small
l20 Census pf India, 1951, vol. 6, Bengal lA, 105.

121 On the relative weakness of jute prices, see above chapter 2, pp. 67-9
and chapter 3, pp. 84, 94-7.
ANDTHEAGRARIAN
ECONOMY
TABLE 6.5
ESTIMATES
OFRURALDEBTIN BENGAL
Year Provincial FamilyAverage Field of Source

total Debt enquii-y
(Rs) All Indebted
families only
190~16 55 121 Faridpur Jack, Economic
Life
1910-17 121 256 Dacca Dacca, SR
1927 128 203 Talma, RCA,4
Faridpur
1928 146 Faridpur Bd Eco. Eng.
Report 1935
1928 112 Bengal Ibid.
1927-8 i67 Bogra Banking Cmt.
1929-30 100 crore 160 Bengal Ibid.
1929-30 212 crore 240 Bengal Sen, Sankhya
1933 97 crore 187 Bengal Bd Eco. Eng.,
Report 1935
1933 217 262 Faridpur Bd Eco. Eng.,
Bull Dt Earidpur
1943 25 crore 25 85 Bengal ISi, Rehabilita-
tion Survey
1944 46 82 Bengal Ibid.
1944-5 150 crore 134 Bengal Ishaque Report
1944 48 290 5 villages KM. Mukherji,
Faridpur Ind. JI.Eco.
1946 80 crore 80· 148 Bengal ISI, Rural
Indebtedness
Report
NOTE: the 1940s estimate relate to 'all rural families' and the rest to
'agricultural families', except the Board of Economic Enquiry
estimates which include' agriculturists with permanent and
transferable rights, mostly occupancy raiyats but also some
cultivating tenureholders and under-raiyats.
sample sizes and the highly conjectural multipliers used to

arrive to provincial, estimates. They are also not strictly com-
parable. Some refer to the total rural debt of cultivators and
non-cultivators, other only to cultivators including sharecrop-
pers, and one only to occupancy raiyats. Yet, the figures set out
in Table 6.5 provide a plausible picture of the growth and decline
of agricultural indebtedness during the first half of the twentieth
century.
The first estimate of the total agricultural debt in Bengal in
1929 by the Banking Enquiry Committee suggested a figure of
Rs 100 crore, including Rs 6 crore worth of paddy loans. 122 This
was based on the sample of debts of the members of cooperative
societies. An investigator at the Statistical Laboratory in Calcutta
questioned the representativeness of the sample, pointing out
that cooperative debts had been found to be much lower than
the overall rural debt in other provinces. Using the alternative
method of deducing the total indebtedness from the total value
of registered mortgages per year, he produced an estimate of Rs
212 crore with a family average of Rs 240 as against Rs 160
suggested by the Banking Committee. 123 In 1933, the Bengal
Board of Economic Enquiry found it difficult to ascertain the
accumulation of interest. Since moneylenders in any case were
prepared in the slump to sacrifice the greater part of their
accrued interest, they decided to calculate only the total capital
debt of agricultural families with a permane11t and transferable
interest in their lands. This, they believed,_ to be in the neigh-
bourhood of Rs 97 crore and the family average was Rs 187.124
There are four estimates of the total rural debt for the 1940s.
The Indian Statistical Institute (ISI) team made estimates of
indebtedness in 1943 and 1944 as part of theidamine rehabilita-
tion survey. The Ishaque Report gave an estimate for 1944-5
based on sample surveys in 77 villages. Finally, the ISi made

l23 S.N. Sen, 'Statistical Notes: An Estimateof the Rural Indebtedness of
Bengal', Sankhya, 1, 1-4 (1933-4), pp. 335--7.
124Bengal Board of Economic Enquiry, Preliminary Report on Rural Indeb-
tedness, pp. 4--6.
another survey, this time specially into rural in4ebtedness, in

1946. Of these, the highest estimate was in the Ishaque Report
which suggested a figure of Rs 150 crore in 1945 and a family
average of Rs 134.125A contemporary student of the debt prob-
lem, who had experience of local field work in 14 districts,
regarded this estimate as 'too high and prima fade unbeliev-
able'.126Even by this high estimate, as Ishaque himself pointed
out, 'in terms of actual purchasing power of money and in
relation to the annual income of the province, the average
indebtedness may be considered to have decreased rather than
increased' .127According to the Rehabilitation Survey, the total
rural debt in 1943 was only Rs 25 crore with a family average
of Rs ·25, which increased in 1944 to Rs 46.128In 1946, the Rural
Indebtedness Report estimated the total rural debt at nearly Rs
80·crore, the average for all families working out at Rs 80.129As
to the extent of indebtednes$, the Board of Economic Enquiry
had estimated that 77 per cent of all agriculturists were in debt
in 1933.130The ISi estimates as fractions of all rural families were
a mere 30 per cent in 1943, 57 per cent in 1944, and 54 per cent
in 1946.131Between 1930 and 1943, the volume and extent of
indebtedness clearly declined. Large amounts of existing debts
were either written ,off or settled and few new debts were
incurred. If the statistical estimates are to be believed, debts were
again incurred from 1943 onwards, thoug~ on a moderate scale.
Considering that prices quadrupled between 1930 and 1945, the
value of rural debts in real teQils had shrunk drastically.
125 H.S.M. Ishaque, Agricultural Statics by Plot to Plot Enumeration(Calcutta

1945), vol. 1, p. 55.
126K.M. Mukherji, 'The Problems of Agricultural Indebtedness in Bengal',
p. 383.
127 H.S.M. lshaque, Agricultural Statistics, vol. 1, p. 56.
l28 Cited by K.M. Mukerjee, 'The Problems of Agricultural Indebtedness',
pp. 375-84.
129 Ibid.
130Bengal Board of Economic Enquiry, PreliminaryReport on Rural Indeb-
tedness,p. 6.
l3l Cited by K.M. Mukherji, 'The Problems of Agricultural Indebtedness',
pp. 375-84.
THEDIFFERENTIAL IMPACT
The collapse of crop.prices and the stoppage of tlre flow of rural

credit had, as we have seen,-markedly different results in terms
of changes in sbcial relations in the countryside in the three
sectors of the agrarian typology.
The bond-snapping character of the depression WJ\smost
clearly evident in the highly monetized, market-oriented econ-
omy of east Bengal. The erstwhile creditors, the talukdars ,as
well as the traders, made themselves redundant to the process
of reproduction of the small-peasant economy of east Bengal.
By severely disrupting the system·of rural credit relations,.the
slump cut away from the Hindu talukdar-mahajan, distanced
from effective possession 'Of the land, the, major source of his
economic control and power. The old awe of the mahajan, the
great man of the countryside, also vanished, for he no longer
played the role of guarantor of the peasants' subsistence se-
curity. In fact, now the talukdar waS'merely a source cJfirritation
as a petty rent-controller. Those trader-moneylenders who re-
mained on the scene now played the role of grain-dealer in a
food-deficit region. If this aspect of the grain ti:ade and the
ultimate dominance of the purchasers of raw jute who had
simply cut away the host of intermediaries were over-looked, it
might be tempting to describe a situation of reversion to a
semi-natural economy. With the withdrawal of the old money-
lending groups, a few better-off peasants now entered the
field via the lease market. Once the process of land alienation
gathered pace after 1938 and rocketed during the subsistence
crisis of the 1940s,they were well-placed to launch an expedition
of (primitive) accumulation.
In west Bengal, the crisis of the 1930shad almost the opposite
result of strengthening the ties of debt bondage. Credit in cash
no doubt declined. Small lenders fared badly and credit came
to be concentrated in the hands of the more substantial creditors.
The chief moneylenders, who already had a sizeable khamar
sector under their direct control, were able to gain at the expense
of the mc;>rewidespread peasant smallholding sector, which the
fall in prices and credit had thrown into the doldrums. Under
these circumstances, grain loans to dependent cultivators were

not only maintained, but were probably extended to cover the
new territories brought under the moneylenfier-landlord's and
grain-dealing rich peasant's sphere of influence. The different
perceptions of their interests by peasant smallholders and the
traditionally landless prevented the emergence of any alliance
that might have threatened the bases of dependency. While the
east-Bengal debtor made jacquerie his pastime, his west-Bengal
counterpart remained quiescent.
In north Bengal, the land of the rich and powerful jotedar,
the picture is more ambiguous. The fall in the product market
and the liquidity crisis were grievous blows to the grain-dealing,
moneylending jotedar. Money credit became scarce. In cases
where tied adhiars cultivated the land, grain loans in return for
labour service continued. Where there was a measure of de-
centralized sharecropping, the character of grain distribution
changed, as in east Bengal, from 'lending' to 'selling'. Raiding a
troubled smallholding sector was not a significant option, except
in the reclamation areas in the south. The rise in the land market
at the end of the decade would give at least some jotedars an
opportunity to wash their hands of the rural mess. With adhi of
some kind being the universal norm, and bhag the life and death
issue, here was a situation where, when the cloud of the depres-
sion lifted, a class-based challenge could aim at chinks in the
jotedars' armour, __
Chapter Seven
;,
The Career of an Anti-God in
Heaven and on Earth
RANAJIT GUHA
I
·Religion is the oldest of archives in our subcontinent. Allthe
principal moments of the ancient relatiop.ship of domihance and
subordination are recorded in it as codes of authority, collabora-
tion and resistance. These codes \lave their origin in historically
articulated structures of power. Congealed and generalized
thro1::1ghrecursiv!:?use over long periods, they tend ,to outlive
thefr' original functions and operate in subsequent cultures nof
only as a relic but also as an actively overdetermining factor.
The result is a cumulative documentation of subaltern and elite
attitudes to power as expressed in myth, cult, ritual and custom
and their permutations in the belief systems. This documenta-
tion is not easy to read precisely because of the form in whicl\
it comes. Existing for the most part as a qody of oral tradition,,
it lacks the transparency of written discourse; shrouded often in
mystic sentiments <\fidobscure symbols, it5 reason defies the
rationalistic assumplions,of its interpreters; modified by accre-
tion and decay, it does not allow itself to be grasped as lucidly'
as a consistent body of law; elliptical and syncopated, it suffers
in comprehensibility because of the duplex character of its
messages which are worldly and other-worldly at the same time.
More than any other historian it is'D.D. Kosambi to whom
• Extract from Ashok Mitra, (ed.) The Truth Unites:Essaysin Tn'buteto Samar
Sen (Calcutta, 1985).
we owe our awareness of the existence of this documentation

and its importance. In both of his great historical surveys he has
demonstrated how the continuities of our material and intellec-
tual cultures are made up of imbricated survivals from an old
tribal past and elements of relatively later social develop111ents.1
At the level of the superstructure this pattern is most obviously
discernible in the religions of the ca~tes which clust~r a.tthe very
bottom of the Hindu hierarchy and 'owe their lower social and
economic status to their present or former refusal to take to food
production and plough agriculture'. These lowest castes, many
of them classified as 'criminal tribes' by the colonial regime,
'often pt:eserve tribal rites, usages and myths'. 2 These latter do
not, however, exist in an altogether frozen state. The pull of
'parallel traditions' and the pressure of upper-caste, especially
Brahmanical, culture tend to assimilate and thereby transform·
them to sy.ch an extent that they show up as little more than
archaic traces within an establisned Hindu idiom. For 'the main
work of Brahminism has been to gather the myths together, to
display them as unified cycles of stories and to set them in a
better-developed social framework'. 3 However, once the
syncretic wrapping is taken off, the content of many a mytti'can
be identified as what it really is--that is, as a figure of some
ancient and unresolved antagonism.
II
The myth of Rahu 4 can be read as the record of such an an-
tagonism. It is given ih its first elaborate version in the Maha-
r
1 D.D. Kosambi, ~n Introductionto the Study of Indian HiM01y,rev. 2nd edn.
(Bombay, 1975), ch. n; and The Culture and Civilisation of Ancient India in
HistoricalOutline (reprint, Delhi, 1972), ch. 1;et pass.im.
2 Kosambi (1972), p. 15.
3 Ibid., p. 16.
4 'Riihu' is written hereafter without a diacritical mark. The use of the latter,
for purposes of transcription, has been testricted, throughout the essay, to
words within quoted excerpts, and apart from them, to such occasions as
require it indispensably in order to clarify a meaning.
The version given in Myth I comes from The Mahabharata:I. The Bookof the
Beginning, tr. and ed. J.A.B. van Buitenen (Chicago, 1973), pp. 74-5.
THE CAREER OF AN ANTI-GOD / 303
bharata as an episode in the account of ,the Churning of the

Ocean. ~
Myth I
... from the churning ocean ... came forth the beautiful God Dhan-
vantari who carried a white gourd that held the Elixir.
When they saw this great marvel, a loud outcry for the Elixir went
up from the Danavas, wh.o screeched 'It is mine!' But Lord Narayal).a
employed his bewitching wizardry and assumed the wondrous shape
of a woman; then he joined the Danavas. Their minds bewitched, they
gave that woman the Elixir, both Danavas and Daityas did, fot their
hearts went out to her.
Now the Daityas and Danavas masst!d togelher ... and' rushed
upon the Gods. The mighty God Vi~i;iuheld fast to the Elixir; and the
Lord, seconded by Nara, took it away from the Rrinces of the Danavas.
And all the hosts of the Gods received the Elixir from Vi~i;iu'shands,
and amidst a tumultuous confusion, drank of it.
While the Gods were drinking the yearned-for Elixir, a Danava by
the name of Rahu took the guise of a G6d and began to drink it too.
The Elixir had gone down as far as the Danava's throat when the Sun
and the Moon gave alarm ... The blessed Lord who wields the discus
thereupbn cut off his diademed head as he started to drink. The
Danava's gigantic head fell rolling on the ground and roared most
frighteningly. Ev.ersince there has been a lasting feud between Rahu's
head and the Sun and the Moon; and even todaY,he swallows th~m
both'..
The symbolism of this heavenly violence leaves no room for
doubt about its morality: The dialectic of creation required an
interptay between opposite principles-between the elixir of
eternal life' (amrta) and poison (kiilakuta), between gods and
anti-gods. 5 In the contest for ambrosia between the latter, the
supreme god Vi~~u had to throw- his weight on the side of the
This legend, says Georges Dumezil, is already .known to the Veg.as, but with
the demon named as Svarbhiinu. It is not associated there with awi·ta,which,
he suggests, may be evidence of its having been une innovation hindoue. 0.
Dumezil, Le Festin d' Immortalite(Paris, 1924), p. 20.
5 For a perceptive comment on this dialectic, see W.D.O'Flaherty, Hindu
Myths (Harmondsworth, 1975), pp. 273-4.,
devasand use a mean, sexist trick in order to deprive the other

side of their share. When, however, a diinavawas bold enough
to sneak his way into the celestial banquet, he had to be punished
for the dual crime of misappropriating the food of the god~ and
defiling their ceremonial meal. The festin d'immortalite(to use
Durnezil' s graphic expression) turned thus into an occasion for
the most positive act of slaughter, that is, by decapitation in a
manner conforming to the highest Brahmanical standards of
da1:uf.a.
This symbolism agrees well with the idea of disjunction and
distortion underlying the myths and rituals connected with the
eclipse in many cultures. An eclipse 'repres~nts the disruption
of an order' governing 'the alternation of the sun and the moon,
day and night, light and darkness, heat and cold' .6 Such a break
in that natural sequett~e, says Levi-Strauss, coincides with 'the
intrusion of a foreign element into this same sequence ... thus
bringing about a distortion'. He shows how popular beliefs
about this cosmological phenomenon in certain ncin~Western
societies have a close parallel, on the sociological level, to Euro-
pean attitudes about those kinds of marriages which were c9n-
sidered irregular enough to provoke a charivari. Misalliance in
marriage was thought to be di~ruptive of 'the ideal continuity
of the sequence of matrimonial conjunctions' in a manner not
unlike the way an eclipse disturbed the order of planetary
movements.7
In India, too, anxieties about lapse!i in social order were
associated, in popular imagination, with what appeared to it as
a particularly sinister lapse in the functioning of nature at an
eclipse. The latter, it was believed, could disturb the cycle of
biological reproduction and interrupt the succession of birth aqd
death by suspending the first of these terms altogether or by
distorting it. Folklore is therefore replete with warnings about
6 C. Levi-Strauss, The Raw and the Cooked(London, 1970), p. 288.

7 Misalliance of this kind could include such 'abnormalities' as 'disparity
in age between spouses, improper behaviour by one or the other of them, the
marriage of a pregnant girl, and the refusal to hold a ball to celebrate the
wedding' (ibid., p. 288).Levi-Strauss discusses the homology between eclipse
and charivari at length in Part 5(1) of this work.
the adverse effectsit'is supposed to have on childbirth. Pregnant

women, and in some regions their husbands as well, are en-
joined not to look at an eclipse or the child is bound to be born
deformed. The embryo is liable to be affected not only by the
act of seeing but by any other activity undertaken at this time,
In such cases the infant's body is likely to replicate the nature
of that activity-a hare-lip as evidence of chopping and cutting,
m<Ukingson the fingers as that of the strain involved in splitting
wood or any other object, crooked fingers as testimony to work-
ing with locks, and a variety of tell-tale birthmarks to either of
the parents having applied surma to the eyelids or a tilak to the
forehead. 8 All of this conforms to the penal code of the Dhar-
mashastras where punishment for a piitakais often addressed to
that limb of an offender's body which has been directly in-
strumental in committing the particular'offence. But the disad-
vantages of birth during an eclipse could go far beyond physical
deformity and haunt a man for the rest of his life in many other
ways: 'if a person be born under the planet Rahu, his wisdom,
riches and children will be destroyed; he will be exposed to
many afflictions and be subject to his enemies' .9
An eclipse threatens society also by pollution associated with
death. This is explained by stapling together the Hindu notion
of ritual purity and the myth of Rahu thus:
... when an eclipse takes place, Rahu, the huge serpent, is devouring
the sun or moon, as the case may be. An eclipse, being thus the decease
of one of.these heavenly bodies,' people must of necessity observe
pollution for the period during which the eclipse la"sts.10
According to some variants the pollution is said to be caused
not by the death of the luminaries but by Rahu's approach, 11
just as a low-born person of unclean status would defile a
Brahman by the very shadow cast by his body. Since such
pollution is transitive, the entire world is condemned to a state
8 H.A. Rose, A Glossaryof the Tribesand Castesof the Punjaband No1th-West

FrontierProvince,vol. I (Lahore, 1919), pp. 127, 738.
9 G.W. Briggs, The Doms and Their Near Relations(Mysore, 1953), p. 547.
10 E. Thurston, EthnographicNotes in Southern India (Madras, 1906), p. 289.
11 Briggs, p. 547.
of impurity for as long as Rahu continues to hold the planets in

its grip. 'The shadow of a demon is as defiling as the touch of
a scavenger (Bhangi) and pollutes everything it falls on,' wrote
an observer of upper-caste traditions. in Gujarat at the beginning
of this century,' so the sun [and] the moon are themselves defiled
during an eclipse, and not only so, but they pollute all that their
light falls on.' 12 Consequently, a householder was. required to
discard his entire stock of cooked food and drinking water as
contaminated, and make no attempt to replace these by cooking
or even engage in culinary preparations such as husking rice,
grinding spices, etc. before the eclipse was over. 13 Indeed, so
utterly defiling was this phenomenon believed to be that it was
considered inauspicious for even a death to occur in a family at
this time. 14 Manu's injunction that 'a learned Brahmai;ia shall
not recite the _Veda'-that most sacreq. and sanctifying,of all
texts--'when Rahu by an eclipse makes the moon impure, 115
shows how popular belieHn this regard derived from an ancient
Brahmanical superstition.
This image of Rahu as a highly malevolent power is backed
by the antidotal functions of the rites prescribed for this oc-
casion. Some of these are olfactive; such as the South Indian
practice, mentioned by Thurston, of burning an animal's hoofs
and horns 'in the hope that the smell will keep away the evil
spirits' .~6 This is an exorcising device for de~ling with ghosts ih
many parts of the subcontinent. Even· more widespread is the
use of noise, as noticed by a Jesuit in an eighteenth-century
travelogue, 'to make the pretended monster disgorge the mighty
morsels'. 17 Noise-making of this kind is common to, many cul-
tures throughout the world ranging, literally, from 'Peking to
Pery. 18 In our country this could take the form of sounding
12 (Mrs) S. Stevenson, The Rites of the Twice-Born(London, 1920), pp. 351-2.
13 Ibid., p. 352; Briggs, p. 547.
14 Rose, p. 869.
lS The Laws of Manu, ed. G. Buhler, Sacred Books of the East Series, vol. xxv
(reprint, Delhi, 1975) [hereafter Manu]: iv, 110. 'Eclipses of the sun are of
course included,' says Buhler in a note to this passage.
16 Thurston, p. 290.
17 •
Ibid., p. 307.
18 For China and Peru, see N.M. Penzer, 'Ncite on Rahu and Eclipses,' in
THE CAREER OF 1\N ANTI-GOD / 307
gongs as in Assam, or shouting as among the Todas of the Nilgiri

Hills, or actually shooting at the sky as done by the Coorg.19
'The function of noise is to draw attention to an anomaly in the
unfolding of a syntagmatic sequence,' says Levi-Strauss. 'Two
terms of the sequence are in a state of disjunction; and, correla-
tively, one of the terms enters into conjunction with another
term, although the latter is outside tl)e sequence. 20 What is
important for us, in the context of our discussion, is that this
term, which intrudes from outside, appears in popular imagina-
tion as a serpent trying to devour a hare, or in its sanskritized
version, as a monster (danava)devouring a celestial being. The
latter is what calls for the ritual use 'of dub and kusa against
defilement at eclipse. 21 Each of·these owes its sanctity, as herba
benedicta,to the part it is supposed to have played in the struggle
against the demons. Dub (from ,the Sanskrit word darbha)has
been transubstantiated by sacred lore into a hair which fell from
Visnu' s mane when, in his incarnation as a boar, he fought and
destroyed a daityawho was trying to drag the earth to the bottom
of the sea. Again, thanks to a mythopoeic conversion of a blade
of grass into another kind of blade, kusa too has a number of
legends ascribed to it as an instrument of decapitation used by
gods and rshis against some of the more overbearing and ag-
gressive of their enemies. 22 I( came thus to acquire a function
not unlike Visnu's disc (chakra).The latter foifed,a demon's
attempt to help himself to ambrosia at the time of the Churning
of the Ocean (Myth 1), just as kusa qerved to punish the Serpents
(Nagas) by splitting their tongues as they began to lap up the
same elixir stolen by Garuda under duress. 23 Myth ancl_ritual
thus came together to confirm the classic Hindu image of Rahu
The Ocean of Sto1y, vol. II, tr. C.H. Tawney (reprint, Delhi, 1968), p. 81.
Levi-Strauss discusses the universality of su·ch noise-making in the work
mentioned above in n. 6.
l9 Penzer, pp. 81, 82; M.N. Srinivas, Religionand Society among the Co01-gs
of
South India (Oxford, 1952),pp. 239-40.
20 Levi-Strauss, p. 289. ,
21 Stevenson, p. 352; W. Crooke, The PopularReligionand Folkloreof Northern
India, vol. I (reprint, Delhi, 1968), p. 22.
22 See, for inslance, Briggs, pp. 26, 66.
23 O'Flaherty, p. 22Z,n. 57.
as a disruptive force on both the cosmological and the sociologi-

cal levels so that his appearance in the sky triggered, with
good reason, Brahmanical fears about the imminent end of the
world. 24
III
\
The Brahmans, however, did not have the last say. Rahu, con-
demned by them as predatory and polluting, still managed to
acquire for himself a large following at the lower end of the
Hindu hierarchy. The evidence we have on this subject in the
literature of the colonial period is ample and unmistakable, It
ranges from observations made by Buchanan-Hamilton at the
beginning of the nin~teenth century to those by administrators
and ethnographers during the last fifty years of the Raj.25 All
have testified to the existence of an ancient cult of the eclipse as
a still very active element in the belief systems of several castes,
namely the Dom, the,Dosadh, the Bhangi and the Mang.
I
These castes were differentiated in, their internal structures
and in their ways of life in many resp1;cts. But taken together
they constitute~ a group--<:alled the Dom Group by Briggs in
his authoritative monograph-in so. far as they shared a very
high degree of economic degradation, socW stigma and ritual
impurity as their common. lot. Their condition was described
thus by an obseryer seventy-five years ago:
He [the Dom] is born in an ahr [pulse] field and schooled to theft from
his infancy. He wanders an outcaste from the beginning. He lives
without shelter and without food for the morrow, perpetually moving
from encampment chased by the police and execrated by all the
24 Some of this cataclysmic apprehension is reflected in the Mahabharata
thus: 'rahumetii yathakase uditau jagatah ksaye' (Karnaparva, 87: 92).
25 Among the most authoritative sources are Briggs, op. cit.; F. Buchanan
[Buchanan-Hamilton], An Account of the District of Purneain 1809-10 (Patna,
1928); Crooke (1968);Crooke, the Tribesand Castesof the North-WesternProvin-
cesand Oudh, vol. II (Calcutta, 1896);E.T. Dalton, DescriptiveEthnologyof Bengal
(Calcutta, 1872);G.A. Grierson, BiharPeasantLife (2nd rev. edn., Patna,, 1926);
Penzer, op. cit.; H.H. Risley, The Tribesand Castes of Bengal,vol. I (reprint,
Calcutta, 1981); R.V. Russell and H. Lal, Tribes and Castes of the Central
Provinces,vol. IV (London, 1916);Thurston, op. cit.
villages ... Hinduism has failed to reach him ... the advance of civil-
ization has only thrust him into deeper degradation. 26
This agrees, in all essentials, with what Manu had to say
about the Chandalas and the Svapachas who, according to many
scholars, 27 were the historic precursors of the communities men-
tioned above. Thus:
... the dwellings of the Chai:i~Hilas and Svapachas shall be outside
the village ... their wealth (shall be) dogs and donkeys. Their dress
(shall be) the garments of the dead, (they shall) eat their food from
broken dishes, black iron (shall be) their ornaments, and they must
always wander from place to place ... at night they shall not walk
about in villages and in towns.28
Quite clearly, time had not helped to alter the status of the
Dom and the others of this group as vagrants condemned to
move about warily on the margins of society. 'They must always
wander about from place to place,' said the ancient law-giver,
and that precisely was-what they continued to do well into the
twentieth century. This wanderlust,which appears as prescrip-
tive in the shastras but as a sort of second nature in official
writing under the Raj, is no doubt an index of the change that
has occurred in ethnography over 1,500 years-a change in its
character as a sacred knowledge to one that is secular. But'tli.at
progress from the theological and archaic to the sociological ari.d
modern relates inversely to the conservative forces of ahistorical
phenomenon of very long standing-that is, 'the resistance of
some of the autochthonic masses of pre-Aryan tribal origin to
assimilation within an agrarian society and its spiritual condi-
tions dominated by Brahmanism. This phenomenon has been
described thus by Kosambi:
At the lowest end [of 'the social scale'] we still have purely tribal
groups, many of whom are in a food-gathering stage. The surrounding
26M. Kennedy,Notes on CriminalClasses in the BombayPresidency(Bombay,

1908), cited in Briggs,p. 147.
27 See, for instance,Briggs,ch I et passim. The'Doms were often called
Chandalsin Risley's days(seeRisley,p. 240) and perhapsthiscontinuesuntil
today at leastin someeasternregionsof the subcontinent.
28Manu, x, 51, 52, 54.
general society is now food-producing. So food-gathering for these

very low castes generally turns into begging and stealing. Sui;:hnether-
most gx:oups were accuratelY. labelled the 'criminal tribes' by the
British in India, because they refused as a rule to acknowledge law
and order outside the tribe.
This stratification of Indian society reflects and explains a great
deal of Indian history ... It can easily be shown that many castes owe
their lower social and economic ~tatus to their present or former
refusal to take to food production and plough agriculture. The lowest
castes often·preserve tribal rites, usages and myths. 29
It has been authoritatively stated that the communities men-
tioned above were, like the Dom and the Mang, of purely tribal
origin, 30 or 'constituted on an aboriginal base' modified, as with
the Dosadh and the Bhangi, by recruitment from non-aboriginal
populations. 31 In either _case,what they all had in common was
a remarkable inaptitude about work on the land-a legacy, no
doubt, of a historic reluctance 'to take to food production and
plough agriculture'. The result was,that even as late as the 1890s
Risley could write of the Dom and the Dosadh as poor agricul-
turists none of whom had risen above the rank of tenants-at-will
or at most that of occupancy raiyats and a large proportion of
whom earned their living, like the Man, as nomadic cultivators
or landless day-labourers. 32 As the poorest and weakest section
of the rural population, they were the principal source of begar
(forced labour) for landlords and the sarkar, and, '.condem,ned
to the most menial duties,' they served traditiom\lly as 'the
helots of the entir~ Hindu community'. 33 For the rest they were
left with vagrancy and its concomitants----begging and rob-
bing-as an alternative way of life. Regarded as marginal in a
society that came increasingly to be identified wi_thagricultural
settlements, they were despised as ante'vasiiyinah by the other
inhabitants and persecuted by the authorities as a potential
threat to law and order even in Manu' s time. The colonial regime
29 Kosambi (1972), p. 14.

30 Risley, p. 241; Kosambi (1975), p. 41.
3t Risley, pp. 252-3; Crooke (1896), pp. 348-9; Briggs, p. 97. '
32 Risley, pp. 250,257; Briggs, pp. 197, 200.
33 Risley, p. 241; Briggs, pp. 174-5.
added to the material insecurity of their life by denying them

access to the forest which had hitherto been their provider,
while it embellished their outcaste status by classifying them as
'criminal tribes' fit only to b~ caged up in detention camps
governed by curfews and penal discipline. 34
Poverty and social degradation are matched in the life of
these communities by the utntost degree of ritual pollution.
They are described as quite literally the embodiment of impurity
in the Dharmashastras, so much so, indeed, that the sin accruing
to a person of the higher castes from physical contact with them
or with their shadows or, in some cases, even from the. sight of
them required absolution by severe penalties and rigorous puri-
ficatory rites. This was no empty Brahmanical injunction, ahd
social practice conformed to it even as late as the eighteenth
century. For 'it is recorded that under native rule the Maha.rs
and Mangs were not allowed within the gates of Poona between
3 p.m. and 9 a.m. because before nine and after three their bodies
cast too long a shadow'. 35 The 'modernizing' infhtence of colo-
nialism appears to have done little to abolish such prejudice, of
which the following observation put on record in the last decade
of the Raj is a measure: 'When a Dom is called to witness in a
court of justice, the spectators draw in their ·skirts to avoid
contact with him. (This practice extends to Bhangis and others
of this general class').36
Ironically, however, the objects of such loathing have per-
suaded tnemselves, thanks to the weight of tradition, to inter-
nalize the sense of their own impurity. All of them have myths
about some sort of an original sin to account for their polluted
status and that sin assumes invariably the form of a deviation
from Brahmanical norms of purity on the part of an ancestor.
Supach Bhagat, the first Dom, is said to have turned up rather
late at a feast given by Siva and Parvati for all castes and ate
34 Briggs, ch. VI, VII and xx, discusses at len"gththe material conditions of
these groups and the operation of the Criminal Tribes Act with regard to
them.
35 Russell and Lal, p. 189. For a story about how the sweepers managed to
overcome this stigma with Valmiki's help, see Briggs, pp. 58-9.
36 Briggs, p. 123.
what was left over. Since then his descendants have been con-
demned to eat the leavings of all other castes, so that, according
to Risley, they would readily identify themselv,es at least in some
parts of the ~ountry as belonging to the jutha-khai ('eater of
leavings') caste. 37A variant of that story. (in which Sita and Rama
appear as hosts) is used by the Bhangis to explain their own fall
from grace. 38 Both of these communities have also legends about
polluting offences committed by their forbears. in the form of
handling of dead animals. The Mang, on their part, trace their
cqngenital impurity to a curse addressed to the first-born of
their community for castrating the sacred bull which, in Hindu
mythology, serves as Siva's carrier. And so on. All of which
helps to rationalize in the eyes of the wretched of this world
their wretchedness in other-worldly terms.
However, it will be one-sided, hence false, to speak of this
typically i:eligious consciousness as nothing more than a d~vice
to reconcile the dregs of Hindu society to their lot. There are
other components of the. same consciousness, expressed in a
parallel set of myths and legends fabricated by the same subal-
tern f<1ntasy,which use religiosity at least as a cahierde doleance
if not quite a proclamation of revolt. To recognize this is to define
that threshold beyond which humanity would not put up with
its own debasement, and that threshold is built into the spiritual
condition of the masses despite an elitist notion to the contrary
about their uncritical acceptance of fate.
,l
IV
Elements of a critique are quite clearly inscribed in the belief
system of these castes. It is a critique which is oriented towards
a defiance rather than acceptance of the regime of social and
cultural dominance imposed on them, although it is not matched
· by any practice articulate and strong enough to turn the world
upside down. On the contrary, it is precisely this failure on its
37 Risley, p. 241. See also Croqke (1896), p. 319.

38 For this and the rest of the information in this paragraph, see Briggs,
pp. 63--4,65, 76.
part to realize its potential that allows the mock practice of ritual
to manipulate'it into the service of that very dominance. In other
words, it is a theoretical consciousness which registers a sense
of genuine distress, but lacking, as it does, the support of any
truly and adequately corresponding practice, ends up as art
opiate to induce passivity. This contradiction lies at the very
heart of lower-caste religiosity. The tendency it has to incline in
favour of the ruling culture must therefore be takeh together
with its Other-the tendency which pulls in the opposite direc"
tion towards dissent.
Some of the myths and cults of the Dom Group speak
eloquently of that contrary-and yet complementary-tenden-
cy. This is manifest in that spiritual audacity which has led to
the elevation to divine status of a number of empirical and
mythic figures utterly non grata to. the ruling culture. Typical of
the former are those real-life thieves and bandits who have been
apotheosized after their death, and of the latter those legendary
heroes whos.e fantastic achievements have· impressed the weak
and the meek of this land as parables of super-human power-
physical as well as spiritual. Taken together, they represent.the
spiritual legacy of two historic displacements brought about by
Aryanization and colonization. l:atge sections'of those popula+
tions who were insufficiently absorbed in the material culture
of an agrarian society and the spiritual culture of Brahmanical
Hinduism, and remained unassimilated, by and· 1arge, even
under the, Raj, found for themselves an alternative way of life
in crime and, corresponding toJpat, alternative strain's of re-
ligion which transformed the criminal into a godling.
This process which amounted to a',reversal of some of.:,the
dominant values of Hindu society and spiritualized what was,
for its custodians, grossly antisocial, had been active. long
enough to constitute a counter-tradition. Kosambi writes of 'a
west co,untry goddess, Bolhai, as 'supposed to have gone with
some brigands (cora),which is a sure indication,' according to
him, 'that she had been the patrone!'is of an untamf!d tribe for a
long time' .39 In much the same way, the bandit godlings Goraiya
39 Kosa~bi (1972), p. 48.

and Salesh worshipped by the Dosadh, the burglar Gandak

hanged for his crime but apotheosized by the Maghaiya Dom
along with his consort Samaiya, and Syam Singh the robber chief
regarded by the entire Dom family as a patron deify and ances-
tor, are all witness to the autochthonic pre-history of these
castes. 40 The suggestion of an 'untamed' tribal past is further
, strengthened by the representation of these deities in lumps and
stones rather than the iconic form characteristic of the Hindu
pantheon, as well as by such typically non-Brahmanical ritual
offerings as pigs, cocks and liquor addressed to them.
The bandit god whose cult, unlike that of the others, was not
confined to particular localities, was Valmiki. The claim, sup-
ported by Briggs,41 that he was 'a member of one of the ab-
original tribes of mid-India,' may be opert to doubt. However,
there can be no question about his divine standing among some
of the lowliest castes throughout the subcontinent including the
south. The legend about his 'rareer as a man of violence who
ultimately redeemed himself through penance is shared by all
sections of the Hindus. But the outcastes have made him their
own by integrating that motif into a number of their ancestral
myths. One of these designates him· as the father of Kalu and
Jivan to whom the Dom and the Bhangi trace, respectively, their
descent. In a few other tales he is variously identified with the
Bhangi ancestor Lal Beg himself, or with his son, or with Supach
Bhagat, the legendary founder of the Dom caste, or with Nakula,
one of the Pandava brothers, who is promoted to the status of
the first Bhangi by a nimble play on words.
The latter merits some comment as yet another linguistic
device with a transformative function in this particular cycle of
myths. There is, for instance, the story which ascribes the origin
of the metric structure of the sloka to Valmiki's declamation
in the Ramayana, beginning with the words manishiJ.da,ad-
dressed to a hunter after a particularly cruel act of. killing. 42
40 For these godlings, see Briggs, pp. 465-7; Grierson, p. 406,409; Buchanan,
pp. 249-50.
41 Briggs, p. 41. The information in the rest of this paragraph is based on
ibid., pp. 52, 54-5, 56, 60--2,64-5.
42 See RiimiiymJam(Adikai;isfa:II, 15-18). This verse structure is, however,
Again, there are folk tales, in many variants, 43 about his absolu-
tion from sin, thanks to a coincidence in sound between the
continuous utterance of the vile and by implication polluting
word for death, marii,and that of the phonetically reverse and
sanctifying name of the divine hero Riima.
What distinguishes the Bhangi myth from the others in this
series is its grafting into an episode of the other epic and the
identification of Valmiki with Nakula, brought about, according
to Briggs, by a semantic manipulation on the word biilmik,
meaning 'good lad'. This was supposed to have been used by
his brothers who coaxed him, so the legend goes, to remove a
carcass and deserted him while he was doing so. Then, by yet
another verbal twist, Nakula, reconstituted now as Balmik,
hence-thanks to a mythopoeic slide-Valmiki, is transformed
into Supach Bhagat as the divinely ordained progenitor of those
who live by making and selling the winnowing fan (sup) used
to sift flour for 'cooking' {V pach = to cook) bread. 44 In the
Ra~ayana the reformed bandit-turned-poet extols the slaying
of a highly virtuous Sudra as an act of exemplary justice, for the
latter had offended the Brahmans by coveting spiritual excel-
lence and its rewards to an extent attainable by none but the
elite castes. The Bhangi turns the tables on the latter and used
his own words and imagination to mould the unreformed ban-
dit into an ancestor and patron saint without the least effort to
's"nskritize' him. If the concept of social banditry may be said
to be an acknowledgement of that ambivalent morality
which informs the type of subaltern practice stigmatized indis-
criminately .as crime, the apotheosization of Valmiki and a host
of delinquent godlings must rank as a powerful tribute to that
morality and the notion·that goes with it.
The alternative morality and the criticism it implies are
exemplified not merely in the spiritualization of banditry. Some
of this inversive tendency shows up also in an explicit,avowal
said to be older than that epic, for the metre occurs already in the Vedas. J.
Dowson, A ClassicalDictionmy of Hindu Mythology,etc. (London, 1950),p. 333.
43 For several versions of th.ese tales, see Briggs, pp. 55, 59, 61.
44 Briggs, pp. 64-5, has this story.
of that notorious rebel of Hindu rnythology-Kix:ig Vei;ta.45 Brah-

inanical literature is stacked with tales about his wickedness.
Manu (IX,66) accuses him of introducing or at least tolerating
widow marriage, 'which is reprehended by the learned of the
twice-born castes as fit for cattle'. According to Padma-Purii,:za,
he had started off well as a ruler but strayea into Jains heresy.
Bht his worst crime, according to the sacred authorities, appears
to have been the banning of all ritual sacrifice, gift or oblation
except what was addressed to himself. 'I am for ever the lord of
offerings,' he declared. Wq.en the rshis, who customarily of-
ficiated at these rites and appropriated the gifts offered to gods,
remonstrated with him, he answered them with scorn: 'Who is
this Hari whom you style the lord of sacrifices? Brahma ... and
whatever other gods 1:herebe ... are present in the person of a
King .. , 'That was too much for the sages and the priests to
put up with and they slew hill') with blades of kusa grass, used
euphemistically irf the Puranic stories as a weapon for cutting
up the enemies of the gods. Mlecchas and the-wild tribes of the
Vindhya region called Nishadas issued fron1 his body, accord-
ing to legend,, and the Dorn themselves claim descent from him,
as a recall perhaps' ,of their own tribal origin. Whatever the
historical basis of suah a claim, it would certainly agree with the
spirit of defiance one finds in some elements of the Dom tradi-
tion, such as those relating to the Basti-Gorakhpur rulers of this
caste who are said to have upset the Brahmans by proposing, to
marry their daughters.
V
Rahu too is an enemy of the gods and betenoireof the Brc}hrnans.
Its cultic standing among the mernl;,ers of the Dorn Group is yet
another instance of lower-caste resistance to the hegemony of
varna-Hindu culture. Buchapan-Harnilton, to whom we owe one
of the first and most elaborate descriptions of this cult as found
in the Purnia region during the early years of the nineteenth
45 The sources of our· material on the legend of Vel_laas used in this

paragraph are Briggs, pp. 26, 66; 67 and Dowson, p. 354.
THE CAREER OF AN ANTI-GOD/ 317
century, 46 noticed how it provided the Dosadhs of Nathpur with

an occasion to fl.aunt the power of their own rituals·as an obvious
act of defiance agains~ the Brahmans. The worship of Rahu
assumed there the form of a sacrifice, and central to this was
an act of fire-walking by the chief officiant (bhakat),Jajmself a
Dosadh, who functioned also as a spirit-medium. 47 Comment-
ing on the mood of the crowd as it watched the bhakat put his
hands into a pot of boiling water and then walk barefoot thrice
over a three-and-a-half metre long bed.of burning coal without
being scalded or burned, Buchanan-Hamilton wrote, 'It was
evident ... that the whole spectators, who were numerous,
believed in the influence of this god, and at least all the Dosadhs
and probably most of the others considered the imposition of
the deity as what enabled the fellow to resist the effects of the
fire. His followers exultingly challengedthe Brahmanswho were
iri.my company to imitate the priest'.48Tiie outcome of that contest
did' not reflect favourably on 'the Pandit of the mission' led by
the sahib.
Even more than such affirmation of ritual power it is the
lower-caste myths about eclipse which illuminate the contradic-
tion,between elite and subaltern religious idioms. These myths
rurrparallel to the Pur~nic version (Myth 1) and, taken together,
they make up a series with an independent ideological 'standing.
However, this series does pot'operate in isolation. On•the con-
trary~ it works cm'the' classical Hindu myths with its own motifs
and transforms them, first, by positing an existential connection
between Rahu and his adherents within the Dom Group, and,
secondly;by grounding-' earthing' would be a more expressive
term_o._that"Connectionin the material and social conditi6ns,of
those castes; The 'sum of the structural changes brought' about
by this dual operation is what constitutes the' specificity of
lower-caste ideology in this particular instance1
How 'these subaltern communities takeover the Puranic
46 Buchanan, pp. 249-52.

47 For some later accounts of this ceremony, see Risley, pp. 255-6 and
Dalton, p. 326.
48 Buchanan, p. 252 (emphasis added).
materiel and make it their own may be seen in the following

story.
Myth2
Rama, on his return from the defea,t of Ravai;iain Lanka, gave a feast
to his victorious army. Mahadeva (Siva) and Parvati were serving the
meals. Presently .Mahadeva drew the attention of Parvati to the
presence of a low-caste Mang boy ... in the assembly, and asked her
to be careful, and to serve him the meals from a distance. But as soon
as Rama saw the Mang he slew him for daring to mar the sacredness
of the feast by his impure presence. The mother of the slain boy took
up the head, placed it in a basket and tried in vain to resuscitate it
with fresh water. With. the basket containing the head of her lost son,
she went" to the gods and goddesses begging for her meals. In turn
she goes to the sun and moon, threatening to touch them if her request
is not granted, thus desecrating their sacred character. It is the shadow
of her basket that causes the eclipse, and so it is to remove this Mang
woman, this importunate creditor, that people are asked to give
offerings to the luminaries and alms to the Mang caste.49
The elements of transformation can be picked upat a·glance.
The textual site ot Myth 1 was the Mahabharata; that shifts now
to the Ramayana. There the host and slayer was Visnu; here it
is Rama. The offender and victim in this story is not an anti-god,
but an untouchable, executed, like Sambuka, for overstepping
the limits of his prescribed rights. Correspondingly, his offence
consists not so much in stealing the food of the gods as in
polluting them by his presence at a meal. Unlike the Puranic
story the sequel to beheading in Myth 2 does not emphasize
revenge but the search for justice by a mother deprived of her
son and, by implication, breadwinner; and it takes the traditional
form of importunat~ begging for alms-dharna-from all the
gods (because the unjust act was committed by Rama, an incar-
nation of Visnu, the leader of the entire pantheon) rather than
that of a recursive act of aggression against the sun and the
moon, the informers in Myth 1.
The key to this entire series of transformations is the opera-
49 Penzer, p. 82.
THE CAREER OF AN ANTI-GOD/ 319
tion which identifies Rahu with the Mang and attributes to him
all the conditions of the latter's social being. It is an existential
operation common to many Indian myths in which the divine
and the human are collapsed and mutually identified. The
operators used for this purpose are of three kinds--grammati-
cal, genealogical and cultic. The grammatical operator functions
as a copula bonding any two terms in the general from: A is B.
In Myth 2, Rahu is a Mang. Again, according to some folklore
collected by Russell and Lal in Madhya Pradesh, Rahu is a
sweeper (Mehtar or Bhangi).50 The genealogical operator comes
in the form: A is an ancestorof B. The Dosadhs of Tirhut in Bihar
claimed Rahu (locally known as Ra.ha or Rah) as an ancestor
who was killed .in a battle, 51 while those of Mirzapur also
~oasted of their descent from Rahu who, according to a legend
still charged with the memory of the Puranic conflict, was 'shut
up in the temple of Jagannath [i.e. Visnu] at Puri' as he made
his way from Bengal to Uttar Pradesh. 52 The west cquntry Mang,
too, were said to be 'of the race of the demons which swallow
the moon ~t the time of eclipse'. 53 The function· of the cultic
operator (B worshipsA) is to assign a ritµal following to a deity.
This is yet another existentiaJ linkage, because the relatio.n be-
tween a worshipper and his patron deity is supposed to be the
same as that between a child and its parent. In effect, therefore,
the functions of the last two operators are interchangeable, and
that being so, the adherent.s of the cult related to Rahu as a
classificatory progeny, even whert, unlike the Dosadh and the
Mang, some of them liad no origin myths to show for it.
This existential bo;nding is of the utmost significance for the
ideological structures tinder disc.ussion. It confers on these out-
caste groups Hie role of tnediators between an eclipse and all it
threatens by its malevolence ahd impurity. As Rahu' s people,
they alone are beH~ved to have the power to coax him to release
so Russell and Lal, p. 232.

51 A. 'Cunningham and H.B.W. Garrick, Report of Tours in North and South
Biharin 1880-81 (Archaeological Survey of India, vol. XVI;reprint, Delhi, 1969),
p. 28.
52 Crooke (1896), pp. 349-50.
53 Briggs, pp. 543-4.
the sun and the moon from his grip. Ironically, thus, it is the
weakest and the most despised sections of Hindu society who
are called upon to save it from pollution and destruction. This
endows them with a spurious authority which accrues, charac-
teristically, to the 'intermediate situation' by virtue of the fact
that 'it comprises the opposite poles, and ultimately always
appears as a one-sidedly higher power vis-a-vis the extremes
themselves'. That, according to Marx, 54 is equally true 0£ the
mediatory status of exchange value in the world of wealth and
the role of intermediaries of the spiritual world.
Thus, in the religious sphere, Christ, the mediator between God and
humanity-a mere instrument of circulation between the two-be-
comes their unity, ·cod-man, and, as such, becomes more important
than God; the saints more important than Christ; the popes more
important than the saints.
In much the same way the outcaste, mediating as he does in -a
situation of the utmost antagonism between Rahu and a lumi-
nary, appears to be more important than either. He seems to
have.power over both--over the former in so far as he can ~ake
the monster disgorge the planet, and over the latter and all
others dependent on the sun and the moon for their survival, fn
so far as he alone can often them the protection they need.
The importance of the lower-caste mediators who are iden-
tified thus with Rahu by linguistic usage as well as by cu\t clnd
sacred lineage is acknowledged ritually by the gifts sho\<Yered
on them during an eclipse. 'As the Doms, who worship these
demons are able to induce them to release the moon, pious
people give alms to these castes at eclipse in order to secure their
good offices to release the moon.' 55 This description of the
custom as it prevailed in Uttar Pradesh coincides with R,isley's
observations in Bengal and Bihar at about the same time, except
that the gift in this region came not as alms but copper coins put
out by the upper-caste householders for the Dom to collect.56
Again, in Madhya Pradesh, the belief that Rahu was 'either a
54 Karl Marx, Grundrisse(Harmondsworth, 1973), pp. 331-2.

55 Crooke (1968), p. 320.
56 Risley, p. 247.
sweeper or the deity of the sweepers'' made people give them

.alms during an eclipse in order to 'appease him and cause him
to let the luminaries go' .57 Further west, in Gujarat, on such
occasions, 'as soon as the darkening sets in, the Bhangis· go
about shouting, "Garhandan,Vastradan,Rupadan," or 'gifts for
the eclipse, gifts of clothes, gifts of silver'.ss
VI
From the standpoint of the elite castes, these gifts can only be
regarded as a price they have to pay for the return of peace in
the heavens and purity on earth. The suggestion of a douceur
meant to pacify the polluting monster ort a rampage is inscribed
in the very name of the ritu~l activity, santi, 'the rite of appease-
ment,' prescribed for this occasion. 59 Indeed, no other interpreta-
tion of these gifts is possible if viewed in the characteristically
Brahmanical terms of Myth 1.
But viewed from the standpoint of the outcaste recipient, the
gifts lend themselves to a very different interpretation construed
in terms of the parallel myth mentioned above-Myth 2. There
the alms solicited so in;lportunately by the Mang woman stand
for a right to which she was entitled as a person left without any
means of supporting herself because of her son's murder. What
she earned by begging might have been the equivalent of 'con-
science money' for the gods whose leaders, Rama (= Visriu) and
Siva, were, respectively, the perpetrator and instigator of that
violence. For the aggrieved mother, however, asking for a
modicum of subsistence was a highly moral act-a' quest for a
just recompense. By the same token, the reciprocal act of alms-
57 Russel and Lal, p. 232.

58 Ibid. ·
59 The ritual gifts for this occasion could include, according to Kane, horses,
chariots, cows, land, sesame, ghee, etc. as well as figures of gold. The
diinamantra addressed to Rahu during this ritual speaks clearly of its
pacificatory function:
tamomaya mahabhima somastiryavimardana
hematarapradanena mama santiprado bhaba.
P.V. Kane, Historyof Dharmasastras,
vol. v, pt. II (Poona, 1962), p. 766.
giving, too, represented a morality. Indeed, it would be al-

together wrong to withhold .from her what was rightfully her
due. For the Bindu ideal of the gift-dana-is conceptualized as
a two-way exchange involving the donor and the donee in a
relationship of mutual dependence which is no less spiritual
than it is material. The rules of the 'economic theology' (as
Marc-el Mauss called it) governing this transaction prescribe
hierarchically graded entitlements to resources on the part of
individuals and groups for the satisfaction of their material and
spiritual needs in such a way as to constitute a moral right. To
share their resources is, therefore, a duty on the part .of those
who have them. But it involves no loss. On the contrary, they
have much to gain in spiritual merit and, what is equally
important, in material wealth as well. For the thing given 'may
automatically bring the donor an equivalent return-it is not
lost to him, but reproductive; or else the donor finds the thing
itself again, but with increase' .60 By responding charitably to the
outcaste beggar the patrons could, therefore, be said to have
done themselves a favour; it is not only that they were assured
of an equivalent return or even an increase of the resources
parted with; they also managed the~eby to sidestep the sin of
interrupting the reciprocal flow of asking and receiving which
is what constitutes dana.
What happens to the donor when he allows that flow to be
interrupted in spite of his best efforts is illustrated by the fate
of Harischandra. That legendary king had responded to a
Brahman's demand for a gift by offering all he wanted including
'gold, his own son, wife, body, life, kingdom, good fortune'. The
Brahman took him at his word and stripped him of everything
until he was forced to sell, first his wife and child, and then
himself to redeem his pledge. The last of these transactions-the
ultimate misery-involved a Chandala as the purchaser. In an
adaptation of this Puranic story by the Dom, it is Kalubir, their
ancestor, who is said to have acquired the unfortunate king at
that sale and treated him so well that 'in return the Raja con-
verted the whole tribe to his religion' .61 This is why they claim
60 M. Mauss, The Gift (London,.1974), p. 55.
6l Risley, p. 246.
to receive gifts on his behalf at'an eclipse. 'When the raja came
back from heaven to wander and to beg,' _they explain, 'God said
that if anyone refused to feed him, the sun and moon would
disappear. That is why Doms collect alms when an eclipse
occurs; because his spirit is calling for food.' 62 Harischandra
appears here with his role reversed: instead of being the donor
he was in the original version of the myth, he is made out to be
the receiver. However, nothing is changed about the significance
of diina as a reciprocal act in which asking must be matched by
giving. To break that sequence by any lapse in charity could ruin
not only an individual householder but the entire universe by
disturbing the sequence of planetary movements.
The motif of diina occurs in yet another eclipse story, but
with a less significant part to play in its structure.
Myth3
The sun and the moon were brothers. A hungry worshipper came to
them, saying, 'I am poor and hungry. Give me something to eat.' The
brothers went to a sweeper-woman and said, 'Give this man grain.'
She agreed to give grain to the beggar for a year. She was directed by
the brothers to take the grain out of the bin from below, and they
agreed to fill it by putting the grain in from the top. During the year
the sun and moon were unable to fill the bin, and when the year was
. up, the woman said, 'Now pay me, for the bin is not full.' They were
unable to pay her and hid themselves.Now, when eclipses occur, the
worshippers of the sun and moon collect various kinds of grain, mix
them, and distribute them to beggars, and thus deliver the sun and
moon from shame.63
What is remarkable about this story is that it is told without
the aid of any Puranic idiom. There is no mention here of Rahu,
no retreat into the Hindu bestiary to acc6unt for a natural
phenomenon. We are, of course, still in the realm of fantasy, but
one t]lat is made up of at least some 'identifiable chunks of
reality. An explanation of the heavenly disorders is offered here
in terms of the all-too-familiar elements of our village life, such
62Briggs,p. 546.
63Ibid.,p. 545.
as the hunger and want .of a lean season, begging for food,
borrowing from a neighbour to meet one's social obligations
towards the needy, and the shame of not being able to repay.
These are assembled in the story in order to give a heavenly
scenario the verisimilitude of earthiness. The object of this exer-
cise in the artless art of subaltern discourse is to suspend dis-
belief about what is truly fantastic. For what can be more
fantastic than the upper-caste 'worshippers of the sun and
moon' going hungry while the Bhangi and Mehtar have bins
full of grain than the former having to beg and their divine
patrons to borrow and the latter having enough to spare? Rural
society seems to have turned upside down, but only~alas, within
the inverted world of religious thinking.
Yet it will be wrong to dismiss even that inversion as without
significance. For it is nothing other than a consciousness articu-
lated as a recognition by the despised and the poor of their own
debasement and the need to overcome it. Unable to find redress
in real life they compensate for it in wishful thinking. This wish
is still too feeble to actualize itself as a project powered by a
radical will. Nevertheless, it is a wish predicated on a critique
of the social and cultural conditions of subalternity.
What is of importance for us in the present discussion is that
with all its infantile fumbling this critique bears in it the seeds
of a development. We met the very first moment of that develop-
ment in its emergent phase when it spoke only in the language
borrowed from the upper-caste culture which it had set out so
diffidently to criticize. But there were indications, already in
Myth 2, of its urge to rearrange and transpose the Puranic
material and fit it into the outcaste' s social experience and
imageries derived from it. Then, in Myth 3, we find subaltern
religiosity come to its own. It replaces the baroque impedimenta
of Brahmanical mythology by a world of fantasy constructed
out of the stuff of lower-caste existence in everyday life. In that
process it relegates the archaic motif of dana to the background
and allows the motif of the unredeemed loan to dominate the
narrative-all of which amounts to a significant, if still rather
small, shift away from 'economic theology' in the direction of
political economy.
VII
This development continues in a series which finally recasts the
story of Rahu' s conflict with the sun and the mopn in terms of
a real antagonism within our society-the all-too-p~infully real
antagonism between debtor and creditor. To cite a fairly repre-
sentative version which comes from Madhya Pradesh:
Myth4
... the sun and moon are in Rahu's debt, and he comes and duns
them, and this is the eclipse; and the alms given to the sweepers are
a means of paying the debt.64
It is found in several variants, some of which, like those
9uoted below, come witJi strikingly realistic details.
Myths
..... the sun owes the sweeper a debt which he refuses to pay. The
S:'7eeper,however, is not to be put off easily ap.d sits dhama at the
sun's door ... his dark shadow can be seen quite clearly. In time the
debt is paid and the sweeper departs.65
Myth6
... both the sun and the moon at one time borrowed something from
Dhrubh [i.e. Rahu] ... This debt·must be repaid, and if at any tlme
the sun or the moon is not able to pay on the debt, it is attacked by
Dhfubh who begins to devour it. He never quite does so, however,
and vomits it up, as there is still mo,ney owing and payments must
go on.66
With these tales the career of Rahu quit~ its original site in
the ,Puranic heaven and finds itself grounded in the· earthy
material which makes up the life of its cultic adnerents. Conse-
quently, what began as a story of celestial violence is trans-
64Russell and Lal, p. 232.

6!\.Penzer, p. 82.
66 W.G. Griffiths, The Kol Tribeof Central India (Calcutta, 1946), p. 131.
326 / CREDIT, MARKETS AND 'IJ-IE AGRARIAN ECONOMY
formed into one of social violence. In reality (as against what

happens in myth) that violence, operating as it often does in the
vicious form of chronic indebtedness and bond slavery, counts
the members of the Dom Group among its worst'victims. The
condition of the eponymous caste, as described by Briggs to-
wards the end of British rule in India, speaks for all of t~em:
'Debt constitutes one of the most heavy of all the economic
burdens which the Doms have to bear ... A not unusual rate of
interest is four annas on the rupee per month, which adds up
to 300 per cent per year. Descendants of debtors assume debts
of their ancestors even to seven generations and more and pay'. 67
According to an observer in a region of Uttar Pradesh in 1931
the Dom was 'like a serf, either traditionally attached to ~ome
old thokdarifamily from generation to generation' or 'a life-long
slave to the moneylender'. 68His poverty, cultural backwardness
and, occasionally, recourse to crime for a living could all be
explained by the burden of debt under which he laboured. ·
As a prisoner of debt his idea of power relied largely on his
own experience of the creditor's power over himself: For the
oppres~ed everywhere tend to model their image of authority
first of all on their own oppressors. This is why the idealization
of the moneylender is a common feature of the folklore of many
castes and communities for whoin chronic and in some cases
hereditary indebtedness is.a living tradition. Among th~ Dhitr-
wa of Bastar, for instance, a legend about an orphan's success
in life has tlfe status of a sahukar made out as his highest
achievement. 69 The Grasia of Bombay and Rajasthan, cruelly
exploited by banias, attribute to the latter the power to reduce
rainfall, create drought and ,thereby add to their profit from
higher grain prices. 70 Idealization of this order is stretched to its
limit in the Rahu myths. Those who are reduced to a state of
near servitude by the moneylender pay him the ultimate tribute
of making a moneylender of their own patron deity. The apothe-
osization of the usurer could hardly go further.
67 Briggs, p. 187.
68 Ibid.
69 KN. Thusu, The Dhurwaof Bastar(Calcutta, 1965), pp. 219-20.
70 P.C. Dave, The Grasias(Delhi, 1960), p. 65.
But if that is the way for the Dom,. Dosadh, Bhangi and Mang
to acknowledge the creditor's power, it is also their way of
liberating themselves from it. For, identified as they are with
Rahu as his progeny, pujari, or simply as aff emanation, they
transform themselves into creditors by the same ide'alizing pro!.
cess, and destroy, in the ideal world, that thraldom which, in
the real world, they are unable to overcome. Khatak(=Khadak),71
that is, consumers'of credit themselves in the society they live
in, they assunre, with Rahu, the role of devourer of the celestial
debtors. This irony-the spectacle of the oppressed dressing up
as oppressors-is that imprint which negative consciousness
leaves on many an attempt to turn the real world upside down.
But as our reading of Myths 4-6 demonstrates, that irony is not
absent from the inversions which occur in the world of religion
either.
VIII
There is no doubt therefore that the graduation of Rahu from
heaven to earth does not achieve anything but a false liberation.
Yet it will be wrong to conclude that we are still where we had
been at the start. Quite the contrary, we are now, at the end of
the series, separated by a considerable distance from Myth 1.
How long ago was it that the.primordial ocean was churned and
gods and demons fought over their share of ambrosia? How
long ago the beheading at the Feast of Immortality? We stand
now within our own time and with out feet planted (not as
firmly yet, perhaps, as one would have liked) on the native
ground of our own experience. It is true that the explanation for
a natural phenomenon like the eclipse is still being sought in
myth and not in science. But it is no longer a myth that has gods
and monsters as its protagonists-but people. It is a myth which
has transformed a contest for amrta into one for control over
such material resources as mortals live by. As such, what was a
71 These two words can be used interchangeably, both in Hindi and

Sanskrit, to mean 'consumer' as well as 'debtor'. See Ramchandra Varma,
Manak Hindi Kosh,vol. 11,and Radhakanta Deva, Sabdakalpadrnma,pt. n.
figment of Brahmanical fantasy has been fashioned by the naive

imagination of the poor and the oppressed into a fable for our
times.
'Rahu became the enen;i.yof the Sun and the Moon,' says the
Matsha-PuriiJJamin its 'version of the legend, 'and he takes
vengeance on them even up to the present day at the time of
their eclipses.' 72 Rahu has not yet ·avenge.clhimself fully to his
own satisfaction and must continue his relentless pursuit. How-
ever, it is fo his advantage that his en.emies have been tracked
down to earth. The struggle, judging by these tales, is still being
waged in the head; however,..it has now a better prospect than
ever of materializing itself in that social struggle for which.the
last thre~ myths could be ,taken as a metaphor.
72 ihe Matsya-Puranam, pt. 11, ed. B.D. Basu (Allahabad, 1917), p. 290.
Annotated Select Bibliography
The theme of credit, markets and the agrarian. economy of colonial

India has a voluminous historical literature. What appears below is a
very selective annotated list that might serve as a guide to additional
readings for students interested in this theme. Readers should also
consult closely related volumes on rural labourers, agricultural
"production and peasant resistance published in this series.
I
Amin, Shahid, 'Small Peasant Commodity Production and Rural In-

debtedness: the Culture of Sugarcane in Easter11aU.P., c. 1880-
1920', in Ranajit Guha (ed.), Subaltern Studies I (Delhi, 1982). Using
historical evidence from the sugar-cane growing region of eastern
U.P., this important article analyses rural credit relations in the
framework of the exigencies of agricultural temporality.
Ashton, T.S. and C.H.E. Phillpin (eds.), The Brenner Debate:Agrarian
Class Structure and EconomicDevelopment in Pre-Industrial Europe
(Cambridge, 1985). This set of articles debating the role of demog-
raphy, commercialization and class structure in transitions, to
captalism in Europe is of relevance to the theme of agrarian
capitalism and credit tn colonial India.
Baden-Powell, B.H., The Land Systems of British Inllia (Oxford, 1892).
As an encyclopaedic study of land systems, this continues to be a
useful reference work for agrarian historians.
Baker, C.J., 'Economic Reorganization and the Slump in South and
Southeast Asia', in ComparativeStudies in Society and History, 23, 3
(1981), 325-49. Breaching the insularity of agrarian regions in
India, this insightful article studies th~ flows of credit as well as
skills and labour between South and,Southeast Asia.
--, An Indian Rural Economy:the Tamilnad Countryside, 1885-1955
(Oxford, 1984). This masterly study of the economy of the Tamil-
nadu countryside has a strong chapter on interlinked markets.
Banaji, Jairus, 'Capitalist Domination and the Small Peasantry: Deccan
districts in the late nineteenth century', in Economicand Political
Weekly, Vol. 12, No. 33-34, August 1977, 1375-1404. Drawing on
sources on the Deccan, this article advances a powerful, if con-

troversial, argument about the formal subsumption of labour
under capital in colonial India.
Barrier, N.G., The Punjab Alienation of Land Bill of 1900 (Durham, North
Carolina, 1966). A careful study of the making of this landmark
legislation.
Bayly, C.A., 'The Age of Hiatus: The North Indian Economy and
Society, 1830-1850',in C.H. Phillips and M.D. Wainwright (eds.),
Indian Society and the Beginnings of Modernization, c. 1830-1850
(London, 1976). A key article on north India during the economic
downturn of the 1830s.
--, Rulers, Townsmen and Bazaars: North Indian Society in the Age of
British Expansion, 1770-1870 (Cambridge, 1983). Widely regarded
as a contemporary classic, this magisterial work is especially
strong on the sociai history of Indian merchant capitalists and
service gentry.
Bhaduri, Amit, 'A Study in Agricultural Backwardness under Semi-
Feudalism', in Economic Journal, 83, (1973), 120-37. A seminal
article on the persistence of extra-economic ties of dependence
in agriculure despite the advent of capitalist markets and the
availability of new technologies.
Bhattacharya, Neeladri, 'Lenders and Debtors: Punjab Countryside,
1880-1940', in Studies in History, 1, 2 n.s. (1985), 305-42. A
thoroughly researched and balanced article on rural credit rela-
tions in Punjab.
Bose, Sugata, Agrarian Bengal: Economy, Social Structure and Politics,
1919-1947 (Cambridge, 1986). This book focuses on the 1930s
depression arid its impact on agrarian economy and society, espe-
cially credit relations.
--, Peasant Labour and Colonial Capital: Rural Bengal since 1770 in The
New Cambridge Histo1y of India series (Cambridge, 1993). An inter-
pretation of the longue duree in modern Indian agrarian history.
--, 'The Roots of 'Communal"Violence in Rural Bengal: A Study of
the Kishoreganj Disturbances, 1930', in Modern Asian Studies, 1984.
A close analysis of a revealing anti-moneylender uprising.
--, 'Starvation amidst Plenty: The Making of Famine in Bengal,
Honan and Tonkin, 1942-45', in Modern Asian Studies, 1990. A
comparative study of the causes and consequences of wartime
famines in India, China and Vietnam.
Catanach, I.J., Rural Credit in Western India, 1875-1930 (Berkeley, 1970).
A useful monograph especially strong on co-operative credit so-
cieties.
ANNOTATED SELECT BIBLIOGRAPHY/ 331
Charlesworth, Neil, 'The Myth of the Deccan Riots of 1875', in Modern

Asian Studies, 6, 4 (1972)pp. 401-21. A 'revisionist' article sceptical
of the scale and significance of the Decca!) riots.
--, Peasants and Imperial Rule: Agriculture and Agrarian Socfety i1;1the
Bombay Presidency, 1850-1935 (Cambridge, 1985). A,carefully re-
searched monograph offering a debatable functional view of
credit.
Chaudhuri, B.B., 'Rural Credit Relations in Bengal, 1859-1885', in
Indian Economic and Socill;lHistory Review, 6, (1969), pp. 203-57. A
meticulously researched article of credit relations between the
Rent Act of 1859 and the Bengal Tenancy Act of 1885.
--, 'Growth of Commercial Agriculture in Bengal, 1859-1885', in
Indian Economic and Social History Review, 7, 2 Gune 1970). An
empirical study illuminating the changing relationship between
the credit and product markets in the late nineteenth century.
Cheesman, David, 'The Omnipresent Bania: Rural Moneylenders in
Nineteenth Century Sind', in lyiodern Asian Studies, 16, 3, (1982),
445-62. This article on the under-researched province of Sind
discusses the }Vays in which the rural moneylender played an
exploitative role while assuring the,social reproduction of labour.
Darling; Malcolm Lyall, The Punjab Peasant in Prosperity and Debt (1st
edn., London, 1925; 4th expanded edn. London, 1947; reprinted
New Delhi, 1978).This early twentieth-century' classic' is the most
comprehensive, if occasionally confused and contradictory, treat-
ment of the problem of peasant indebtedness under coJonial rule.
Dewey, Clive, 'The Official Mind and the Problem of Agrarian Indeb-
tedness in India' (Unpublished }?h.D:thesis, Cambridge, 1972).An
excellent study of the connections between ideology and agrarian
policy.
Dhanagare, D.N., Peasant Movements in India, 1920-1950 (Delhi, 1983).
A set of case studies of peasant movements iricluding qmflicts
between cre,ditors and debtors.
Dutt, Romesh C., Economic History of India, Vol. 2, In the, Victorian Age
(London, 1904; reprinted Dflhi, 1960). The most sustained nation-
alist critique of colonial economic policies.
Guha, Ranajit, 'The Career of an Anti-God in Heaven and on Earth',
in Ashok Mitra (ed.), The Tmth Unites: Essays in Honour of Samar
Sen (Calcutta, 1985). A perceptive essay on the consciousness of
peasant debtors.
Guha, Sumit, 'Commodity and Credit in Upland Maharashtra, 1800-
1950', in Economic and Political Weekly, 26 December 1987,
pp. A126-A140. This important article contains a critique of Amit
332 / CREDIT, MARKETSAND THE AGRARIAN-ECONOMY
Bhaduri and a careful periodization of continuity and change in

the character of credit and related markets.
Hardiman, David, 'The Bhils and Sahukars of Eastern Gujarat', in
Ranajit Guha (ed.), Subaltern Studies V: Writings on South Asian
History and Society(Delhl, 1987). A textured study of the Bhil rising
of 1899 marred by a misreading and pedantic critique of the
theoretical literature on 'moral economy'.
Kumar, Ravinder, Western India in the Nineteenth Century: A Study in
the Social History of Maharashtra (London, 1968). An important
monograph making a strong argument about the disruptive im-
pact of colonial rule on Indian rural society in general and credit
relations in particular.
--, 'The Deccan Riots of 1875', in Journalof Asian Studies, 1966. This
article presaged one of the main argm11ents in Kumar's b,ook on
Western India that colonial rule created the context for large-scale
dispossession of kunbis by vanis.
Maine, Henry S., Village Communities in the East and West (3rd edn.,
London, 1879). One of the most influential books contributing to
the invention in the nineteenth century of the image of traditional
Indian village communities.
Mohapatra, Prabhu Prasad,"Land and Credit Market in Chotanagpur,
1880-1950', in Studies in History, 6, 2 n.s. (1990), 163-203. This
carefully documented study of the markets in land and credit in
the tribal belt of Bihar contains insights into the differential impact
of wider economic crises on lending in cash and kind.
Mukherjee, Mri~ula, 'Con;unercialization and Agrarian Change in
Pre-Independence ,Punfab', in KN. Raj, Neeladri Bhattacharya,
Suinit Guh'aana SaRti Padhi (eds.), Essayson the Commercialization
of Indian Agriculture (Delhi, 1985). This article claims that the
process of agricultural commercialization was as' forced' in Punjab
as in other parts of India.
Mukherji, Saugata, 'Some Aspects of Commercialization of Agricul-
ture in Eastern India, 1891-1938', in Asok Sen et. al., Perspectives
in SocialSciences2: ThreeStudies in.the Agrarian Structure in Bengal,
1850-1947 (Calcutta, 1982). A major article on the jute economy of
eastern India.
Musgrave, Peter, 'Rural Credit and Rural Society in the United Provin-
ces, 1860-1920', in Clive Dewey and A.G. Hopkins (ed.), The
Imperial Impact: Studies in the EconomicHisto1-yof Africa and India
(London, 1978).This article asserts the functional character of rural
credit.
Prakash, Gyan, Bonded Histories: Genealogiesof Labor Servitude in
ANNOTATED SELECTBIBLIOGRAPHY/ 333
Colonial India (Cambridge, 1990). A relentless critique of the

colonial discourse of freedom.
Raj, K.N., et. al. (eds.), Essayson the Commercializationof Indian Agricul-
ture (Delhi, 1985). A collection of essays on the process of agricul-
tural commercialization in the different regions of India.
Satyanarayana, A., 'Commercialization, Money Capital and the Peas-
antry in Colonial Andhra, 1900-1940', in Sabyasachi Bhattacharya
et. al. (eds.), The South Indian Economy:Agrarian Change,Industrial
Structure, and State Policy,c. 1914--47(Delhi, 1991). A useful article
on the Andhra countryside which is relatively under-researched
compared to the Tamilnadu countryside.
Scott, James C., Dominationand theArts of ~esistance:Hidden Transcripts
(New Haven, 1990). This book, like Scott's earlier works on the
'moral economy' of the peasant makes important theoretical ar-
guments of relevance to any study of relations of dominance and
resistance.
Siddiqi, Asiya, Agrarian Change in a North Indian State: Uttar Pradesh,
1819-1833 (Oxford, 1973). This monograph discusses the changes
in colonial financial and agrarian policies and the ways in which
these compounded the depression of 1828-1833.
Stokes, Eric, The Peasantand the Raj (Cambridge,.1978). A collection of
twelve insightful and elegantly written essays on agrarian society
and peasant rebellion, especially in 1857.
Thorburn, S.S., Mussalmans and Moneylenders in the Punjab (London,
1886). This early 'research monograph' on the debt problem high-
lights the problem of land alienation from mostly Muslim 'agri-
culturists' to 'non-agriculturist'-moneylenders.
Washbrook, David, 'Country Politics: Madras 1880-1930', in J. Gal-
lagher et. al. (eds.), Locality,Province and Nation: essays on Indian
politics (Cambridge, 1973). This excellent article shows how dif-
ferences in ecology and the balance of class forces contributed to
variations in the nature and level of dependence of peasant debtors
on their creditors.·
Whitcombe, Elizabeth, Agra1ianConditions in Northem India. Volume I:
the United Provinces under British Rule, 1860-1900 (Berkeley, 1972).
This carefully researched and lucidly written volume offers in-
sights into the causes of indebtedness, especially in the context of
cash-crop cultivation.

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CREDIT,MARKETSAND.

© Oxford University Press 1994

Typeset by Rastrixi, New Delhi 110070

Prosperity and Debt 29

Peasants, Moneylenders and Colonial Rule: 57

Small Peasant Commodity Production and 80

The Markets 136

The Peasantry in Debt: The Working and Rupture 248

The Career of an Anti-God in 301

Annotated SelectBibliography 329

This series focuses on important 't~~mes fnIndian history, on

I wrote the introc;iuction to this voh,me during a period of

We thank the following for permission to reproduce the material

Credit, Markets and the Agrarian

The social relations of debt constituted a deeply unsettling

1 Tne best nineteenth-century example of this genre is B.H. Baden-Powell,

important aspects of the colonial context since the la.te nine ..

3 For an elaboration of this argument and the concept of 'peasant labour'

enterprise has often been marked by a culture fetishism that is

(CLARIFYING) CONTINUITY AND CHANGE

The theme of credit, markets and the agrarian economy began

4 S.S. Thorburn, Mussalmans and Money-lendersin the Punjab (London, 1886),

indebtedness prepared ten years later 5 prov:ed to be effective

5 Government of Punjab (S,.S.Thorburn), Report on PeasantIndebtednessand

preoccupation with economic stability. The mixing of religious

authority: 'Shylock was a gentleman by the side of Nand Lal,

10Ibid., pp. 32--6,44, 61, 90-1, and 176-8.

l3 Ibid., pp. 156-7.

West's fabrications of traditional India, Ravinder Kumar wrote

l8 Kumar, WesternIndia,ch. V and I.J.Catanach, RuralCreditin WesternIndia,

one faction of colonial officialdom in their opportunistic bid to

to write the essay reproduced below was whether indebtedness

wari moneylenders gaining control of agricultural lands which

23 Jairus Banaji, 'Capitalist Domination and the Small Peasantry: Deccan

of the 'modes of production' debate of the, 1970s, especially the

related yet distinct question of 'freedom' and forms of subor-

'Darling's principal discovery,' writes Clive Dewey in introduc-

26 Darling, Punjab Peasant,pp. xvi and 246.

problem was seen to have, been compounded under colonial

28 B.B. Chaudhuri, 'Growth of Commercial Agricultµre in Bengal, 1859-

economic change in the late nineteenth century and did not

31 Elizabeth Whitcombe, Agrarian Conditionsin Northern India. Volume I: The

of natural harvest cycles or the intrinsic commodity characters

in the instances of opium, indigo or jute in Bengal or sugarcane

historian of the peasantry who, forsakes the nakshatras for the

articulation between agrarian production and markets. helps

The severe crisis in world capitalism in the 1930s affected

(RET,HINKING} RECIPROCITY AND RESISTANCE

The etymology of the two most common indigenous terms for

moneylender has claims to deference ingrained in them.

that such a transference 'does not achieve anything but a false

hidderi trattscri)?tSof cultural dissel}t al;d'n~&ation t!?make their

ideology' and 'm01:e constrained at the level of political action

and second, the demand for a continuance of .subsistence loans.

and dialogic dimension to their interrogation of power, for

46 Cf. Scott, Domination,ch. 4.

capital and land markets and entitlement to subsistence was. the

FREEDOM FROM BONDAGE

Malcolm Lyall Darling had written early in this century of how

50 A similar point can be made about a common economic conjuncture and

which 'the creditor [wa]s in danger of being turned into a tyrant

51 Darling, Punjab Peasant, p. 247.

Prosperity and Debt*