Jignesh Shah, managing director of the Multi Commodity Exchange, India’s largest commodity exchange, is the best-known face of India’s modern commodity futures trading fraternity. Articulate and just media-friendly enough to warrant a mostly favourable press, Shah’s story holds a Narayana Murthy-type of attraction — humble background, ambitious, pioneering, tech-savvy, simple, hard working et al.
In these days of instant fame and desktop publishing, it would have been all too easy for Shah to commission a book on his life story thus far or produce a treatise on his thoughts, as some of his contemporaries in other businesses have done. To his credit, he has resisted these temptations, choosing instead to jointly produce this semi-coffee table offering that traces the evolution of commodity trade in India.
It’s a neat touch: A pioneer of modern financial markets in India authors a history of the subject. Shah has not chosen the historian’s role, so there’s no original over-arching theory on India’s commodity trade to be found here. Instead he’s co-written a linear narrative based on “archeological, literary, and inscriptional sources (circa 7000 BCE to 1800 CE)”, as the subtitle explains, plus academic discourses on the subject.
Given that commodity trading was the major business activity in the period he covers, this book is a de facto narrative of India’s economic history. It also provides a platform for Shah to make his eloquent case for a robust, enabling environment for futures trading, the bread and butter of modern commodity markets.
Of course, he makes the point diplomatically. “Clearly, history has much to teach those who blame the markets for the present financial turmoil,” he writes in the Preamble. “For all its occasional failing, Back to the future clearly evidences that there is no better system for rapid and sustainable economic growth and development than properly-regulated market capitalism.”
Being a straight, narrative history, the utility of the book depends on who’s reading it. For a foreigner curious about India’s past, this may be of interest because it is shorn of the serious historian’s earnest writing style and bolstered with maps and illustrations accompanied by detailed captions. But even a casual student of Indian history is unlikely to find anything strikingly new.
Take, for instance, the opening account of the sophistication of the urban civilisations of the Indus Valley and their extensive trade links with Mesopotamia and the Gulf. The existence of some sort of standardisation in manufactured articles, and the weights and measures used are all purveyed in teachings of ancient India from standard one to university courses as evidence of the existence of an over-arching trade regulatory authority.
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Shah and his co-writer Biswajeet Rath cover this familiar ground of archeological evidence and, like other researchers, suffer the problem that the Indus script has not been fully deciphered. That alone will yield a wealth of new material to interpret and complement the mute (and often fast-disappearing) evidence from the archeologists’ digs.
Unlike the Chinese, early Indian history suffers a paucity of the objective written record, so for the Vedic period till the 13th century, Shah and Rath’s account is limited to that extent by scanty mentions in the Vedas and, later, in Jain and Buddhist religious literature. That is why Kautilya’s economic treatise Arthashastra attracts a high degree of attention.
Shah and Rath do warn the reader of the caveats. As they point out, the Arthashastra “reflects on market conditions in the time of the Mauryan empire but we do not know for sure that all the stipulations… were actually followed”.
For instance, they refer to a passage in the Arthashastra that some scholars have interpreted to suggest the existence of futures trading in Mauryan times. The writers suggest the conclusion is based on the interpretation of the term desakalantaritanam which is being taken to refer to futures, which may not be accurate.
They write: “This phrase does not necessarily refer only to a temporal interval, but also a spatial interval. If we look into the context in which Kautilya mentions this phrase, it seems that he is talking about the duties of the Superintendent of Commerce and the role of the Director of Trade in ensuring fair trade practices. This section of the Arthashastra deals with commodities being brought to a central location, fixation of quality and price… Therefore, desakalantaritanam probably refers to goods that are manufactured in far off places and naturally take a long time to travel… for inspection... .” Of course, they do not rule out the existence of futures trading, but are only pointing out that the evidence for it is not robust enough.
By the time of the Delhi sultanate (13th to 15th centuries), the authors are on stronger ground, not least because of the relative wealth of sources, from court accounts to travelogues by foreigners. By Mughal times, a creative forward trading market was in operation, especially for India’s main export, textiles. Known as the Dadni system, it involved paying local merchants an advance to buy goods from the market. Merchants often passed this dadan on to manufacturers as a sort of working capital loan. The transaction was considered a means of reducing price fluctuations caused by demand-supply imbalances.
The book may have worked had it not been for the poor production values. As it is, it falls between coffee-table lavishness and text-book stolidity. On the first count, a cramped, old-fashioned layout detracts from its decorative value, and poor copy-editing gives the text a turgid feel. Also, for a book that costs Rs 999, the producers could have taken more care with the binding: pages 57 and 58 are repeated and placed between pages 59 and 60.
BACK TO THE FUTURE
Roots of Commodity Trade in India
Jignesh Shah and Biswajeet Rath
Takshashila Academia of Economic Research
143 pages; Rs 999
