SESSION 2

MARKET

According to Adam Smith, The division of labour is limited by

the extent of the market. The market is the key to
specialization.

Firms cannot specialize in particular product lines, or

particular stages of production, if they cannot sell a sufficient
quantity of their output

It is the growth of the market that facilitates both the

emergence of new production and distribution methods - the
growth of the firms and industries that exploit these methods.

The market does not just allocate resourcesit stimulates

innovation too.

The market is an arena of competition. In a market where entry

is easy, monopoly power is eroded by the entry of competitors

Trade can be personal as well as impersonal: within a

supply chain, for example, transactions between firms
may be mediated by personal relations and shared
affiliations between the owners and managers involved.

While entrepreneurs may determine the strategies of

their businesses, market competition selects the
businesses that pursue the most efficient strategies,
thereby determining the pattern of business success and
failure.

THE STATE OF THE MARKET

Vast Size and Population

Scattered Markets
Facility for moving goods and services Ignored by All
Intricate Web of Chowkis
Plethora of Currencies spread across the nation

MERCHANTS AND THEIR

OPERATIONS

Set Hira Nand Sahu ManekChand Fateh Chand or the

famous Jagat Seth
Hari bhakti
Abdul Ghafur 20 sailing ships
Virji Vora
Ahmedabad known for cotton silk and wool & Indigo
Third Battle of Panipat(1761)
Types of Merchants

Dalals Hundis

Shroffs or Sarafs

Banjaras

Nature of business was commercial and not industrial

Competition from Westeners
From British in Surat, Mumbai, Madras and Calcutta
From French in Surat Pondicherry and Hoogli
From Dutch and Portuguese in Masulitpatnam, Cochin
etc.

1835 Companys silver rupee was declared to be a legal

tender.
Postal System Reduced dependence on Hundis
Crippled the business of Sahukars
Industrial Revolution & policy of tariff protection
Manufactures became distributors

THE RISE OF AGENCY

HOUSES

New class of entrepreneurs in England

Britain lost its colonies of North America in 1776

Liberal licensing to British citizens

1813 the companies monopoly over trade ended

Led to the Agency House

These agency houses were mostly British, though a couple of were

European. They were confined to Bombay, Madras and Calcutta.
They started their business because there were no exchange
facilities between India and Britain then. The people that were
staying here, from the British bureaucracy, had to send money
home to their families. Most of these agency houses were adjunct
to the big business groups, operating from London. This business
clearly wasn't paying enough, so they began to add other things
like trading and banking.

Agency Houses were Bankers, brokers, agent of a firm in

london, ship owners, importers and exporters
First agency house in India Forbes and company 1767
(bombay) funded the east india company during maratha wars
1820 regular coal mining started by Alexander and company
Raniganj Dhanbad
Parry and Company Madras traded in wine, hides agents for
ship, lotteries, insurance firms
Palmer and Company Opium King- major exporters to china,

BIRTH PANGS OF MODERN

INDUSTRIES

Calcutta
Mumbai