Book review: A tribute to the resilience of Indian businesses

In theory, there is nothing wrong with that because any analysis of past events, as long as it is well-researched and well-written, could qualify as literature. In fact, historians have won the Nobel for literature as well as for economics. Theodore Mommsen won the Nobel for literature in 1902 for his three-volume tome on Roman history. Economic historians Robert W. Fogel and Douglass C. North won the Nobel for economics in 1993, and Claudia Goldin, who is both an economic historian and a labour economist, in 2023.

It is thus commendable that investment adviser Adil Rustomjee has attempted to document the chequered history of Mumbai’s iconic stock exchange, BSE Ltd (formerly known as the Bombay Stock Exchange), in Running Behind Lakshmi. It is arguably the oldest in Asia and a memorial to the resilience of Indian businesses trying to keep their heads above water as colonial powers twisted rules to stifle local entrepreneurship and enterprise. The BSE’s history occasionally mirrors the country’s economic trends and, at the same time, often represents a completely contrasting picture. Its centrality to the Indian economy is beyond doubt but its reputation has often been put through the shredder.

Rustomjee delves deep into the archives to craft his creation story and like a good historian provides much of the context for the exchange’s raison d’etre in the early days. This is crucial because the founding of a stock exchange by local traders and for local traders, which pointedly excluded foreigners from seeking membership, in a colonial outpost in 1875 would have seemed counter-intuitive at first sight. Rustomjee provides detailed insights into how global influences in the exchange’s founding period serendipitously helped cement the organisation’s physical presence, its commercial foundations and economic networks.

The American civil war, for example, forced British cotton mills to temporarily relocate their supply chains to India, the surplus generated from the sudden and providential export opportunity triggering a cotton and share mania.

The archives have yielded interesting insights for the author, especially into the inherent speculative urge that imbued most exchange members from an early stage, probably a reflexive carry-over from their past commodity trading habits.

The granular details he excavates reveal incisive personal details of Bombay’s (now Mumbai) early speculators. One of them, Premchand Roychand, was an inveterate speculator and over-extended himself during the cotton boom, only to find himself stranded with suffocating debts after the end of America’s civil war. A Jain trader from Surat, Roychand also willed himself into the public consciousness by constructing prominent landmarks—such as the impressive Rajabai clock tower which looms over parts of south Mumbai—and by instituting scholarships for university students.

But when moving from historical archives to the market’s post-independence track record and its intersections with the real economy, Rustomjee starts to veer. Historians are allowed to deviate from the straight and narrow to provide background and context, but these digressions also need to be researched and backed with archival proof. The author, like many WhatsApp uncles infected with a taste for the conspiratorial, instead falls prey to tropes which have no basis in reality. Chief among them is the popular pastime of bashing Jawaharlal Nehru, which wilfully ignores the context behind some policy formulations or the compulsions of that age; worse, it propounds hypotheses without backing them up with data.

The author writes: “…the planning approach to development that commenced in 1951 did not foresee a major role for stock markets as a source of savings channelization from households or capital issuance by firms." This is a surprising post hoc, ergo propter hoc statement, and quite unexpected from somebody attempting to write serious history.

The 50-odd years before independence saw a massive transfer of income and wealth to the colonial metropolis, that is London; economist Angus Maddison has observed that while India’s per capita income remained mostly stagnant during 1857-1947, the UK’s doubled during the same period. The economy inherited at independence was dominated by agriculture, marked by widespread illiteracy and deep poverty. It would have been premature to expect a fully integrated economy at that time, with smooth transfers between the real and financial economies.

Here is another piece of critical data. The Economic Survey accompanying the Budget for 2025-26 shows that gross domestic savings during 1950-51 (2011-12 series, at current market prices) was only 9.4% of gross domestic product (GDP), of which the household sector accounted for only 6.7%. Overall savings rate continued to remain low for quite some time after 1951. It is also true that physical assets (such as property or valuables) accounted for a large part of household savings during this period. It is therefore specious to expect household savings of such meagre magnitude, with myriad uncertainties (such as droughts or floods) forcing investment into physical assets, to gravitate to capital markets.

What about industrial capacity building? Data shows gross fixed capital formation at 11.4% of GDP, with the additional 2 percentage points probably sourced from internal reserves, overseas savings or borrowings. What emerges is that households were saving and industry was investing as well, but this was not intermediated through the capital markets.

The fault here—instead of pointing fingers at Nehru and his economic policy—probably lies with the exchanges which were totally insular and cabalistic, structured by the broker and for the broker. Rustomjee does diagnose some ills that plagued the BSE for decades, especially the rent-seeking behaviour by powerful BSE members, but then glides over the influence that this broker community exercised over the political economy. Many academic papers have alluded that it is only this persuasive power over the political economy that could have helped BSE authorities perpetuate distortions and repeatedly stymie government attempts to reform the bourse.