South Asia Multidisciplinary Academic Journal

15 | 2017 Sociology of India’s Economic Elites

Surinder S. Jodhka and Jules Naudet (dir.)

Electronic version URL: http://journals.openedition.org/samaj/4270 DOI: 10.4000/samaj.4270 ISSN: 1960-6060

Publisher Association pour la recherche sur l'Asie du Sud (ARAS)

Electronic reference Surinder S. Jodhka and Jules Naudet (dir.), South Asia Multidisciplinary Academic Journal, 15 | 2017, « Sociology of India’s Economic Elites » [Online], Online since 16 January 2017, connection on 06 May 2020. URL : http://journals.openedition.org/samaj/4270 ; DOI : https://doi.org/10.4000/samaj.4270

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TABLE OF CONTENTS

Introduction. Towards a Sociology of India’s Economic Elite: Beyond the Neo-Orientalist and Managerialist Perspectives Surinder S. Jodhka and Jules Naudet

The Hindu Undivided Family in Independent India’s Corporate Governance and Tax Regime Chirashree Das Gupta and Mohit Gupta

From “Outsider” to Insider: The Case of Reliance Surajit Mazumdar

Indian Software Capital: Sociography of a New Entrepreneurial Elite Roland Lardinois

When Cracking the JEE is not Enough Processes of Elimination and Differentiation, from Entry to Placement, in the Indian Institutes of Technology (IITs) Odile Henry and Mathieu Ferry

A “New” Economic Elite in India: Transnational and Neoliberal? Jivanta Schoettli and Markus Pohlmann

Reproducing Elite Lives: Women in Aggarwal Family Businesses Ujithra Ponniah

Elite Delights: The Structure of Art Gallery Networks in India Olivier Roueff

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Introduction. Towards a Sociology of India’s Economic Elite: Beyond the Neo-Orientalist and Managerialist Perspectives

Surinder S. Jodhka and Jules Naudet

1 Is there such a thing as an “Indian way of doing business”? Many publications, whether academic or not, indeed assert the singularity of Indians’ approach to business, often mobilizing an orientalist gaze and reifying the peculiar conception of business that supposedly prevails in the subcontinent. This special issue of SAMAJ proposes to move away from a focus on “doing business” in order to rather dedicate more attention to the role of economic elites in the production and reproduction of inequalities and privileges as well as on the possible roles they play in the process of capital accumulation. In order to do so, we choose to follow Shamus Khan and to define elites as “those who have vastly disproportionate control over or access to a resource” (Khan 2012). From such a perspective, economic elites are those who benefit from top incomes or who control the means of economic production. Going beyond a narrow focus on business culture (though not denying the potential interest of such a perspective), we thus suggest approaching business elites from a wider set of

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perspectives. It is indeed decisive to look at the way economic elites secure political and administrative connections in order to maximize their profits, at the way they develop exclusionary practices in higher education in order to preserve their privileged access to top educational credentials, at the way they reproduce their privileges through elite lifestyles or, among other possible examples, at the way they convert their economic capital into other forms of capital (into cultural capital through buying art or into social capital through accessing elite circles for instance).

2 Caste, astrologers, vaastu consultants, tantric experts, Baniya and Marwari cultures, hawaladars, hundi networks and other idiosyncrasies are generally the main elements of the Oriental scenery depicted by promoters of an approach focused on the idea of an Indian business culture. Such othering views strongly inform the way American and other Western executives “construct representations of management and business” in India (Jack et al. 2011:282; McKenna 2011; Srinivas 2012). This neo-orientalist “text- book” approach, often combined with either a rejection or a celebration of the Indian way of doing business, is far from being specific to Western commentators. It is actually deeply grounded in the common views Indians have of their own business culture.

3 In his book Rokda: How Baniyas do business, Nikhil Inamdar insists on “the matchless ingenuity of this community” and evokes “the spirit of the Baniya DNA, which is wired for enterprise” (Inamdar 2014:xi-xii). A similar tendency to naturalize the dispositions of Indian businessmen might be found in several volumes of the book-series, “The Story of Indian Business” edited by Gurcharan Das, former CEO of Procter and Gamble India and whose name was recently mentioned in the Panama Papers.1 In his foreword to The Marwaris, Das revealingly praises the virtues of merchant communities. For him, “India has been fortunate in having communities who for centuries have known how to conserve and grow their capital” and this leads him to suggest that “our much-reviled caste system might have some redeeming features” (Das 2014:xvii). Not dissimulating his “sense of wonder at the vivid, dynamic and illustrious role played by trade and economic enterprise in advancing Indian civilization,” he indeed describes his series as an attempt to “celebrate the ideal captured in the Sanskrit word ‘artha’” (Das 2014:xxvii), a word that refers to material success (understood as wealth and power) as an existential goal. Writing in a similar vein, Devdutt Pattanaik in his book Success Sutra: An Indian Approach to Wealth, intends to defend the goddess Lakshmi against those who perform “Lakshmi-ninda, or the abuse of wealth” (Pattanaik 2015:xii). He indeed warns us against the use of “derisive words like ‘bazaruu’ and ‘dhanda’” through which “we equate professionalism and commerce with prostitution.” Performing Lakshmi- shruti is actually the only way “the legendary golden bird of prosperity (sone ki chidiya)” will “return to this rose-apple continent we call India” (Pattanaik 2015: xii). In another book published by Harvard University Press, Peter Capelli, Michael Useem and their colleagues try to convince their readers that the “Indian way,” understood by them as distinctively Indian management practices, helps account for exceptional economic performances. They notably insist on the fact that “The priority and value placed on service to others and the widely held belief that one’s goal in life should extend beyond oneself, especially beyond one’s material needs, has been crucial to the Indian way. The third of the four stages of Hindu life, with its focus on the search for meaning, helping others, and a gradual withdrawal from the competitive business world, also neatly coincides with the typical age (over fifty) of senior business leaders” (Capelli et al. 2010:287).

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4 One obvious reason for such a pervasive tendency to stereotype the so-called “Indian way of doing business” is the near complete absence of any kind of serious and sustained social science engagement with the subject. As of today, there exist very limited systematic sociological studies of the Indian economic elites in the contemporary period. What we have is a fragmented mosaic of studies that do not sufficiently dialogue one with another.

5 India is also generally the missing case in the social science writings on international comparisons of the various forms of capitalism and thus has remained mostly absent in the general theories of contemporary capitalism. According to Michael Witt and Gordon Redding, “India, now the third-largest economy of Asia, is virtually terra incognita from a business systems perspective” (Witt and Redding 2013:267). This is all the more surprising since India was at the center of Max Weber’s comparative analysis of capitalism in the early years of the 20th century (Weber [1916–1917] 1958) and that a growing body of scholarship is now exploring the specific relationship between state and capital in the Indian context (Das Gupta 2016).

6 This SAMAJ special issue has been prompted by the conviction that there is an urgent need to propose a more sociologically and empirically grounded view of Indian economic elites than what currently exists. If there are indeed many businessmen2 who consult vaastu specialists, karmic healers and astrologers to guide their decisions (Guenzi 2013, Guenzi and D’Intino 2016), if caste networks do play a structuring role (Naudet and Dubost 2016), if hawala and hundi networks actually structure the financing of many firms (Ballard 2013, Martin 2009), if certain communities do place religion at the center of their professional activities (Harriss 2003), the so-called “Indian way of doing business” should not be exoticized on the sole basis of these cultural clichés. The specificity of the Indian business world cannot be explained drawing on the idea that Indian civilization provides spiritually and culturally superior resources (like a so- called success sutra). The undeniable observation that these social facts are deeply embedded in the Indian social fabric should not justify making them the main prism through which to approach Indian business. Nor should the behavior of businessmen solely be accounted for by drawing on naturalizing repertoires referring to the blood or mythical DNA of Indian merchants. These are idioms that need to be interrogated drawing on the reflexive tools of social science. India has long been a very diverse country, with a wide range of communities, cultures and traditions living together and across regions. India has also been changing, with newer communities joining the ranks of business owners and managers, and in the process re-configuring their community and caste cultures.

7 The share of Asian economies in the world economy has been continuously growing since the end of the Second World War (cf. Figure 1.1.). If the economic elite of countries such as China or Japan have been the object of many studies, India has strangely been comparatively left out by scholars working on these groups. This lack of knowledge is regrettable and needs to be urgently addressed since the place occupied by India in the world economy is experiencing a constant rise.

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8 A need for exploring the empirical dynamics of the social life of Indian businesses becomes all the more urgent as, according to some estimates, India is already the World’s third largest economic power in terms of Purchasing Power Parity (and the 10th in terms of GDP nominal value). India is also home to the 8th largest group of super-rich people in the world. According to a recent report, India has as many as 14,800 multi- millionaires (meaning they own assets worth more than 10 million USD).3 The Hurun Report also claims that India ranks 3rd in the world with regard to the number of billionaires.4

9 Much of the existing research on the Indian business class has been based on specific castes or communities (see for example Birla 2009; Lachaier 1992; Markovits 2000; Rudner 1994; Tambs-Lyche 2013; Timberg 1978), specific industries (see for example Upadhya 2004, Engelsohven 1999), specific localities (see for example Harriss 2003; Hazlehurst 1966; Oonk 2014). Historians are certainly those who have explored the Indian business class in the most depth and the books of A. K. Bagchi (1972), Claude Markovits (2000), Raj Chandavarkar (1994) or Dwijendra Tripathi (1984) are now classic references.

10 Parallel to the consolidation of historical scholarship on the economic elites, attempts at systematically addressing the sociological characteristics of this group in the contemporary period remain rare, though a few of them must be noted. In 1971, Sagar C. Jain was the first to propose an initial description of the demographic characteristics of Indian managers (Jain 1971). More recently, Peter Capelli et al. (2010) have studied more than one hundred executives (though their research lacks systematic criteria in the sample selection and the authors mainly try to assess the differences between management styles in the U.S. and India). Gandhi and Walton (2010) have studied Indian billionaires using data from the Forbes list, but drawing upon a rather limited number of variables. Ajit, Donker and Saxena (2012) have looked at caste diversity among board members of top Indian companies, showing that the Indian corporate network remains an “old boys club” based on caste affiliation. Recently, Jules Naudet and his colleagues revisited classical methodologies of the sociology of elites and

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applied them to the Indian case. They developed an analysis of the evolution of the Indian corporate network from 2000 to 2012 (Naudet and Dubost 2016). They also extended their work and have recently completed a quantitative analysis of the sociological profile of top business leaders (Naudet, Allorant and Ferry, forthcoming).

11 Among the other various recent attempts at developing a more informed vision of Indian economic elites, one can mention a tradition of research grounded in the sociology of organizations or in management and business studies. There is for example a growing body of research on Corporate Social Responsibility in the Indian corporate world (Krichewsky 2014). One can also mention studies on firm structures, family business groups and corporate governance in India (see for example Khanna and Palepu 2000). While these studies offer a reasonably good view of the context in which business is conducted in India; they often lack in-depth analysis of the sociological dispositions of the actors evolving in this world. Several of the studies focusing on the issue of “corporate governance” also follow a narrative that defends the idea that most of the flaws of Indian capitalism, from nepotism and cronyism to corruption and tax evasion, could be tamed by so-called “good governance.” They suggest that new norms of governance inspired by American practices or by the British Cadbury report, would create the necessary conditions to get rid of the many evils that gangrene India’s business. This gives way to a very popular discourse among business leaders in which there is supposed to be a very strong symbolic and moral boundary dividing business leaders who have been fully acculturated to the norms of good governance, and those who are supposed to have been socialized to ways of doing business that presumably belong to the past. Such a binary and excessively moralistic vision of the reality of business practices in India is obviously an over-simplification and does not help to account for the structural roots of the perceived malpractices. The crossing of legal boundaries in business is obviously not the monopoly of supposedly archaic actors embedded in traditional ways of doing business. For example, the infamous Satyam scandal5 actually revealed that India’s most-cutting edge ICT sector might also be affected by such malpractice.

12 In a land where crony-capitalism and other evils are commonly denounced by the media, some commentators note that the situation is such that even the word “insider- trading” is hardly considered a bad one.6 Businessmen frequently admit, in a secretive tone, that when the rules of the game are flawed you have no choice but to sometimes bend the rules. Or to let your sub-contractors and business partners bend them for you. The issue is thus no longer framed in terms of an opposition between legality and illegality but rather in terms of an opposition between gentle (and hence excusable) illegality and reckless illegality, in which intentions (rather than actual actions) are supposed to be the best criteria to distinguish good from evil. Such home-grown narratives, drawing upon the rhetoric of inevitability, are dangerously misleading and obviously constitute attempts at justifying one’s wrong-doings rather than venturing to explain how and why the system works the way it does.

13 While cronyism (Mazumdar 2008) and other deviant practices are spread across the whole spectrum of the Indian business world, it nonetheless remains true that actors behave according to varied norms and diverse principles. The landscape of Indian firms is not homogeneous. Economic actors reside in different social worlds and therefore “differ in the extent to which they engage in embedded exchanges” (Mani and Moody 2014:1659; Naudet and Dubost 2016). The complexity of the landscape of business in

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India is further complicated by the diversity of the Indian nation-State and its federal political structure. With different languages, caste systems varying from one region to another, the absence—until 2017 and the implementation of the Goods and Services Tax —of a free circulation of goods from one State to the other, labor laws and taxes varying from one State to another, the field of Indian business actually encompasses many sub-fields that all have a certain degree of autonomy. From one city to another, from one State to another, from the State to the Federal level, the players are not the same and to a degree the rules of the game also vary. As they accompany the flow of business transactions, some actors are nonetheless able to navigate between sub-fields and thus contribute to weaving them together. But they necessarily have to constantly adjust their behaviors and mobilize different dispositions as they pass from one world to another.

14 As suggested, the obvious way forward is more sociological work that could help us better understand the various sub-worlds of economic activities in India, how they are interconnected and how they produce an economic elite. It is the accumulation of such studies, whether quantitative or qualitative, whether focusing on the big picture or on precise case studies, whether looking at individuals or at organizations, whether scrutinizing legal texts or cultural norms, that will in the end provide the necessary material to brush a complex and nuanced portrait of the dynamics of capital accumulation in India. And in turn, such a panoramic vision of the Indian economic elite should enable us to cast a new light on many essential questions. For one, it should help to distinguish more clearly what can in India be accounted for by processes linked to homogenizing global forces and what should rather be explained by processes that are linked to Indian specificities. It should further help contextualize the impact of cultural specificities on the ways of doing business without reducing the complexity of these activities to a few exotic traits. Finally, and most importantly, this should also help better understand the role of economic elites in the production and reproduction of inequalities. The articles put together in this special issue attempt a move in this direction.

15 In the first article, Chirashree Das Gupta and Mohit Gupta help us lift the veil on a central institution of business in India: the Hindu Undivided Family, commonly known as the HUF. It indeed exposes, in a way that has surprisingly no precedent, the socio- economic issues raised by this legal disposition in terms of institutional discrimination and of perpetuating religious and gender divides. Unveiling the mechanisms at play behind the HUF constitutes a major contribution to the understanding of inequalities and capitalist accumulation. If the interlocking of families and firms is a feature observed in other national capitalist systems, in India, the HUF offers a unique and specific form to this interlock by greatly facilitating the control of Hindu families over their family businesses.

16 In his contribution, Surajit Mazumdar offers the reader a rare account of the rise of Reliance Industries to its present status as one of the most powerful business empires in India. His article offers both a reassessment of the story of the growth of the firm under Dhirubhai Ambani and a stimulating account, through a precise caste study, of the evolution of India’s corporate sector up to the 1990’s liberalization. Drawing upon publicly available information, Surajit Mazumdar demonstrates that the key to the success story of the group is massive and timely support from public institutions. In

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words that the author does not use himself, one could thus say that “cronyism” and “systematic corruption” have been crucial to the success of Reliance Industries.

17 As opposed to crony capitalism of the “conventional” business, the Information and Communications Technology (ICT) sector is often presented as the spearhead of good governance in India. Roland Lardinois’s article is dedicated to this sector and offers a nuanced view of its actors. While most studies look at either the structure of the firm or at the social profile of business leaders, Roland Lardinois proposes to study both these aspects at the same time. The combination of these two sets of characteristics helps him define what he calls “(Indian) Software Capital.” His careful description of the structure of this sector helps us go beyond the usual approximations and understand that the ICT sector is not, in fact, dominated by Tamil-Brahmins and IIT alumni. Much to the contrary, the traditional baniya-controlled business groups were among the first companies to foresee the development of IT technologies and they diversified their activities quite early. Though ICT managers have higher credentials than their non-ICT counterparts, the ICT sector nonetheless includes internal divisions and is not completely foreign to the oppositions that structure the oldest industrial groups of the country.

18 Odile Henry and Mathieu Ferry’s article makes another important contribution to the sociology of engineers and elite education in India, thus helping us to better understand how certain groups manage to reproduce their privileges through elite education. Degrees from the Indian Institutes of Technology (IITs) are among the most selective in India and often constitute a passport to access top positions in the Indian corporate world. Drawing upon a rare and original dataset about one of the IITs, Henry and Ferry objectify the processes through which IITs continuously differentiate and exclude students from Scheduled Castes (SCs) and Scheduled Tribes (STs). They notably show that the categories produced by the institution actually have deep social effects and that they contribute to rigidifying class and caste boundaries on the campus. Students from modest origins are filtered out at multiple levels: after they have cracked the JEE but before they enter the IIT, during their schooling at the IIT and at the moment when they enter the labor market. The authors argue that a better understanding of the structure of social relationships between students on the campus might be the key to further our understanding of the link between academic (under-)achievement and social dispositions.

19 Jivanta Schottli and Markus Pöhlmann further contribute to the renewal of the sociological analysis of the various paths to elite positions by developing a systematic analysis of the profile of the managers of top companies in India. Drawing upon a database of 111 CEOs, they revisit a study conducted in 1963–1964 by Sagar C. Jain and they argue that the evolution of Indian career patterns is similar to what is observed in many other countries. They also stress the crucial role played by education in accessing top business positions. By focusing uniquely on managers, Schottli and Pöhlmann’s article offers an interesting complement to Naudet et al. who defend a rather different thesis and argue that the case of India strongly differs from that of Western countries (Naudet et al. forthcoming). In their study of the social space of top CEOs and Chairmen in India, Naudet et al. indeed show that in India the inheritance of economic capital does not always seem to require further legitimization by top credentials. Credentialism, they argue, does not apply uniformly to managers and owners of top companies. While for top managers or for the aspiring upper-middle classes, education

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is the open sesame that provides access to top positions, for chairmen and owners, not having a prestigious diploma does not disqualify one from entering the small world of top capitalists.

20 Education is clearly not the only way to access top positions and Ujithra Ponniah’s article powerfully shows that the reproduction of privileges is also a matter of lifestyle. She does so by focusing on the decisive role played by women in the social reproduction of the Aggarwal, a dominant business community. She identifies the various mechanisms through which the cohesion of the family and of the caste group are perpetuated, thus enabling the Aggarwal community to sustain its advantages and privileges in the realm of business. She shows that while men are busy developing their business, women play a strategic—though often unacknowledged—role in the reproduction of the privileges of their caste group as well as of their family. By doing so, she makes a decisive intervention in the debates on intra-caste stratification.

21 Prolonging the reflection on the importance of elite lifestyles, Olivier Roueff draws on Social Network Analysis (SNA) to cast a fresh look at the world of art galleries. These galleries indeed play a crucial role for the economic elites as they help them convert their economic capital into cultural and symbolic capital through the acquisition of highly-reputed (and prized) pieces of art. Roueff’s analysis of their strategies and hierarchies help us better understand the cultural standards of the Indian elite. He notably shows that the Indian elite is characterized by “a collective ability to define its own aesthetic norms, independently from Western prescriptions.” Furthermore, the Indian art market is characterized by a focus on heritage more than on living artists, which is one of the reasons why the Indian market for modern and contemporary art is quite small considering the size of Indian upper classes. In spite of these limitations, the art market has experienced a strong and continuous expansion since liberalization. Art has become a real financial asset and acquisition has thus become “an effective way of laundering money, simply because there is no standardized scale of price (the social arbitrariness of cultural taste makes it easy to overvalue works)”.

22 We hope that the articles published in this special issue will offer a few valuable elements to the composition of the nuanced picture of Indian business we are calling for.

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NOTES

1. http://indianexpress.com/article/india/india-news-india/investments-in-merrill-lynch-i-t- tracks-new-offshore-trail-in-cayman-islands-2814527/ 2. We here use the term businessman on purpose as women in leadership positions remain very rare in the Indian context (see Naudet and Dubost 2016:24). 3. New World Wealth report 2014. 4. http://www.hurun.net/en/articleshow.aspx?nid=15703 5. The Satyam scandal refers to the episode when Ramalinga Raju, the former chairman of Satyam Computer Services (one of India’s largest ICT companies), confessed that he had manipulated accounts to inflate profits, which led to the dissolution of the board.

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6. http://blogs.wsj.com/indiarealtime/2014/04/21/why-is-it-tough-to-catch-insider-trading-in- india/

INDEX

Keywords: elite, power, inequality, business, social class, caste, sociology

AUTHORS

SURINDER S. JODHKA Professor, Centre for the Study of Social Systems, Jawaharlal Nehru University and Senior Affiliate Fellow at the CSH, New Delhi

JULES NAUDET CNRS Research Fellow, Centre d’Etudes de l’Inde et de l’Asie du Sud, EHESS-CNRS, Paris

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The Hindu Undivided Family in Independent India’s Corporate Governance and Tax Regime

Chirashree Das Gupta and Mohit Gupta

Introduction

1 This paper is an overview of the Hindu Undivided Family (HUF)—a legal entity embedded in tax, corporate governance and state codification of Hindu personal law in India. The HUF found legal recognition in the late 19th century, but it was the Income Tax Act under colonial rule in 1922 that gave it the status of a separate and distinct tax entity. The legal category of the HUF has existed in the tax code since then. This inclusion is based on a much longer history of recognition of customary law by the British colonial state in India. In the interpretation of the colonial state, the HUF represented a joint family that was held together by strong ties of kinship and entailed a variety of joint property relations among the members. There were blurred and porous boundaries between the cultural underpinnings of the family as a social entity and the commercial existence of the family as a trading entity. These porous boundaries were a function of marriage, lineage, patriarchal ties, and trade and business. The colonial interpretation of the entity did not recognize the complex networks which resulted in the family as a business entity being governed by personal laws as against partnership firms being defined by legal contracts (Birla 2008). This had its roots in the colonial legal system which set a clear dividing line between the “public” and the “private.” Its “public” side aimed at rendering an individual free of moral relations, and law was meant to shape the individual’s relations freely in the market, while its personal side entrenched the denominational status based on caste, religion and family as basis for individual rights (Washbrook 1981).

2 This dual characteristic of the HUF shaped its legal status as a unit of business and taxation. It was recognized as a trading entity/ family firm i.e. an income-generating entity on the production side of the economy. But the arguments against it being taxed

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were based on recognizing cultural ties, customary existence and the notion that the family preceded the firm, and that “family income” was solely for the purpose of maintenance of the unit and fulfilling of customary obligations—i.e. the family was an income-utilizing entity on the consumption side of the economy. This sharp exclusivity of definition inherent in the neoclassical conception of economic activities—with a tight compartmentalization of production and consumption—created for the state the dilemma of deciding what the HUF was at the time the Income Tax Acts of 1860 and 1886 were passed. Both the acts recognized the HUF as a variant of a legal person under the category of “individuals” (Birla 2008). Finally in the debate on the Super Tax Bill of 1917, it was proposed the HUF be recognized as a distinct category for taxation, in order to overcome the problem of the dual characteristics of being a family and a business entity. This interpretation led to the recognition of the HUF as a separate tax entity which was subsequently incorporated into the Income tax Act of 1922 (Newbigin 2013). It is this dual existence of the HUF as both a family and a firm that makes it distinctive from all other institutional categories, as we shall see in the next two sections.

3 However, it was in the first decade after independence that the HUF was legally consecrated (as originating in state code through the codification of Hindu customary and personal law) and then integrated into the Indian corporate governance and taxation system. Thus the HUF’s consecration in state code is the major departure in its status after independence as compared to the colonial period.

4 The historical literature on the evolution of institutions of Indian business in the colonial era and the first three decades after independence has focused on the political economy of colonialism, caste, community and the specificities of the mercantile character of the “business-house” structure, thus recognizing the business house (as an institution consisting of interlocked corporate entities and not discrete firms and companies) as the unit of organization of capital and business (Bagchi 1972; Markovits 1985; Tripathi 1990; Tyabji 2000). In sharp contrast in the last two decades, the dominant literature on the post-independence period is based on an envisioning of Indian business as a plethora of independent firms whose relationships with one another are based on industrial cluster-formation. These firms are buyers and sellers in and across industries and disparate entities, which have economic linkages mediated by the market as opposed to institutional linkages through organizational inter-locks (De Beule and Narayanan 2016). In India, the organization of the “business house” was legally sanctioned through multiple pieces of legislations spanning corporate and tax laws and it forms the object of studies in the literature on “corporate governance” (Sarkar and Sarkar 2012). But the relationship between the discrete legal units recognized as private income- or wealth-generating and accumulating entities (individuals, partnership firms, public and private limited companies, trusts and societies and the HUF) are not the subject of critical examination. Both in law and the study of law, the unit of analysis assumes all units that comprise a business group to be distinct, separate and mutually exclusive wealth-and income-generating entities.

5 A third set of sociological literature (Singer 1968; Owens 1971) examined the family and business interface from a socio-cultural perspective, but did not examine the legal embedding of the family-firm/business-house inter-locks. This lacuna is significant because, just when this literature was being generated, the Hazari report in 1967 officially identified the “business group” consisting of inter-locking firms and

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companies as the basic institutional unit of organization of Indian big capital. This was opposed to the dominant macroeconomic construction that followed later of “firms” and “households/family” as disparate and mutually exclusive units of analysis. In Hazari’s analysis the group consisted of a number of related and unrelated activities of a plethora of firms and companies, controlled by a single central decision-making authority and thereby functioning as a coordinated organization. The report showed that besides a high degree of product concentration, big capital in India was dominated by a few representative units of capital organization (through interlocked firms) in most areas of industry and trade in the form of the “business group” (Hazari 1967). The key groups of business, both old and new, maintained both ownership and control over capital flows and decision making through the modalities of the institutional structure of the family run business house (Das Gupta 2010, 2016). This was the understanding of the structure of monopoly capital in India as opposed to monopoly conceptualized as product and market concentration in the mainstream economic literature. In this paper, this conceptualization of the monopoly of family-run business houses, in the institutional organization of capital-accumulation structures and processes in India, follows from the analysis of monopoly structures and process in terms of ownership and control over capital flows and decision making in the entity of the family-run business house.

6 More recently, the study of the legal institution of the “family” has fallen in the ambit of specialized readings of “personal laws” with respect to the relationship between religious code and property rights (Agnes 1990, 2011; Parashar 1992). But it does not examine the family/firm interface. While the entity of the “business group” has found its conceptual space in institutional economics and the larger social science literature, the familial basis of ownership and control of corporate structures remains a grossly understudied area. The relationship between the two and the regimes of accumulation in independent India has been largely unexplored in the otherwise growing corpus of business studies and business-management literature on the relation between the family-owned business group, “corporate governance” and public policy in not only India, but also the USA, Canada, Europe, Hong Kong, Taiwan, Japan, South Korea, China and Pakistan (Gulzar and Wang 2010). The peculiar form of the HUF as a distinct form of property holding for the purpose of corporate governance and taxation has only recently been recognized in the literature (Dewan 2009; Das Gupta 2013; Das Gupta 2016).

7 The legal provisions of “corporate governance” structures have facilitated the optimum mix of various forms of registered companies such as partnerships, private limited companies, unregistered and registered public limited companies under the umbrella group through interlocking share-holdings. These interlockings were made possible through the legal provisions of the Indian Partnerships Act of 1932 and the Companies Act of 1956. This not only was a mode of risk spreading, but also provided legal avenues to escape the Monopolies and Restrictive Trade Practices after 1973, until it was repealed in 1991. It was also important for labor deployment and control with employers, often ensuring that each company had less than seven employees and pre- empting any possibility of trade-union formation under the stipulations of the Trade Union Act of 1926 (Das Gupta 2016).

8 In corporate law and personal law—the two spaces it inhabits—the HUF has been largely regarded as incongruent with “modern” corporate governance and taxation

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structures (Sachdeva 1987). It is often referred to as a remnant from an archaic time that does not serve any purpose in contemporary modes of capital accumulation. The women’s movement in India, which has had the closest critical engagement with this structure has often associated it with feudal structures of land and property holdings. Its implications for capital accumulation in the “modern” sectors have not been studied at all. This paper is an attempt to arrive at a comprehensive delineation of the role of the HUF in the corporate governance and taxation regime in independent India.

9 Interlocked firms and families are the legal structure in which capital accumulation is institutionally embedded in India. It may also be noted that the first level of the firm/ family interlock is germane to capitalism universally, i.e. individual members of families own and control shares. But in India, the HUF interlock with firms is unique and specific in not only maintaining the family’s control over the family business, but also driving a range of activities related to capital accumulation which do not get captured in the taxation structure. Moreover, this privilege as a legal entity is only given to Hindus as defined in the state’s codification of Hindu personal and family law— a Hindu is anyone who is not a Muslim, Parsi, Christian or Jew.

10 The rest of the paper is divided into three sections. Section I elucidates the process through which the HUF was institutionally embedded into the state’s codification of Hindu personal and family law. Section II analyzes the institutional embedding of the HUF in corporate governance structures. Section III dwells on installation and use of the HUF in tax structures and the role it plays as a vital institution in tax avoidance processes. The three sections together show the critical role the HUF plays in the circuits of capital accumulation in India.

Installation of the HUF through the Hindu Code

11 The codification of Hindu Personal laws continued for more than nine years from 1947 to 1956 as part of the exercise of nation-building. The original draft of the bill by Dr. B R Ambedkar (who resigned from the Union Cabinet in protest after agreeing to many of the changes that were inserted at various stages of the debate) was watered down through political compromise and was finally broken down into four separate acts on marriage, guardianship, succession and adoption which were passed in Parliament between 1955 and 1956. Big capitalists played a significant part in the process through which Hindu personal law became state law in India in 1956 (Das Gupta 2013; Das Gupta 2016).

12 The first step towards the legal sanctification of the HUF as the institutional basis for organization of the business group was achieved through the codification of Hindu personal laws. First, the Hindu code (adopted as state code) defined a Hindu as anyone who was not a Muslim, Christian, Parsi or Jew and thus by default included followers of other institutionalized religions like Buddhism, Jainism and Sikhism in the Hindu category, along with a range of theistic practices outside the domain of organized religion like those of adivasis. Thus the onus was placed on the individual to prove if necessary that she/he is not a Hindu (Das Gupta 2016).

13 The same code recognized both Dayabhaga and Mitakshara—the two forms of customary caste-Hindu property holdings (a compromise over the original draft which had proposed to do away with customary laws in defining hereditary rights to property)— and marriage only between two Hindus (according to hetero-normative customary law

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based on caste rules and practices on both endogamy and exogamy) as falling within the ambit of the code. Adoption and succession were to be defined in jurisprudence by the state’s Hindu code, institutionalizing male lineage of descent as the “natural” inheritors of property and the expropriation of any right to property of children born outside marriage. Thus, Hindu personal law became state law, embedding the definition of the Hindu Undivided Family.

14 The patriarchal basis of the property-rights structure was institutionalized in the organization of wealth and property. Women were denied an equal share in any property. Specifically, they were denied any property right to land on the feeble excuse of preventing the “fragmentation of land.” Thus with the aid of two definitions, that of a Hindu and that of the HUF, religion, caste and patriarchy were installed as the institutional basis of determining property rights. The modification of the right to property as a statutory right guaranteed by the Constitution, in favor of Hindu males through the creation of the legal entity of the HUF, was the most significant intervention of the first post-independence decade (Das Gupta 2013).

15 The impact of this institutional arrangement became evident as soon as the codification was completed in 1956, with a sudden spurt in the proliferation of HUFs. The annual growth of the number of HUFs jumped to 38% in 1957–58 when the growth of all tax entities amounted to 16%. The average annual growth rate of HUF accounts between 1954–55 and 1965–66 was 9% while all tax entities grew at close to 12%. In this period, HUFs on average accounted for 6% to 8% of tax assessees and 5% to 8% of the total income assessed (Statistical Abstract of India, All India Income Tax Statistics, Various Years).

16 The codification of Hindu personal laws preserved the patriarchal rules of limiting women’s rights to inherit property and assigned the “karta”—the eldest patriarch of the family—legal powers to represent and make decisions to structure the holding of property (Sachdeva 1987). In case law (based on the Hindu code adopted by the state), an HUF consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters, while a Hindu co-parcenary is a much narrower body including only those persons who acquire by birth an interest in the joint or co- parcenary property. Before the 2005 amendment, the Hindu Succession Act made a provision for a Hindu Undivided Family in order to ensure that property would remain with the male line of descent. As a co-parcenary, a son got a share equal to that of his father; a daughter got only a share in her father’s share. She could not reside in the family home unless she was single or divorced, and could not claim her share of property as long as the men of the family continued to live in it. Further, a woman’s right to agricultural property was still denied to “prevent fragmentation of landholdings” (Das Gupta 2016). Contrary to assertions that the 2005 amendment “established a gender-equal basis of land and agricultural property” (Kelkar 2014), it gave only daughters the right to be co-parcenaries in HUFs under Mitakshara rules, and excluded wives and daughters-in-law (Singh 2005). Moreover, the status of the “karta” and the HUF as a form of property holding in a body incorporate were not affected by this amendment. The status of the karta was preserved in its implication for inheritance rights as well as the HUF as a tax entity (which is elaborated in the last section).

17 It created the formal legal space for any Hindu male to break away from the “joint family” and start a new “Hindu Undivided Family” as karta as long as he was married. Even as families went nuclear, the “HUF” could be perpetuated as a legal entity, as each

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nuclear family marked the beginning of a new “HUF” because a Hindu male can be a “ karta” for more than one HUF accounts. So every time a joint property is partitioned or a joint family breaks up into nuclear units, it gives rise to a new “Undivided” family. Thus the expansion of the HUF through male lineage is the only pre-condition to the formation of new HUFs.

The HUF in Corporate Governance

18 In 1956, the Companies Act recognized the HUF as a legal entity in independent India which could be part of ownership and control structures of corporate entities, i.e. private and public limited companies. The Indian Partnership Act of 1932 had already given similar recognition to the HUF in holding structures of partnership firms. The interlocking of the HUF with corporate governance structures is mediated by the role of the karta in his dual role—as an individual legal person and as karta of the HUF. For instance, a HUF cannot enter into a partnership with other persons, as it is not a legal person, but the karta of a HUF can (Sachdeva 1987). Similarly the karta and the other members of a HUF are entitled to receive a salary and compensation as a legal person. Also an HUF can be a proprietor of one or more business firms by maintaining names separate to the HUF as a business entity. Further the HUF can own different kinds of assets including factories, land, property and trades. This legal interlock of the HUF with companies and firms is central to the holding asset structures of Hindu family- owned business groups in India. Both “old” and “new” capitalist business houses of Hindu origin use the provision of HUF to consolidate family holdings and ensure the control of capital within the family through transactions between the HUF and individuals within the HUF, these individuals occupying key positions in the share- holding and managerial patterns of the companies within the fold of the business house, through interlocking directorships and share-holding.

19 One of the most important features of the “old” regime of accumulation was the mercantile basis of Indian family-owned business groups. The few explanations for this phenomenon have been rooted in the realm of either “behavioralism” or “culturalism.” While on the other hand, the studies of “new” capitalists—which have been emphasizing the diversification of the regimes of accumulation between 1956 and 1980 (e.g. Damodaran 2008)—have missed out on the one unchanging feature of the “business group,” which is its ability to retain control over diverse ventures with very little investment of family wealth.

20 The distinction between ownership and control gets blurred in the complexity of holding structures, through the maze of inter-corporate holdings and interlocking directorships (Mazumdar 2006). The interlocking of the HUF into overlapping directorships and inter-corporate holdings provides yet another layer for ensuring family control over corporate governance structures, apart from providing an avenue for concessions on wealth and income. In the absence of any official account of such interlocked holdings, case law is one avenue through which this relationship can be studied. Our analysis of twenty five landmark HUF related cases involving some of the top business houses in India shows the following uses of the HUF: 1. To keep property within the Hindu family (based on the male line of descent) using the definition of the Hindu as adopted in the Acts based on the Hindu Code. 2. Splitting of income between individuals and HUFs for the purpose of tax avoidance.

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3. To evade large amount of taxes by entering into complex transaction between HUF and Group Companies with same person as karta and chairman respectively. 4. To gain benefits of tax exemptions in capital gains. 5. Holding land of enormous value in HUFs claiming to be received as dowry by ancestors 6. Interlocking of funds and assets between HUFs and group companies 7. To make a profit from speculation through sale and purchase of shares of group companies by the HUF. 8. Multiple HUFs within the same family with overlapping kartas and members and then multiple dealings of a single property by these different HUF eg same land pledged for different purposes by repeated transfers between HUF holders.

21 The case law analysis summarized above is indicative rather than exhaustive. However, it does bring out the peculiar provisions of the HUF that “Hindu” business houses have used in different spatial and temporal contexts to perpetuate capital accumulation. Needless to say, no such provision was available to business houses held by Muslims or Christians, Parsis or Jews. While the interlocking characteristics of family-owned trusts are used by business groups from all religions, the HUF is a favor exclusively for Hindus as defined by the Hindu code. There is no equivalent structure or provision for business groups belonging to other religions.

22 The other method through which the HUF can be studied is through survey. Using snow-ball sampling techniques, we carried out a survey of financial statements and institutional interlocks of 150 business groups in two phases between 2003 and 2005 and between 2008 and 2011. This survey consisted of 150 business families, the study of the financial statements of the last ten years of 7,500 firms affiliated to these 150 business families. This survey also involved 1,000 extensive interviews with members of business families, and managers and employees in family-controlled firms. These interviews were based on written and/or oral consent based on the condition that no identities would be revealed in the study.

23 The survey (spread over Kolkata, Mumbai, Delhi and Hyderabad) reveals judicious use of provisions in personal and corporate governance laws, with each group consisting of some or all of the legal forms of partnership firms, private limited companies, unlisted public limited companies and listed public limited companies (using the provisions of the 1932 Partnerships Act and of the 1956 Companies Act). The holding structures are comprised of individually-owned stocks, along with stocks held by Hindu Undivided Family accounts (except for the two business groups of “non-Hindu” origin in our Survey),1 and a number of “group” companies spread across the four forms of business entities stated above. In 35.3 percent of the groups surveyed, stocks in group companies are not held by HUFs in publicly-listed companies, but are held in the “private limited” companies. However, the kartas of the HUF or other HUF members hold stocks in the publicly listed companies in 61.3 percent of the groups surveyed. Thus the payouts to the HUF as well as to the individual who is part of an HUF is simultaneously maintained. At the same time, the HUF can hold other property, e.g. houses, cash, gold, share certificates, fixed deposits which would not be considered in the asset accounting of the business group. The income and wealth holdings in the HUF do not get counted in the business group’s ownership and control of assets (Das Gupta 2016).

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Table 2.1: Survey Summary

Number of business families surveyed 150

Number of firms affiliated to business groups which were analyzed for institutional 7,500 interlocks

Average number of companies/firms in a family-owned/controlled business group 47

Average number of HUFs found to be interlocked in each business group 9

Average number of trusts/registered societies found to be interlocked with each business 4 group

Number of detailed case studies of family owned business groups 25

Number of members of business families interviewed as part of case studies 300

Number of managers of firms interviewed as part of case studies 300

Number of employees who were not managers interviewed as part of case studies 200

24 Thus, on an average, for every five firms controlled by a family-owned business group, there is one HUF to play the pivotal role of legal facilitation of family control over the holding structures of family-owned business groups.

Family Control over the Circuits of Capital within the Business Group

25 The provision of the HUF is used to consolidate family holdings and ensure the control of capital within the family through transactions between the HUF and individuals within the HUF who hold key positions in the share-holding and managerial patterns of the companies within the fold of the business house, through interlocking directorships and share-holding.

26 To illustrate the modalities of family control over the circuits of capital within the business group, we present a case study from our survey of a family-owned business group based in Mumbai:

27 Patriarch A from business family X is married to B from business family Y. They have two sons C and D and one daughter E. C and D have a son each named M and N. Daughter E is married to F into business family Z. Sons C and D are married to G and H from business families V and W.

28 The HUFs created from these alliances in Family X are: 1. HUF1 (A –karta, C and D coparcenaries, B member): 2. HUF2 (C – karta, G member) 3. HUF3 (D- karta, H member) 4. HUF 4 (A-karta, C - coparcenary, B and G member) 5. HUF 5 (A-karta, D – coparcenary, B and H member) 6. HUF 6 (C – karta, M coparcenery (minor with C as guardian) 7. HUF 7 (D – karta, N coparcenary (minor with D as guardian)

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29 Similar HUFs exist in families V, W and Z. Family X has two flagship companies—ABC Ltd and DEF Ltd. Five percent of the shares in ABC Ltd are held by A, B and C. Another three percent shares are owned between HUFs 1, 2 and 4. Similarly, six percent of the shares in DEF Ltd are held by A and D. Another two percent is held by HUFs 1, 3 and 5. Eight other group companies together hold a ten percent share of ABC Ltd. Seven different group companies hold an eleven percent share of DEF Ltd. There are two other subsidiary/holding companies in the group. These hold shares in nine other group companies. HUFs 6 and 7 hold a two percent share in ten of the group companies. Two group companies along with A, B, C, D, E, F, G, H hold shares in three trusts named after A’s grandfather, father and mother respectively. These trusts own shares in six group companies. The HUFs belonging to families V, Y, W have shares in six group companies. The daughter, son-in-law and the daughters-in-law (E, F, G and H) own shares as individuals in six corporate entities in which three are partnerships and three are companies. Thus individuals, HUFS, firms/companies and trusts form multiple levels of overlapping interlocks to control 26 firms/companies and two trusts, even though each of these entities is governed by different corporate governance laws as we have shown earlier.

30 A, the patriarch is a director in six companies, The sons C, D and son-in-law F in four each, the daughter E in two, three members each from families V, W and Y in two each. All the women in the family are involved in active management of the trusts in a position of executive authority. Had there been no HUF provision, individual family members would need to own a much larger proportion of the shares in order to exert family control over the constituent firms/companies in the business group.

31 This business group owned two large and six medium sized factories and two small scale enterprises spread over four states in India. Out of these, two were owned by public limited companies, four were owned by private limited companies, two by HUFs and two by partnerships. These factories were integrated into the global textiles value chain at different levels, with a production range of intermediate goods. Fifteen other corporate entities in the group were shown to be invested in hotels, trading, property dealing and leasing, and entertainment (a digital studio). One partnership firm was invested in financial services while the trusts ran for-profit schools along with temples, an old-age home and an ecological park. However, on an average, sixteen out of the twenty-six corporate entities reported losses in the previous four years. With asset and income transfers within group companies and HUFs (through related party transactions which are captured in the financial statements), profit and loss accounting was spread across business groups to declare the minimum level of profits to avoid taxation in nine consecutive years from 2002–03 to 2010–11.

32 The HUF also exists legally in tax law independent of these interlocked entities. For example, the land for three of the factories is owned by three different HUFs of family X and is shown in financial statements to have been leased to the company owning the factory.

33 A similar case study of the largest business group in India by Naz (2016), shows that around 64 out of 88 interlocked group companies, reported a loss in two consecutive years in 2013 and 2014. It must be noted here that such related party transactions must by law be approved by the Board of the company. Given the interlock between family members on the board, such transactions are facilitated by the legal sanction of the corporate governance structure interlocked with the family (Naz 2016).

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34 Our interviews with the mother, daughter and daughters-in-law (B, E, G and H) revealed significant aspects of the firm/family interlock. All four women had been married through alliances brokered by the family. Two of the four women were married into families whose ethnicity was different from their own. However, all four alliances were based on caste rules of endogamy/exogamy along with considerations of class status. All four women narrated how they were part of fundraising (own capital) for multiple business groups spanning the families inter-connected through marriage. They called these “deposits,” which were made by women either informally in cash or formally through personal cheques from their own bank accounts to one or another HUF. These would then be channeled through the HUF into various related party transactions to fund the purchase of land, investment in machinery or stocks and bonds, all of which then are used in the accumulation activities of group companies. These deposits return, completing the circuit of capital at higher than the original value through the same circuitous routes as family income, very much in keeping with Marx’s original exposition of M-M’ i.e. the social relation of capital as money begetting more money than its original value (Marx 1887). As the monetary transactions are between the HUF and the individual, these never show up in the accounts books of the corporate entities. Thus the legal separation of the individual, the HUF of which the individual is a member, and the company in which the HUF and the individual exert ownership and control, create the formal legal structure in which the informality of exchange between members of the family to generate and accumulate capital is embedded.

35 Within the structure of the family-owned business group, the importance of Hindu Undivided Family assets have not declined, even as many of the business groups in question have forged relationships based on technological dependence and spates of mergers with and acquisitions of both indigenous and foreign companies. It has only meant that the wealth holdings in the HUF cannot be used for controlling stakes in the merged foreign entity, as opposed to the wealth held through “corporate governance” structures. But the interlocking of HUFs in “Hindu” corporate entities still makes it a vehicle for family control over all the operations and stakes of the “corporate” business group and continuous rearrangement of liabilities and tax obligations between individuals and the HUFs. In absolute terms, the number of HUF assessees almost doubled between 1991 and 2000 from around two hundred thousand to four hundred thousand. The number of HUFs assessed for income tax increased by 47% in 1997–98 as compared to the previous year and registered double-digit annual growth rates in eight out of twenty years between 1990–91 and 2009–10. As per the latest income tax data released by the Central Board of Direct Taxes in 2016 there were 9,40,061 effective HUF assessees in 2014–15 that had appeared in the income tax statistics while their number stood at 4,47,820 in 1999–200, the year after which disaggregated data was not provided; disaggregated data was not provided beyond this date. So even as per official statistics the number of HUFs has almost doubled within a decade and increased almost four-fold since 1991.

36 Table 2.2 compares the disaggregated growth rates of HUFs with that of companies and firms (i.e. partnerships and sole-proprietorships) added together. In seven out of thirteen years for which comparable data is available, the number of HUFs has grown faster than that of firms. In the three years during which the number of companies and firms has shown an annual decline, the HUF has also shown a decline. Thus the growth

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of the HUF is similar to that of firms and companies and distinctly different from individual tax assessees whose growth rate has exceeded 100% in all the thirteen years for which we have comparable data (Table 2.2). This feature has to do with the “business” entity of the HUF, which is further elaborated later in this section.

Table 2.2: Annual Growth Rates of HUFs Compared to Companies and Firms after 1991

Annual Growth of Annual Growth of Firms and Annual Growth of Year HUFs (%) Companies (%) Individuals (%)

1990–91 10.82 15.57 114.34

1991–92 –8.93 –5.70 105.99

1992–93 11.31 1.13 115.69

1993–94 7.98 4.54 112.76

1994–95 24.79 28.05 137.81

1995–96 –3.62 –2.22 101.03

1996–97 –6.31 –7.60 108.41

1997–98 47.13 26.61 122.99

1998–99 0.06 3.72 118.61

1999– 10.53 6.51 132.70 2000

2012–13 87.59 18.14 203.09

2013–14 6.86 4.77 116.11

2014–15 4.72 7.43 108.72

Source: Authors’ calculations based on data released by Central Board of Direct Taxes, Various Years

37 Socially, nuclearization of families is directly combined with proliferation of HUF accounts among middle-class, double-income, upwardly-mobile, caste-Hindu India. One of the features associated with the neoliberal era has been that family-owned business groups have been transforming themselves into multi-nationals without an increase in their total corporate liability through vertical and horizontal integration. This is possible because the laws in India have been suitably altered to facilitate such transformation of firms in the period of contemporary globalization by the reduction of the compulsory share of Indian partners in a transnational venture, the introduction of limited liability partnerships, the dismantling of the MRTP and FERA Acts, and amendments in the National Patent Act to make it amenable to the WTO regime of product patents (Das Gupta 2010). However, the laws relating to holding structures of companies remain flexible enough to accommodate the requisites of change in

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corporate governance but are unchanging in their function of providing the legitimate basis of family-owned business groups spanning the entire domain of ownership, control and individual- and family-based appropriation of profit in favor of the “Hindu,” defined as anyone who is not a Muslim, Christian, Parsi or Jew (Das Gupta 2016).

38 In the post liberalization period, it also provides yet another channel of “tax-saving” on income and wealth for not only upwardly-mobile “Hindu” families in India, but also for Hindu Non Resident Indians (NRI). The 1961 Income Tax Act specifies the residency status of citizens and entities into three broad categories—resident, nonresident and not ordinarily resident (NOR). This trilateral categorization also existed in the colonial Income Tax Act of 1922. The 1939 amendment to the 1922 Income Tax Act allowed “NOR” status for individuals only. For the HUF and other assessees, the status was restricted to ordinary residents. It was only with the 1961 Income Tax Act that NOR status, which was earlier available only to individuals, was extended to the HUF in Section 6(6)(b), which provides that a HUF can be NOR if the manager is an NRI and has stayed outside India in nine out of ten previous years or has remained in the country for less than 729 days in past 7 years. This legally allows business families to register a HUF in India, conduct their business abroad for years and establish the presence of the manager of the HUF in the country for the minimum stipulated period to enjoy the benefits of the HUF (for instance if a father and his two sons have a HUF, the father can return to India occasionally while his sons continue to do business abroad). The residential status of an individual has to be established by physical presence in the country over a certain time. But for the other corporate governance structures having a separate legal existence, the residential status was extended under the Income Tax Act on the basis of establishing management and control in the country, a caveat which by definition brings in an element of ambiguity. The HUF was treated on par with corporate entities on this point and the provision that was meant for firms also applied to the HUF. This was in continuity with the 1922 colonial Income Tax Act. Subsequently, Section 6(2) of the 1961 Income Tax Act provided that a HUF is recognized as a resident in India in every case, except when its control and management is situated wholly outside India. This provision goes a step further than the earlier provision where the manager or karta has to establish presence for a brief period. This allows the karta to reside outside the country. HUF benefits can be taken advantage of as long as there is an official devolution of the powers of control and management to the other members of the family who stay in the country.

39 Thus the interlock of the caste-Hindu patriarchal family with corporate governance institutions is formally embedded in law in India. It is the materiality of capital that forges the social entity of the family-owned business group, which is formally, legally embedded in the seamless interlock of the firm and the family. This spans state codification of Hindu family law, corporate governance laws and taxation laws. Moreover, this unique legal family/firm interlock is not available to Muslims, Christians, Parsis or Jews and hence constitutes a perverse legal privilege for the Hindu family. The caste-Hindu patriarchal family bound by son preference is an imperative of the social reproduction of institutional accumulation structures in India. Trust and informality of kinship and familial relationships are very much “within the law.” It is capital in its material social role, at work in the circuit of financial and capital flows, that drives the network of institutions that constitute the “family-owned business

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group” in India, which is legally and formally undergirded by caste, patriarchy and religion.

Installation and Uses of the HUF in Tax Structures

40 The recognition of the Hindu Undivided Family as a legal tax entity, separate and distinct from individuals and corporates (which were firms defined under the Companies Act and the Partnership Act), was the final step in defining the legal entity of the HUF. While all other corporate bodies recognized in corporate and individual income tax laws are defined on the basis of company law, the HUF as a legal entity in Indian tax law is defined on the basis of Hindu personal law. After defining the HUF through the codification of personal laws in 1955–56, the state then took the next step to perpetuate the “Hindu Undivided Family” (HUF) as an entity recognized by the 1957 Wealth Tax Act and Section 2 of the 1961 Income Tax Act, as a distinct unit of taxation, with the grant of tax avoidance facilities on “family income,” with higher exemptions and lower tax rates as compared to other categories of assessees. Under the income and wealth tax laws in India, an HUF is assessed for tax as a distinct unit of assessment and its interlocking relationship with other income- and wealth-generating entities like companies and firms is not taken into account in the calculation of tax liability.

41 Though the HUF was recognized in colonial income-tax laws earlier (discussed in the introduction), in 1936, the Ayers Committee mentioned the need for recognition of the HUF but did warn of substantive revenue loss if any special exemptions were granted. It is significant that a decade later such a consideration did not prevail over the committees which were constituted to make recommendations on direct taxation after independence. Some of these committees justified the preferential tax treatment to the HUF and further recommended higher tax exemptions than other assessees as an incentive for remaining a joint unit.2 Others either did not mention or failed to provide a solution, citing reasons like the administrative burden involved, except for two significant exceptions—the Wanchoo Committee and the K. N. Raj Committee.3 Hence the tax provisions served the objective of preserving the interest of the capital-owning class of caste-Hindu origin by offering a plethora of special concessions under the aegis of the HUF. The Wanchoo Committee report was scathing in its assessment of the purpose of the HUF. It held that: “We feel convinced that the Hindu Undivided Family as a unit of assessment is retained in most cases only when it enables the person concerned to reduce their tax liability and that in other cases, it is promptly partitioned without considerations of sentiments coming in the way.”

42 A member of a HUF is not taxable at for any sum which s/he receives as a HUF member out of the income of the family, even though the family may not have paid any tax on its own income. So the privilege cannot be ascertained by how much tax a HUF pays, but by how much of its income is not taxed at all by virtue of being declared as “family income.” Moreover, an individual can organize her/his wealth across multiple HUFs and thus reduce her/his effective tax liability.

Use of the HUF for Tax Avoidance

43 There is a distinction between statutory and effective taxation rates. The statutory rates of taxes are defined by the government for various categories of assessees.

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Statutory income tax rates are defined by the government annually as part of the annual budget announcements through tax slabs based on income declared. These tax slabs are defined in terms of a certain percentage of income, which increases with increasing intervals of income threshold. There is a difference between the statutory rates, which are announced every year by modification of the Finance Act, and what finally translates into the actual payments as taxes by income tax payers. These actual payments as percentage of declared income are called the effective tax rates (Bandyopadhyay 2012; Rao 2015). Hence there is a fine distinction made between effective and statutory tax rates (where the statutory rates are the ones prescribed by law and the effective tax rates are the realized average tax rates). For instance in a comparison of the Transitional economies with an advanced one like the EU, the ratio between these two tax forms (effective and statutory) for direct and indirect taxes was taken as basis for analyzing the tax administration and policy prescriptions (Schaffer and Turley 2001). Therefore algebraically, the effective rate of taxes which can be described as the actual tax payable by an assessee as a proportion of the income/profit before taxes can be assessed. The very construction of effective tax rates then makes them lower as opposed to the statutory rates prescribed by the government if the level of exemptions for tax assessees is high. It is also important to mention here that the percentage of effective tax rates gets lower on account of exemptions, subsidies and rebates, which can be both implicit and explicit. Exemptions are granted for investments in pension funds, insurance policies, government bonds, housing loans etc. The taxable units circumvent the mandatory/statutory payments by deploying various ways to lower effective tax rates (ETR) using exemptions. However the HUF provides a further mechanism for tax avoidance for Hindu business families. Table 3.1 presents statutory tax rates reduced to a scale of Rs 100 as equivalent to Rs 10,00,000.

Table 3.1: Statutory Tax Rates in India: 2015–16

Income Reduced to Actual Tax to be paid Income Tax Slab Income Tax Rate Unit of Rs 100 on Income

Income up to Rs. 2,50,000 Nil 25 0

Income between Rs. 10% of Income 25–50 < or =2.5 2,50,001 - Rs. 500,000 exceeding Rs. 2,50,000

Income between Rs. 20% of Income 50–100 >2.5 and < or = 10 500,001 - Rs. 10,00,000 exceeding Rs. 5,00,000

Income above Rs. 30% of Income As per actual income > 100 10,00,000 exceeding Rs. 10,00,000 exceeding Rs 100

Note: Rates are for 2015–16 as per the 2016 Finance Act

44 Let us start with a Hindu business family that consists of Patriarch A, his wife B, two sons C and D and daughter E. Let us say the family controls a firm called Patriarch & Sons (P&S) in which the father is the owner/manager and has an annual income of Rs 100 from this firm. If there is no HUF provision, A will pay no tax on the first Rs 25 of

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the annual income, Rs 2.5 for the next Rs 25 and Rs 10 for the next Rs 50 that he earns. So on his total income of Rs 100, he would pay Rs 12.5. So his ETR would be 12.5%.

45 However, because there is the legal HUF provision, A will form an HUF with himself as karta, his sons and daughter—C, D and E—as co-parcenaries and his wife B as member. Let us call this HUF 1. Using firm/family interlocks (described in Section II), he will report Rs 50 as income of the HUF and Rs 50 as his own individual income. Since the tax law does not recognize the relationship between the individual and the HUF, these separate entities each will be taxed as follows. The HUF will pay no tax on the first Rs 25 and will pay Rs 2.5 on the second Rs 25, i.e. the HUF tax liability for an income of Rs 50 will be Rs 2.5, which is an effective tax rate of 5%. The same rates apply to individuals. So A as individual on his reported income of Rs 50 will also pay Rs 2.5 as income tax which is an ETR of 5%. Thus by the combination of one individual, one firm and one HUF, effective income tax liability can be brought down from 12.5% to 5%.

46 Let us say A’s income from P&S increases to Rs 300 in the next year. His total tax liability would be none for the first Rs 25, Rs 2.5 for the next Rs 25, Rs. 10 for the next Rs 50 and Rs 60 for the Rs 200 rest of his income. This would be a total tax liability of Rs 72.5 on an individual income of Rs 300 which implies an effective tax rate of 24.2%. It is at this stage that two more HUFs would be formed if and only if the two sons are married: • HUF1 (Described earlier) • HUF2 (A karta, C co-parcenary, C’s wife member) • HUF3 (A karta, D co-parcenary, D’s wife member)

47 Using firm/family interlocks, the Rs 300 would be now spread over 3 HUFs and A as an individual in income reporting. This Rs 300 can be distributed among these four entities in various ways. Chartered accountants of P&S would work out the details of the apportioning to minimize ETR. One way would be to report Rs 50 each as income of each HUF. So each HUF would pay Rs 2.5 as tax on Rs 50, i.e. Rs 7.5 on Rs 150. A would show his income as Rs 150, on which he would have to pay no tax on the first Rs 25, Rs 2.5 on the next Rs 25, Rs 10 on the next Rs 50 and Rs 15 on the last Rs 50. So he would pay a total tax of Rs 27.5. All entities together pay only Rs 35 as tax on the same income of Rs 300. The ETR reduces from 24.2% (in the absence of HUF) to 11.67% through judicious use of HUF provisions. If A had three married sons and no daughter, he would be able to form an additional HUF and reduce tax liabilities further. If any of the sons do not get married, then the possibility of forming the additional HUFs reduces. Thus son preference and hetero-normative marriages in every generation, bound by caste and religious rules as per the state’s Hindu code, have a very material incentive in the form of the HUF tax provisions in India.

Trends in Effective Direct Taxation of Income: the HUF Compared to Other Categories

48 The problem of direct tax mobilization in India in the post-liberalization phase is attributed to high rates of taxation and sources of “inefficiency” traced to the administrative structure of taxation and proliferation of multiple taxes. Thus, in the architecture of tax reforms, the emphasis has been on the “rationalization” of taxes and tax rates4 (Rao and Singh 2005). Along with this, the post-liberalization period has seen tax exemptions and tax subsidies being awarded to corporates (Mazumdar 2014;

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Rao 2015) as a major incentivizing policy tool. This process has generated a large amount of opinion without consistent empirical evidence of the fall-outs on effective rates of taxation. One reason for the lack of empirical evidence is the significant change in the process of data dissemination on direct taxes in India. The Central Board of Direct Taxes (CBDT) under the Ministry of Finance has stopped releasing state level data classified by taxation units after 1989–90. It has also stopped disseminating national-level data on actual income assessed and tax collected for various taxation units after 1999–2000. After a long gap and in the face of mounting criticism, in April 2016 the CBDT released partial data for three years (2012 to 2015).Within these constraints, we have compiled taxation data from various volumes of the Statistical Abstract of India and computed effective rates of taxation for the different units of direct income taxation in India. An attempt has also been made to incorporate the plausible analysis of the latest direct tax data released by the CBDT in October 2016, which is being celebrated as a step towards transparency of tax data in India after more than a decade of non availability of disaggregated tax data. But this data suffers from various limitations and hides more than it reveals; an analysis of this is outside the scope of the present discussion. Suffice it to note that the time series from 2001 to 2011 lumps HUF tax data under “other direct taxes.” It is only for the years 2012–15 that disaggregated data for the various categories of assessees are available with no distinction between tax payable and actual tax paid. Banerjee and Piketty (2004) used the same data set (called All India Income Tax Statistics) generated by CBDT (which we have used in this paper). They have used it to compute the top shares of income in India from 1922 to 2000. Their data-set ends in 2000 as the CBDT did not make tax data available since then until very recently. Observing that the share of HUFs is just 5% of total assessees, Banerjee and Piketty (2004) had merged the HUF assessees with the individual assessees for defining tax units in their analysis. For them the HUF is the same as an individual which is exactly the Indian state’s understanding since 1961. This is why in the contemporary tax structure individual and HUF assessees are treated on par as we have argued so far. Our difference with Banerjee and Piketty (2004) lies in our conceptual critique of not recognizing the HUF as a unique mode of firm-family interlock distinct from individuals which we have illustrated through our discussions so far. It must be noted that the significance of the HUF lies not in how much tax it pays, but in how much wealth it owns on which it does not pay taxes by claiming it as “family income” as illustrated earlier.

49 Ramanujam a former Chief Commissioner of Income Tax argued that axioms of tax law are based on the assumption that nobody can make a profit out of one’s self. The entity of the Hindu Undivided Family (HUF) is an exception to this principle. He noted after the 2005 amendment to the Hindu Code that the HUF is an entity peculiar to the Indian tax law. There is “nothing sham” about it. He succinctly argued that the “government carries out any amount of amendment to the Hindu law without looking into the revenue loss caused by the recognition of the HUF as a separate taxable entity. The HUF may be a boon to the taxpaying Hindu. But it is definitely a bane to government revenues” (Ramanujam 2006). The reporting of taxation data reflects the dichotomy of taxation and corporate governance structures in India. Thus taxation assumes five types of units (individuals, HUFs, firms [sole proprietorships and partnerships], corporates [limited liability companies], and AOP/BOI [Association of Persons/Body of Individuals]) which are reported as separate and distinct without any relationship to each other. On the other hand, our analysis of the institutional structure of corporate

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governance shows that the institution of the family-owned business group operates through a complex maze of interlocked ownership and control across all the five categories. The various reports on tax reforms in the last twenty years also reflect this dichotomy in which the institutional assumptions of corporate tax rationalization completely occlude the purview of the system of self-rationalized tax avoidance offered by the interlocking tax entities. Thus, analyses based on sources like the PROWESS database capture the larger picture of 60–71% of “firms” (limited liability companies) reporting positive profit before taxes and showing effective taxation rates below 25% in the last five-year period, and also confirm the observation that larger firms face lower effective tax rates (Rao 2015). While this corroborates our findings discussed below, our point of departure from both Banerjee and Piketty (2004) and Rao (2015) is based on the observation that such studies do not differentiate the type of “firm,” the interlocking relationships between “firms,” and between firms and HUFs (and AOI/BOIs); hence they do not capture the differential impact of tax policy on different but inter-locked tax entities. Nonetheless, the data reveals some significant features of the Hindu Undivided Family which are incorporated in the discussion that follows.

50 In Figure 1, we present the annual average effective taxation rates of individuals, HUFs and all other assessees (which consist of different forms of body incorporates or corporate entities—firm, companies, societies and trusts etc.). From 1954–55 to 1998– 99, the ETRs of individuals were lowest, the ETRs of corporate entities were highest while the ETR of HUFs was between the two. Also, the ETR of all entities increased between 1973 and 1993. This had to do with the abolition of higher exemptions and lower tax rates to HUFs as compared to individuals,5 along with the promulgation of the Monopolies and Restrictive Trades Practices (MRTP) Act in 1971, which recognized the business group as a whole as the unit of organization of capital and put in restrictions on interlocking shareholdings and directorships. Further, the ETRs of HUFs increased significantly in the same period with the abolition of HUF privileges in land and other property holdings (but not corporate holdings which come under the purview of the central government) in Tamil Nadu, Kerala, Andhra Pradesh and Maharashtra. The decline in the ETRs of corporates after the mid-1980s is explained by the dilution of the MRTP Act and its subsequent repeal. The ETRs show a sharp decline in 1998–99 and 1999–2000 after which the CBDT stopped releasing data. The recent data that has been released since 2012–13 to 2014–15 shows a decline in the ETR of individuals. But the steepest decline is recorded by the ETR of HUFs in this period. Figures 1 and 2 together show that, in the period 2012–13 to 2014–15, HUFs have had the lowest ETR since 1956. This decline has been so steep that among the three categories of individuals, HUFs and corporate entities, the HUF has been paying the lowest effective tax in the same period, in which it is growing faster than corporate entities (Table 2.2).

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Figure 1: Annual Average Effective Taxation Rates from 1955 to 2000; 2012–15

Source: Authors’ calculations based on data released by the Central Board of Direct Taxes, Various Years Note: Data for the years 1970–71, 1973–74 are not available for all assessees. Also, data for registered firms are available from 1956. There is no data available between 2000–01 and 2011–12.

Figure 2: Annual Effective Taxation Rate of HUFs

Source: Authors’ calculations based on data released by the Central Board of Direct Taxes, Various Years

Table 3.1: Composition of Income of Different Tax Categories: Average Shares (%) (2012–15)

Firms and AOP/ Category of Income HUF Individuals Others Companies BOI

Salary Income 0.0 52.9 0.0 0.0 0.0

House Property Income 9.3 2.4 1.6 1.9 1.6

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All other Income (business income, short and 90.7 44.7 98.4 98.1 98.4 long term capital gains, interest etc.)

Loss Set-Off 1.08 0.97 5.04 19.5 8.22

ETR 8.28 9.69 39.06 24.92 22.23

Source: Authors’ calculations based on data released by the Central Board of Direct Taxes, 2016

Figure 3: Effective Income Taxation (%) Rates by Range of Income (Rs): 2012–2015

Source: Authors’ calculations based on data released by the Central Board of Direct Taxes, 2016 Note: 1.)10 lakh = 1 million; 10 million = 1 crore 2). There are only 3 HUFs in the income range of Rs 25–50 crore

51 An analysis of the sources of incomes of for various categories of tax assessees for the period from 2012 to 2015 (the three years for which this data is available) is presented in Table 3.1. More than 90 percent of HUF income accrues from business income, short and long term capital gains and interest income. There is no salary income reported by HUFs. In fact the composition of the HUF income is similar to the income composition of firms, companies and other body incorporates and very different from the composition of individual incomes in which salary income constitutes 52%. Thus the HUF is similar to a corporate entity with the additional characteristic that around 9% of its income comes from house property while this share is less than 2% for firms and companies. But, it gets away with exemptions claiming to be a “family” utilizing income for maintenance treated on par with an “individual” tax payer and pays the lowest rates of income tax (Table 3.1).

52 Figure 3 shows that the effective taxation rates of firms and companies decrease as size of income increases, which is similar to the finding of the study based on the PROWESS database cited earlier, demonstrating the regressive character of corporate taxation in India. For individuals the trend of taxation is progressive but becomes regressive at the top range for incomes above Rs 100 crores. The same trend is evident for the HUF but with two significant features. First, at the bottom end, up to an income below Rs 10 lakhs, the effective rate of taxation of HUFs is consistently less than individual tax assessees. It is only for HUFs which earn an income higher than Rs 10 lakhs, that the

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effective taxation rates are marginally higher than individual assessees. In the Rs 25 crore to 50 crore range, the ETR increases significantly but there are only 4 HUFs with an income above Rs 25 crore (Figure 3). Second, the effective tax paid by the HUF is much less than corporate entities of business even though its income structure is similar to corporate entities as we have shown earlier. Thus the HUF is an inter-locked corporate governance structure whose activities based on income source is typically that of a business incorporate. It is interlocked into the institutional structure of asset, wealth and property holding in India in a maze of interlocked family and business entities spanning all five tax categories which comprise the Hindu family-owned business group. There is no systemic compilation of data by the Indian state on interlocking tax entities and the extent of direct and indirect ownership of economic assets and property by family-owned business groups. The institutional structure of property rights (across all sectors of the economy) in HUFs in India interweaves personal laws, corporate governance structures and tax laws privileging the Hindu male as the asset/property/capital owner. Thus patriarchy and religious discrimination are endogenous to the institutional construction of the structures of corporate governance and taxation that govern both institutions and processes of capital accumulation in India. This institutional structure shows a sturdy continuity in the post-independence period despite ideological shifts in the macroeconomic policy regime.

53 This institutional structure is embedded in state codification of Hindu family law, corporate governance laws and taxation laws. This unique legal family/firm interlock is not available to Muslims, Christians, Parsis or Jews and hence is a perverse legal privilege for the Hindu business family. The HUF has been and remains the primary unit of organization of family and corporate property, income and wealth reliant on the institutions of majority religion, caste and patriarchy.

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NOTES

1. See Das Gupta (2016) for detailed case studies. 2. In their reports, the Vardachari Commission (1949) and the Matthai Commission (1953) justified exemption of HUF income from income tax and suggested twice and thrice the exemption limit to individuals. Both the committees were of the opinion that the sentiments involved in remaining undivided should be given consideration and that enough concessions should be made for those who otherwise want to remain undivided but, for the purpose of lowering taxation, go for partition. Their recommendations were given effect through the subsequent Finance Acts. 3. The Mahavir Tyagi Committee (1958) did not mention the HUF as a tool for tax evasion while it recognized trust and cooperative society to be so. The Bhoothalingam committee (1967) did mention the HUF as a tool for tax evasion, but regarded administrative burden as the reason not to intervene in the provision. It was only the Wanchoo (1971) and K. N. Raj (1972) committees that pointed to the HUF as a tax evading entity and suggested withdrawal of tax exemptions. 4. See Academic Foundation 2003. 5. The statutory tax rate for the HUF has been the same as that of individuals since the intervention of the Wanchoo Committee and the K. N. Raj Committee, because of which the lower tax rates for HUFs were raised to the level of the individual income-tax payer and the higher exemption limit was done away with in the 1970s.

ABSTRACTS

Social science has had a very limited engagement with the socio-legal entity of the Hindu Undivided Family (HUF). In corporate and personal law—the two spaces it inhabits—it has been largely regarded as separate and distinct entity from “modern” tax and corporate governance entities like individuals and body incorporates. It is often referred to as an archaic remnant associated with feudal structures of land and property holdings. Its implications on capital accumulation in the “modern” structures of corporate governance and tax structures have not been studied at all. This paper is an attempt to arrive at a comprehensive delineation of the role of the HUF in the corporate governance and taxation regime in independent India.

INDEX

Keywords: HUF, family firm, business group, taxation, corporate governance, capital accumulation

AUTHORS

CHIRASHREE DAS GUPTA Associate Professor, Centre for the Study of Law and Governance, Jawaharlal Nehru University, New Delhi

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MOHIT GUPTA MPhil candidate, Centre for the Study of Law and Governance, Jawaharlal Nehru University, New Delhi

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From “Outsider” to Insider: The Case of Reliance

Surajit Mazumdar

Introduction

1 A fundamental premise of this paper is that the capitalist or business class in any society is a product of its particular historical development. Its character is, therefore, not only variable across societies but can also change in any one society over the course of its development. Changes in the composition of the class are one of the mechanisms through which such transformations of its character can be effected. This paper makes use of a case study of the pre-liberalization rise of a new business group in order to derive insights about the nature of the contemporary Indian capitalist class. The extent to which this group shed its original character and became more industrial in nature before India’s opening up process began in 1991 will also be explored.

2 India’s modern capitalist class was born under the very specific conditions of a colonial economy, emerging from a mercantile background and initially under the shadow of foreign dominance even in the sphere of business (Ray 1994). For nearly a century after it came into being, its development was constrained by the extremely limited growth of a modern factory industry that was made possible by colonial conditions. A domestic market-based process after independence saw industrial development become relatively more rapid and diverse. Yet India never quite made the transition to being an industrialized economy before Indian capitalists came to confront a new competitive context with India’s full-scale entry into the Globalization process (Mazumdar 2008). Through this period, big business in India remained primarily family controlled and was usually organized in the specific form of the business group.

3 While the overall extent of industrialization between independence and the onset of liberalization in 1991 remained limited, it was accompanied by a marked continuity as well as important shifts in the composition of Indian big business (Mazumdar 2011). Notwithstanding the continued dominance of older elements within them, entry into and exit from the large business sector as well as a significant reordering of relative

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positions did take place over that period. These changes contradict the commonly held view that the competitive context created by the regulatory regime of Indian dirigisme was tailor-made to perpetuate the reproduction of a traditional Indian business elite since it protected this elite from competition from new entrants. However, the change in the composition does not by itself tell us if there was any fundamental transformation in the nature of the capitalist class.

4 Of the new groups that emerged in the large business sector, the Reliance group was the most important representative. The story of its rise to the top ranks of Indian business groups is a chapter of the period after independence and up to the pre-1991 era of Indian capitalism. Its history was not traceable backwards to any old business firm of the pre-independence period. Yet, by 1990 Reliance was already among the largest of Indian private business groups, behind only the Tata and Birla (unified) groups in terms of assets. Understanding the basis for the success of Reliance in the context of rivalry with older established constituents of the capitalist class can thus yield some insights about the nature of the change expressed as that growth.

5 The method used to construct the story of the Reliance phenomenon in this paper involved the mutually interacting processes of assembling detailed evidence derived from a variety of available sources and finding a plausible interpretation of all that evidence. Insights into the structure of business groups, available from major studies undertaken in the 1960s (Hazari 1966; Government of India 1969), the ways of identifying linkages within a group and some of their implications proved to be specifically important for this exercise. Our method may be contrasted with a different approach prevalent in some of the current international literature on business groups in “emerging markets” (Bertrand, Mehta and Mullainathan 2002; and Ghemawat and Khanna 1998; Khanna and Palepu 2000 and 2005; Khanna and Rivkin 2001; Khanna and Yafeh 2007; Leff 1978). Eschewing the task of putting together detailed concrete evidence on such groups, the approach in these studies tends to use anecdotal observations to construct explanatory models and derive hypotheses about the behavior of groups that are then sometimes “tested” against the readily available statistical evidence.

6 It should, however, be emphasized that this study has been based entirely on information and data accessible from publicly available documents (details are given in the bibliography). Extensive use was made of the statutory filings with the Registrar of Companies and annual reports of some of its major companies (including their balance sheets and profit and loss accounts). Records of over a hundred companies were examined in the process. In addition, information was culled from reports of India’s Monopolies and Restrictive Trade Practices (MRTP) commission or the Bureau of Industrial Costs and Prices and other official reports, as well as some prepared by different industry associations. The academic literature existing on the subject and the available official data sources were used to prepare the background story of the textile and petrochemical industries in India as well as internationally. The Bombay Stock Exchange Official Directory also provided a great deal of information on the history of many companies engaged in these industries. Of course, what has been extracted from all these sources can only be presented in summary form in this paper.1

7 Confidential insider information or interviews of either those involved in the Reliance group or those who dealt with it in any official capacity could, if available, have of course been used as additional material. Some such information is available in

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published biographical accounts (McDonald 1998; Mohnot 1987; Piramal 1997; Piramal and Herdeck 1984). However, this study does not rely excessively on these sources. Part of the reason for this is simply that independent access to reliable material of this kind —to add to or corroborate what was available in existing accounts—would not have been easy to get. Such material could in any case not have completely substituted for the information gathered from the sources mentioned earlier. This was all the more so since one of the objectives of this study was also to shift attention from a virtually exclusive focus on the innate and highly exceptional abilities of a particular individual and to demystify the Reliance phenomenon by bringing out the combination of historical forces that produced it. Directing the effort towards the also significantly difficult task of putting together what was available in the public domain but scattered across a variety of sources thus seemed to be the better route to take. Reinforcing this choice were two important points. First, the final outcome that it was possible to say a lot based on the evidence compiled. Further, this more reliable evidence was also found to be in contradiction with some impressions that have acquired the status of “facts”— for instance the myth that Reliance was forced to resort to capital issues because it could not get credit from public sector financial institutions.2

The Reliance group in 1990

8 Like other Indian groups, the Reliance stable included a large number of companies (close to 200), though only 10 companies and 5 partnership/proprietorship firms were registered under the then existing MRTP Act as inter-connected undertakings of the group. Most of these companies were primarily investment and trading companies and the group’s manufacturing activities were concentrated in a small number of companies—the bulk of them in the one major public company, namely Reliance Industries, and its two subsidiaries. Moreover, manufacturing was the principal business activity and while the large number of investment and trading companies performed important functions, investment and trading were only nominally their business and not the actual reasons for which they existed. They were interconnected to each other through cross-holdings and common directors. Many of them in turn together held a fifth of the share capital of Reliance Industries and this constituted the major part of the stake through which the Ambani family exercised control over the company (the direct holding by the family being less than one percent). A summary and approximate presentation of the structure of inter-corporate investments within the Reliance Group is shown in Figures 1A and 1B, incorporating 141 companies and based on shareholding information for the period from 1983 to 1990.

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Figure 1A

Notes: 1. Cos. Marked ‘M’ regd. under MRTP Act in 1990 2. All arrow originate from company(ies) holding the shares 3. Arrow to/from top/bottom of box valid for entire box. Arrow to/from side only for sub- box

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Figure 1B: Structure of interconnections, Reliance group, Part B

Note: Companies in Box A appear in Fig. 1A as well.

9 While the key figure associated with the rise of Reliance was Dhirubhai Ambani, a larger extended family including not only his two sons but also the immediate families of his brothers, Natvarlal and Ramniklal, as well as their relations by marriage formed a large and cohesive controlling group. While Reliance was not an inherited family business, the Ambani family belonged to a mercantile caste group and their social network had always included wealthy members of their community (McDonald 1998).

10 In Reliance Industries family members occupied the positions of Chairman, Managing and Joint Managing Directors and Executive Directors in 1990. Another director was T. Ramesh. U. Pai was from the Manipal group with which Reliance had a long association. Two other directors, Jayantilal R. Shah and Mansingh L. Bhakta, had also been directors of the company from the time it was still a private limited company (before 1977). Indeed, the Board of Directors of Reliance Industries in 1990 did not look very different from what it had been nearly a decade and a half before. The Secretary of the company was also the same, as were the auditors and the advocates and solicitors.3

11 By the end of the 1980s, Reliance’s manufacturing activities were largely concentrated in petrochemicals—with polyester and polyester intermediates forming the core, but with a greater diversification underway. While this gave it a strong linkage with the textile industry, the textiles side proper of Reliance’s manufacturing portfolio accounted for less than a fifth of its sales in 1990. It was also in petrochemical products that Reliance had achieved the status of leading firm in a range of industries— accounting for a significant (mostly largest) share in installed capacity, production and sales of Polyester Filament Yarn, Polyester Staple Fiber, Linear Alkyl Benzene, Purified

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Terepthalic Acid and Paraxylene (Tables 1 and 2). Thus it was not only big in an aggregate sense but was also a dominant firm in its industries of operation.

Table 1: Number of Companies and Reliance Share in Installed Capacity in Selected Industries, 1990

Number of Percentage Share of Reliance in Total Industry Installed Product Companies Capacity

24.41 PFY 16 24.41 24.41

22.95 PSF 10 22.95 22.95

42.86 LAB 3 42.86 42.86

100.00 (42.55) PTA 1 (4) 100.00 (42.55) 100.00 (42.55)

74.59 Paraxylene 3 74.59 74.59

Figures in brackets represent the position with regard to the aggregate of PTA and its substitute, DMT. Source: DGTD, Handbook of Indigenous Manufacturers, 1990; CMIE, Markets & Market Shares, 1991; GOI, BICP (1994).

Table 2: Production Shares and Market Shares of Reliance Industries in 1989-90 (Percentages to Industry Totals)

Reliance Share in Sales Product Reliance Share in Production Quantity Value

PFY 38.04 N.A. N.A.

PSF 41.93 44.32 33.61

LAB 38.54 45.53 43.78

PTA 100.00 (50.35) 100.00 100.00

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Paraxylene 76.89

Source: CMIE, Markets & Market Shares, 1991and GOI, BICP (1994).

Brief history of the Reliance group

12 The commercial history of the Reliance group began with the creation of Reliance Commercial Corporation, a partnership firm, in 1958. From then on till 1966, when Reliance Textiles and Engineers Ltd. was registered, the group had apparently no manufacturing activity and was engaged only in trading. Reliance Textiles and Engineers was also the first joint-stock company of the group. This was thereafter always its most important company as well, the entity that eventually became Reliance Industries Ltd. in 1985.4 Its growth served as the barometer for the growth of the entire group after 1966. Until 1977 it was a private limited company, which went public in that year.

13 In terms of its organizational features therefore, three phases of the Reliance group’s growth up to 1990 may initially be distinguished: 1958 to 1966, when it operated through partnership or proprietorship firms; 1966 to 1977, when first one and then a few other narrowly-held private limited companies were added to the group’s stable; and 1977 to 1990, the period in which the principal group company became an extremely widely held public limited company, and there was a rapid proliferation in the number of companies in the group.

14 The incorporation of the first joint-stock company of the group neatly coincides with the entry of the Reliance group into manufacturing. However, the subsequent period up to 1990 can also be divided into two phases on a different basis, with 1982 as a dividing line. Prior to Reliance going public, and for a period subsequent to that, Reliance’s principal involvement was in the textile industries. In the 1980s, the focus shifted to polyester and other petrochemicals, and these became the locus of its growth from 1982 onwards and gave rise to the picture in 1990 described above. Thus the period up to 1982 may be called the textiles phase of Reliance’s growth and the subsequent period the polyester fibers/petrochemicals phase. However, it may be noted that the textiles phase after 1977 was not just a mere expansion of past activities, and the same was also true of the polyester/petrochemicals phase from 1986. There was also an essential continuity that accompanied each transition and aided it.

1958 to 1966: The trading phase

15 Reliance Commercial Corporation (RCC) began its business activities with the export of spices and other items to the Middle East and East Africa (Mohnot 1987; Piramal and Herdeck 1984). Somewhere along the line the trading activities were extended to include textiles. By the mid-sixties, Reliance’s business involvement with the textile and man-made fibers industry, in particular with what was known as the “art silk” industry, would appear to have been fairly deep. Though the art silk industry in those days was an export-oriented industry, and was given various incentives by the Government for that reason, Reliance’s primary focus in this period was not really on exports of rayon textiles but on the domestic market for synthetic fibers. “Exports”

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were simply the instrument for taking advantage of the incentives and acquiring synthetic fibers whose production had not yet taken off in India, though their use in the manufacture of fabrics had acquired proportions of some significance. Thus the early history of the Reliance group coincided with the incipient stages of the development of the synthetic fibers and textiles industry in India.

1966 to 1977: The first textile phase

16 Subsequent to the coming into being of Reliance Textiles and Engineers, the Reliance group incorporated only 5 other companies before 1977: Reliance Exports (1969), Vimal Fabrics (1973) and three companies in 1975 (Anil Fabrics, Dipti Textile Industries, and Nina Textile Industries). These were to take over the running businesses of three partnership firms in which members of the Ambani family were partners. The growth in the first decade after the entry into manufacturing was, however, quite rapid (Table 3), and by 1975-76 the group had crossed the Rs. 20 crores (200 million) mark in terms of value of assets. At that time, this figure was the asset limit beyond which registration under the MRTP Act was required (even though the actual registration of Reliance companies under the Act occurred in 1978). The combined sales of the group had nearly reached the Rs. 100 crores (1,000 million) mark by 1976-77. Thus, the Reliance Group had reached a fairly large scale even before it included any public company.

Table 3: Selected Balance Sheet Items of Reliance Group Companies, 1970-71 and 1976-77 (Values in Rs. Lakhs)

Year Share Capital Net Worth Gross Block Net Block Total Assets/Liabilities

RELIANCE TEXTILE INDUSTRIES

1970-71 65 152.18 289.14 265.03 399.81

1976-77 595.11 954.16 1,699.92 1,451.45 2,910.87

TOTAL for All 6 Group Companies

1970-71 65 152.18 289.14 265.03 399.81

1976-77 655.33 1,023.37 1,756.91 1,489.03 3,082.93

Source: Company Balance Sheets

17 As earlier, the core of the group’s business activities remained centered around the synthetic textile industry. While Reliance Exports occasionally dabbled in other business, the dominant sector in the group’s operations was textiles and ultimately every company within the group focused itself on the textile industry. In 1977, the Reliance group was a combination of an art-silk weaving/knitting unit, a processing house for synthetic fabrics and yarns, and a trader in fabrics and yarn (the indicators in Table 4 serve to establish this). Thus while it had graduated from its purely trading enterprise character in the first phase, it still remained on the intersection between

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trading and manufacturing. Moreover, while it was an organized sector unit it was actually a part of the “powerloom” sector.5

Table 4: Indicators of Manufacturing Activity and Capacities of Reliance Group Companies, 1975-76 and 1976-77 (yarn quantities in kilograms and fabric quantities in meters)

Item Total for 4 companies

1975-76 1976-77

Raw Materials Consumed

Yarn 2,101,253 2,416,260

Fabrics (Grey) 8,648,496 6,089,677

Production

Crimped Yarn 1,498,450 1,762,983

Fabrics 15,273,260 14,391,274

Installed Capacity (Numbers/Spindles)

Looms 246 246

Knitting Machines 34 34

Crimping Machines 2,848 2,848

Twisting Machines 20 20

Source: Company Annual Reports

18 While the group still continued to “export” as a means of securing import entitlements, by the mid-seventies its manufacturing and sales activity was mainly directed towards the domestic market; its export earnings even declined. However, from the entry into manufacturing through the installation of imported machinery up until 1977, the dependence of the group on imports for production and expansion activity was substantial (Table 5).

Table 5: Import Intensity of Reliance Textile Industries Investment and Production, 1975-76 and 1976-77 (Values in Rupees Lakhs)

1975-76 1976-77

1. Imports

Raw Materials 420 350

Dyes, Chemicals, Stores and Spare parts 18 16

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Capital Goods 84 154

Total Imports 522 520

2. Import Intensity of Investment

Capital Goods Imports as Percentage of Increase in Plant and Machinery 28 49.68

3. Import Intensity in Current Costs

Share of Imports in Consumption of Raw Materials and Dyes, Chemicals, etc. 41.15 48.24

Source: Company Annual Reports

19 Much of this expansion of the Reliance group was debt financed (Table 6), and loans accounted for two-thirds of its total liabilities in 1976-77. Public-sector banks and ICICI6 were its major creditors. Even the conversion of Reliance Industries into a public company was initially prompted by the condition accompanying the agreement of public-sector financial institutions’ to support Reliance’s expansion project in 1976-77. All the major public-sector financial institutions7 were involved in this arrangement under which they agreed to finance nearly 69% of the total project cost of Rs. 1,250 lakhs (including foreign currency loans of Rs. 239 lakhs), which was nearly half of the value of the company’s assets at that time.

Table 6: Structure of Liabilities of the Reliance Group, 1970-71 to 1976-77

Percentage to Total Liabilities Year Net Worth Secured Loans Unsecured loans Total Liabilities

Reliance Textile Industries

1970-71 38.06 48.10 13.84 100.00

1971-72 37.73 61.16 1.11 100.00

1972-73 33.72 65.43 0.85 100.00

1973-74 35.79 63.50 0.71 100.00

1974-75 40.63 59.24 0.06 100.00

1975-76 37.79 60.70 1.44 100.00

1976-77 32.78 65.04 2.18 100.00

All Group Companies

1970-71 38.06 48.10 13.84 100.00

1971-72 37.73 61.16 1.11 100.00

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1972-73 33.72 65.43 0.85 100.00

1973-74 35.78 63.46 0.76 100.00

1974-75 40.63 59.14 0.16 100.00

1975-76 38.36 62.11 1.43 100.00

1976-77 33.19 63.84 2.20 100.00

Source: Company Balance Sheets

20 Thus it is quite clear that significant support from public-sector financial institutions and banks at an early stage of its history was a critical element in the making of the Reliance story. The establishment of a close association with the Pais of the Manipal group (erstwhile controllers of Syndicate Bank) and with the ICICI would appear to have played an important role in securing this institutional financing. Even before Reliance Textile Industries became a public company, ICICI had become a minority shareholder. There is also clear evidence of the formation of a link with the Pais. During the early 70s (until 1972), Reliance Exports operated a business of rubberized coir products under the agency of Karnataka Coir Products Ltd., a Manipal Group company. As mentioned earlier, the Manipal Group also acquired in this period a minority shareholding in Reliance Textiles, when it was still a private company. So too did Syndicate Bank, with which the Pais had a close association both before and after its nationalization in 1969.8 Again, Syndicate Bank gave an irrevocable guarantee in lieu of hypothecation of the plant and machinery for Reliance’s borrowing from the ICICI in this period. MAC Investments, an investment company which ultimately was to become (with its eight subsidiaries) a crucial link in the chain connecting various Reliance companies was originally a subsidiary of Maharashtra Apex Corporation, another Manipal Group Company. Mynylon Ltd. referred to in the next paragraph was also associated with the Manipal group. The significance for Reliance’s growth in this phase and thereafter of this close personal association with a group that had a long history in financial businesses, and with individuals who were part of the political establishment, cannot of course be calculated from any statistics.

21 The first manufacturing phase of Reliance’s growth came to an end with the public offer for the equity shares of Reliance Textiles in late 1977, and its subsequent listing on the Bombay and Ahmedabad Stock Exchanges in January 1978. The conversion to a public company was, however, accomplished through a complex course. First Reliance Textiles was amalgamated into another company with no business, Mynylon Ltd., whose name in turn was changed to Reliance Textiles and its registered office shifted from Bangalore to Bombay. This otherwise strange sequence was apparently undertaken with the objective of maximizing the increase in the family holding in Reliance Industries before converting it into a public company. The number of shares did increase from 17 to 59.5 lakhs as a result of the amalgamation, and it is from this increase that the family offered 28.2 lakh shares for sale to the public in 1977, in order to get the company listed on the stock exchanges.

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1977 to 1990: From textiles to petrochemicals

22 The first public offer of shares by Reliance Textiles, and the subscription to it, did not bring any additional finance into the company because it only amounted to a change of ownership of existing shares. However, the oversubscription of that issue pointed towards possibilities which Reliance was then able to exploit. Recurrent large public capital issues became thereafter a major source of financing for the rapid expansion that made Reliance one of the largest business groups in the country. It became the most significant beneficiary of the capital market boom of the 1980s (Table 7), the conditions for which were created by larger trends in the Indian economy and the consequent increase in financial savings. Public-sector financial institutions continued to provide fairly significant financing support. However, given the scale of expansion, in purely relative terms this support was less significant than it had been before 1977.

Table 7: Public Capital Issues by the Private Corporate Sector, 1980-81 to 1989-90

Group No. of Issues Amount Raised (Rs. Crores) Percentage to Total Capital Issues

Large Issues (Over Rupees 50 Crores)

Reliance 8 1,749.00 9.16

Tata 10 1,261.76 6.61

Birla 11 1,024.93 5.37

L & T 4 994.19 5.21

Oswal Agro 4 871.72 4.56

Usha Rectifier 3 714.50 3.74

Essar 3 506.53 2.65

Total Issues 4,938 19,096.54 100

Reliance (All Issues) 13 1,833.79 9.60

Source: Mishra, B. M. (1993)

23 Coinciding with the transformation of Reliance Industries into a public company was the addition of a new dimension to the group’s growth—a consistent trend of proliferation of the number of its companies (Table 8). This regular increase in the number of investment and trading companies was associated with the need to increase (even if not proportionately) the shareholding of Reliance Industries that the family could control, even as the share capital base of the company increased massively. Narrowly held investment and trading companies could achieve this objective by subscribing to shares or acquiring them through purchases and financing these purchases by borrowing from institutional and non-institutional sources. The proliferation of companies also made it possible to transfer both the debt and the

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holdings from one set of companies to another, allowing each of them to service their own individual debt.

Table 8: Increase in the Number of Companies of the Reliance Group, 1978 to 1989

Year-> 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

Companies Registered in the 6 7 2 10 17 21 31 6 49 5 2 5 Year

Cumulative Total of 12 19 21 31 48 69 100 106 155 160 162 167 Group Companies

Note: The above table excludes companies for whom the relevant information was not available. 7 companies that were registered earlier but acquired during this period have also not been included. Source: Company Memorandums of Association and Directory of Joint Stock Companies, 1990

24 The growth of Reliance Industries however still served as the barometer of the growth of the group (Table 9). In contrast to the earlier phase, the growth of its assets in this period was more rapid than of its sales. This reversal was a result of the gradual replacement by the group of trading and processing related sales by sales based on its own production and its increasing vertical integration. This happened in two stages. The initial expansion after Reliance Industries became a public company was within the textile industry itself—partly the completion of the expansion project mentioned earlier, which saw an increase in the number of installed looms. The group also entered into the spinning of yarn for the first time when it set up a new unit for the manufacture of man-made fiber yarn on the worsted system. The weaving and spinning capacities were also expanded by the acquisition of a sick industrial unit, Sidhpur Mills (originally belonging to the Shri Ambica group). However, even as Reliance Industries became through these a more conventional textile mill, it also ceased to grow on that basis.

Table 9: Growth of Reliance Industries: 1977-78 to 1989-90 (Values in Rupees Crores)

Year Share Capital Net Worth Net Fixed Assets Total Assets/Liabilities Sales

1977-78(15) 6.25 14.44 25.03 57.98 120.11

1979 7.84 23.63 37.74 85.42 155.13

1980 12.36 31.79 57.95 124.66 214.58

1981 16.97 57.09 105.56 222.51 312.22

1982 24.40 91.54 314.61 317.98 421.03

1983 41.95 129.88 321.46 388.42 520.35

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1984 51.98 246.39 426.28 490.45 622.01

1985 57.41 311.12 606.80 946.76 733.14

1986 57.41 311.53 949.46 1,137.34 905.48

1987-88(18) 157.90 1,022.12 1,584.08 1,956.69 1,770.74

1988-89(9) 157.91 1,071.31 1,502.78 2,123.65 1,112.45

1989-90 157.92 1,086.98 1,469.01 2,203.31 1,840.66

Note: Figures in parentheses indicate number of months in the relevant accounting period when different from a year Source: Company Annual Reports

25 The Reliance group’s textile manufacturing capacities, measured in terms of spindlage and loomage, remained virtually frozen from 1979 onwards and the increase in capacity thereafter was limited to that due to modernization operations (Table 10). The entire thrust of expansion shifted towards petrochemicals, which was in fact initiated alongside the last major expansion in textiles. The commissioning of the Polyester Filament Yarn (PFY) project in 1982 marked the first realized step of this change in course. By the mid 1980s, Reliance had applied for and secured clearances (partial or complete) for expanding its PFY capacity and setting up large capacities for the manufacture of a range of petrochemicals—Polyester Staple Fibre (PSF), Purified Terepthalic Acid (PTA), Monoethylene Glycol (MEG), Linear Alkyl Benzene (LAB), High Density Polyethylene (HDPE), Polyvinyl Chloride (PVC), and Synthetic Filament Yarn including Industrial Yarn/Tyre Cord. By the end of the 1980s, it had secured further Letters of Intent or Licenses for the manufacture of Ethylene, Propylene, and Butadiene, Synthetic Rubber, as well as acrylic fiber. In other words, its planned areas of expansion covered the entire range of the four main categories of petrochemicals— viz. plastics, synthetic fibers, synthetic rubber, as well as the synthetic organic chemicals used in their manufacture. In this period the group also secured clearances for a few projects outside the sphere of petrochemicals—for the manufacture of colored glass shells and TV tubes as well as Chlorine (with Caustic Soda and Hydrogen as by- products).

Table 10: Installed Capacity of Reliance Group Companies, 1977-78 to 1989-90

TEXTILES PETROCHEMICALS

Cotton/Blended/ Crimped Product→ MMF Fabrics PFY PSF PTA LAB Yarn

Crimping and Knitting Spindles/ Looms/ Unit→ Twisting Machines/ M.T. M.T. M.T. M.T. Nos. Nos. Machines/Nos. Nos.

End-Year RELIANCE INDUSTRIES

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1977-78 0 61 450 22 0 0 0 0

1979 9,582 80 450 22 0 0 0 0

1980 12,494 122 450 22 0 0 0 0

1981 50,682 130 940 22 0 0 0 0

1982 50,682 200 940 22 10,000 0 0 0

1983 50,682 221 940 22 10,000 0 0 0

1984 50,682 0 940 22 10,000 0 0 0

1985 12,494 0 450 18 25,125 45,000 0 0

1986 12,494 0 450 16 25,125 45,000 0 0

1987-88 12,494 0 450 20 25,125 45,000 100,000 60,000

1988-89 12,494 0 450 20 25,125 45,000 100,000 60,000

1989-90 12,494 0 450 20 25,125 45,000 100,000 60,000

DEVTI FABRICS

1986 36,448 0 490 0 0 0 0 0

1987 35,496 0 490 0 0 0 0 0

1988-89 36,546 0 490 0 0 0 0 0

1989-90 37,536 0 490 0 0 0 0 0

Source: Company Annual Reports

26 Of course not all of these approvals had been converted into actual capacities by 1990. In 1985, the capacity of the PFY plant was increased by 2.5 times and a horizontal diversification was achieved with the commissioning of the PSF plant. In 1987-88, the PTA and LAB capacities were commissioned, the former representing a backward integration from PFY and PSF manufacture. A further step in backward integration was achieved in 1989 with the commencement of paraxylene production for the manufacture of PTA. The MEG, HEG, HDPE, PVC, Chlorine and by-products projects were still under implementation in 1990 while those of others had not been initiated.

27 The strategy of growth that Reliance pursued in the 1980s was thus clearly not that of the backward integration of a synthetic textile manufacturer. On the contrary, the expansion strategy adopted was one of using its base in the synthetic textile industry to transform itself into an enterprise with the manufacture of petrochemicals as its core activity. Facilitating that metamorphosis was the essential link between its earlier base in textiles and its new thrust in petrochemicals provided by synthetic yarns.

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28 As in the earlier phase, in the petrochemical phase as well the growth of Reliance was based on the domestic market but required an exceptional ability to command imports and foreign exchange. Large capital goods and technology imports were associated with its major foray into petrochemical manufacture in the 1980s. Further, its backward integration process only involved the replacement of one set of its imports by another, so the imported component of its raw material consumption remained high throughout (Table 11).

Table 11: Import Intensity of Current Consumption of Reliance Industries, 1977-78 to 1989-90 (Percentage Share of Imports)

Raw material Consumption Dyes, Chemicals, Spares and Parts Consumed Total

56.77 37.00 54.67

Source: Company Annual Reports

Explaining Reliance’s growth

29 In different ways in different periods of its growth from 1958 to 1990, through its transitions from trading to processing and manufacturing activities, and from textiles to petrochemicals, the trajectory of the Reliance group remained firmly tied to that of the synthetic textiles industry in India. Even the growth in the 1980s, though mainly outside the textile industry proper, was based on products that were part of the chain of production of synthetic textiles. In other words synthetic textiles provided a common thread to a process of growth that took place along the intersections of the textile and chemical industries, where the shifting weight was one of the features of Indian industrialization over the period. The path of rapid expansion that Reliance took advantage of was created by the overall trajectory of import-substituting industrialization based on a dissemination of technology from advanced capitalism.

30 The post-war period had seen the initiation of a rapid transformation in the global textile industry, which had until then been an extremely slow-changing industry (Kroese 1971 and 1972; Strolz 1971; Thiriez 1970). Technological changes originating in the textile machinery and chemical industries, the conditions of the Golden Age, and the new political context of the world, were the driving forces of these changes. The increasing use of synthetics as opposed to natural (and even rayon) fibers—polyester being the most important—and the increasing speed of machinery and use of newer techniques like knitting were indications of the changes in textile manufacture that were initially most marked in the advanced economies. Alongside that, however, was also a redistribution of the more conventional spinning-weaving and cotton based textile production towards the underdeveloped economies. Synthetic fibers and their intermediates were products of the petrochemical industry, and a handful of advanced- country MNCs came to initially dominate world synthetic fiber production (Read 1986; Spitz 1988; Tisdell and MacDonald 1979). The end of the Golden Age in the 1970s and the consequent crisis of the synthetic fiber industry, along with the ongoing process of global redistribution of textile production, set the stage for a more widespread

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diffusion of synthetic fiber manufacture to the Asian continent and a process of import- substitution in them.

31 India too was incorporated into the changes within the global textile and synthetic fiber industries but in its own specific way (Alam 1982; Chandrasekhar 1984; Chaudhuri 1994; Goswami 1990; Khanna 1984, 1989; Mishra 1993; Siddharthan and Narayanan 1990). The initial redistribution of world textile production did not have any significant impact in India. It was one of the few Third World countries that already had substantial textile industry and the Indian process of import-substitution in textiles had been completed before independence. Instead, stagnant demand conditions in India and an increasing shift of fabric production into the “decentralized sector” resulted in a protracted crisis for the organized textile industry—most acutely in its fabric production segment. However, there was a gradual penetration of synthetic fibers and a trend of change in the fiber composition of textiles. This penetration first took the form of imports and then synthetic fiber manufacture and the petrochemical industry got established in the 1960s at the state’s initiative and with its support.

32 Though the growth of synthetic fiber and fiber intermediate production was in itself of an import-substituting kind, the growth of the synthetic textiles and fibers industry had at the same time a domestic production-replacing character. In comparison to the cotton textiles that they replaced, synthetic textile growth had to be significantly more import-dependent for both inputs as well as technology. Foreign exchange availability and the import-policy environment therefore were important factors conditioning their growth. The greatest expansion and rapid import-substitution in these industries actually took place in the 1980s, so that India also came to participate in the global redistribution of such manufacturing.

33 Notwithstanding the crisis in the organized textile industry, organized sector units did play an important role in the increasing penetration of synthetic fibers. To begin with, before the 1980s, most of the processing of yarn as well as the production of synthetic fabrics were undertaken by organized units—some of the traditional spinning-weaving mills focused on blended fabrics, while organized units outside the mill sector in the art-silk industry specialized in synthetic fabrics. At this time, synthetic fibers were costly and the market for synthetic textiles was small and concentrated in the upper- income segments. In the 1980s, however, the global cheapening of synthetic fibers relative to cotton, partly through the increased scales of production of these fibers in India, led to a greater penetration of synthetics into the mass-market for textiles. The more conventional “decentralized” or powerloom units, however, led this process. Yet this meant an expansion of the market for synthetic fibers and the scope for growth in their manufacture—behind the wall of protection from imports—and the production of synthetic fibers and intermediates was the natural preserve of organized sector units. In comparison to the other textile related activity, technological factors made the minimum levels of concentration in their production also significantly higher.

34 Clearly Reliance’s trajectory of growth was one that closely reflected the overall pattern of expansion for organized units connected to the textile industry, associated with the increasing penetration of synthetic fibers. The group began with trading in synthetic fibers. It then moved into the manufacturing and processing of synthetic textiles and the processing of synthetic yarns, enabling the group to grow through its participation in the process of substitution of cotton textiles by synthetic textiles in the upper segment of the market. Since Reliance had no history in that industry, it was able

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to avoid the parallel crisis that afflicted the cotton textiles industry. In the 1980s, as the scope for growth of organized sector units in synthetic textile manufacture tended to reach a plateau, Reliance moved backwards and tied its fortunes with the synthetic fiber and petrochemical industries, where the potential growth opportunities for individual organized sector enterprises came to be greater. The base in these industries in turn enabled the horizontal expansion into the manufacture of other petrochemicals that Reliance initiated towards the end of the decade.

35 What is in addition a remarkable feature of Reliance’s growth is that even in the Indian context it was not a pioneering firm—whether one considers the activities with which the Reliance group began its manufacturing history or any one of those it subsequently diversified into. It was typically a later entrant in all of them, though usually before they had achieved full maturity. Synthetic textile manufacturing, including both knitting and weaving units, existed before 1966 and Reliance as a trading enterprise in fact did business with them. The spinning of synthetic fiber yarn began much before Reliance entered into that field in the late 1970s. Reliance’s entry into PFY manufacture was nearly a decade and a half after its first production in India, while the same gap in the case of PSF was two decades. The public sector Indian Petrochemicals Corporation (IPCL) initiated the manufacture of polyester intermediates in 1973, again a decade and a half before Reliance’s entry into this activity. Even in the case of LAB, Reliance followed IPCL and the private sector Tamil Nadu Petroproducts of the M. A. Chidambaram group.

36 Not only was it typically a later entrant, Reliance’s entry in most of the industries was also as part of a generalized trend of investment in them in which other new entrants or incumbent firms, both private and public sector, also participated. In other words, the directions in which it chose to seek growth opportunities were not typically unique.

37 In its textiles phase, the Orkay group closely resembled the Reliance group. The Orkay group, like Reliance, was not a traditional large group, and began its business activities through partnership firms. Orkay Silk Mills, the principal group company in 1990, was incorporated in 1968 to take over the business of a partnership firm set up in 1957. The group was involved in the organized synthetic textiles industry till the 1980s, like Reliance combining the knitting and weaving of textiles with the processing of fabrics and synthetic yarns. In the 1980s, it too diversified, like Reliance and in the same year, into the manufacture of PFY as part of a proposed expansion into chemicals.9

38 In 1981, apart from Reliance and Orkay, two of the existing manufacturers of PFY, Petrofils Co-operative and J. K. Synthetics, were also granted approval for substantial increases in their capacity. Between that year and 1984, before Reliance secured approval for its entry into PSF manufacture, two existing units, J. K. Synthetics and BRPL, and two new entrants, India Polyfibres and Orissa Synthetics, secured approvals for a large addition to the industry capacity. Indeed in the 1980s, four-fifths of the capacity expansion in PFY and PSF manufacture was accomplished by some 20 odd firms other than Reliance. Apart from Reliance, J. K. Synthetics, Bombay Dyeing of the Nowrosjee Wadia group, and the public sector Bongaigaon Refinery and Petrochemicals (BRPL) and IPCL expanded or created capacities for polyester-intermediate manufacture. The combining of PSF and PFY manufacture was done before Reliance by J. K. Synthetics, which along with BRPL also preceded Reliance in going in for a degree of vertical integration in polyester manufacture.

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39 If its expansion was nevertheless of an exceptional magnitude it was because of two features of Reliance’s growth:

40 No other group or company operating in the same industries as Reliance managed to achieve involvement in all the industries it was able to diversify into through its sequence of expansion. Orkay for example matched Reliance’s trajectory up to the point of entry into polyester manufacture but not thereafter. BRPL, manufacturing paraxylene, Dimethyl Terepthalate (DMT), and PSF, came the closest to Reliance’s petrochemical-product profile, but did not have the same involvement in the textile industry. Neither did IPCL, a producer of paraxylene and DMT, and a host of other petrochemicals in whose production Reliance was still creating its entry capacities in 1990. Other private groups combining involvement in the textile and synthetic fiber industries on the other hand had no presence in fiber intermediate and petrochemical industries, with the exception of the limited captive capacities for DMT and MEG of the J. K. group. Bombay Dyeing produced one fiber intermediate, DMT, but the Nowrosjee Wadia group was not involved in synthetic fiber manufacture.

41 In both its textiles as well petrochemicals phase, the Reliance group managed to secure for itself a larger share in the expansion of its chosen areas as compared to most other participating enterprises. In each venture it undertook, Reliance acquired a dominant position despite being a later entrant. Its large share in 1990 in petrochemical products has already been highlighted. In its earlier phase, Reliance also clearly became one of the dominant enterprises within the organized art-silk industry. The emergence of a dominant firm of the type that Reliance became in either phase was in itself a likely possibility given the inherently concentrated structure of the industries it operated in. In its textiles phase, the limited size of the upper end of the market for synthetic textiles, the prevalence of non-price competition in it, and the restricted access of firms to imported machinery and inputs, gave it an inherently oligopolistic character. In synthetic fiber and petrochemical manufacture, the existence of significant economies of scale made for highly concentrated industries. Indeed, as the Reliance group graduated from the synthetic textiles to fibers and then to the fiber- intermediates industries, it moved in the direction of industries where scale factors were more and more significant. This made the sequence of its diversification something that could not be easily replicated by a number of firms. By achieving it, the Reliance group successively left behind other enterprises competing with it in an earlier stage of its expansion, even as its scales of production and vertical integration reinforced its position vis-à-vis these competitors.

42 To sum it up then, the story that the Reliance group scripted for itself over its life span from its birth to 1990, a short span of two and a half decades, had its objective basis in factors largely originating outside the group itself, where it had little direct impact or influence. The path that Reliance followed to become one of the largest business groups in India was a creation of the specific pattern of industrialization in the post- independence period. Like other traditionally dominant Indian business groups, it used foreign technology as the basis for taking advantage of that path and was not a technological innovator. Like them it also made significant use of external finance— from both public-sector institutions and the capital market in the 1980s. Even the boom in the capital issues market was something that had its basis in the increased significance of the financial savings of the household sector, which emerged starting in the late 1970s. The investment opportunities the Reliance group used were also not in

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areas overlooked by other firms or considered too risky by them. At each stage the group was induced to move in particular directions by a combination of its own past history as well as the operation of generalized inducements to which other firms also responded. But in its entire sequence of diversification across phases, and the consequent ultimate combination across industries, in its relative position in each industry and the capital issues market, as well as in the scale of its expansion, Reliance was unique amongst all these enterprises.10 But here again objective circumstances dictated that the Reliance-type story, at least in terms of its magnitude, had to be a somewhat unique one.

43 It says something about the nature of Indian capitalism and its capitalist class that such a remarkable story of movement to the top of the corporate hierarchy in India as Reliance’s was based on so little of what could be considered as expressions of industrial entrepreneurship. The only two related elements that can be identified as the key to separating Reliance from others—those that made Reliance rather than any of its actual and potential rivals the most successful exploiter of the opportunities that were in principle open to other firms—were its exceptional success in gaining from the regulatory regime and in mobilizing financing.

44 Reliance’s expansion was achieved in the context of rivalry with other firms which played itself out not primarily in the marketplace but in the determining of the preconditions or parameters of market rivalry. The execution of the growth strategy of Reliance and its rivals necessarily involved multiple points of interaction with the prevailing regulatory regime. Every industry Reliance entered into was governed by the industrial licensing policy so that capacity creation had to be “approved.” Once it became registered under the MRTP Act, additional approvals were required. Foreign collaboration and imports also required approvals and import licenses. If public-sector institutions were the sources of institutional financing, capital issues were also subject to government approval. The levels of taxes, excise duties and import duties were also crucial in determining profitability and market prospects in the industries Reliance operated in. Of course, Reliance was not subject to any exceptional regulation, nor was it the only firm to try and use the regulatory regime to its advantage. The evidence, however, does indicate that Reliance’s success in getting a favorable configuration of decisions by State agencies was rather exceptional through most of its history:

45 The direct results of favorable decisions on the financing side of Reliance’s growth were the support of the public-sector financial institutions and the approvals for making use of the potential for capital issues in the 1980s. It is in the latter that Reliance proved to be somewhat “innovative” and the use of this mode of financing also contributed to reduction in costs of finance. The consequent improvement in profitability in turn also increased the availability of retained earnings for financing expansion. Adding to this was the fact that Reliance paid virtually no taxes on its profits for two decades—taking advantage of available concessions.

46 While it managed to secure licenses and MRTP approvals for what were then fairly large capacity creations/expansions in the petrochemicals industries, Reliance also benefited from the fact that rivals who might have created barriers to its entry by creating similar capacities or diversified structures before Reliance were denied similar approvals. A perusal of rejections/approvals under the MRTP Act for capacity creation, for example, reveals that the Thapar group’s proposal for setting up a PFY plant with a larger capacity than that created by Reliance, and made before Reliance actually began

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its production, was rejected after two years. By contrast, just a year after, Reliance’s proposal for substantially increasing its capacity was approved within the month. Similarly, the Shri Ram group’s LAB proposal made before Reliance was also rejected as were those of others subsequently. Not only applications of other groups for large capacities, but also those that could have created other similarly vertically or horizontally integrated petrochemical manufacturers as Reliance were also rejected— for instance, the Thapar group’s applications for both PFY and PTA, and of the J. K. Singhania group for PFY, PSF and PTA. It had been widely alleged that Reliance succeeded in installing capacities that were much larger than its stated and licensed capacities, and these allegations were even translated into official charges made by the customs authorities (Mohnot 1987). As far as evidence goes, it is true that Reliance Industries’ actual production figures for PFY were much higher than its stated installed capacity, almost double in 1989-90. Similarly, in the case of PTA production, in its very first year of operation, Reliance’s PTA plant produced 25% over its stated capacity. Though it was not the only manufacturer with a capacity utilization of over 100%, the gap between its production and the industry average per unit was larger than in other manufacturers’ capacities.

47 Not only was Reliance able to be a major net user of scarce foreign exchange throughout its expansion path, its raw material consumption and technology imports were more foreign-currency intensive than those of its peers. Also, in the 1980s, the raising of customs duties on imports of certain products and the lowering of excise duties on the same, at times coincided with Reliance’s switch from importing the product to producing it. Thus, in the case of both PFY and PSF, Reliance’s entry was followed by sharp rises in customs duties on imports of these products and in the case of the latter, there was also a parallel reduction in excise duties.

48 The success that Reliance achieved on the financing side, in combination with that in securing approvals, enabled Reliance to pursue a strategy—encompassing the combination of industries, degree of vertical integration, scales of production and technology choices—different from that of any of its rivals. Apart from allowing the group to achieve a larger size, these also secured a decisive advantage for Reliance when the polyester industry faced difficulties because of overcapacity in the late 1980s and some firms turned sick.

Conclusion

49 The phenomenal success of Reliance was very much a product of the pre-1991 regime of Indian capitalism, though the group was also able to make use of that success as the foundation to benefit greatly from the subsequent liberalization process. This of course begs the question—was Reliance truly an outsider which forced its way into the Indian business elite by achieving business success and overcoming the disadvantages of not being initially a part of it? Or was its success itself based on its finding a way to become a privileged insider and making use of the means made available by that privilege? On balance, it would seem that the Reliance story was a specific reflection of the fact that in Indian capitalism business success has heavily relied upon securing means— financing, technology and state support—from the outside rather than on creating technological and managerial capabilities within firms that would be proprietary in nature. Many, though not all, older members of the business elite were able to use

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precisely this feature to transform their enterprises and grow even as the industrial landscape changed and the industries in which they had originally established themselves declined in importance. Reliance’s success and the way it was achieved, however, serves to establish that the degree of influence commanded by a business firm did not have a simple relationship with its past business success, as the causality also operated in the other direction. The growth of Reliance and the survival among the elite of those it joined thus had common roots—highlighting in the process the persistence of the mercantile element in Indian capitalism. Given this, it cannot really be said that the rise of Reliance was an expression of a fundamental transformation in the nature of India’s capitalist class. That the ability to influence government decisions has been an important facet of Reliance’s success even after 1991 (Guhathakurta 2014) would suggest that some essential features of Indian capitalism have survived the transition to liberalization.

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Khanna, Tarun and Krishna Palepu. 2000. “Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups.” The Journal of Finance 55(2): 867–91.

Khanna, Tarun and Krishna Palepu. 2005. “The Evolution of Concentrated Ownership in India: Broad Patterns and a History of the Indian Software Industry.” Pp. 283–324 in A History of Corporate Governance around the World: Family Business Groups to Professional Managers edited by R. Morck. Chicago: University of Chicago Press.

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Statistical and Other References

A. Government

Compendium of Textile Statistics, 1991 and 1993: Office of the Textile Commissioner, Ministry of Textiles, Government of India, Bombay

Consumer Purchases of Textiles, Market Research Wing, Textiles Committee, Ministry of Commerce, Government of India, Bombay

CSO, National Accounts Statistics, various issues: Central Statistical Organisation, Department of Statistics, Ministry of Planning and Programme Implementation, New Delhi.

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Directory of Joint Stock Companies in India 1985: Research and Statistics Division, Ministry of Industry, Government of India, New Delhi.

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Indian Textile Bulletin, various years: Office of the Textile Commissioner, Ministry of Commerce, Government of India, Bombay

Reserve Bank of India: Private Corporate Business Sector in India, Selected Financial Statistics from 1950-51 to 1997-98 (All Industries), Company Finances Division, Department of Statistical Analysis and Computer Services, Mumbai

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B. Non-Government

(Bombay) The Stock Exchange Official Directory, various years: Bombay Stock Exchange, Bombay.

ASFI (Association of Synthetic Fibre Industry), various years: Handbook of Statistics on Man- made/Synthetic Fibre/Yarn Industry, Bombay

Chandhok, H. L. and The Policy Group, 1990: India Database: The Economy, Annual Time Series Data, Living Media India, New Delhi

CIER’s Industrial Databook, 1994: Centre for Industrial and Economic Research, New Delhi

CMIE (Centre for Monitoring Indian Economy): Market and Market Shares, February 1991, Bombay

SASMA (Silk and Art Silk Mills Association Ltd.), 1964: Directory of Members (Brought out on Silver Jubilee of Association), Bombay

SASMA (Silk and Art Silk Mills Association Ltd.), 1966: Statistical Supplement for Year 1965-66, Bombay

SASMIRA (Synthetic and Art Silk Mills’ Research Association), 1974: Statistics Man-made Textiles, Bombay

C. International

UN (United Nations), various years: Industrial Statistics Yearbook/Yearbook of Industrial Statistics, Department of Economic and Social affairs/Statistical Office of the UN

UN (United Nations), 2001 and 2002: Industrial Commodity Statistics Yearbook

D. Reliance

Annual Reports of Reliance Industries and Subsidiaries, 1975-76 to 1989-90

Annual Returns, various years, and other filings of 115 Companies submitted to the Registrar of Companies, Bombay and Bangalore.

NOTES

1. More details are available in Mazumdar (2006) 2. Khanna and Palepu (2005) citing India Unbound: From Independence to the Global Information Age by Gurcharan Das. 3. The founder of one of the auditing firms, D.N. Chaturvedi, was supposed to be part of the inner think-tank of the Reliance group (Mohnot 1987). 4. Incorporated as Reliance Textiles and Engineers Ltd., it was eventually transformed into Reliance Textile Industries Ltd. before finally acquiring the name Reliance Industries Ltd. Technically, however, there was a discontinuity in between which is explained shortly. 5. Organized sector refers to formally registered units/establishments/factories. In the cloth- producing textile industry, the major component of the organized sector was classified as the mill sector (spinning and weaving mills) while the “decentralized” sector included handloom units as well as weaving units using power driven looms (mainly unregistered but including some registered units). 6. ICICI is presently a private-sector bank. It was originally however a publicly-sponsored industrial development bank (see 7 below), which—though created in the private sector with

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shares held by banks, insurance companies, and international financial institutions—effectively became a government company with the nationalization of banks and insurance. 7. The Industrial Development Bank of India (IDBI), the Industrial Finance Corporation of India (IFCI), the Industrial Credit and Investment Corporation of India (ICICI), the Unit Trust of India (UTI), the Life Insurance Corporation of India (LIC) and the General Insurance Corporation (GIC) and its subsidiaries 8. Dattaraj Salgaocar, of the Salgaocar group and son in law of Dhirubhai Ambani, in a tribute to his father-in-law stated that both K.K. Pai (Chairman and Managing Director of Syndicate Bank from 1972 to 1978, and custodian of the Bank after nationalization) and T.A. Pai (Chairman of Syndicate Bank before nationalization, and subsequently a Union Minister) were close common friends of Dhirubhai Ambani and his father in the early 1970s (Goa Today, August 2002). 9. The approvals for the establishment of PFY plants by Reliance and Orkay were on the same date. 10. This statement needs a small qualification: in terms of the absolute increase in size between 1966 and 1990, the Tata and Birla groups achieved a greater expansion than Reliance.

ABSTRACTS

At the time of India’s liberalization, the Reliance group was already one of India’s leading business groups and in subsequent years it has only solidified its place at the top of India’s corporate hierarchy. Reliance was not, however, among the “traditional” large groups that emerged during the colonial era and remained dominant in the mid-1960s. This paper traces the story of the Reliance phenomenon and briefly discusses the process (method) by which that story was constructed. In addition to demystifying the phenomenon, the paper seeks to demonstrate there is sufficient evidence available to assert that the basis for the success of Reliance was fundamentally no different from that which other groups used to perpetuate their dominant position, and that the roots of this success lay in the nature of Indian capitalism.

AUTHOR

SURAJIT MAZUMDAR CESP/SSS. Jawaharlal Nehru University

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Indian Software Capital: Sociography of a New Entrepreneurial Elite

Roland Lardinois

This research was conducted in part in collaboration with Jules Naudet whose work focuses on the top 100 Indian companies listed on the NSE; the selection of the companies studied was carried out by Guillaume Tzelepoglou while Vasundhra Srivastava contributed to the collection of the data. I am grateful to Vena S. Kulkarni, Professor of Sociology, Arkansas State University, who has identified the caste origin of the managers through the study of their familys’ names. A preliminary analysis of the data was carried out by Kenza Haouche, from the ENSAE, Paris, using “R” software; the final analysis was elaborated by the author; Mathieu Ferry has always been helpful in answering my questions. This paper owes much to the three anonymous reviewers who helped me to clarify my point even if I have not been able to resolve all their queries. Finally I want to thank Praveen Singh Bhada who introduced me to Pramod Maheshwari at Career Point, Kota (Rajasthan).

Introduction

1 The Information Technology (IT) and IT Enabled Services (ITES)1 or to put it simply the software industry is a newcomer in the economic history of India. If we consider the year the hundred major IT companies went public, being listed at the National Stock Exchange (NSE), 83 % of them (see below) were founded after 1985. Yet today the economic weight of this industry is quite impressive. According to NASSCOM, the premier professional trade body for the software industry, the Indian share of the worldwide IT market more than doubled from 24 % in 2002 to 55 % in 2015 (NASSCOM 2015). This Indian industry was estimated to account for revenues of 146 billion US dollars in 2015, and the annual growth rate has risen from 1.2 % in 1998 to 6.4% in 2011 and to 12.3 % in 2015. At the mid-term of the second decade of the 21st century, the direct workforce included 3.5 million employees and affected over 10 million indirect

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jobs, while the relative share of the sector amounted to 9.5 % of the Gross Domestic Product of India.

2 Although the history of the software industry in India dates back to the early 1950s, this sector became important more than thirty years later when the government changed its economic policy in the last two decades of the 20th century (Parthasarathy 2004; Sharma 2009, 2015). In 1991, the monetary crisis and the situation of quasi bankruptcy of the State triggered a major shift in economic policy. Devaluation of the rupee, deregulation of the economic market, liberalization of international trade, opening up to foreign investments, privatization of the companies and reforms in their governance, all these changes marked a major break in the Indian economy: it shifted from the import-substitution policy led by the State to a new economic era which made possible the development of private industry that benefited the IT sector in particular. This is the reason why, by and large, the entrepreneurs who set up IT companies from the 1980s onwards can be considered as new entrants in the Indian economy, with some qualifications: firms like Tata Consultancy Services (TCS), Reliance Communications, TVS Electronics or Hinduja Solutions, to name a few, are the offshoots of larger industrial groups. Yet, we can hypothesize that even in these particular cases the managers who entered the new IT sector had qualifications that are different from those of the managers who worked for a long time in more traditional economic sectors.

3 The software industry has been the subject of a great number of studies conducted by economists (Heeks 1996; Arora and Athreye 2002; Saith, Vijayabaskar and Gayathri 2008), social anthropologists (Upadhya and Vasavi 2008; Lardinois and Illavarasam 2014; Upadhya 2016) and geographers (Leducq 2009). But we know little about the entrepreneurs and the companies who are the main actors of these changes. This article intends to partly fill this gap by focusing on Indian software capital considered as the nexus of firms and entrepreneurs which make up the core of the software industry. It is structured in five sections. First, I review some studies that deal with the software industry in order to clarify the aim of my research. Second, I detail the sources, data and methodology used in the survey, before analyzing, in the third part, the social space of software capital. In the fourth part, I describe the 3 clusters that constitute Indian software capital and in the fifth and last part I discuss the caste background of the top managers. The conclusion addresses some limitations of this study.

Studying the software industry

A nebulous milieu?

4 First, let us see how social scientists have analyzed this services sector. I will consider mainly two issues: the economic structure of the software companies and the socio- demographic profile of its entrepreneurs with a side issue, the caste background of the top managers of this industry.2

5 According to a report of the Software Technology Park of India (STP) a State agency in charge of facilitating the services required by the industry, IT companies are divided into three main categories: first, small and medium enterprises, second, major Indian companies with exports above three crores (10 million) rupees and third, Indian

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multinationals with foreign equity participation. At the beginning of the 2000s, 53 % of the 275 companies registered with the STP at Bangalore belonged to this third category (Upadhya 2004:5151). In her book Engineering India, Carol Upadhya recasts these three categories in order to define “software capital.” She distinguished 3 groups: first, the national companies, referring to “Indian companies founded by local entrepreneurs with indigenous capital,” second the foreign multinational, and third the transnational firms (Upadhya 2016:48–49). These last firms are called transnational or cross-border firms because, although they are registered in the US as they are financed by Non- Resident Indians (NRI), and venture capitalists often based in California, they operate in India through their subsidiaries. The chief managers of these cross-border firms constitute a “transnational capitalist class,” a class of people which is the product of the globalization of the IT market in which they operate (Upadhya 2016:62–66). This classification is mainly based on the location of the registration of the software companies, opposing Indian versus foreign firms, but it does not say much about the social origins and the sources of the IT capital, information which could draw distinctions between the national firms constituting the major segment of the industry. Regarding Indian software companies Upadhya wrote that “entrepreneurs in the IT industry contrast their firm with ‘traditional family business’” (Upadhya 2016:37), but she does not engage with this statement in order to confront it with empirical data on the IT industry.

6 Two other studies conducted in Chennai have mentioned in passing IT-firm structure. John Harris, who interviewed 40 chief managers of 31 firms that belong to the top 500 IT companies in terms of market capitalization, stated: “the great majority of the software firms are fully Indian owned companies. A minority are collaborative ventures with European or American capital” (Harris 2003:330). Moreover added the author, almost all of these companies (28 out of 31) can be classified as “family business,” a statement that contradicts the IT entrepreneurs interviewed by Upadhya at Bangalore. In their study of the Tamil Brahmans, C. J. Fuller and Haripriya Narasimhan also contrasted, on the one hand, the IT “family business” firms that are owned and controlled by the same family, and on the other hand the companies for which managers and owners are two distinct groups. Yet, none of these authors addressed the issues of the economic and social structure of the software companies.

7 The shareholding pattern of Indian corporates has been studied by many authors from a managerial viewpoint in order to assess its effect on the governance of the companies (Khanna and Palepu 2004, 2005; Jain 2006; Balasubramanian and Anand 2013; Tawiah and Benjamin 2014). Although the trend over the first decade of the 21st century varies from one industrial sector to another, the authors agreed that the predominant shareholding pattern in India is concentrated ownership and control over the capital through the promoters group. This statement holds true for the software industry, wrote Tawiah and Benjamin, although their study is limited to the top 10 Indian IT companies. But it is confirmed by Khanna and Palepu who furthermore showed, on the basis of a survey of a thousand firms across different activities sectors, that “family- owned business groups … can coexist with specialist firms focused on a particular industry,” a point they have illustrated by contrasting TCS with Infosys (Khanna and Palepu 2004, 2005:284, 308–18). But all the authors, except the last ones, focused mainly on institutional and non-institutional shareholders and do not consider other groups

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like national and foreign, or private and public shareholders, categories which are more relevant for characterizing the National software enterprises.

8 If the structure of the IT companies has not been much studied, it is also true that little is known about the socioeconomic background of the IT entrepreneurs. The common view is that the majority of these entrepreneurs have a “middle-class” background (although the definition of the “middle class” is a vexed issue) in terms of social origins and higher education. Yet Upadhya and Vasavi, who conducted a pioneering study of the IT sector in Bangalore in 2002–2003, wrote: “There has not been any large-scale survey of the social origins of Indian software entrepreneurs that could reliably confirm this assertion” (Upadhya 2004:5149). In the survey just mentioned, the cross- border firms seem overrepresented. These start-ups that are not listed on stock exchanges—at least in India—work on products, a particular niche of the software industry, while the core segment of this industry is concerned with projects and services. Furthermore, the chief managers of these start-ups clearly present a high sociodemographic profile: all the CEOs and many software entrepreneurs interviewed in Bangalore graduated from Indian Institutes of Technology (IIT), while this group accounts for less than one-quarter in our panel. The same bias towards the upper- middle classes characterizes the software engineers who work in these start-ups: half were Brahmans and three fourths from upper-caste groups, percentages higher than those we found among the chief managers of the major IT companies we studied.

9 The concentration of Brahmans in the software industry contrasts, it seems, with the well-known fact that Indian entrepreneurs, in general, still belong quite often to traditional merchant communities (Vaish3 like Agarwal or Marwari, Sindhi, Khatri, or Jains for example) whose families control the capital and the business of their firms (Chakraborthy 2011; Tripathi and Jumani 2013). Regarding this issue, Fuller and Narahsiman need to be quoted at length: “the endlessly repeated wisdom about Brahman overrepresentation in IT is really just a factoid, because nobody ever cites any figures to prove it. … Actually, we too, are sure that Brahmans are overrepresented in the major IT companies. … But let us acknowledge at this early stage that we will be unable to cite many figures to reinforce the qualitative evidence that we present (Fuller and Narasimhan 2014:22). Harris’ general statement that the “the largest single group of the new software entrepreneurs [at Chennai] is constituted by Brahmans” would seem to reinforce Fuller and Narasimhan’s point (Harris 2003:332), but it does not concur plainly with our data. Nevertheless both authors reviewed, who mainly used qualitative sources, agreed about the overrepresentation of the Brahmans and the high castes in the IT industry, and they both follow the same line of argument in order to explain this overrepresentation: the high level of education of the Brahmans, their long-standing mastery of the English language, as well as their urban ethos suffice to explain, more than their caste origin per se, they wrote, the heavy concentration of this elite group in the IT industry, which requires this particular kinds of skills and resources.

10 Yet the sociological analysis presented by these authors produces the feeling that neither the people interviewed nor the social scientists are fully comfortable in dealing with this issue, a sense of unease clearly expressed by Fuller and Narasimhan. That the caste diversity of the software industry is a sensible political subject should not refrain scholars from raising sociological questions that are often left aside: for example, the modes of recruitment and particularly the referral system, the mode of promotion, the

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selection of members of the board of directors, patronage and networking are some relevant subjects that should be addressed from an empirical viewpoint in order to extend our understanding of the grammar of caste in contemporary India (Deshpande 2011).

11 The studies reviewed have tended to paint a rather homogeneous picture of software companies, particularly national ones. Instead, we hypothesize that national software companies are differentiated both by their age (the period when they were founded), their economic structures, and the profiles of their top managers. In order to break with these impressionistic approaches of the IT sector, our analytic strategy has been to conduct a quantitative survey of software capital grounded on a panel of selected companies.

Aims of the study

12 Since its inception, one of the particularities of the software industry in India has been the close association between, on the one hand, the entrepreneurs who are predominantly engineers and scientists sharing the same technical education and, on the other hand, the IT enterprises they have founded, or have been closely associated with for the past decades, moving from one company to another as is illustrated by the career paths of IT managers. The software capital that is the subject of this study can be understood as the nexus of objectified socio-economic properties, resources and skills concentrated together both by the firms and their entrepreneurs or top executives.4

13 Sociological studies of elites most generally focus either on the entrepreneurs or the enterprises, as it is the case with the different surveys that Pierre Bourdieu and Monique de Saint-Martin conducted on French chief managers, single-family house builders or publishers (Bourdieu and Saint-Martin 1978, 1990; Bourdieu 1999). Yet, our hypothesis is that the new economic elite associated with the software industry cannot be dissociated from the companies they work for as it is a rather closed milieu, even if it has developed an international dimension. In this study, we focus on the top 100 national software companies, in terms of market capitalization, listed at the Mumbai National Stock Exchange (NSE) in 2012 as they constitute the main segment of the software industry specialized on projects and services.

14 The aims of this study are twofold and closely interlocked. The first aim is to highlight the socio-educational background of these IT entrepreneurs, or their credentials and their professional qualifications. Regarding the diversity issue of the software industry, a euphemism widely used by managers who deny the working of caste within the industry, we look at the caste origins of the entrepreneurs and ask: are the software companies really different from the “family-business” firms run by merchant groups. In order to answer this question, we turn to the next objective of this paper.

15 The second aim of this study deals with two related issues. Firstly, we look at the shareholding pattern of software companies. As most of these firms are first- generation, we consider the different groups of shareholders in order to determine their social origins: Indian or foreign, public or private? Secondly, we question the national character of the software companies and their access to the IT market, international or domestic, in relation with the degree of professionalization of the firms. For this purpose we use two indicators: one is the share of the global revenue drawn by geographical areas, the second is the level of certification of the firms for

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which we considered the Capability Maturity Model level 5 (CMM5), the highest certification recognized by NASSCOM. Thus combining shareholding pattern and sources of revenues, we reach a more appropriate understanding of the characters of the National software companies.

16 In order to get robust answers to these questions, I have conducted a quantitative survey using Multiple Correspondence Analysis (MCA). The purpose of this analysis is to present a sociography of software capital or, in other words, an empirically- grounded description of the milieu studied, which is the preliminary step before we can engage with theoretical issues.

Sources, data and methods

Sources

17 I collected the data from four main sources. The first source is the NSE that provides quantitative data regarding the market capitalization of companies and the distribution of theirs shareholders by broad categories. This information has been supplemented by the annual activity reports of the companies, which constitute our second source of information. These reports give personal details regarding members of the Board of Directors, the shareholding patterns according to the size of the shares held (information not given by the NSE), the distribution of the revenues by geographical segments (unfortunately the business segments are too heterogeneous to be codified) and, lastly, the technical certification of the firm (if any). When a firm has subsidiaries, the data coded relate to the group, that is the standalone firm and its subsidiaries. I ascertained the NASSCOM membership of the companies from the register provided by NASSCOM. Finally, I have supplemented these three main sources of information by variety of available sources (books, magazines, economic websites, like those of Dataquest, Bloomberg or Forbes) in order to complete the data collected either on the firms or regarding the biography of their managers. Although I conducted a thorough investigation of a variety of the available or easily accessible sources, the data collected always appeared unsatisfactory when compared to the time and effort invested in their collection.

Data and methods

18 The preliminary step of this research was to select the first hundred plus IT companies listed on the NSE. This selection was reached on the basis of the market capitalization of the companies over a period of ten years before the year of reference, which is the end of the 2011–2012 fiscal year. For each company I collected two sets of data: on the one hand, biographical information for one top manager, whether Chief Executive Officer (CEO), Chief Manager (CM) or Managing Director (MD), according to the structure of the Board of Directors (BoD); and, on the other hand, data related to the company itself, its economic structure and position on the IT market.

19 Finally the database contains 95 software companies with their executive managers, which we call statistical individuals (see the list in Appendix Table 9). For each of these individuals I constructed a set of 25 categories totaling 72 sub-categories, which characterize both the companies and their managers (see Table 2 and Table 3). The

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categories are classified in two sets according to their function in the MCA. First, “A” categories stand for active categories (n=16) subdivided into 41 active sub-categories, which create distance between individuals and contribute to the construction of clouds of points on a Euclidian space produced by MCA. Second, “S” categories stand for supplementary categories (n=9) subdivided into 31 sub-categories, which do not contribute to the structure of the Euclidean spaces although their coordinates, produced by MCA, allow us to locate them on these spaces.

20 The distinction between active and supplementary categories is always a statistical issue as well as a sociological one. Some basic methodological principles apply: the active categories should discriminate between individuals, they should not overlap, a particular set of categories should not be overstated, and finally the discrimination of the data by active categories should be clearly relevant from a sociological viewpoint. It is easily understandable to consider “Sex,” “Age” and “Religion” as supplementary categories as they do not really discriminate the data: 97% of the managers are men and 95% are Hindu; the same reasoning applies for “Board status”: 96% of the managers are executive managers. The categories “Graduation” and “Studies abroad” could have been defined as active categories, but “Studies abroad” would have been redundant with the category “MBA,” obtained quite often from a US university, and the education variables would have weighted too heavily upon the variance of the clouds of points.

21 The involvement of the family in the company business is approached through the category “Family members on BoD” without distinguishing the total number of people sitting on the board. Regarding the involvement of the family in the capital, we rely only on the category “Promoters group,” although some family members (children, spouses) may hold shares individually; but if we do not know the amount of shares held and the total number of family members holding shares, the category does not seem relevant to us.

22 Last is the category of “Caste”. The coding of caste has been done mainly from a study of the surnames. Although there is uncertainty about this way of guessing caste origin, this is a means used by others scholars (Mani and Moody 2014). In order to reduce the uncertainty, I excluded State categories like Scheduled Castes, Scheduled Tribes, and Others Backward Classes, which are not pertinent for this elite milieu, and I used only broad categories that nevertheless remain quite unsatisfactory. I coded religion separately. “Caste” has been considered as a supplementary category because its coding and its sociological interpretation are too problematic to allow its use as an active category. I will come back to this issue later.

23 The distinction between the total number of active categories related to managers (n=8) and the active categories related to companies (n=9) is well balanced; all the supplementary categories are related to individuals (managers), except one: “Number of foreign subsidiaries,” which intends to measure the position of the software firms on the international IT markets; yet, as this category is not straightforward I decided to include it as a supplementary instead of an active category. Information we would have liked to introduce proved difficult to obtain in a homogenous manner, even concerning some basic indicators like: number of employees, profitability, foreign countries from which the revenues are drawn, portions devoted to products and services, to research, etc. The complete set of the categories with their coding is described as follows.

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24 1 Socio-demographic variables: Gender (S): Man, Woman. Age group (S): <45, 45–49, 50–59, >60. Caste (S): Agriculture and artisan, Brahman, Merchant high-caste, Non- merchant high caste, Other, Unknown. Religion (S): Hindu, Non-Hindu.

25 2 Qualifications: Higher degree (A): Graduation, Post-Graduation (Master’s and PhD). Type of Bachelor’s degree (S): Commerce, Engineering, Science, Humanities, Law. Chartered Accountant or Company Secretary (A): Yes, No. Studies in higher institutions (A), Indian Institute of Technology (IIT), Regional or National Institute of Technology (RIT), Indian Institute of Management (IIM): Yes, No. MBA or equivalent (A): Yes, No. Studies abroad (S): Yes, No; Honorific distinctions (A): Yes, No.

26 3 Position in the company: Founder of the firm (A): Yes, No. Shareholding in the company owned by the individual in percent (A): Nil, <5 %, 5–20 %, >20 %. Board function (S): Chief Manager (CM), Managing Director (MD) or Chief Executive Officer (CEO), Managing Director or Chief Manager (MD/CM). Board status (S): Executive, Non- Executive; Family in the Board of Directors (A): Yes, No.

27 4 Economic structure of the firm: Year company founded: <1985, 1985–1994, >1995. Market capitalization (A): low, medium, high. Promoters share (A): Prom<30 %, Prom 30–50 %, Prom>50 %. Indian Public (A): IP<15 %, IP 15–40 %, IP>40 %; Foreign Funds (A): FF<20 %, FF 20–40 %, FF>40 %; Domestic market (A): DM<20 %, DM 20–60 %, DM>60 %. Certification: CMM5, Other certification, No certification. Foreign Subsidiaries (S): FS0, FS1–5; FS6–16, FS>16; NASSCOM membership: (A): Yes, No.

28 Multiple Correspondence Analysis: Multiple Correspondence Analysis (MCA) is a geometric data analysis technique grounded on geometric modeling that uses the mathematical theory of linear algebra. This technique, based on an inductive philosophy, is firstly a method of description of the structure of a dataset, whatever its size; it never imposes an a priori model upon the data but allows its pattern to reveals itself. MCA has been widely used within sociology in France, particularly by Pierre Bourdieu, for example in Distinction: A Social Critique of the Judgment of Taste (1979). MCA makes it possible to visualize a frequency table (statistical individuals x variables) by representing both individuals and categories as separate clouds of points (cloud of categories and cloud of individuals) in a Euclidian space. Although MCA differs from standard regression techniques, both can be combined; the active variables of a MCA are often considered as independent variables of regression analysis (Le Roux & Rouanet 2010, Lebaron 2006).

29 To run the MCA5 I considered 85 companies as active individuals out of the 95 selected in the sample: for 10 of them, either the data were not complete for some categories (particularly “Domestic market”) or they had some peculiarities that set them apart (for example, Tamilnadu Telecommunications Ltd is the only PSU firm, [Public Sector Undertaking] whose capital is 100% held by Public funds). These 10 firms have been entered as supplementary individuals and thus they do not contribute to the clouds of points. But using their coordinates given by the MCA, these firms can be located within the cloud of individuals and also affected to a partition of the cloud.

30 The first step of the MCA is the construction of Euclidian spaces defined by different couples of axes on which are plotted the cloud of categories and the cloud of individuals. Then in a second step, I conducted an Ascending Hierarchical Classification (AHC) on the principal components of the factorial analysis. The aim of the AHC is to get a partition of the cloud of the 95 companies into a couple of clusters which would

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correspond to the profile of companies and managers revealed by the cloud of categories. The hierarchical tree produced by the MCA suggested a classification into 3 clusters that provide a map of the social space of the software companies.

Cartography of Indian software capital: credentials, market and shareholding

31 Before we describe the space of the software companies, we need to explain how the space is structured. Table 1 gives the contributions6 of the first 4 axes to the variance of the clouds of points, which contribute to the structuration of the space of software companies. The contribution of axis 1 is 31.61 %, in other words, we say that axis 1, which has the higher contribution, “explains” 31.61 % of the clouds of points. We notice that the contribution of axis 2, which is 30.29 %, has a value almost equal to the contribution of axis 1. Cumulated together, axes 1 and 2 explain 62 % of the clouds of points. The contribution of axis 3, 17.05 %, is about half the contributions to the first 2 axes, while the contribution of axis 4, 8.43 %, is half that of axis 3. The cumulated value of the first 3 axes explain almost 80% of the clouds of points, therefore there is not much gain to extending the interpretation beyond axe 3.

Table 1: Contributions of the 4 first axes to clouds of points (%)

Axes Contr. % Cumul. contr. %

1 31.61 31.61

2 30.29 61.90

3 17.05 78.95

4 8.43 87.38

Credentials and positions on the IT market

32 We shall now analyze the main socio-economic categories that structure the different axes (Tables 2 and 3, Graphs 1 and 2). The IT top managers who are predominantly men (there are only 3 women7 in the panel) and Hindu8 (94 %), constitute a highly educated group; all of them have graduated at least.9 If we consider the field of graduation (Table 3), 54 % of the top managers graduated in engineering and 15 % in science, quite often in engineering science (like information technology), which means that collectively these elite managers hold the same kind of educational capital in its engineering component and, therefore, they share the same technical culture. Yet beneath these common features, our analysis revealed a main opposition along axis 1 according both to the specific credentials of the top managers and to the strength of the companies they work for, which determines their position on the IT market.

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Table 2: Coordinates and contributions of active categories (axes 1, 2, 3)

Axis 1 (31,61%) Axis 2 (30,29%) Axis 3 (17,05%) Categories Nb % coord. contr. coord. contr. coord. contr.

Founder

Founder 60 63 -0,16 0,64 -0,18 0,82 0,28 2,44

notFounder 35 37 0,29 1,18 0,32 1,50 -0,52 4,47

Total 95 100 1,82 2,32 6,91

Higher degree

Graduation 36 38 0,71 7,60 0,67 6,94 0,22 0,88

Master’s & PhD 59 62 -0,43 4,59 -0,41 4,19 -0,13 0,54

Total 95 100 12,19 11,13 1,42

MBA, PGDM

MBA, PGDM 41 43 -0,54 4,83 -0,61 6,36 -0,18 0,66

noMBA, PGDM 54 57 0,39 3,55 0,45 4,67 0,13 0,49

Total 95 100 8,38 11,03 1,15

Chartered Act.

ChartAct 14 15 0,59 2,12 0,58 2,08 -0,98 7,04

noChartAct 81 85 -0,11 0,38 -0,11 0,37 0,18 1,27

Total 95 100 2,50 2,45 8,31

IIT, RIT, IIM

IIT, RIT, IIM 26 27 -0,86 8,32 -0,09 0,10 0,08 0,09

noIIT, IIM 69 73 0,34 3,27 0,04 0,04 -0,03 0,03

Total 95 100 11,59 0,14 0,12

Shareholding %

SH 0 pc 28 30 0,01 0,10 0,41 1,92 0,31 1,28

SH <5 pc 25 26 -0,22 0,53 0,48 2,54 -0,76 7,34

SH 5-20 pc 23 24 0,24 0,57 -0,12 0,15 0,01 0,01

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SH >20 pc 19 20 -0,13 0,14 -1,08 9,45 0,57 3,06

Total 95 100 1,34 14,06 11,69

Distinctions

Distinction 30 32 -0,74 7,44 0,32 1,39 0,38 2,39

noDistinction 65 68 0,38 3,85 -0,16 0,72 -0,20 1,24

Total 95 100 11,29 2,11 3,63

Family BoD

FamilyBoD 35 37 0,36 1,91 -0,21 0,63 0,58 5,76

noFamilyBoD 60 63 -0,21 1,10 0,12 0,36 -0,33 3,31

Total 95 100 3,01 0,99 9,07

Year founded

< 1985 16 17 -0,44 1,47 0,29 0,63 0,64 3,71

1985-1994 48 50 0,14 0,39 0,23 1,04 -0,32 2,33

> 1995 31 33 0,05 0,03 -0,48 3,18 0,09 0,13

Total 95 100 1,89 4,85 6,17

Market capit.

High mkt cap. 33 34 -0,67 6,77 0,56 4,85 0,04 0,04

Mid mkt cap. 31 33 0,66 5,59 0,22 0,60 0,04 0,03

Low mkt cap. 31 33 0,16 0,28 -0,97 11,14 -0,11 0,15

Total 95 100 12,64 16,59 0,22

Promoters share %

Promo<30 pc 26 27 -0,11 0,12 0,07 0,06 -1,14 15,90

Promo 30–50 pc 30 32 -0,32 1,23 -0,51 3,21 0,02 0,01

Promo>50 pc 39 41 0,29 1,44 0,31 1,73 0,66 9,02

Total 95 100 2,79 5,00 24,93

Indian Public

IP<15 pc 26 27 -0,27 0,88 0,93 10,37 0,21 0,64

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IP 15–40 pc 46 48 0,04 0,03 -0,28 1,58 0,36 3,02

IP>40 pc 23 25 0,29 0,71 -0,64 3,52 -1,14 12,95

Total 95 100 1,62 15,47 16,61

Foreign Funds

FF<20 pc 42 44 0,37 2,31 -0,32 1,77 0,16 0,50

FF20–40 pc 33 35 -0,39 2,24 0,08 0,10 0,23 0,94

FF>40 pc 20 21 -0,06 0,04 0,50 2,14 -0,72 5,16

Total 95 100 4,59 4,01 6,60

Domestic market

DM<20 pc 34 36 -0,49 3,90 0,12 0,22 -0,17 0,53

DM 20–60 pc 22 23 -0,06 0,04 -0,29 0,85 -0,12 0,18

DM>60 pc 30 32 0,60 5,16 0,13 0,07 0,35 1,29

na 9 9 nr nr nr

Total 95 100 9,10 1,14 2,00

Certification

CMM5Cert. 12 13 -1,40 11,03 0,70 2,82 -0,11 0,08

othersCert. 37 39 0,21 0,72 -0,01 0,01 0,07 0,09

noCert. 46 48 0,25 1,11 -0,21 0,82 -0,03 0,02

Total 95 100 12,86 3,65 0,19

Nasscom

Nasscom 59 62 -0,18 0,81 0,22 1,74 0,10 0,34

noNasscom 36 38 0,34 1,57 -0,49 3,35 -0,20 0,66

Total 95 100 2,38 5,09 1,00

Reading. We consider the 2nd category “Higher Degree.” The total contributions of this category to axis 1 (12.19 %) and axis 2 (11.12 %) are almost equal and high, far above the mean contribution (2.44 %) of the categories. The respective contributions to axis 1 are 7.60 % for “Graduation” and 4.59 % for “Master’s and PhD.” The coordinates of “Graduation” are positive on axis 1 and axis 2; this is the reason why this category is located on the upper-right quadrant. Conversely, the coordinates of “Master’s and PhD” are negative on both axis 1 and axis 2, therefore the category is located on the lower-left quadrant, at the opposite side of “Graduation” (na = not available, nr = non relevant).

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Table 3: Coordinates of supplementary categories (axes 1, 2, 3)

Categories Nb % Axis 1 (31,61 %) Axis 2 (30,29 %) Axis 3 (17,05 %)

Gender

Man 92 97 –0,02 0,00 –0,01

Woman 3 3 0,88 –0,18 0,61

Total 95 100

Age groups

< 45 11 12 0,22 –0,21 0,37

45–49 27 28 0,15 –0,16 –0,12

50–59 33 35 –0,06 0,03 –0,10

> 60 20 21 –0,25 0,27 0,14

na 44

Total 95 100

Religion

Hindu 89 94 –0,02 –0,03 0,03

Others 6 6 0,21 0,42 –0,40

Total 95 100

Caste

AgricArtisan 22 23 –0,27 –0,43 –0,18

Brahman 27 28 –0,11 0,32 –0,38

Merchant high castes 15 16 0,32 0,12 0,10

Non-Merchant high castes 22 23 0,15 –0,14 0,43

Other 5 6 0,13 0,64 –0,02

Unknown 4 4

Total 95 100

Graduation

Commerce 23 24 0,29 0,12 –0,53

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Engineering 51 54 –0,15 –0,05 0,25

Science 14 15 –0,31 0,01 –0,08

Humanities 3 3 0,84 –0,64 0,52

Law 4 4 0,77 0,22 0,01

Total 95 100

Studies abroad

Aboad 29 30 –0,22 –0,26 0,07

NotAbroad 66 70 0,11 0,13 –0,03

Total 95 100

Board function

CM 10 11 0,00 –0,05 0,21

MD/CEO 37 39 0,18 0,22 –0,21

MD/CM 48 50 –0,13 –0,13 0,10

Total 95 100

Board status

Executive 92 97 0,00 0,02 0,01

Non-executive 3 3 –0,10 –0,57 –0,27

Total 95 100

Foreign subsidiaries

FSubsd 0 13 14 0,84 0,01 0,12

FSubsd 1–5 40 42 0,25 –0,36 –0,04

FSubsd 6–14 30 32 –0,35 0,04 0,02

FSubsd > 15 12 12 –0,55 0,91 –0,03

Total 95 100

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Graph 1: The space of Indian software capital. The cloud of active and supplementary categories (Axes 1-2)

Graph 2 : Social Space of Indian Software Capital (simplified)

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33 On the one hand (on the left of the diagram), we find the managers who have the highest level of education: they hold a Master’s or a PhD (62 %), plus an MBA for almost half of them (43 %), obtained quite often abroad (30 %) in a US university, and for less than a third (27 %) they studied at a premium higher institution, an IIT or an NIT for their engineering graduation, or an IIM for a Post-Graduate Diploma in Management. These highly-educated top managers hold positions as CEO or CM in big software companies that are characterized by a high market capitalization and a high standard of professionalization evidenced by CMM5 certification.10 These Indian multinational companies draw the main part of their revenue from the international IT market: less

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than 20 % only of their total revenue is realized on the domestic market. Finally, a third of the top managers (32 %), mainly located on left of axis 1, are honored by awards (honorary PhD, professional distinctions or national awards) for their personal achievements in the IT sector.

34 One significant example is Krishnakumar Natarajan, a co-founder of MindTree in 1999, one of the first venture capitalist-backed IT companies, now a mid-size services firm where he was the CEO and the CM in 2012. K. Natarajan was born in 1958 in a Tamil Brahman family whose father was a civil servant, a doctor in the Indian Railway Medical Services, and his mother a house-wife. In 1979, he graduated in Mechanical from the College of Engineering of Guindy in Chennai; as he could not go abroad to pursue Post-Graduate work as he wished, in 1981 he completed his MBA from the well- known XLRI-Xavier School of Management of Jamshedpur. Then from 1982 to 1999 he worked for 17 years with Wipro where he was the CEO of the Electronic Commerce Division. In 2012, K. Natarajan served as Vice Chairman of the Executive Council of NASSCOM. He has been honored by several awards from the IT industry, like the Bloomberg UTV’s award as CEO of the year 2010 in the Emerging company category.

35 On the other hand, at the opposite side of axis 1 (on the right of the diagram), the managers are characterized by a lower level of higher education: many of them are graduates but not necessarily from an IIT or an NIT and they do not hold an MBA. The software companies they work for have a mid-market capitalization and their IT activities are more oriented towards India as 32 % of the companies draw more than 30 % of their revenues from the domestic market.

36 Omnitech Infosolution, a company co-founded in 1990 by Atul Maganlal Hemani, is one example. Born in 1962, Atul Hemani holds a Bachelor’s of Engineering-Electrical from the University of Bombay. Before founding his own company, he worked for two years with HCL. Omnitech helps corporates to develop and manage IT applications and infrastructure, particularly in the banking and financial sector, and in 2012 it realized 75% of its revenue on the domestic market.

Positions on the IT market and shareholding pattern

37 The second factor of the MCA, or axis 2, differentiates the companies once more according to the credentials of the top managers and the economic size of the companies in terms of market capitalization (Graph 3). It opposes, on the top of the diagram, the managers who are graduates but do not hold an MBA, and the companies that have a high market capitalization and, at the bottom of the diagram, companies with low market capitalization and top managers whose credentials (Post Graduation and MBA) are high. Yet in order to understand the structure of software capital, we need to consider together the second and the third factor as axis 3 differentiates the companies mainly according to the shareholding pattern.

Table 4: Main shareholders of Indian software capital in % of the total number of equity- shares holders (n=95)

Types of shareholders %

Indian Promoters 40,7

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Indian Public 24,2

Foreign funds 26,5

Others 8,6

Total 100,0

38 In order to estimate the weight of national capital on the shareholding pattern, we have divided shareholders into 4 main categories (Table 4). The group of promoters, who are predominantly Indian,11 holds almost 41% of equity-shares while the second half of software capital is divided almost equally between individual holders (Indian Public) for 24.2 % and Foreign funds for 26.5 % (there is not a single firm without Foreign funds); the last category, which holds less than 9 % of the equity-shares, is made of small Indian Institutional holders (Central and State Governments, Mutual Funds, Banks). In other words, almost 70 % of software capital is Indian in origin, or conversely about 30 % of the capital is controlled by foreign funds.

39 This study confirms what we have learnt from the literature review. IT companies are characterized by concentration of the shareholding in the hands of the family members who control the firm through the mechanisms of the promoters group.12 Yet, this distribution of the number of equity-shares among the main groups of shareholders does not say much about the value of the equity-shares they hold. Unfortunately, the data we need to measure this value is not available in the Annual Activity Reports. In order to approach this issue we present the distribution of the shareholding pattern according to the size of the equity-shares (Table 5).

Table 5: Shareholding pattern of Indian software companies according to the size and value of the equity-shares in % (n=95)

Nb of Shares Holders (%) Value (%)

< 5,000 95.7 7.5

5,000–10,000 2.0 0.7

> 10,000 2.3 91.6

Total 100.0 100.0

40 If we compare the number of shares held and their value in terms of capital,13 the distribution of the shareholding presents a clearly chiasmic structure: the mass of small holders represents almost 96 % of the total shareholders but they control less than 8 % of the capital while about 2 % of the shareholders hold almost 92 % of the capital. Clearly there are two levels of concentration of the equity-shares, firstly regarding the main groups of shareholders and, secondly, in terms of size and value of the shareholding, a fact not mentioned by the authors in the management literature. The individual small holders (Indian Public), who hold almost a quarter of the number of shares, do not control much in terms of value of the equity-shares; yet their weight

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on the shareholding pattern of the different companies gives us a hint of the openness of the software enterprises towards the Indian Public group on the stock-market.

41 The third axis of the factorial analysis, combined with the second one, differentiates between two categories of firms where the first makes no distinction. On the one hand (at the top of the diagram), are located the oldest IT companies, founded before 1985, whose promoters group hold above 50% of the equity-shares while the share of the individual holders is medium, 15–40 %.

42 The company that best exemplifies this position would be Wipro, located at the top of axis 2, slightly on the right of the diagram. Although Wipro began as a vegetable-oil manufacturer in 1945, the company entered the IT industry in the early 1980s through the manufacture and sale of mini-computers. Ten years later, Wipro had developed its software expertise, particularly in offshore services, and it had transformed itself into a major IT firm. The man who was behind the technological turn of the company is Azim Premji. Born in 1945, Azim Premji was studying electrical engineering at Stanford University in the US, when the sudden death of this father in 1966 compelled him to come back to India. He then succeeded his father at the head of Wipro and became its CEO from 1968 to 2011. In 2012, he became the Chairman of the Board of Directors and T. K. Kurien served as the CEO, IT Business and executive director, and also as member of the Wipro Executive Corporate Council. Both top managers belong to non-Hindu denominations: Azim Premji is an Isma’ili Shia Muslim from Western India while T. K. Kurien is a Syrian Christian from Kerala. Born in 1960, Kurien who has been educated at Hyderabad is not an engineer but a Chartered Accountant; he joined Wipro in 2000 and worked over 10 years for Wipro GE Healthcare (a subsidiary of General Electric). Wipro shareholding is controlled by the Promoters group that holds 78 % of the total equity- shares; Foreign funds are the second group, with 11 % of the capital, while the equity- shares of individual residents, Indian Public, is at a low 7 %. Wipro draw 21 % of its revenue from the domestic market, but the company has never completely stopped its activities as a vegetable-oil manufacturer. In 2011, Azim Premji was awarded Padma Vibhushan, the second highest civilian award, by the Government of India for his outstanding achievements in the IT sector.

43 On the other hand (at the bottom of the diagram) we have a concentration of top managers with a high level of education (Post-Graduation and MBA), like those situated on the left of axis 1, combined with comparatively young IT companies, founded after 1995, and characterized by low market capitalization, lesser control by the Promoters groups (less than 30 %), and a higher share of Indian Public funds. I come back to the managers and companies located in this lower part of the space in the following section.

The 3 clusters of Indian software capital

44 So far, I have described the three main factors, or axes, that structure the space of Indian software capital according to the different categories designed for the MCA. I now synthetize this description in focusing on the 3 main clusters that are the outcome of the hierarchical classification. These 3 clusters and their barycenters (weighted average of points) are represented on Graph 3 while Table 6 details the main categories that characterize each cluster. These 3 classes of firms have unequal economic strength

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on the software market, which is in part the result of the history of the software industry in India.

Graph 3: The 3 clusters of Indian software capital (Axes 1-2)

Table 6: The 3 clusters of software capital according to the main categories

% Category in the % Category in the % Cluster in the Categories cluster panel category

Cluster 1: n=19 (20 %)

High Market 100 39 58 Capitalization

Nasscom 89 66 30

Indian Public < 15 % 74 29 56

Distinction 74 34 48

Domestic Market <20 % 63 40 35

IIT, IIM 53 28 42

CMM5Cert 42 14 67

Foreign Subsidiaries > 15 37 14 58

Cluster 2: n=38 (40 %)

noIIT, IIM 86 72 52

noMBA 84 58 63

noDistinction 81 66 54

Graduation 68 38 78

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Indian Public 15–40 % 68 49 60

NoCertification 65 45 63

Mid-Market 57 32 78 Capitalization

Domestic Market >60 % 51 34 66

Shareholding 5–20 % 43 25 76

Cluster 3: n=38 (40 %)

Post-Graduation 93 62 51

Low Market 69 29 80 Capitalization

MBA 69 42 56

Foreign Funds < 20 % 62 42 50

noNasscom 59 34 59

Foreign Subsidiaries 1-15 59 40 50

Indian Public > 40 % 55 21 89

Shareholding > 20 % 41 20 71

AgricArtisan 34 19 63

Reading Cluster 1. We consider the category “High Market Capitalization,” 1st column, 2nd line. All the 19 companies in cluster 1, that is 100 %, are characterized by “High Market Capitalization” (2nd column) while this category accounts for 39% only in the whole population studied (3rd column). Moreover, the companies characterized by “High Market Capitalization” in cluster 1 represent 58 % of all the “High Market Capitalization” companies in the panel studied (4th column).

The Indian Multinational software companies

45 The first cluster groups together 19 companies (20 % of the 95 firms studied) which are located on the upper-left quadrant of the diagram (the barycenter of the cluster is almost at the center of the quadrant). All 19 companies have a high market capitalization and almost all of them are members of NASSCOM. This is clearly the class of the Indian Multinational software companies where we find: TCS, Infosys, Wipro, HCL Technologies, Mphasis, Hexaware, MindTree, or Core Education, an IT education service company.

46 The high market capitalization has to be related to the age of these firms, which have been founded before 1985. These companies drew less than 20 % of their revenue from the domestic market as they worked mainly for the international IT market through their subsidiaries (most of these big firms managed more than 15 foreign subsidiaries

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in 2012). The high number of CMM5 certification is an indicator of the professionalization of these companies: 67 % of the firms with this certificate belong to cluster 1.

Table 7: Market capitalization of the 6 first software companies compared to the total market capitalization of the companies studied in % (n=95)

Company % market cap. Cumul. %

TCS 38.9 38.9

Infosys 28.0 66.9

Wipro 18.4 85.3

HCL Technologies 5.7 91.0

Mphasis 1.4 92.4

Hexaware Technologies 0.6 93.0

47 The most remarkable character of these software companies is there unequal economic strength on the IT market (Table 7). In fact 3 firms only—TCS, Infosys and Wipro— together produced 85.3 % of the total market capitalization of the 95 firms studied; there is a sharp decrease in the share of market capitalization for the next firms: HCL Technologies 5.7%, Mphasis 1.4 % and the sixth one, Hexaware Technologies represents only 0.6 % of the total market capitalization of the panel. The ranking of these firms according to their market capitalization is congruent with the strength of their workforce in 2012: TCS ranks first with 240,000 employees, then Infosys 150,000, Wipro 140,000, HCL Technologies 85,000; below these biggest brands are companies with a workforce of 30,000 people or less like Mphasis or FirstSource. In other words, out of the 95 companies surveyed, Indian national software capital is concentrated in the hands of three big companies, and a sixth of the first companies accounts for 93 % of market capitalization. Not only is there a double level of concentration of software capital in terms of shareholding pattern, but furthermore a handful of software companies concentrate the market value of the software industry and compete in order to maintain or expand it.

48 If we consider the top managers associated with these Indian multinational companies, about half of them have been educated in a premium institution (IIT, NIT or IIM), while less than a third have in the panel as a whole: 14 out of 19 hold a Master’s Degree and 10 an MBA. Thirty years ago, an MBA was not necessarily a prerequisite to succeed in the IT industry. The founders or executive managers of TCS, Infosys and Mphasis have a Master’s Degree in Engineering but no MBA. Yet, these billionaire managers who make the regular headlines of the American magazine Forbes, became IT magnates in a generation, and they are the most distinguished (74 %) of our panel in terms of honorific distinctions.

49 Regarding the individual equity-shares of these top managers, very few hold more than 5 % of the shareholding (although we should consider the shares held by their spouses and children, information not always disclosed). In fact, the top managers control the

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shareholding through the Promoters group whose share is quite high even for the Multinational companies: 78 % for Wipro, 74 % for TCS, 51 % for HCL, but 16 % only for Infosys which has the highest Indian Public share, 13 %, combined with the highest portion of Foreign funds, 54 %.

50 Among the 4 giants of the IT industry, HCL and Infosys deserve particular attention. While TCS is an offshoot of the Tata conglomerate and Wipro a reinvented vegetable-oil manufacturer, HCL and Infosys epitomize the success of the IT companies that emerged from the 1970s onward. HCL14 was founded in Delhi in 1976 by six engineers who came out of the IT division of a typical Indian merchant firm, DCM (Delhi Cloth Mills). The man who led the move, Shiv Nadar, was born in 1945 in a Tamil Nadar15 family whose father was a judge. In 1967, Shiv Nadar graduated in Electrical and Electronics engineering from the PSG College of engineering of Coimbatore, in the far south of the state of Tamil Nadu. Then the 22 year old engineer who had never visited even Madras (now Chennai), move to Poona and Delhi where he joined the new IT division that DCM was developing as software engineer, before starting his own venture some years later. At the end of the 1970s, Nadar made and sold micro-computers and digital calculators, as did Azim Premji with Wipro. But the liberalization of the Indian economy in the 1980s caused difficulties for the hardware sector as it could not compete with the imported computers, which were far cheaper than the Indian brands. Then, the nascent software industry reoriented itself towards IT services, a move initiated earlier by TCS, which was founded in 1968. Today Shiv Nadar has not only extended the area of the company’s IT services with the founding in 1986 of its main subsidiary, HCL Infosystems, he has also ventured into the area of higher education by opening first the SSN College of Engineering at Chennai and second, the Nadar University at Noida (Uttar Pradesh); his wife, Kiran, is an Indian art collector, founder of the Kiran Nadar Museum of Art at Delhi, while the museum has also a gallery within the premises of HCL headquarters at Noida.

51 Like HCL, Infosys was founded in 1981 at Poona by a group of 7 engineers led by N. R. Narayana Murthy, who were both working for Patni Computer Systems, an IT company then run by a Marwari Jain business family. Among the seven founders, 6 were South Indian from Karnataka, Tamil Nadu or Kerala, and 5 were Brahmans, while the last one was a Punjabi. The leading founder, Narayana Murthy, was born in 1946 in a Kannada Brahman family from Mysore (Karnataka). His father, N. Rama Rao, who had a BSc. (1931), joined the Mysore Educational Service and taught Physics and Mathematics in a High School, but he was Deputy Director of Education of the Karnataka State when he retired in 1968. Narayana Murthy, who refused to become a civil servant like one of his uncles, passed the entrance exam for the IIT but his father could not afford to pay the fees; therefore, in 1967, Murty graduated in Electrical engineering from the National Institute of Engineering at Mysore, and two years later, in 1969, he completed his MTech from IIT-Kanpur. In 2011, Narayana Murthy quit as Chairman of the Board of Directors of Infosys, but the company was still in the hands of its founders: Senapathy K. Gopalakrishhnan (a Tamil Brahman from the Palkad district in Kerala) was Executive, co-Chairman of the Board and S. D. Shibulal the CEO and Managing Director. Shibulal, born in 1955 in Allapuzha, Kerala, was the only child of his father, an Ayurvedic doctor (but not from a Brahman caste, probably Ezhava which were traditionally tappers like the Nadar in Tamil Nadu), and mother a State employee of the

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Excise Department. He obtained a MSc. in Physics from the University of Kerala and later on, in 1989, a MSc. in Computer Science from Boston University.

The mid-size National software companies

52 The second software capital cluster groups together 38 companies (40 % of the panel) which are predominantly located on the upper-right quadrant of the diagram although they straddle axis 1. Compared with the first class, these firms more distinctly represent the National software companies founded by engineering graduates and financed by indigenous capital. The top managers of these companies are defined negatively in terms of higher education, compared to cluster 1: no studies in prestigious institutions, with some exceptions, no MBA, no distinctions, and more graduates than post-graduates. The companies have a mid-market capitalization, they were founded in the years 1985 to 1995 and are younger than the Multinational of cluster 1, they are less CMM5 certified and their IT activities are more oriented towards the domestic market. Among these companies, we find a substantial number in which family members are on the Board of Directors (16 firms out of 38) while in the first clusters only 3 firms have family members sitting on the Board. In this cluster we find companies that operate in the technical education sector which is a typical domestic market.

53 One example of this cluster is Career Point, a medium player in the education sector founded in 1993. The company is present in this market from Kindergarten to Class XII, with a boarding school, but also in higher education, running two universities with engineering colleges plus a coaching center. Based at Kota (Rajasthan), Career Point was founded by Pramod Maheshwari16 who holds a Bachelor’s of Technology (Textile) from IIT-Delhi. He is the CEO, Chairman and Managing Director of the company. Pramod Maheshwari hails from a Marwari merchant family of grain-dealers at Kota. They are a well-off family but are not among the big grain players of the place. In order to diversify their sources of revenue the family has opened two shops that sell electronic goods. After his graduation, Pramod Maheshwari wanted to go abroad to pursue his studies, but his close relatives wanted him to stay in Kota and join the family business. This perspective did not appeal to him and he turned to coaching when this sector was just developing in Kota at the end of the 1980s. The company drew 100 % of its revenue from the domestic market, largely from Kota. Although listed on the NSE since 2010, Career Point is a family business run by Pramod and two of his three brothers. The Promoters group detains 60 % of the equity-shares, but 53 % is in the hand of the close relatives: father, mother, brothers and their wives. The concentration of shareholding is quite high: 0.3 % only of the shareholders detain 88.5 % of the value of the capital.

The small-size companies with high qualified managers

54 The third and last cluster groups also contains 38 companies (40 % of the total). They are all located in the lower side of the diagram (the barycenter is plotted in the middle of the lower part of axis 2), which sets them apart from clusters 1 and 2 in terms of market capitalization, quite low for almost 70 % of the firms in cluster 3. Yet, this

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cluster is spread along the first factor (axis 1), therefore it shares some active categories at work along this factor, on both side of axis 1.

55 The top executives in cluster 3 are characterized by their high credentials. They are far more educated even from those in cluster 1: 93 % of the managers in cluster 3 are Post- Graduates and 59 % hold an MBA. If we consider this management degree as a resource that should differentiate “managers” from “owners” as a class, this distinction does not hold for the IT sector: 40 % of the founders have an MBA, but 58 % of the MBA holders are founders. Not only are the holders of a management degree well represented among the founders, but it seems that getting an MBA degree is a resource that is used for founding a company (assuming that the management degree has been obtained prior to the creation of the company, which is not always the case). Furthermore, 30% of the managers studied abroad, mostly in the USA, and 81% of those who went abroad hold an MBA; this point emphasizes the fact that the main aim of going abroad was to get an MBA.

56 The vast majority of IT managers not only are new entrants into a new activity sector, but they started their professional career when the process of liberalization of the economy began. Considering the 60 managers out of 95 who are founders of their companies, 85 % of them (n=49) were born after 1953. If we assume that they were around 25 years old maximum when they graduated,17 this means that they entered the field of the software industry from the end of the 1970s onwards. Among the 27 managers who graduated from a premium institution, only 18 founded their company and are still in command: 12 of them, born from 1952 to 1967, are 45 to 60 years old.

57 The economic categories that most differentiate the firms in cluster 3 from those in cluster 2 are their position on the IT market and their funding pattern. Two indicators are particularly significant. First, the firms in cluster 3 are clearly oriented towards the international IT market and second, for more than half of the companies, the Indian Public share is above 40%, a rare situation for the firms in cluster 2; consequently, the portion of Foreign funds is below 20 %. Quite often, moreover, the companies in this cluster are not members of NASSCOM. At this stage of the research, it is difficult to go further in the differentiation of the firms: we need to know more about their activities and clientele to better understand their particular position on the IT market.

58 Megasoft is a good example of this cluster. The company was founded in 1994 by S. Ravindra Babu who was its managing director until 2012, but it was not registered with NASSCOM. Ravindra Babu, born in 1963, hails from an entrepreneurial family and belongs to the Reddy caste, one of the dominant agricultural castes of Andhra Pradesh. He completed his Bachelor’s of science from the then Regional Engineering College of Tiruchirappalli, in Tamil Nadu, before going to the USA where he received various technical degrees, particularly an MTech in civil and environmental engineering from the Utah State University, but he has no MBA. Megasoft is a services provider of mobile solutions for banking payments whose activities are oriented towards the international market: only 6 % of its global revenue is drawn from the domestic market. Megasoft is highly capitalized from the stock-market as its India Public share amounts to almost 50% of its total equity-shares.

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Software capital: Brahmans and family business

The caste background of IT managers

59 Table 7 gives the distribution of the top managers for the 3 clusters according to their castes, which we coded into 4 main groups. There are different ways of reading this table. We can say, first, that less than 30 % of the managers are Brahmans, about 40 % are non-Brahman high castes, and less than 30 % are from other castes; or, second, that 67 % of the managers are from upper castes, and that the merchant high castes constitute a minority (16 %) among these upper-caste managers. But the statistical results of the hierarchical classification we conducted shows that the category “Caste” would be significant only for the third cluster (Table 6), in this case the “Agricultural- Artisan” castes that we grouped below with “Others.”

Table 8: Castes of the top managers of the software companies for the 3 clusters (n=95)

Castes Cluster 1 Cluster 2 Cluster 3 Total %

Brahmans 8 11 8 27 28

Merchant High Castes 2 8 5 15 16

Non-Merchant High Castes 4 13 5 22 23

Agri-Artisans & Others 5 4 18 27 29

Unknown 0 2 2 4 4

Total 19 38 38 95 100

60 However the codification of caste is not a neutral procedure from a sociological viewpoint. Rejecting the State categories (SC, ST, OBC) that were useless in this context, the groups we have coded are close to the varna categories, although they were not designed with this purpose. But in coding the Brahmans and the merchant castes separately, the sociologist is reproducing a previous legal category already codified in Hindu law, which singled out the Brahmans as a collective entity, therefore legitimizing the Hindu varna system of representation of the social world.18 What do we intend to do sociologically with the category of caste? Quite often, it is implicitly used in the place of missing data regarding the credentials and profession of the parents. Yet, the relationship between caste (whatever its definition) and the socio-economic characteristics of family is often either misleading or difficult to interpret, nor is it straightforward.

61 If we assume that the Brahmans, as a collective entity, would represent about 4% of the total Hindu population,19 they are overrepresented among the top executives of the IT sector, according to our survey, as they would probably be in many other professions. To overcome the statistical limitation of our data, we can focus on a case study that will help us to raise a few more questions regarding this issue. Let us consider Tata Consultancy Services (TCS), a firm whose recent developments have been documented

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by Subramaniam Ramadorai (2011) who retired as CEO in 2009 after 37 years of service, and then became vice-chairman of the Board of Directors. Ramadorai is a Tamil Brahman born in 1945 at Nagpur (Maharashtra), where his maternal grandfather settled when he retired from the Posts and telegraph audit department in Bombay. His paternal family came from a village in the south of Tamil Nadu where his paternal grandfather was village accountant, but his father was a civil servant who retired as accountant general of Tamil Nadu at Chennai.

62 Ramadorai, who grew up in Delhi, graduated in physics from the University of Delhi, then did a Master’s degree in electronics and communications at the Indian Institute of Science at Bangalore, before going to the University of California Los-Angeles in the US where he finally completed his PhD in computer sciences. These three complementary degrees gave Ramadorai a strong scientific background to start his professional career in the IT industry. Although he had the opportunity to stay in the USA, Ramadorai decided to come back to Indian and, in 1972, he was recruited as a software engineer at TCS by F. C. Kholi (a Punjabi born in 1924 in Peshawar, now in Pakistan), then the general director of the company.

63 Among the top executives of TCS, we find Tamil Brahmans closely connected by caste, kinship and alliance. Seturaman Mahalingam, born in 1948, is a qualified Chartered Accountant who holds a degree in commerce; he joined TCS in 1970, two years before Ramadorai, and became Chief Financial Officer in 2012. Mahalingam and Ramadorai’s ancestors came from the same region in Tamil Nadu, but they do not belong to the same Brahman sub-caste (Fuller and Narasimhan 2014:89–90). Another top manager was N. Ganapathy Subramanian executive vice-president of TCS and head of TCS Financial Solution; in 2014 he was appointed additional director and chairman of the board of Tata-Elxi where he took over the role of Ramadorai who stepped down at the age of 70. N. Ganapathy Subramaniam, who entered TCS at the beginning of the 1970s, is an older brother of Natarajan Chandrasekaran who was Chief Operating Officer at TCS (TCS 2009:46) in 2008. Natarajan Chandrasekaran was born in 1963 in a Tamil Brahman family; his father (Srinivasan Natarajan) was a lawyer in the Madras High Court and also held a farm in the Cavery basin of Tamil Nadu. He obtained a BSc in Applied Sciences from the Coimbatore Institute of Technology before completing a Master’s in Computer Application (a degree quite rare at the time) from the then Regional Engineering College of Tiruchirappalli in Tamil Nadu. After he did an internship at TCS in 1986, he joined the company as a software engineer the next year, in 1987, and 22 years later, in 2009, he succeeded Ramadorai as CEO of TCS. In January 2017 Natarajan Chandrasekaran was named Chairman of Tata Sons, while his older brother N. Ganapathy Subramaniam became Chief Operating Officer of TCS. There is no family relationship between Natarajan Chandrasekaran and S. Ramadorai (TCS 2009:46). 20

64 Are these individual cases significant from a sociological viewpoint? Historians of Modern India have underlined the fact that the Tamil Brahmans at Madras, during the colonial period, were closely connected and functioned like a clique.21 It whould be worth historicizing this network and extending its study after Independence in order to see if this mode of networking stopped with the end of colonial rule. TCS should be a good case in point because the concentration of South Indian employees seems higher in this company than at Infosys, Wipro or HCL for example.22

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Brahmans and merchants

65 According to some socioeconomic studies, three fourths of the 400 estimated largest companies in India, called business groups, would be a family business with a strong caste background among merchant communities (Chakraborty 2011). But what do we mean by family business in regards to the software companies we have studied?

66 The presence of family members on the board of directors can be considered as an indicator of a family business. In this regard, almost all the 35 family-business firms of the panel (37 %) are distributed equally between clusters 2 and 3. Among the biggest companies (cluster 1), only 3 firms have family members on their board of directors: eClerx, Persistent Systems and Hinduja Global Solutions, this last one being part of the Hinduja group founded by a Sindhi Hindu family, and now based in London. Yet, a firm whose family members do not sit on the Board of Directors can nevertheless be under the control of the promoters group in which the founder might have the main share. The typical example would be Azim Premji at Wipro.

67 Furthermore, 12 out of the 35 family-business IT companies are run by managers who are from non-merchant castes, the remaining 23 family-business firms being equally spread among the other groups. In other words, the companies founded or run by managers who hailed from merchant communities are not necessarily organized according to the family-business model. But we should notice that some business groups run by old merchant families were among the first companies which had foreseen the development of IT technologies and had diversified their activities quite early, like DCM, Tata, or Patni Computer Systems (Subrahmaniam 2014).

68 The fact remains that the opposition between the family-business firms and the major software companies like TCS, Infosys, Wipro or HCL is a common view endlessly repeated by people who might have some well-founded reason for defending this representation of the software industry. Nandan Nilekani, one of the founders of Infosys, recalled that Narayana Murthy and the engineers who parted from Patni Computer Systems, in 1981, wanted to develop, he said, an “un-Marwari company” (Sanghvi 2007:1–10). Vir Sanghvi, the journalist who conducted the interview, added: “By this they meant … employees should be treated with respect; no bribes will be paid; there will be no cash transaction.” Narayana Murthy and his colleagues could not stand “the typical Marwari-bania business ethic of that era’ wrote Vir Sanghvi. Stressing the number of South Indian Brahmans among the founders of Infosys, the journalist added: “Infosys represented the revolt of South Indian Brahmans against the North Indian Banias who dominated Indian business at the time.” Whether Vir Sanghvi expressed the unspoken view of Nandan Nilekani (who professed memory loss about what he said), whether the founding of Infosys could be understood as a revolt or not against North Indian Banias, this is not the issue here. At the very least, this saying points to an opposition between traditional merchant groups who are accustomed to doing business, whatever the sector of activities, and new comers into the economic market, for whom values and ethic could be mobilized as a resource in order to legitimate the place they have to find for themselves.

69 But what is significant is that the dominant view of the software industry has been developed by the major companies, particularly through NASSCOM, although there socioeconomic characters set them quite apart from the other IT companies listed on the NSE. Infosys itself is a software firm quite different from TCS and Wipro. It is not

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part of a conglomerate; it is a new player on the economic market; its share of the Promoters groups is not very big; its percentage of Indian Public Funds is quite significant, and although branded as an Indian company, which it is, Infosys has more than half of its shareholding held by Foreign Funds. Moreover, the management of the company is more in tune with that of its American competitors than with a so-called Indian merchant family-business. For all these reasons, it is understandable that the representation of the software industry projected by these major IT firms, and Infosys in particular, has become the dominant view of this services sector, in India but also outside India where the main clients of these Indian Multinational companies are located.

Conclusion

70 In studying the structure of Indian software capital, combining biographical data of the top managers with socioeconomic information on the IT companies, our aim was to break with the nebulous view of the software industry that has prevailed among scholars. Considering the first hundred software companies listed on the NSE, some sound conclusions can be summarized. There is a three-tier concentration of software capital, first, in the hands of the tiny group of the Indian Multinational companies, second, among the Promoters groups, which are the main shareholders in most of the companies, and third, within the holders of shares of the highest size and value, whatever the companies are. Moreover there is not a single Indian IT firm, in the panel, without foreign funding. Consequently, the Multinational Indian software companies and their managers are as Transnational as the start-ups located in the niches of the high technological sectors of the IT market. But what differentiates the Indian software companies is their access to the international IT market according to their economic strength and their level of professionalization.

71 This survey also breaks with the general view that the software entrepreneurs or top managers are all highly-educated people who graduated from elite engineering colleges. This is true only for less than a quarter of them who are concentrated either in the biggest IT companies or in smaller ones. Otherwise, there is a clear divide between these managers who cumulate studies abroad, post-graduate degrees, and diplomas in management with those engineers who are just graduates but might be as successful as other managers.

72 Finally, combining these sets of data, we have differentiated 3 main clusters that constitute the space of Indian software capital: first the Multinational Indian companies, second, the middle-size national firms oriented predominantly towards the domestic market, third and lastly, the small companies founded or managed by highly educated executives.

73 At this stage of the research, however, the results should be qualified and a couple of issues need to be raised. The results presented in this article have at least three main limitations. Firstly, regarding the sociodemographic profile of the top managers, we require better knowledge of their family background in terms of occupation and education of the parents. Otherwise it is meaningless to consider the caste origin as a proxy for these two socio-demographic variables (the example of Shiv Nadar at HCL is a good case in point). But the grammar of caste within the IT industry should be reconsidered in order to better understand the practice of networking among the top

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managers. Secondly, the understanding of software capital should be coupled with an analysis of the labor force of the IT companies. But quantitative data are scarce as very few companies detail the origins and educational background of their employees, and so far we have had to rely on qualitative study (Upadhya 2016). Finally, the main limitation of this survey might be the filter we have used, which is the NSE itself. It is clear that we know little about the small and medium enterprises that have not yet gone public whether they work for the domestic or the international IT market, like high-tech start-ups (Parthasarathy and Aoyama 2006). But the main difficulty remains the access to reliable sources on those firms. In any case, this study of the first hundred major firms of the IT sector should give us a reference point from which we should be able extend our knowledge of Indian software capital.

Annexe - Table 9: The software companies and their top managers selected for the MCA according to their cluster (n=95)

Company Company Cluster Top Manager Cluster Top Manager (Active) (Active)

1 Core ET Sanjeev Mansotra 2 Prime Focus Naresh Malhotra

1 eClerx P. D. Mundhra 2 Ramco P R Venketrama Raja

1 Firstsource Shailesh J. Mehta 2 Software Tech Yogesh C.Vaidya

HCL 1 Shiv Nadar 2 Spanco Kapil Puri Technology

HCL 1 Ajai Chowdry 2 Take Solutions Sivan Sridharan Infosystems

1 Hexaware P.R. Chandrasekar 2 Usha Martin Prashant Jhawar

Hinduja 1 Partha DeSarkar 2 Vakrangee Dinesh Nandwana Solutions

1 Infosys S. D. Shibulal 2 Zenith Info Akash Saraf

1 Infotech Entrp B.V.R. Mohan Reddy 3 Acropetal D. Ravi Kumar

Krishnakumae 1 Mindtree 3 Aftek Ranjit Dhuru Natarajan

1 Mphasis Balu Ganesh Ayyar 3 Bartronics Sudhir Rao

1 Onmobile Arvind Rao 3 Compuage Atul H. Mehta

Persistent 1 Anand S. Deshpande 3 Cyber Media Pradeep Gupta System

Polaris 1 Arun Jain 3 Cybertech Viswanath Tadimety Software

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1 Rolta Kamal K. Singh 3 Educomp Shantanu Prakash

1 TCS N. Chandhrasekaran 3 FCS Software Dalip Kumar

Techno Padam Prakash 1 3 Four Soft Palem Srikanth Reddy Electric Gupta

1 Wipro T. K. Kurien 3 Glodyne Annand Sarnaaik

1 Zensar Ganesh Natarajan 3 GSS Infotech Bhargav Marepally

2 3i Infotech V. Srinivasan (NRI) 3 HOV Services Sunil Rajadhyaksha

2 Accel Frontline N. R. Panicker 3 LCC Infotech Kirti Lakhotia

2 AGC Networks Satya Kumar Jha 3 Megasoft G. V. Kumar

2 Allsec Tech R. Jagadish 3 Melstar Richard D’Souza

2 Aptech Ninad Karpe 3 Panoramic Univ Arun B. Tari

Vuppalapati Satish 2 Aurionpro Amit Sheth 3 Prithvi Info Kumar

Vaidynathan 2 Blue Star Sunil Bhatia 3 Quintegra Sriraman

2 Career Point Pramod Maheshwari 3 R Systems Inter Satinder Singh Rekhi

Surendra Kumar 2 Compucom 3 RS Software Rajnit Rai Jain Surana

2 Datamatics GS Lalit S. Kanodia 3 Saksoft Aditya Krishna

2 EdServ S. Giridharan 3 Sasken Comm Rajiv Mody

2 Everonn Susha John 3 Smartlink Kamalaksha R. Naik

2 Financial Tech Jignesh Shah 3 Sonata Software P. Srikar Reddy

2 Genesys Sajid Malik 3 Tanla Solutions D. U. Kumar Reddy

2 Geodesic Kiran P. Kulkarni 3 Thinksoft A V Asvini Kumar

Manu Mahmud 2 Geometric 3 Trigyn R. Ganapathi Parpia

Hinduja 2 Ashok P. Hinduja 3 Zicom Manohar Bidaye Ventures

Nirmal Bhanwarlal Sudarshan 2 India Infoline 3 Zylog Jain Venkatraman

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2 Infinite Comp Upinder Zutshi Cluster Companies (Sup.) Top Manager

2 Info-Drive Soft K. Chandrasekaran 2 Tamilnadu Telec V. S. Parameswaran

2 IntraSoft Tech Arvind Kajaria 3 Allied Digital Nitin D. Shah

Unnamalai 2 KPIT Kishor Patil 3 Elnet Tech Thiagarajan

Ramamurthy 2 Mastek Sudhakar Ram 3 Gemini Vijaykumar

2 Micro Tech P. Sekhar 3 Helios&Matheson G. K. Muralikrishna

Mirc 2 Gulu L. Mirchandani 3 ICSA G. Bala Reddy Electronics

2 Net 4 India Jasjit Singh Sawhney 3 Kernex Micro Colonel L.V. Raju

2 Nucleuss Vishnu R. Dusad 3 Prithvi Softech Ashok Kumar Kavad

2 Omnitech Atul Hemani 3 Spectacle Info Tejesh Kodali

2 Onward Harish S. Mehta 3 TVS Electronics S. S. Raman

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NOTES

1. IT Enabled Services include Business Process Outsourcing (BPO) and Business Process Management (BPM). 2. The literature review has been limited to the works most closely related with our field and subject, whether on the software industry or on caste issues. 3. Commonly called Baniya, particularly by their non-merchant competitors, people from these traditional merchant groups feel that the term is slightly derogatory and they prefer to call themselves Vaish, designating the varna of the Vaishya, a term widely used in the press in Hindi when presenting the caste background of candidates in local elections for example. 4. The definition of “software capital” I propose in this article, differs from the sociocultural approach developed by Rajan (2006). 5. For running the Multiple Correspondence Analysis I have used SPAD software. The results presented here can be considered as the most coherent I obtained considering the categories selected. The population studied is a panel of the software companies listed on the NSE and not a sample, in the probabilistic meaning of the term, of all the software companies listed. 6. I follow Le Roux and Rouanet who used the “modified rated” defined by J. P. Benzécri in order to better appreciate the contributions of the first principal axes to the construction of the clouds of points (see Le Roux and Rouanet 2010:39). 7. The under-representation of women is also high among the top managers; there is only 7.6 % of women among the 882 top managers of Tata Consultancy Services, the only company that mentions the gender of its managers (see TCS 2009:32–46). 8. Muslims are also under-represented in the software industry: less than 1% of the top managers at TCS are Muslims (see TCS 2009:32–46); according to the Annual Activity Reports of the other companies, 2,5 % (3 out of 120) of the top managers at Wipro are Muslims, and not a single one, it seems, at Infosys and HCL in 2012. 9. For a comparison with the profile of the chairmen and CEO of the top 100 companies listed on the NSE, see Naudet, Allorant and Ferry (forthcoming). 10. Among the 95 software companies we studied 12 mentioned CMM5 certification in their Annual Activity Report for 2012. This professional certification remains highly distinctive. According to different authors, in 2002–2003 the total number of Indian companies that had CMM5 certification varied between 65 and 85 (Parthasarathy and Aoyama 2006:1271, Upadhya 2016:121). 11. In the panel I studied, 8 companies have foreign promoters who represent 0.7% of the total promoters group; they have been included in the group “Foreign Institutions.” 12. The structure of the Promoters group and the way it exercises its control can be quite complex for the biggest companies, but we do not consider this issue in this article. 13. The breakdown of the shareholding pattern in the activity reports of the companies did not allow us to go beyond the distinction of the shareholding into 3 main classes. The value of shareholding is estimated using the mean market capitalization of the companies for the fiscal years 2002–2003 to 2011–2012. 14. See “The Amazing Story of the Birth of HCL” in Rediff India Abroad, June 9, 2007. Retrieved December 23, 2016 (http://www.rediff.com/money/2007/jun/09bspec1.htm). 15. More exactly, Shiv Nadar’s ancestors belong to a sub-caste of the Nadar, the Nadan, who were owners of land, well-off economically, and who accessed English education at the beginning of the 20th century; his maternal uncle S. B. Adityan or Adithan (born in 1905) who founded the

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Tamil daily, Dina Thanthi, completed his MA from the University of Madras and studied law at the Middle Temple in London (see Hardgrave Jr. 1969:39). 16. Personal interview with Pramod Maheshwari, Kota, September 30, 2014. 17. The mean age of entry in the IT industry, observed from the list of the top managers we collected for TCS, Infosys and Wipro (n=1018) is roughly 22 to 25 years. 18. On the sociological effect that involves any codification of the professions (or here the caste), see Bourdieu (2016: 226–27). 19. See Davis (1951). In 2011, the Tamil Brahmans population was estimated at about 2.5 % of the total population of the Tamil Nadu State, see Fuller and Narasimhan (2014:231–41). On the opposite side of the Indian social order, Untouchables were estimated at 14% of the total population of India in 1931. 20. Yet, while I was doing fieldwork at Chennai in 2012, people (who were not Brahman) told me that Natarajan Chandrasekaran could be, for some, the “son-in-law,” for other, the “brother-in- law” of Ramadorai, statements that circulate on the net as well. This hearsay evidence is difficult to interpret. It might express an anti-Brahman feeling aroused by the high number of Tamil or South-Indians employees at TCS, among whom many are probably Brahmans, but it also underlines the strength of the caste and kinship model which is mobilized by people in order to make sense of the overrepresentation of the Brahmans, here at TCS, whether this overrepresentation is factually grounded or not. The Tamil Brahmans, nicknamed “Tambrahms” both by outsiders and insiders, have a singular historical trajectory compared to other groups of Brahmans in contemporary India, see Fuller and Narasimhan, in particular chapter 7 (2014: 211– 29). 21. On the struggles for control of the modes of the patronage system in colonial South-India, see Washbrook (1977). 22. Among the 882 top managers listed at TCS in 2009 under the Particular of Employees Act, at least 25% have a South-Indian name (see TCS 2009).

ABSTRACTS

The aim of this article is to study Indian software capital considered as the nexus of IT companies and their top managers. For this purpose, we have conducted a Multi Correspondence Analysis of a set of data collected for the first hundred IT firms listed on the National Stock Exchange in Mumbai in 2012. We address three main research questions. Firstly, what is the socio- demographic profile of these entrepreneurs, secondly, what is the shareholding pattern of these companies and their position on the IT market and, lastly, what are the differences between these IT companies and traditional business groups? Although the managers are highly educated and share the same technical culture, the results show a clear division of software capital in 3 clusters. First, the Multinational companies, which are the oldest firms and the biggest in terms of manpower and global revenue, are opposed to a second group of IT companies founded or managed by executives who are mainly graduates, and whose activities are oriented towards the domestic market; lastly, a third group of companies run by highly-qualified managers (with MBAs) combined characters of clusters 1 and 2, but are smaller companies more dependent on the stock-market. In the software industry, the family-business model, which is not specifically related to the merchant high castes, is well represented, except for the Indian MNCs, but with some qualifications.

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INDEX

Keywords: Brahman, castes, elite, entrepreneurs, IT (Information Technology), Multi Correspondence Analysis (MCA), shareholding

AUTHOR

ROLAND LARDINOIS Centre national de la recherche scientifique, Centre d’études de l’Inde et de l’Asie du sud (EHESS)

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When Cracking the JEE is not Enough Processes of Elimination and Differentiation, from Entry to Placement, in the Indian Institutes of Technology (IITs)

Odile Henry and Mathieu Ferry Translation : Renuka George

We thank Yoann Demoli (Associate Professor, UVSQ, Laboratoire Printemps) for his advice on econometric models.

Introduction

1 Since Independence engineering studies have been seen as a force capable of transforming Indian society, with advanced technology occupying a central position in the development model. Hence the Indian Institutes of Technology (IITs) in particular embody the values of modern India promoted by the political elite.1 Exempted from the application of reservation policies at first, the IITs were long perceived as meritocratic elite institutions released from contingencies related to caste and their political exploitation. The success of IIT graduates in the US computer industry in the 1980s (Lardinois 2014) and the liberalization of the Indian economy in the 1990s tend to make IIT a “brand” associated with Indian global competitiveness and the values of a private sector “disembedded from the social and political spheres” (Subramanian, 2015).

2 However, with the introduction of quotas for the Scheduled Castes (SCs) and Scheduled Tribes (STs)2 in 1973, then a new category of reservations for the Other Backward Classes (OBCs)3 in 2008, 49.5% of seats at IIT are now “reserved,” as compared with only 22.5% before 2008. Some former students, products of this institution that was marked by a very strong social homogeneity when it was first conceived, see the introduction of quotas as a threat to the meritocratic spirit of the IITs. They believe the “marked down” admission of these new students has weakened the IIT “brand.” In contrast with these nostalgic observations on the lost purity of the elite, the discourse pronounced within the institution by a section of the professional corps tends to strongly defend

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the meritocratic nature of the IIT. Thus there is supposed to be a high correlation between the level of academic achievement, admission to a stream and an IIT (which are also hierarchized) and placement on the job market: the best students are supposedly admitted to the most selective streams and go on to secure jobs that are both better paid and offer better prospects, in career terms.

3 As the object of differing evaluations, the meritocratic model embodied by the IITs today should be empirically explored. Are the IITs, and particularly their “undergraduate programs,”4 a vehicle for social mobility based solely on the students’ skills, as they claim? This vulgate, spread by the media, which students and their families largely believe, deserves to be questioned.

4 A certain number of studies carried out on India in the 1970s and 80s tried to assess the value of the institutions encouraged by the Constitution of 1947, and studied the connections between education, the distribution of power within society and the circulation of elites (Krishna Kumar 1985; Rajagopalan and Singh 1968; King 1970). These works tend to show that positions within the Indian elite, particularly the bureaucratic and economic elite, are the monopoly of the upper castes, and that so- called merit based selection corresponds largely to selection based on social background. C. Rajagopalan and Jaspal Singh conclude that the IITs made a very low contribution to phenomena of social mobility in the 1960s and 70s. Although they are not free of a certain normativity, the conclusions of a more recent work underscore the under-representation of the most dominated categories within the IITs, in terms of caste, class, gender and religion (Roli and Kapur 2009). With the introduction of reservations for the OBCs, and the high increase in the number of students admitted to IIT5 as a consequence of this, do we currently see the rise within these elite schools of “new” social groups, or groups that were formerly marginalized? Or, on the contrary, has there been a reinforcement of the positions of power occupied by members of the former elite? Further, to what extent do the IITs contribute to a relative opening up of the Indian elite, for example by encouraging access for the elite of these populations dominated in terms of caste or gender.

5 The results of the research presented here aim to provide a general documentation of the role IITs play in the process of reproduction of the social order, particularly their contribution to the reproduction of the Indian elite. They provide empirical elements and statistical analyses that enable an identification of the social functions endorsed by these schools, described as schools of excellence. They thus highlight the processes by which the IITs both continually and differentially eliminate students from the dominated groups (particularly those belonging to the SC and ST categories), and contribute to a strongly differentiated return, hence the social value, of academic titles on the job market. Thus, although they are formally identical, the academic titles obtained by SC and ST students, are globally less productive. Far from giving in to a functionalism that would endow the institution with an intentionality, the sociological reasoning adopted here attempts, on the contrary, to reconstitute the various institutional processes, which taken together, contribute to “creating” these statistical trends.

6 The statistical results presented in this article were produced, as we will see, by recoding and processing a group of numerical data, produced by the institution for its own practical needs. Gathered over the course of a long field study (December 2014 to December 2016) conducted at one of the IITs6 these institutional data all show a

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breakdown of the student population by admission status, although in their statements the people interviewed—both professors and students—agree that social differences (of caste, class, gender, religion) lose their pertinence once a student is admitted to the campus. These administrative categories distinguish students admitted on quotas (SCs, STs, OBCs) from the “General” students (called GENs or even “Merit Based Admission” students), that is to say students who did not benefit from the reservation policy. Carrying out a socio-genesis of the idea of meritocracy in India, Satish Deshpande’s (2013) work shows how, from the 1930s onwards, a new norm of “castelessness” emerges and, with the application of reservation policies, is practically embodied in this so called “General” category. Such an appellation tends to erase all caste characteristics leaving only merit. This conforms to the historical process by means of which the dominant castes in India have gradually transformed their illegitimate inherited capital (social status related to caste) into a modern capital (access to property, education and modern professions). At the end of this long process, the collective identity of the GENs is marked by the qualification achieved, and caste (rendered invisible) is erased, while the collective identity of the lower castes remains primarily marked by caste (rendered hyper visible), and the acquired qualifications remain secondary. The author underscores the fact that with the “conflagration” generated by the Mandal Commission in 1990 and the introduction of quotas for OBCs, the “GEN” category becomes a euphemism for a small, relatively homogenous social group—the members of the privileged castes—and a convenient appellation that allows the members of these castes to see themselves (and to be seen) as “modern,” or casteless, released from any caste association. Such a socio-genesis very convincingly reveals the processes of collective amnesia involved in the constitution of the national history. Thus, the institutional history of Indian modernity is written by strongly denying certain grey areas: on the one hand the history of the processes of normalizing the elite and the reconversion of forms of inherited capital. On the other hand, that of the processes that made caste identity, which along with the reservation policy now constitutes a major resource for the dominated groups, something outdated, a block to the democratization process and hence illegitimate.

7 Within the conceptual framework forged by Deshpande, Subramanian’s (2015) research highlights the important role the IITs historically played in this process of converting an inherited caste capital into an acquired modernistic capital. Nonetheless, while these works underscore the historical unconscious that inhabits the institution and the administrative categories it produces and reproduces, they say nothing about the institutional work of aggregation and segregation of populations over the course of which these administrative categories are continually updated. In addition, while they draw attention to the processes of assigning identities, they brush aside the fact that the forms of segregation applied within IITs go hand in hand with ongoing and often masked forms of exclusion of students belonging to the dominated populations. Lastly, based on analyses of discourses (official speeches or interviews) or in other words, representations of the world, the analyses presented in these works deserve to be related to the objective reality of the practices. That is to say, on the one hand, the statistical trend that reveals there is a higher probability of students registered on the general list fully benefitting from the educational capital they acquire at IIT, and hence representing the only legitimate title holders this institution produces. And on the other hand, the concrete daily mechanisms that create this trend are brought out. It would seem that it is only by revealing the correspondences between objective social

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structures and mental (or cognitive) structures that research gives itself a chance to denaturalize the institution, the social hierarchies it produces, and the principles of hierachization that invest these hierarchies with their strength. (Bourdieu [1989] 1996:1–6).

8 To clarify the presentation we will distinguish between various mechanisms which contribute to the creation of the statistical trend. We will start by explaining the data collection methods and the operations involved in the processing of this material. We will go on to examine the work done by the institution to produce administrative categories that fulfil its needs, that is to say the concrete operations of grouping and differentiation required for the production of taxonomies. The third part will deal with the mechanisms of male and female student selection that take place even before the student joins IITL, during a little known phase of the national JEE competition, in which the students have to rank and record their choices. The last two sections will examine the processes of differential elimination and differentiation in the social value of the degrees.

Survey methods, data gathered and data processing

9 Our survey is based on a long fieldwork study carried out at IITL. During this fieldwork, we conducted a number of ethnographic observations (11 ten-day fieldwork sessions) and 62 interviews with professors, students and some former students. During the first year of this fieldwork, we were able to gather a certain amount of data on the student population produced by the institution (see infra), which we had to enter, encode and process.7 Nonetheless, in order to process this data, which is key to an understanding of the institutional policy, we first had to understand the internal logic that led to its production, and hence carry out further interviews.

10 For the moment we have chosen to limit the surveyed population to undergraduates, that is to say those who were admitted to IITL after passing the JEE. There are a variety of reasons for this choice: apart from reasons of feasibility, we want to work on those who are internally considered the “cream of the elite,” as the JEE embodies a model of hyper-selectivity and incorruptibility.

11 Three types of data were collected:

12 First, national data from the JEE 2011, that is to say the official (public) report and different databases related to the 13,196 students who qualified for admission, 9,627 of whom were finally admitted. These data allow us to correlate the ranks obtained in the exam—differentiating the ranks of the students accepted under the Common Merit List and those who were admitted under the quota system—and the stream and the IIT where these students registered. The students who obtained the highest ranks in the JEE tend to “choose” the most highly-rated branches of knowledge (grouped under departments in IIT terminology). The ranking of the departments is partly linked, as we will confirm below, to the placement rate on the job market and the salaries offered.

13 Then we have the data produced by the Dean of Academic Affairs’ office (IITL), the “Roll list of Undergraduate Students,” a thick, printed document that shows the distribution of the students by degree and department chosen for each semester of the university year. This office provided us with data compiled over the last 10 years (2004–2005 to 2014–2015). These lists specify the students’ admission status, their gender and they

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also show the number of physically handicapped (PH) students. We chose to process this administrative data in a manner that allowed us to reconstruct the seven classes of students who joined IIT between 2004 and 2010 (and graduated between 2008 and 2015), to follow the cohorts over the 4 to 5 years of their studies and to observe the failure/ dropout and repeat rate.

14 In order to evaluate the failure/dropout rate for each class, we decided to focus on the whole class admitted to BTech and to compare the number of students registered in the first year (semester 1) with the number of students registered in the fourth year (semester 8). The difference between these two figures represents the number of failures/dropouts. Finally, we related the number of failures/dropouts to the initial size of each class; this failure/dropout rate constitutes the first academic success indicator. To evaluate the repeat rate for each class we calculated the number of students present in semester 9 for the students doing a BTech and the students present in semester 11 for the students doing a DD or an Int MSc, as these figures were the highest. When we relate them to the number of students present during the final semester of each program, we hence obtain the repeat rate for each program.

15 Lastly, data produced by the Student Placement Office, SPO, provides information about the 1,090 students registered with this administrative department in 2014–2015. It collects information about academic success (the CPI, cumulative performance index, an academic score updated every semester on the basis of the marks obtained since the beginning of the course), job placement (placed, not placed, position occupied, economic sector and salary range), the degree and department and lastly the student’s status (GEN/SC/ST/OBC). This database covers all the students in all the streams offered at IITL (that is to say, the UG and PG programs), which in the long term will allow us to carry out a comparison.

16 These three types of data are not completely homogeneous due to the reform of the undergraduate program in 2011. Until 2011, students admitted to IITL (UG program) had a choice between three types of degrees: Bachelor of Technology (BTech in 4 years), Dual Degree (DD, Bachelor and Master of Technology in 5 years) or Master of Integrated science (MSc Int in 5 years). Since 2011, the Dual Degree (DD) and the Master of Science Integrated (Int. MSc)—degrees created in 2001 and 1972—were abolished by government decision. The Master of Science has been transformed into a Bachelor of Science (BSc) open to students admitted through the JEE. The Dual Degree remains a course reserved for students admitted under the JEE, but now the option of prolonging the course by a year is taken in the third academic year and is dependent on an internal IIT selection process.

The creation of taxonomies

17 Although caste is to a large extent denied in the official discourses on the institution the admission status (that includes numerous sub-castes, castes or jati and meta-castes)8 is omnipresent (as is the degree the person is working towards and their branch or discipline) in the data regularly produced by the institution on itself. This is not the case of gender, however, a category that does not systematically appear in these data books.

18 One example of how the institution produces and reproduces these categories is the rankings that are established on the basis of the Joint Entrance Examination Advanced

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(JEE), which is a means of selecting “undergraduates.” This highly selective9 national (pan-Indian) examination contributes to substantiating the ideal of the IITs’ independence and the meritocratic values it claims to represent, distinguishing it from other engineering colleges, which are supposedly more exposed to social pressures. The very proceedings of the examination seem to guarantee that meritocratic values are respected: the disciplines selected for the test (mathematics, physics and chemistry) are precisely those which are the least open to various kinds of inherited “capital” (in 1988, the English test paper was removed and from 1990 onwards the exam could be conducted in English and in 13 regional languages, [Kelkar 2013]) and the standardization of the marking system significantly limits the possible consequences of the examiners’ subjectivity. After the examination students are ranked according to their grade and their admission status.

19 A nuanced description of the manner in which this competitive examination takes place is required in order to grasp the institutional stakes involved in this type of classification. We will look at the case of the 2011 JEE. The 15 IITs and the Indian School of Mines Dhanbad, had a total of 9,627 available seats, 50.5% of which were attributed to students who do not claim reservation status (GENs) or choose not to benefit from it,10 and 49.5% were, in principle, allocated to students admitted on the quota basis. In order to fill the seats, a “Common Merit List” (CML) is created.11 Then, the score obtained by the last person admitted from the Common merit list represents the cut-off mark. Students whose results are lower than this mark benefit from positive discrimination measures (relaxed standards) if they are in possession of a certificate stating they belong to a reserved category and have registered for the examination as a member of one of these categories. Thus, OBC students can be admitted on condition their results are no lower than 10% below the cut off mark, while SCs and STs can be admitted on condition their results are no lower than 50% less than the cut off mark.

20 During the qualification process four rankings are created. The general ranking groups students qualified on the CML (the GENs). The OBC, SC, ST lists include students who register for the competitive examination as members of a particular caste. Contrary to the idea that all the students who belong to the reserved categories would benefit from a marked down competitive exam (‘relaxed standards’), we note that these three lists include both some students who qualify on the CML—this is the case for 59.4 % of OBCs, 6.3 % of SCs and 5.1 % of STs—and students who benefit from a score below the cut off mark. It is surprising that the minority students who qualify on the CML are still almost always admitted to reserved seats and then counted on the basis of this admission status. According to the JEE examination board spokespersons, this procedure is in their interest: with an equal score, an OBC, SC or ST student will be in a far more favorable rank in his category list than on the general list and will hence have access to a wider range of choices. But it is also true that such a procedure ensures as well that students from the minority groups who registered for the competitive examination under these categories, and obtained scores comparable to the GENs do not occupy the seats the GEN are “entitled” to. Admission status as a constructed category hence tends to amalgamate student populations whose educational performances are highly variable. Such institutional logics which manufacture homogenous groups based only on admission status have clear consequences, as, when they introduce themselves the students are required to disclose their rank in the competitive exam, and thus the category under which they were admitted.

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21 Although those responsible for the competitive examination underscore the fact that the examination is entirely computerized, both in terms of the calculation of scores and ranks as well as the attribution of seats (value judgments are believed to have been completely eliminated from the examination), the way the JEE is organized contributes to differentiating certain groups within the student population, notably students who qualify but are not admitted due to a shortage of seats, a majority of GENs and students admitted with lower marks.12 These disclosed data seem to be a boon for research dealing with the evaluation of Affirmative Action policies13 as they provide certain empirical foundations for categories constructed for research purposes: the displaced and displacing groups.14 But such social constructions also fuel the resentment felt by a number of students who do not come under any of the quotas, as one can see both in the interview excerpt below and the stereotyped images of the admission status categories that circulate widely on social networks (Figure 1):

22 “It’s very common for SCs / STs, accustomed to having everything without working, to claim that they have bad grades at IIT because they are discriminated against because teachers do not like them, etc. Their delay in basic skills is so great that to succeed they would have to work much more … Those students who think everything is owed to them may experience a kind of segregation on campus, because some GENs have friends that have not been received at IIT with much better results” says Adit, a final year Dual Degree student in Civil Engineering, from the Koshta community in Madhya Pradesh. This community is listed as OBC but Adit was admitted through the general list because his parents’ income is above the limit. Adit says his family is “Sanskritized”: his grandfather is illiterate, his father, a Master of Technology from a “small” Jabalpur (MP) college is a professor of environmental engineering at the National Institute of Technology (NIT) in Bhopal and his mother, he said, works as an executive secretary, something that is extremely rare in this community.15

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Figure 1 – Picture circulating on Facebook and forwarded to us by an ST student.

23 The mechanisms that contribute to the GEN students’ identity being marked by merit to the detriment of caste, and inversely to the identity of the students from the dominated groups being marked by caste to the detriment of the achieved educational qualification, are not only based on discourse, but as we just saw, they draw their efficacy from unquestioned social categories, employed in the most banal administrative practices. The production of these categories is the fruit of a specific effort and fulfils institutional needs. Integrated into the very core of the cognitive structures transmitted by the institution, administrative categories make a major contribution to structuring perceptions of reality and, in this way, become a powerful marker of social identities. The analysis we have sketched here of the social conditions under which they are produced is an integral part of the exercise of reflexivity the social sciences must subject themselves to (Bourdieu 2004) and as such, it constitutes an indispensable precondition to statistical analyses of data constructed on the basis of these taxonomies.

“Students’ choices”: a final phase of the selection process

24 The ranking in the national examination (JEE advanced) determines to a certain extent the possibility of joining one of the IITs, a program, and a department of study, with each of these entities occupying a position within a hierarchy.16 Now, the process by which the available places are attributed during the last phase of the JEE is both little known and highly complex. In a way, we can say that this process constitutes a final stage of the selection process, no aspect of which is left to chance. Many of the students interviewed described this major step, and we compared their explanations with the

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JEE 2011 data we had access to. The qualifying students enter an unlimited number of choices on an online platform, but at least one of these choices must be within the possible options associated with the rank the student has obtained. At the end of the process, that is to say after three rounds during which the algorithm offers the available places, first to the students with the highest ranks on each of the lists. A total of 9,311 candidates are accepted, which means that about 29.4% of the 13,196 qualifying students will not be able to join the institution.17 In 2011, 35.8% of the qualifying GENs were not admitted as compared to 19.3% of the qualifying OBCs, 29.3% of the SCs and 11.6% of the STs.18

25 These figures describe different realities: the correspondence between the number of qualifying candidates and the number of seats available is the least advantageous for students who do not come under any of the quotas, but for the OBCs, SCs and STs, the correspondence is better balanced. This leads us to believe that when GENs have a low position in the ranking, they prefer to choose a different academic path or they maintain their application but do not gain admission to an IIT. On the contrary, OBCs, SCs and STs seem more often to have expressed choices that cannot realistically be fulfilled given their ranking in the exam and they are eliminated for this reason.

26 Thus, the formulation of choices is a very delicate matter. Many of the students interviewed stressed the crucial importance of advice provided by people close to them (family, neighbors, teachers, etc.) at this stage of the examination to figure out these multiple hierarchies: what is a prestigious branch? What is a “good” IIT? And is it better to request a prestigious branch in a lower ranked IIT or the contrary? The lack of social and/or cultural capital, therefore of familiarity with the administrative rules and with the dual hierarchy at work in the IITs and their departments, leads to a certain level of failure every year in obtaining a place at an IIT.

27 “Errors” of perception regarding the options available seem to be more commonly made by students admitted under the quota system. Without access to relevant information, these students have a strong tendency to follow the choices made by students who obtained the same rankings in previous years,19 even though the scores and places never correspond exactly from one year to the next. These “ill-informed” students may thus request a place well above their rank or not explore all the options available to them. In fact, the only means of ensuring a place at an IIT is to ask for a place well below that which one’s rank would permit access to. This is the case of some of the women who “choose” a department that has a low rank and a reputation for being a “women’s” department (bioengineering, for example), while they could gain access to more prestigious departments, but which are also seen as essentially “men’s” departments.

28 Inversely, the best-informed students can set up fairly sophisticated compensatory strategies. Thus Subha (4th year, Master of Technology, Mechanical, IITL), a student admitted on the general list, did not get a very high rank in the JEE, but she wanted to join a core branch at one of the 7 oldest IITs. Now she was only allowed to apply for the scientific courses, which she rejected. On the advice of people close to her (her father is an orthopedist, her mother a housewife who holds a doctorate in botany, and she has a cousin who was a student at IITL while she was preparing for the entrance examination), she opted for a BTech in Mechanical engineering, a core branch, but not very open to girls, in a more recent IIT, but located in the same state as IITL. As she had been informed of the close links between the two IITs, after her BTech, she applied to

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and almost automatically gained admission to the Mechanical engineering department for a postgraduate program at IITL.

Differential elimination of students

29 At IITL can one identify certain processes of relegation or elimination that would more specifically target certain categories of students? Our analysis tends to show that the admission status does not seem to be a discriminating factor in the distribution of students within the hierarchized streams,20 with each stream more or less respecting the quota policy. SC and ST students are nonetheless more present in the most profitable streams in terms of professional insertion, that is to say the engineering streams, and these are also the most sought after and the most prestigious.21 However, with the increase in the number of SC students admitted, we note that from 2008 onwards, like the GENs, these students are forced to occupy seats in the longer and less appreciated scientific streams.22 The SC students interviewed more often mention that when they choose the scientific streams, they are more interested in disciplines (like economics, sociology or political science) that lead to professions related to an analysis of society, with a perspective of social reform, particularly in terms of education. Lastly, girls, who in 2014–2015 represent only 7.5 % of all first year students registered in the undergraduate program, are more often relegated to the scientific streams or to the least well-classified engineering departments.23 Here our results differ from Sreelekha Nair’s conclusions (Nair 2012) that associate the progress in the representation of women in engineering training with the development of new disciplines (Computer Science, Electrical Engineering, Electronics and Communication) that are less committed than others (mechanical or aerospace) to virile values, and thus more open to women. On the contrary, in the elite program of an elite school such as IITL, girls are systematically under-represented in the disciplines considered the most prestigious.

30 While the process of relegation to the less prestigious streams seems essentially to involve female students, what is the situation with regard to the elimination process? The quota policy for entry to an undergraduate programme is globally respected at IITL24 but what is the situation at the end of the program? Do students from the dominated groups have equal chances of obtaining their degree from IITL?

31 Two indicators allowed us to measure the students rates of academic success. On the one hand, the failure (or drop out) rate and the repeat reate were calculated by processing the cohorts for 7 class years (2004 to 2010). On the other hand, the academic score students obtain in their final semester, or the “Cumulative Performance Index” (CPI), which is the average of the marks obtained since the beginning of their studies at IIT.25

32 Our results both suport and confirm the earlier commentaries on ST and ST student failure at IITs.26 Thus, while 3,4% of all students fail or drop out, the failure/dropout rate in BTech is higher for SCs (9.9 %) and STs (7.7 %) than for GENs (2 %), whereas the failure/dropout rate for OBCs is lower (1.3 %). As for the repeat rate in BTech (11.1 % for all students), it is higher for all students admitted on quota seats than for GENs: 26.3 % for SCs, 34 % for STs and 8.8 % for OBCs versus 5.9 % for GENs. The Dual Degree and Integrated Master’s confirm these trends with some variations. We therefore assert that academic success is overall lower for SCs and STs than it is for GENs and OBCs.

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33 The analysis of the distribution of the “Cumulative Performance index” (CPI) by admission status further reinforces these results. Indeed, figure 3 displays a projection of the densities of CPI distribution by admission status.27 The density peaks (or the modes) are in the following ascending order: STs, SCs, OBCs and GENs. While these curves outline differences in academic success between categories, the spreads also highlight the heterogeneity of grades in each of the categories: the STs grade distribution is the most uniform (the peak form is more strongly accentuated).

Figure 3 – Density plot of CPI marks by caste category (source: SPO)

The differential elimination of SC and ST students and the longer duration of their studies contrasts with the girls’ academic success. As we know, a large number of them obtained low ranks in the JEE, so they also—but to a lesser degree—have a lower academic level when they join IIT. Thus although the failure/dropout rate is the same for girls and boys (3.1%), girls repeat less often than boys: 11.2 % of boys as against 9.4% of girls in BTech. This trend is clearly enhanced for five-year programs: while 12.1 % of boys have repeated at some point in their course, no girl has.

34 Several hypotheses can be suggested to interpret these results. The SC and ST students’ lower level of success is partially the product of academic inequalities at the outset, and the lack of institutional initiatives to correct these inequalities.

35 Thus the interviews show that SC or ST students who face academic difficulties (which lead, for example, to their names appearing on the “warning list”28) most often belong to sparsely-educated and poor families (mainly agrarian families) and they are hence the first generation to gain access to higher education. Most of them attended government, Hindi medium, primary and secondary schools, and their parents do not speak English. When they are brutally plunged into an academic world where English is the working language, lectures and classes with over 100 students the norm, and anonymity the rule, all of this reinforces the great difficulty they have in assimilating

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the teachings.29 In addition, some, who did not have sufficient economic resources, did not attend coaching centers. For example Pradeep, an ST student registered in his 5th year of a Bachelor’s degree (Material Science and Engineering, IITL), clearly states it is only on arrival at the campus that the student discovers he does not have the tools to memorize information and work quickly, nor has he acquired the habit early on of working under the stressful conditions (competition and continual evaluation) prevalent in today’s educational institutions. All these are techniques the majority of the other students have acquired at coaching centers. Abrupt changes in the rules of the game can also explain the differential elimination of students from the minority groups. Thus 73 students (31 STs, 23 SCs and 8 OBCs) registered in the first year (UG program) were expelled from IIT Roorkee in July 2015, in the middle of the summer holidays. In this specific case it was due to the combination of the marking system or the relative marks30 that automatically lowers the CPIs of students whose results are below the class average, and the brutal application of an arbitrarily adopted rule. During the summer, the CPI required in order to register in second year was suddenly raised from 4 to 5, but the students had not been informed of this when they began their studies, and this explains these massive expulsions (Mandal et al. 2015).

36 The survey conducted on the campus by a team of researchers brought to light a number of measures that contribute to eliminating the academically-weakest students. Underscoring the disdain with which the IIT Roorke management treated the judgment of a similar case at IIT Delhi, the Fact Finding Report lists the lack of support mechanisms that would give the academically-weakest students real means to progress: irrelevance of the English bridging courses to practically prepare the students for the academic work demanded by IIT, lack of language laboratories, lack of an orientation program that clearly explains to students the rules and functioning of the institution as the time of their admission to IIT, lack of pedagogical support that had been promised by the institution (English language classes, summer coaching classes, slow tracking program),31 dysfunctional SC/ST cell, a support structure for students admitted on the quota basis that exists only on paper. This report also underscores other factors that contribute to eliminating students admitted on the quota basis such as the very high registration fee demanded to retake a test,32 the experience of discrimination the SC and ST students are subjected to by the professors or the “senior students” responsible for mentorship,33 and the non-application of the reservation policy to the professional body.34

37 An analysis of the rationales of sociability on the campus sheds light on another feature of the students’ academic trajectories and contributes to explaining the fact that some of those admitted with a low score manage to catch up, while others remain at the bottom of the class. An observation of social life on the campus, and particularly of the sporting and cultural practices, reveals the rationales behind the constitution of student groups on the basis of caste and class. Thus, Abishek (3rd year, BTech, Chemical Engineering, IITL) states that the students are divided into two main groups: the GEN group, that includes a few OBC/SC/STs includes “those who come from cities and share a certain number of dominant social properties: they speak good English, they know how to organize shows, have oratorical skills, and have dispositions for literary questions.” On the other side, the SC/ST group includes students from rural areas, little attracted to leisure activities (except the most popular sports like cricket or badminton), who speak English badly and have mediocre academic results. Although there are groups based on regional belonging, they seem to exist with this dominant

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division “Students do not expect much from the profs, adds Abishek. People learn from their peer circles so group segregation hence has obvious effects.”

38 This observation confirms the analyses carried out at IITM (Subramanian, 2015): with the creation of quotas for the OBCs, GENs increasingly tend to function as a separate entity and to avoid any kind of association with lower status groups. The theoretical model developed by Norbert Elias (Elias and Scotson 1965) seems to be pertinent here: everything occurs as if the GEN students successfully claim a collective identity constructed along the lines of the “minority of the best” model, a merit-based minority, into which they attempt to assimilate students from reserved categories admitted “on the basis of merit.” In contrast, students admitted on the basis of quotas, the SCs and STs in particular, are assigned a collective identity constructed on the basis of the “ minority of the worst” model.35 Thus when an upper caste (GEN) student has bad results, “it’s because he/she is too busy having fun” while a student admitted on the reserved quota’s bad results are interpreted as the result of intellectual shortcomings (Subramanian 2015).

39 This oppositional structure deserves a specific analysis, questioning, for example, the social gradations that exist within both groups as well as the price to be paid to be included in the community of the best.36 Thus Pradeep, an ST student, (5th year BTech, Material Science and Engineering, IITL) finds himself in a situation of academic failure in his first years at IITL and is threatened with expulsion. Shifting out of his isolation, at this late stage he manages to join a group of friends (3 are OBCs and the fourth is a GEN) whose academic level is higher than his own. He describes this group of students as average and fairly introverted. Pradeep’s inclusion in the group goes hand in hand with an improvement in his performance: his CPI rises from 3.2 in the first year to 4.6 at the beginning of the fifth year. Fairly good at English and interested in the social sciences, Pradeep helps his friends (one of whom is from a Hindi medium school) to prepare for the compulsory subject exams, generally of little interest to the engineering students, although they are difficult as they require a mastery over literary English. In return, his friends help him fill his enormous gaps in math.

40 The price to be paid for such inclusion, which is also a transgression of the boundaries of the group of origin, varies depending on the students’ social properties. Sabeena, a final year Bachelor’s degree student (Electrical Engineering), first said she comes from the Meena community (Scheduled Tribe in the state of Rajasthan) before correcting herself and asking me “to put Brahmin instead” as she appeared for, and passed, the JEE on the Common Merit List and did not take advantage of the quota policy. It was as if the fact of being included among the Common Merit List GENs and in the community of the best meant she was automatically marked as a member of the “upper castes.” She adopts this group’s cultural norms all the more easily as she comes from a wealthy urban family. Nonetheless, the interviews with girls admitted under the quota system (SCs or STs) tend to show that they are more easily included “in the Gen group.” One of them explains that “girls are a rare resource on the campus, so they are coveted in the upper-class student circles.” This is certainly one of the factors that can explain the girls’ exemplary academic success.37

41 Inversely, Amit (BTech Computer Sciences and Engineering, Batch 2005, IITL, currently a PhD student in economics at JNU) pays a high price for the quota policy under which he was admitted. From Bihar, his father belongs to a very poor family: he is a cashier at a bank and the only one of his brothers to have found a “good job.” Very isolated as an

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SC student right from the beginning of his studies, he emphasizes both the need to create good relationships with the upper-class students and the recurring humiliation he experienced when he listened in silence to the insulting comments his friends made in front of him on SC and ST students, and on the quota policy.38 While it is impossible to provide the results of a deeper analysis here, we should nonetheless underscore the role Dalit political socialization plays (a type of politicization transmitted within the family or acquired during protest movements on the campus) in the development of a positive identity and relationships of solidarity within the stigmatized group. On this point, our own observations agree with the conclusions of the work on the social mobility of individuals from dominated and stigmatized groups (Naudet, 2012).

An unequal return on degrees

42 As SC/ST students more often fail to obtain a seat at an IIT, although they are so qualified by the JEE, as they are more often eliminated during the course of their studies and tend to repeat more often, are their chances of securing a job and a high salary comparable to those of the other students? Indeed, according to the usual discourse pronounced by teachers and students, everything occurs as if academic excellence, measured in terms of rank in the JEE classification and the results obtained at the end of the period of study (which do not necessarily coincide), contributed to legitimizing a hierarchy between departments, based on a market rationale. In a circular manner, economic approval (placement rate and high salaries) reinforces the legitimacy of academic hierarchies. Is this relationship between academic success, placement rate on the job market and the salaries secured fully verified?

43 The question of IIT students’ job placements is a very sensitive one. The subject is highly mediatized as the press regularly publishes sensational figures for the highest salaries and the IITs rarely intervene to correct these declarations. It is, in fact, greatly in their interest to reinforce an image widely based on their students’ spectacular success. Thus it is hardly surprising that we encountered the greatest difficulty precisely in obtaining the data produced by the SPO, and specifically the data dealing with individual salaries, which, despite the promises made, were finally refused. Only the salary range, recalculated by the Student Placement Office (SPO) staff was finally shared with us.

44 As registration with the placement service is voluntary (and open to all students, UG and PG), are the students registered representative of all the students at IITL? Let us start by noting that the proportion of UG students registered with the SPO is much higher for students following five-year programs than for those following four-year programs: 82,8 % of the Dual Degree students are registered with the SPO, 65 % of students following an Int MSc program, as against 58.3 % of BTech students and 16.8 % of BSc students.39 This tends to confirm the fact that for many students, the BTech is a stepping stone to further studies.40

45 In addition, registration rates with the SPO vary considerably by admission status; indeed, for the BTech, 61.3 % of GEN students are registered with the SPO, against 58 % of OBC students, 52.9 % of SC students and 45.5 % of ST students. These figures are even more telling for the Dual Degree (85.1 % of GENs are registered as against 82.5 % of OBCs, 70.8 % of SCs and 77.8 % of STs) and for the Int MSc (65.6 % of GENs are registered with the placement service and only 36.0 % of OBCs, 35. 5% of SCs and 7.1 % of STs). If

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the SC and ST students (unlike OBC students) have a tendency not to make use of the opportunities provided by the placement office that many students interviewed saw as one of the privileges IITians enjoy, the reasons for this under representation are numerous: on the one hand, the SC/ST students more often follow the path of civil- service examinations, on the other hand, anticipating their low chances of securing a job and/or a good salary in the private sector, they take the initiative to exclude themselves from a service that is reputed for only rewarding the best students.

46 Let us now look at the associations between placement rate and salaries, on the one hand, and admission status, academic performance (measured by the CPI) and the degree and branch, on the other. Let us begin with a general observation: while 82.8 % of students enrolled in the SPO are placed, 3.9 % of them earn a salary above 25 lakhs (approximately 37,200 US $) a year; 16,2 % a salary between 11 and 25 lakhs; 37,8 % a salary between 6,5 and 11 lakhs and 13,3 % a salary lower than 6,5 lakhs. These few elements put the very high figures often provided in the media into perspective (PTI 2014). Indeed, the press often shows an interest in the small minority of students (3,9 % of those registered with the SPO and 4.8 % of students who are placed) who receive offers of over 25 lakhs (approximately 37,200 US $) per year, ignoring the others. Newspapers rarely mention, for example, that 17.2 % of the students registered with the SPO did not find placements, or that 50 % of the students who were placed by the SPO are paid a salary of only 11 lakhs (16,313 US $) a year. Or even, as we saw above, that the statistics created on the basis of SPO data, in reality, only involve a larger or smaller proportion of IIT graduates, depending on the streams.

47 Is there an association between high academic results and high salaries as the meritocratic discourse claims? To start with, the students who found a job had, on average, higher final marks: 7,9 as against 7,2 for those who did not have a job (the range of the marks is from 4,5 to 10). The distribution of (CPI) marks by salary level shows that the students who are paid the highest salaries were recruited at the highest academic levels; this is all the more true of students who have a salary of over 25 lakhs. We can clearly see, however, that for each salary level, the range of marks obtained can be quite wide and they overlap. This “slack” between the academic mark and the salary secured for a first job deserves to be questioned in order to see whether it is a result of economic criteria (position within the job market the program leads towards) and/or whether it is related to the individual’s social qualities. The general trend seems hence to confirm the meritocratic discourse expressed by the institution, but this is certainly not the only mechanism at work.

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Figure 4 – Boxplot of academic results (CPI) by salary bracket

Reading: the boxplots (also known as whisker plots) allow the CPI marks to be distributed (along the ordinate) for each salary level the students secure (on the abscissa). For every salary level (Level A to D), these boxplots provide information about the mark distribution profile. The bold horizontal line represents the median, the one above is the third quartile, the one below is the first quartile, which means that one can very quickly visualize the CPI interval containing half of the students for a given salary. On each boxplot we have added the average, shown by a dot (Le Guen 2002).

48 Since students belonging to the reservation quota groups have a lower level of academic achievement, it can be assumed that this will have an impact on their employability and their salaries. The results show that students admitted from the general list more easily find jobs than students admitted on the basis of reserved quotas: 90 % of the GEN students registered with the SPO found a job as against 77 % of the OBCs, 68 % of the SCs and barely 46 % of the STs. Therefore, the hierarchy between groups remains the same, be it for academic performance or finding a job. Since academic achievement seems to partly determine the placement rate on the labor market, it remains to be verified whether for an equal grade, different placement rates are observed for different groups.

49 We will hence model the probability of finding a job depending on the CPI and the students’ status, using a binomial logistic regression. The estimates, translated into probabilities in figure 5, clearly show that with equal marks (CPI) the probabilities of finding a job through the SPO are not equal, and differ according to admission status. While the probability of finding a job increases with an increase in the CPI, students admitted on the general list have greater chances of finding a job than students admitted on quotas. There are also disparities between the different quota groups: OBCs fare relatively better in finding a job than SCs, while STs are those with the lowest employment rates. These results corroborate and support the results of other works that highlight the mental representations shared by those responsible for recruitment at large private firms, which contribute to eliminating candidates from the reserved categories (Jodhka and Newman 2010; Deshpande and Newman, 2010).

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Figure 5 – Predicted probability of securing a job through the SPO by final mark and admission status

Note: the relationship between the probability of securing a job and the CPI mark is positive. At every mark level the GENs have a higher probability of securing a job than the OBCs, the SCs and the STs. The predicted probabilities are calculated using the coefficients of the logistic regression, for details of the calculation one can refer to Bressoux, 2014. The coefficients and statistics associated with the regression model appear in table A1 of the annex. Cases: All the students registered with the SPO, for whom the information is available.

50 Beyond these observations on the student placement rate, we can examine the salary differences by admission status group. To do this, we model a multinomial logistic regression performed on the salary levels according to academic success and admission status.41 The reference modality of the variable is the probability of securing a salary lower than 6,5 lakhs a year, the estimated regression coefficients are based on the probability of securing a salary between 6,5 and 11 lakhs and a salary above 11 lakhs.42 If we look at the marginal effects of the significant logit coefficients, the fact of being an OBC rather than a GEN decreases the probability of securing a salary between 6,5 and 11 lakhs rather than a salary lower than 6,5 lakhs by almost 12 %; (for this salary range, we cannot predict the results for other admission statuses as they are not significant). Above all, being an OBC rather than a GEN reduces the probability of securing a salary of over 11 lakhs rather than a salary lower than 6,5 lakhs by 26 %. For SCs, this probability decreases by 22 % and for STs it decreases by 38 %, in relation to the GENs.

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Table 1 – Model of securing an annual salary of above 6.5 lakhs, based on the final CPI and the admission status, among students who secured a job

Note: The coefficients are shown with the corresponding significance, the stars indicate the degree of statistical significance: * 10 %, ** 5 %, *** 1 %. Non-significant coefficients are noted n.s. The model is a multinomial logistic regression, where the reference modality of the dependent variable is the fact of securing a salary below 6.5 lakhs a year. The values in the “Marginal effect” column show the predicted variation of the frequency of this modality depending on the different parameters shown in the model. They correspond to a translation of the significant logits into different probabilities and facilitate the reading. For example, the increase of a point in the CPI score increases the probability of securing a salary above 11 lakhs/year by 9%. At the same time, being an OBC reduces this probability by 25,8 %. Likelihood ratio test of the model with a single constant: 1,552, in the model with explanatory variables: 1,492. Significant likelihood ratio test at p<0.1%. Cases: All students registered with the SPO, who secured a job, for whom the information is available.

51 Lastly, we can question the stream (department and degree) effect in job and salary distribution, starting from the hypothesis that posits that students from the best- classified departments in the symbolic hierarchy should, in principle, more easily find better jobs and higher salaries. Can we observe a “stream effect” that would limit or increase social inequality between students?

52 Unsurprisingly, we note that the three engineering departments at the top of the classification established by the JEE are those with the highest job-placement rates. But if one looks at the other departments, certain questions arise. Thus the Chemical Engineering department’s position, where girls are slightly better represented, is surprising: this department occupies a relatively high position in the JEE classification, a rank that does not seem to correspond to the placement opportunities this subject offers, nor to the salary level of the students placed. In addition, the Civil Engineering department recruits students whose JEE results are far higher than those of the students recruited by the Material and Metallurgical Engineering department, but their placement rate is far lower than that of the latter department.43 Our analysis of the job placement rates thus only partially confirms the departmental hierarchy, as presented in the JEE ranking: the inconsistencies in the relationship between “titles” and “jobs” seem to be greater for the departments located in the lower half of the hierarchy.

53 If we now question the connections between the different departments (more or less selective), the scores and the students’ admission status, do we find, as the partisans of the mismatch hypothesis claim, that students from minority groups are less successful when they graduate from the more selective departments (Frisancho et al. 2012)? Our data allows us to answer this question from the viewpoint of the job placement rate and not from the point of view of the salary secured,44 which is the only factor economists specializing in the evaluation of Affirmative Action look at.

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54 Our data allows us to state that, regardless of the admission status and the students’ score, the job placement rate is higher when they graduate from the more selective departments.45 Nonetheless, however selective the department, the inequalities between GEN and minority-group (OBC, SC, ST) students remain. These inequalities are however far more important in the less selective departments (Figure 5). Finally, with equal CPI scores, these inequalities are the most pronounced for the lowest CPI scores in the less selective streams.46

55 In other words, with the same score, the fact of graduating from a selective department would provide some amount of protection from inequalities in job placement for students from the minority groups: the differences still exist, but they are reduced. On the contrary, the less selective departments provide better returns for students who do not belong to a minority group: they are more advantageous for upper-class students. Better equipped to take advantage of the less highly-classified streams, these students use other types of capital to compensate for their poor academic results and thus manage to find a place on the job market. This last observation, congruous with the inconsistencies in the relationship between titles and jobs that seem to characterize the less selective departments, thus tends to refute the Mismatch hypothesis. The Int MSc in Economics is an example of the courses located at the bottom of the hierarchy in 2011 that were highly profitable on the job market. We have noted the strong presence of women in the economics course and the recent arrival of SC students who were almost absent from this course when it was first created. It seems that the economics program—as it is new and has relatively less-demanding admission criteria, and for which job prospects are probably not yet stabilized—attracts students predisposed to taking risks and moving away from the core sectors of engineering, in the hope of more easily securing a job and a better salary.47 But the return on the qualification is still unequal here, as the proportion of GEN students who find a job is far higher than the proportion of minority group students.

Employment rate by stream selectivity and admission status

Figure 6a – For all the CPI scores combined

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Figure 6b – For the lowest scores (CPI lower than 7)

Note: all scores combined, the employment rate is higher in the Top department than in the Bottom department. In addition, for the lowest scores, the inequalities in the employment rates between OBCs, SCs and STs on the one hand, and GENs on the other, are stronger in the Bottom department for the lowest CPIs. Cases: All students registered with the SPO for whom the information is available.

56 These findings question the meritocratic principle of direct association between academic achievement and professional success. If one of the criticisms addressed to the quota policy is its lack of meritocracy, since it encourages students whose educational outcomes are lower, we note here that it is the reserved groups that suffer unequal treatment for equal academic success. Social mobility through academic institutions, apparently favored by the quota policy, appears very relative: on graduating from an IIT, the private sector logic, which ignores the reservation policy, prevails. But, to locate the existence the mechanisms that the social value of academic qualifications are based upon outside the institution is to forget that the specific functioning of the academic institution is well adapted to the demands of the private sector and actively contributes to making degrees unequally profitable. Thus the students interviewed emphasized the importance recruiters attach to involvement in the extra-curricular activities the institution offers (cultural activities like music, theatre, poetry, dance, etc., as well as sporting and scientific activities). These extra- curricular investments are seen as so many indicators of the spirit of competition, the capacity to introduce and sell oneself, and above all, of qualities such as “curiosity” and “disinterest”—in short inherited capital.48 Now the SC and ST students often mentioned the fact they do not participate in the activities offered by the Gymkhana (the student’s body in charge of extra-curricular activities) for a variety of reasons. Some of them are officially excluded due to their poor academic results. Others exclude themselves for various reasons: lack of familiarity with the dominant culture, focus on academic work and under estimation of the importance of extra-curricular activities in terms of valorizing the degree, a refusal to yet again occupy a subaltern position by taking part in activities whose leaders are chosen among the best students and all belong to the upper castes.49

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Conclusion

57 Contrary to the idea that caste is a rural, traditional institution,50 that is to say “marginal” in modern India, we observe that at the highest-level academic institutions for technical elites, it still determines social trajectories. Questioning the meritocratic model promoted by the institution, we have revealed the multiple mechanisms the institution employs to eliminate and sanction students from the dominated groups, particularly SC and ST students, thus contributing to the differential value of the academic titles it delivers. The statistical analyses carried out reveal the mystifying role of the school, as at the end of these selection and segregation processes, students from the upper class seem to be the only legitimate holders of the academic title: “The apparent neutrality of the school enables this to transform social differences into educational differences by passing off properties acquired in the family milieu as ‘natural gifts.’ In a society where obtaining social privileges depends ever more closely on the possession of educational titles, this ideology of ‘gift,’ by which those who ‘inherit’ become those who ‘merit,’ fills an essential function in legitimizing the social order” (Bourdieu, quoted by Discepolo and Poupeau 2008:33).

58 Having revealed the school’s function of legitimizing the social order our study gives weight, which will be nuanced at a later stage, to a variable admission status constructed by the institution in conformity with its political interests. As we have seen, this category groups together students of very different academic levels and from very different social origins, and these would benefit from being split into a series of indicators showing the position the family occupies in the social class and caste structure. The statistical analysis has nonetheless shown the determining nature of admission status: going against the ideology of the individual gift, it gives students from the dominated group the means to see “their individual destiny as a specific case within a collective destiny” (Bourdieu, quoted by Discepolo and Poupeau 2008:38). At a second stage, as we have attempted to show, it remains necessary to take into account the students’ social dispositions and their practical ability to respond to social restrictions, that is to say to go beyond the mechanical aspect of determinism while avoiding the pitfalls of subjectivism.

Figure 2 – Position of the IITL departments in the GEN students JEE classification (first and last student, source: JEE report 2011)

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NOTES

1. This research is a part of the ENGIND programme, funded by the ANR.

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2. Scheduled Castes’ (SCs) is a category created at the beginning of the 20th century, and “Scheduled Tribes” (STs) gained national administrative status just after independence. In the public administrative services and government universities in India, 15% of seats are reserved for SCs and 7.5 % for STs. 3. After very long and lively controversies from Independence until the publication of the Mandal Commission conclusions in 1990, the Congress party agreed to extend the OBC (other groups are also called “backward,” but they occupy very different social positions) reservation policy to include universities in 2007. The decision was suspended by the Supreme Court for lack of statistical data (the last population census that systematically recorded the cast variable, dates from 1931). A year later this policy was implemented on condition that higher-education establishments increase their student capacity by 54%. On this point see Jaffrelot (2013). These controversies are far from over as recent Indian news proves, with the Patel movement in Gujarat in the summer of 2015 or more recently the Bihar state elections in which reservation policies played an important role (Jaffrelot 2015). 4. The undergraduate program selects students after class 12 on the basis of a national examination, the JEE, which, as we will see, would like to be seen as the embodiment of meritocratic values. 5. For the IIT studied, the annual number of graduates has increased from 71 in 1965 (first class year) to 1273 in 2014 (last year taken into account for our study). 6. This IIT, which we will call IITL, is one of the oldest, and is one of the “top 7” IITs today. 7. Gathering this data was a long and sometimes arduous process: we had to identify the right interlocutors, convince them of the relevance of our questions, and little by little win them over. We would like to thank all of them here. 8. Castes, as administrative categories, have been built following two hierarchical principles (the ritual/symbolic status and the socio-economic status) that were the object of very old debates and do not completely overlap (Lardinois 1985). See Headley (2013) on the polysemy of the term “caste,” which has been the focus of social struggles and arbitrary administrative divisions. 9. According to the data available in the Report of the Joint Implementation Committee (IIT Kharagpur, August 2014), about 1 million 200,000 students register for the JEE after class 12. 600,000 pass the main JEE and 100,000 are allowed to sit the JEE advanced exam. In the end, 10,000 students pass the JEE advanced exam and will join one of the 17 IITs. On the JEE, see Kelkar (2013) and his ongoing research. 10. A few students from dominated castes choose not to make use of their certificate when they register for the examination and are qualified on the CML. 11. All the students on this CML must have scored at least 10 % on each of the written tests and have obtained an aggregate score of 35% 12. The historical processes over the course of which this regulation was developed, then reified in a computerized programme, deserve to be further explored. 13. Over the last few years in India there has been an increase in economic studies dealing with the relationship between economic growth, social disparity and discrimination (Deshpande 2011). These studies, encouraged by international institutions that finance research, and carried out thanks to partnerships between Indian and American research institutes, are highly influenced by the research problems developed in the United States, on the relationship between social mobility (often reduced to economic income) and racial identity. The single competitive examination system, the JEE, provides an appreciable scientific opportunity for these studies. Dealing with IITs or Indian engineering colleges, these studies tend to test the hypotheses most commonly mobilized in scholarly debates on the evaluation of Affirmative Action in the US, from within the Indian higher education system (Bertrand, Hanna and Mullainathan 2010; Frisancho, Robles and Krishna 2012).

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14. “Our point estimates also suggest that affirmative action programs come at an absolute cost, because the negative income level effect experienced by displaced upper-caste applicants is far greater than the positive income level effect experienced by displacing lower-caste students.” (Bertrand et al. 2010). 15. Interview conducted by Odile Henry, October 2015, IITL. 16. The oldest IITs are considered more prestigious and Kharagpur, Bombay, Kanpur, Madras, Delhi, Guwahati, Roorkee are generally seen as the top 7. In IITL terminology, stream means both the degree (sometimes also called “program”), and the branch of knowledge, or the subject studied. At IITL, each branch is represented in one and only one department. 17. Although not all the qualifying students are admitted, paradoxically there are vacant places. In 2011, the seats reserved for OBCs that remained vacant (there were fewer OBC students whose score was above –10% of the cut-off, than seats available) were reattributed to qualifying GENs; this represented 436 seats. With regard to the SCs, all the reserved seats were offered and filled. However, given that the number of ST candidates whose scores were above –50% of the cut-off was lower than the number of seats reserved for this category, these vacant seats were converted to seats for preparatory classes, which allowed the students to join an IIT the following year if their academic achievement was sufficient. 18. Figures calculated from the JEE Report 2011. 19. Data from previous years that cross-checks results obtained on the JEE and allocation of students by branch and IITs are available on the JEE website. 20. Three departments are located at the top of the rating and they are all engineering programmes: Computer Science Engineering, Electrical Engineering and Mechanical Engineering. These departments show the best results in terms of job placement after graduation. Then, we have the departments of Physics, Chemical Engineering, Aerospace and Civil Engineering. Lastly, three scientific departments (Mathematics & Scientific Computing, Economics, Chemistry) are situated at the bottom of the classification, along with two engineering departments: Biological Science & Bioengineering and Materials & Metallurgical Engineering. Cf. Figure 2 in annexe. 21. We must note that the Civil Engineering programs recruit SC and particularly ST students, who are ranked far higher than the students they recruit from the general list. While we must question this association, it could be related to the quota policy as applied by the administration. 22. The SC and ST students’ unwillingness to join scientific programmes that lead to a PhD can be related to the financial investment this type of course demands. Indeed studies carried out by economists show that, while the income of families of low-caste students admitted on the reservation quotas (displacing groups) are on average four times higher than the average revenue of their caste, this income remains much lower than that of the families of the displaced groups (Bertrand et al. 2010; Frisancho et al. 2012). 23. Even though the figures are not strictly comparable, these percentages are lower than those indicated by the national figures: in 2000, girls represent 16.2% of all students in the field of higher education in engineering, according to Kumar and Neelam’s (2008) figures (in Nair 2012). The percentage seems even lower when compared with 40.7% of girls enrolled in 2007 in one of the 194 engineering colleges in Kerala, figures from the Annual Technical Education Reviews (ATER) of Nodal Centre, Kerala, NTMIS, IAMR (in Nair 2012). 24. This is far less true of the postgraduate program: in 2014, only 38 % of the MTech program students and 26% of the PhD program students were accepted under the quota system. For these degrees almost all the OBC quota seats were filled, which is far from the case for the SCs and STs. Unlike admission to an undergraduate program (through the JEE), admission to a Master’s or a PhD includes an interview. Interviews conducted with teachers and students reveal that SC and ST students tend to be eliminated during this oral evaluation.

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25. We have this indicator for the 1,090 students registered with the placement service in 2015. The analyses of CPI distribution hence concern all these students and include both undergraduates and post graduates. 26. Anoop Kumar (2011) estimates that every year, the SC/ST communities lose an average of 62% of the seats attributed to them at IITS for various reasons such as unfilled seats, expulsion, drop out and suicide. 27. The horizontal axis shows the projection of the grade spread and the vertical axis represents the proportion of students around each CPI level. 28. The departments transmit this list of students who are experiencing educational difficulties to the Counseling service that then summons them for a meeting. 29. Some students from poor families have never owned a computer before joining IIT. 30. “In this system, individual students are marked on the basis of the performance of the entire class. For example, if the class on an average scores 75/100, 75 is held as 6.5 CGPA (CPI). Students scoring less than 75 are assigned grade points as per their relative distance from the average marks of the class … given that there is relative marking hence there would always be a few students who would fall in the category of below 5 every year, irrespective of how hard they work. Every year the lowest ranking students would be kicked out of the institution” (Mandal et al. 2015:33 and 45). 31. There are special funds (the Scheduled Caste Sub Plan and Scheduled Tribe Sub Plan) dedicated to improving the well-being of SC and ST students. In 2015–2016, 450 crores were allocated to the IITs (Mandal et al. 2015). 32. The students have two years to to clear their backlog. Beyond this deadline they have to pay a fee of 45,000 INR (appproximately 660 US $) for each test they retake (Mandal et al. 2015). 33. “One of the students recollected his experience with an upper-caste senior. When he approached this senior with a doubt the senior remarked that ‘being an ST he would not understand the concept’” (Mandal and al. 2015:37). 34. Nearly 95% of the 427 faculty positions in IIT Madras were occupied by the Hindu “upper castes” in 2001 (Dalit Media Network 2001). 35. See Elias and Scotson (1965). These concepts seem to be particularly useful for a sociological understanding of these realities. Thus the charismatic group (constructed according to the model of the minority of the best) is the one that manages to impress upon the members of the stigmatized group the highly valorised image it has of itself, while the stigmatized group (constructed on the basis of the minority of the worst) is the one that is given its debased image, which is then progressively internalized, by others (the members of the charismatic group): the members of a stigmatized group tend to see themselves through the eyes of the dominant. 36. A questionnaire that seeks to objectivize the structure of the social relationships between the students was created and was to be distributed to all the students belonging to a Btech class year at IITL. Unfortunately, in the end, we were refused permission to distribute this questionnaire. 37. Other elements come into play—for example the very strong family pressure to marry and have children—that place girls in an ambiguous positon as they are better represented in the longer programs and are subject to strong pressure to study for a limited time. There is also the fact they manage to build support circles in the scientific program where they are a minority. 38. “If you stop making friends with them it will be hard for you. So I accepted this fact, even though they are saying bad things about SC, ST,” Interview with Amit, conducted by Odile Henry, JNU, Delhi, May 2016. 39. We compared the SPO figures with the student numbers of the final year for each program of the undergraduate program (BTech, BSc, Dual Degree and Int MSc) based on the “roll list.” 40. It is impossible to obtain precise information about the trajectories of students who are not registered at the SPO since the departments do not systematically collect data on their alumni.

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41. A more parsimonious ordinal logistic regression model was tested but the parallel lines hypothesis was violated both by the test score and visually. 42. The salary brackets between 11 and 25 lakhs and above 25 lakhs were grouped due to the sample size. 43. This discrepancy between a relatively high level of academic success in the JEE and a low placement rate is also true of students recruited by the Aerospace department. 44. Our results do not show any evidence of a department effect on salary inequalities, except for the highest salaries in the most selective departments, most often allocated to GEN students. 45. “More selective departments” include the three top departments of the JEE 2011: Electrical Engineering, Computer Science Engineering and Mechanical Engineering. “Less selective departments” include the departments of Mathematics, Biological Science and Engineering, Economics, Material & Metallurgical Engineering and Chemistry (see figure 2 in annexe). The SPO data for placement in 2014–2015 correspond to Btech students admitted through the JEE 2011. 46. Taking into account the low number of students with a high CPI, we cannot generalize this observation for all CPI slabs. 47. This observation contradicts the so-called risk aversion mentioned in some studies to explain that students from minority groups are not represented in the “Winning Jobs” category (Frisancho et al. 2012). 48. Thus, a survey of 25 human-resources directors working for large Indian companies shows that, although they constantly employ the rhetoric of merit, recruiters attach great importance to the candidates’ social background. Their individual properties are never clearly separated from those of the family, and beyond this, the community (Jodhka and Newman 2010). 49. At IITL, the person in charge of the class is the one who has the best marks. AT IIT Roorke, an internal rule stipulates that the candidate who stands for the position of President of the Students’ Affairs Council has to have a CPI above 7.5 and only students whose CPI is higher than 6.5 can manage cultural events like the festivals and other shows the IIT organizes. (Mandal et al., 2015). 50. Some students admit there are forms of discrimination on the campus against students admitted on the quota basis and GEN students from rural areas, who are considered “backward,” are singled out.

ABSTRACTS

Exempted from the application of reservation policies at first, the Indian Institutes of Technology tend to be perceived as institutions that produce a meritocratic elite, freed from the contingencies related to caste and their political exploitation. However, some former students, products of this institution that was marked by a very strong social homogeneity when it was first conceived, see the introduction of quotas for the Scheduled Castes (SC) and Scheduled Tribes (ST) in 1973, then a new category of reservations for the Other Backward Castes (OBCs) in 2008, as a threat to the meritocratic spirit of the IITs. They believe the “marked down” admission of these new students has weakened the IIT “brand.” Based on fieldwork in one of these elite technical education institutions, we will question this meritocratic model. We will highlight the processes by which the IITs continually and differentially eliminate students from the dominated groups (in particular those belonging to the SC and ST categories), and contribute to a high differentiation in the return on, hence the social value of, educational titles on the job market.

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INDEX

Keywords: engineering, elites, meritocracy, education system, social reproduction, reservation policies

AUTHORS

ODILE HENRY Professor, Political Science Department, Université Paris 8

MATHIEU FERRY Graduate Student, ENS Cachan

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A “New” Economic Elite in India: Transnational and Neoliberal?

Jivanta Schoettli and Markus Pohlmann

Introduction1

1 India is today one of the world’s fastest growing economies, a G-20 major economy, member of the BRICS and a developing economy, which according to the World Trade Organization (WTO) is among the top 20 global traders.2 As per the International Monetary Fund’s 2015 annual survey, the Indian economy is set to become “one of the fastest-growing, big, emerging market economies in the world” (Cashin et al. 2015). Although the country continues to rank low on indices such as the World Bank’s “Ease of Doing Business” and economic reforms have been slow and cumbersome, corporate India has been gaining global recognition and resonance with the rise of internationally successful companies such as Tata, Mahindra, Birla, Reliance. What lies behind these success stories? Is there an Indian model of doing business or is globalization of the company giving rise to a “global business elite”? Is it the case that the managers leading successful global enterprises are internationally recruited, graduates from the best business schools around the world who thus carry, replicate and implant the same ideas and best practices wherever they go? This is the scenario painted by the renowned Harvard Business School scholar, Rosabeth M. Kanter. Her book, World Class: Thriving Locally in the Global Economy applauds “corporate cosmopolitanism,” for example in the following way: Cosmopolitans are card-carrying members of the world class—often literally card carrying, with passports or air tickets serving to admit them. They lead companies that are linked to global chains. Comfortable in many places and able to understand and bridge the differences among them, cosmopolitans possess portable skills and a broad outlook. But it is not travel that defines cosmopolitans—some widely traveled people remain hopelessly parochial—it is mind-set. Cosmopolitans are rich in three intangible assets, three C’s that translate into preeminence and power in a global economy: concepts—the best and latest knowledge and ideas; competence—the ability to operate at the highest standards

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of any place anywhere; and connections—the best relationships, which provide access to the resources of other people and organizations around the world. Indeed, it is because cosmopolitans bring the best and latest concepts, the highest levels of competence, and excellent connections that they gain influence over locals. Cosmopolitans carry these three C’s with them to all the places in which they operate. As they do so, they create and become part of a more universal culture… (Kanter 1995:23–24) Two specific hypotheses are thus drawn from the globalization literature and tested in this article: (a) the projection that the rise of multinational companies fosters the emergence of a transnational business elite 3 and, (b) that as economic elites globalize they opt for an education in economics / commerce and graduate from business schools which predisposes them towards neoliberal action orientations.

2 The paper is divided into four sections. A state of the art discusses the two hypotheses mentioned above, their outlook of convergence and place within the broader globalization literature. Next, we introduce the research design, which informed the collection of life course data for more than one hundred top managers. The creation of this original database, admittedly drawn from secondary sources, brings together data on nationality, work and study abroad, educational background, career pattern and mobility. Aside from biographies there is limited data available on Indian top managers. The database thus provides a useful starting point for further in-depth studies using regressions analysis as well as complementing our sample of interviews that were conducted with Indian top managers. Furthermore, the data collection was part of an extensive international research project that collated the same data for other Asian, Latin American and European economies, forming a rich international database.4

3 In this article we analyze and compare the data with a benchmark 1963/64 study conducted by Sagar C. Jain entitled, “Indian Manager: His Social Origin and Career,” covering 1,982 Indian managers from manufacturing and processing companies. To contextualize the data, we consider two levels of analysis in part four: (1) the business system and, (2) the organizational form of corporate career systems in India. Our conclusion sums up the main findings and presents comparative data for Asia’s main economies.

1. Theory and State of the Art.

4 Our research draws upon the classical framework of Max Weber’s work on capitalism as a starting point (see Pohlmann 2002, 2005). At an abstract level, Max Weber was interested in how carrier groups with a new spirit of economic thinking became influential in a historical institutional setting, pushing forward the establishment of a new form of capitalism.5 This was also the basis for our research questions, whether the recruitment and selection of CEOs fosters the emergence of new forms of neoliberal management thinking. Weber concentrated on three mechanisms of reproduction: the selection of firms and personnel, the diffusion of concepts and ideas, and the adaptation of ideas through socialization processes. In this paper, we concentrate on the selection of the highest ranked personnel in the biggest industrial firms in India to find out how the carrier group6 of the capitalist spirit is recruited and what their qualifications are. This combines a focus on elites, ideas and institutions, each intertwined and embedded within an organizational framework. Elites are defined using a positional approach. We do not discuss power elites, who are defined by the

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exercise of their power, but focus on positional elites, defined as those who occupy the highest position in a given sector. They have the potential to exercise power, but we do not know nor do we investigate how influential or powerful they really are. We apply this to the category of managers as well as entrepreneurs. Managers are defined as executive staff (in our sample, usually the Chief Executive Officer, CEO) and entrepreneurs are identified as the owners (stock or majority shareholders) who usually run a company group, as President, General Manager, Chairman or as the CEO.

5 Empirical research suggests that there is tough global competition for prized positions with high incomes and that there is a battle for the best—a global “war for talent”— which is being fought between countries and companies (Dreher 2003:18; Chalamwong 2005:488). Professionals and managers are eminently mobile, pursuing boundary-less careers and, thus contributing to a global economy in which money, goods and people endlessly circulate (Appadurai 1998:15). Three core lines of argument can be drawn from the literature.

6 The emergence of a global elite which can choose to live and work where the costs are low, where it is most beautiful and where the taxes are low (Beck 1997:17) or as Castells has put it, “Elites are cosmopolitan, people are local” (Castells 1996:414). The implicit model behind this claim is close to the neoclassical view of labor markets where rational agents, with no preference for specific exchange partners, circulate within markets without institutional barriers or cultural constraints. Globalization literature suggests that people change their jobs to maximize returns on human capital, as explained by theoretical models based upon a “resources and rewards” logic (Tuma 1976; Hachen 1990). Stiglitz (2002) describes the neoliberal competitive market model as one derived from neo-classical economics where supply always equals demand, including for labor.

7 The emergence of a “transnational capitalist class” (Sklair 2001; Staples 2006; Robinson 2004; Robinson 2011; Carroll 2010) including managers and politicians who are inter- connected across countries and companies. Following the flows of commodities and capital, corporate elites become more integrated through interlocking directorates and exchange networks. Subsequently, they are supposed to have more opportunities to switch jobs as well as companies. The explanatory frame here is that of a power- structure network approach to labor markets. Corporate elites use their network opportunities to switch jobs and companies, thus becoming more integrated and international.

8 The growing preference for a “Boundary-less career” (Arthur and Rousseau 1996; Sullivan and Arthur 2006; Thomas and Inken 2007) where the individual follows a career based on personal choice, not one determined or constrained by the organization. Per the neoclassical reward-resource model, which underlies this prediction too, job mobility in labor markets is classified as the voluntary mobility of actors. One that is no longer determined by career paths confined to big organizations. Borderless or boundary-less careers of job- and company-hoppers are assumed to become the new career model for highly-skilled people and CEOs in globalizing economies (Inkson and Elkin 2008). Others have pointed out that t he “idea of a boundary-less career has gained little traction outside limited academic—mainly business school—circles, and has limited empirical support. Nonetheless, many academic writers on boundary-less careers have tended not to question the prevalence

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and importance of the concept but to accept it as common sense.” (Roper et al. 2010:673; Rodrigues and Guest 2010:1158).

9 Business Schools as the training ground for a global economic elite. It is posited that a management education or the acquisition of a prestigious MBA degree creates the desired managerial habitus, a type of cultural capital. Particularly, within the context of global organization, a shared managerial language and values act as the basis for communication and trust, overcoming forces of fragmentation that have resulted through the globalization of production, work conditions and distribution (Grey and Garsten 2001). Most importantly, “business schools are able to legitimate this (common) language by bestowing the hallmark of intellectualism and perhaps even science.” (Grey 2002:502).

10 The basic idea behind each of these claims is the emergence of worldwide labor markets and networks leads to a global corporate elite of job and company-hoppers; a world class of managers and management, often educated in the best business schools and therefore globally oriented and attuned, like their companies. In this brave new management world, neither institutional nor cultural constraints, nor organizational barriers are of significance anymore. This outlook was captured and promoted by a 1997 McKinsey study, “The War for Talent,” in which consultants argued that American firms placed a high premium on degrees from first-tier business schools and especially on newly minted MBAs, as a pre-requisite for success (Michaels et al. 1997). In excellent firms, the report argued, top performers were rewarded inordinately, and promoted without regard for seniority or experience (Michaels et al. 1997). Since then, the talent- mindset, i.e. the “deep-seated belief that having better talent at all levels is how you outperform your competitors,” has spread around the world. The following are therefore considered to be necessary and inevitable outcomes of globalization: (1) well- educated people from business schools fill the highest corporate ranks, (2) they move around the globe, switching firms and countries in response to rewards and resources and, (3) they are no longer committed to pursuing a career within one company or state.

11 However, not everyone agrees that there is a clear trend, or that the incentives are so obvious as to encourage prevalent and widespread global job-hopping. Human capital theory asserts that career mobility has a negative impact on career outcomes because an employee’s wages ought to increase over time, in relation to firm tenure. A longer tenure “implies the accumulation of more firm-specific skills, and/or a better match between worker capabilities and job needs” (King et al. 2005:985). Furthermore, there is the argument of segmented labor markets, which rests upon the assumption that promotions usually take place in relation with job tenure, and that external recruitment to fill higher positions is limited (Blossfeld and Mayer 1988:124; Koehler 2014). The internal recruitment of executives is more efficient for both the firm and the executive, where the firm can test employees’ skills and abilities and the executive can realize higher rewards if he or she stays with the company. In cross-national and cross- cultural studies on labor markets it has been well-established that institutional constraints have a strong impact on job mobility, including education systems, language barriers, welfare systems and so on (Diprete et al. 1997; Pohlmann 2009). Given that the structure of institutional constraints and inducements differs across nations, it is on the one hand to be expected “that nations will differ in the extent to which institutions shield or channel the impact of structural change on individual

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outcomes” (Diprete et al. 1997:320). On the other hand, the stays abroad, the return mobility of high skilled professionals and executives back to their mother country or their mother company is expected to be rather high because of these institutional constraints (see for example, Diehl and Dixon 2005; Pohlmann 2009).

12 The following sections present our data on Indian CEOs to explore whether there is evidence for a “strong” globalization hypothesis or if it fits the expectations of other approaches, mentioned above. While there is much research on the emergence of the “global Indian firm” these have largely focused on internationalization through mergers and acquisitions and the strategies implemented by business groups (see for example the special issue journal on “The Global Indian Firm” edited by Tarun Khanna 2009). The “Indian model” of doing or running a business has made it into the Harvard Business School curriculum, but in the form of case studies. More recently in-depth research has been conducted into how Indian managers are integrating global norms such as Corporate Social Responsibility into their business practices.7 This work has drawn attention to how organizational structures translate and transfer global norms, enabling in the process a legitimation of corporate neo-liberalism. Turning to other literature, from the company level to the role of Indian business leaders, the emphasis has been on success stories, rags-to-riches narratives of outstanding individuals or studies of business communities that fostered entrepreneurial skills and dense networks to overcome the historical odds of colonialism or caste in the Indian context (Merchant 1997; Dadabhoy 2005; McDonald 1998).

13 Furthermore, in the economic globalization literature India is a relatively recent addition to comparative case studies where much of the literature has been intertwined with a discussion of capitalism and capitalist development over time (see for example Gilpin 2002). Especially in the business systems literature (Whitley 1999) the argument has long been made, that there is divergence among global models, as well as convergence. Nevertheless, it is the convergence literature that has largely prevailed, harking back to Modernization theories of the 1950s and 60s and further, to a Hegelian idea that history triumphs with the establishment of a final, rational form of society and state. Scholars have mentioned the inadequacy for instance, of the Varieties of Capitalism methodology for non-OECD countries referring in the Indian case to the problem of “compressed capitalism” (D’Costa 2014). This refers to the simultaneous existence of multiple phases of capitalism, depicted in terms of modern industrial capitalist institutions along with agrarian and petty commodity production sectors. The paucity of primary data and limited empirical investigations with regards to India was affirmed recently, in a 2013 article published in the Socio-Economic Review where the authors stated: “India, now the third-largest economy of Asia, is virtually terra incognita from a business systems perspective” (Witt and Redding 2013:267).

14 However, instead of deploying a macro perspective, in this paper we apply a theoretically informed, empirical research design to investigate the reputed effects of globalization at the meso-level of the organization (the firm) and, at the micro-level, the manager’s life course. We selected CEOs of the country’s leading manufacturing companies (top one hundred that were ranked according to sales turnover). We were unable to collect data on how globalized their activities are. However, there are studies that indicate a wave of internationalization in the Indian manufacturing sector took place from the early 2000s (see for example a 2013 study conducted by the Indian

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School of Business and Brazil’s Fundacao Dom Cabralon on the “Transnationality Ranking of Indian Companies”).8

15 Despite the widespread perception that India’s economic growth is largely thanks to the tertiary sector and especially, information technology services, manufacturing has been, and is, a highly important component of the country’s economic profile. From a ranking—according to market sales in 2015—of companies listed on the Bombay Stock Exchange, seventy-six of the top one hundred and eleven were from the industrial sector.9 In the Indian context this includes the following groups of manufactured goods: basic goods (such as aluminum and steel), capital goods (such as machinery), intermediate goods (including auto parts), consumer durables and non-durables (see for example the Annual Report of 2015–16, Government of India, Ministry of Commerce and Industry, Department of Industrial Policy & Promotion).

16 With this justification, our empirical exploration limits itself to the industrial manufacturing sector, which dominates the top one hundred ranking of companies as well as contributing substantially to India’s merchandise and refined products exports. Using these as our prism we seek to explore whether Indian top managers are becoming more transnational in their careers, and in joining a global elite, whether it can be said they are likely to develop a neo-liberal orientation as a result of MBAs and Business School degrees.

2. Research Design & Method of Analysis.

17 As mentioned above, in the globalization literature there are strong assumptions and expectations of convergence, for example via the impact of globalization on economic elites (Beck 1997; Castells 1996; Münch 2009; Carrol 2010 etc.). Our empirical investigation addresses two hypotheses derived from such discussions:

18 The “Global Elite” Hypothesis: across the world a global economic elite has emerged, a world class of managers (Sklair 2001; Kanter 1995). Managers are no longer constrained by an organizational career but instead pursue a “protean career,” i.e. one that is self- directed and self-chosen involving various changes of company (Hall 1996; Briscoe et. al. 2006).

19 The “War for Talent” Hypothesis: as companies internationalize, managers are recruited form the best business schools, and freshly minted MBAs are quickly promoted to the top (Michaels et al. 2001, Faulconbridge et. al. 2009).

20 We developed a set of indicators and extracted data from an extensive life course analysis of top managers. The life course embeds individual lives in their social structures, and aims at mapping, describing and identifying the synchronic and diachronic features that define a lifetime (Mortimer and Shanahan 2004:3–22). This generated data for statistical analysis, in the form of correlations and regressions, to identify how educational and employment systems, recruitment and careers shape the life course of top managers. We also used our life course data to detect patterns within and across age groups. Thus, the life course is not just the life history of persons as individuals but a manifestation and expression of social structures as well as period and generational effects.

21 The data presented below pertains to active CEOs in India, related to a ranking of firms in the year 2010 according to sales turnover.10 This information was collected using a

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range of online resources; Curriculum Vitae provided by the respective companies as well as published biographies (for example, Piramal 2010, Piramal 1997). While there may be a bias towards a story of continuity, the life course perspective can alert researchers to the dynamics of change. Thus, for our analysis we separated the sample into three different age groups: CEOs and Ex-CEOs born before 1952, born between 1953 and 1962 and those born after 1963 to gain an impression of the dynamics of change over time.11

22 An extremely useful benchmark was an extensive study published in 1971 by Sagar C. Jain entitled, “Indian Manager: His Social Origin and Career.” Conducted in 1963–64 with support from Cornell University, The Asia Foundation and the Indian Institute of Management, Calcutta,12 the book presents data on 1,982 Indian managers of manufacturing and processing companies including the public sector, foreign enterprises and the Indian private sector. Unlike our 2010 data, the firms in this earlier study were selected based on size (a minimum of 2,000 employees) and the position of manager extended from chief executive to second-level supervisors. Nonetheless, it provides a highly valuable base line with which to compare our findings.

23 Where possible, data from additional sources were used to supplement, support or challenge our claims about change and continuity since the 1960s.13 Our findings and conclusions are generally corroborated by the few contemporary empirical studies that exist. The Wharton School study, “The India Way,” published in 2010 by Peter Capelli et al. was based on interviews with more than one hundred Indian executives, leading a spectrum of companies. Focusing on leadership skills, company governance, human resources management and innovation, the study found that Indian corporations are less concerned with shareholder interests than Western businesses. Using the life course data, we explore the pre-conditions for a neo-liberal orientation amongst top managers and provide a potential explanation for finding them. Cross-cultural and comparative international studies such as the Globe Study of 62 Societies,14 INSEAD’s Culture and Business Systems of Asia15 or IBM’s Global CEO study 16 have generated valuable empirical data and insights into the role of culture, organizations and leadership. While these studies focus on norms, values, beliefs and attitudes they do not explicitly explore the mechanisms and processes of selection and socialization that embed top managers within their socio-cultural context.

3. A Global Elite in the Upper Echelons of the Indian Economy?

24 To respond to the broad globalization thesis and our two concrete hypotheses, we examined three indicators: (1) Transnationality: the number of non-Indians who are top managers and the time spent working or studying abroad by Indian top managers; (2) Recruitment & Mobility Regimes: the typical route and recruitment pattern to reach a top managerial position and whether this corresponds with the notion of a “boundaryless career” (Inkson et al. 2012) and; (3) Educational Background: is there a continued bias towards more traditional degrees such as the Natural Sciences and Engineering or are other subjects like Business & Administration / Management (in the Indian case, Commerce degrees) growing increasingly prominent?

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3.1. Transnationality amongst Top Managers in India.

25 To explore how transnational India’s managerial elite is, we first checked how many top managers in the top one hundred list were born and brought up abroad. Second, we ask whether the companies that foreign-born managers worked for were in fact domestic companies or foreign affiliates of multinational companies. Finally, a weaker form of internationality was examined in terms of whether top managers had studied abroad or spent time working abroad. The results from the Indian database are presented below.

Table 1: Number of CEOs heading top 100 hundred companies in India who were born or had grown up abroad (in 2010)

Foreign Foreign born CEOs in Foreign born CEOs in Recruited from Companies born domestic companies Transnational companies internal labor (N) CEOs (N) (N) (N) markets (N)

India (100*) 5 % (5) 2% (2) 3 % (3) 3 % (3)

*Authors’ own data.

26 Considering other studies, India is not an exception and seems to follow a general pattern of largely domestic nationals dominating the top one hundred list of CEOs (this phenomenon has been observed in the cases of Japan, South Korea and Germany17). The two foreign-born CEOs in domestic Indian companies are unusual cases in terms of place of birth but both made their careers in India. Mukesh Ambani of Reliance was born in Aden, Yemen as his father was based there at the start of his career and Mr. Yusuf Hamid of Cipla was born in Vilnius, Lithuania because of a mixed-parent marriage. The CEOs who were born and brought up abroad not only worked for a foreign affiliate firm of a multinational company, but were also all expatriates, i.e. sent abroad by the company and not recruited internationally (this is reflected in the fifth column of table 1 which indicates recruitment of managers from the internal labor market of the company itself). It is of interest to note that out of India’s one hundred and eleven top manufacturing companies (per sales) there are only six foreign multinationals. Each of these foreign multinationals has a long history of doing business in India and their Indian subsidiaries have a strong local brand and corporate identity. They are listed on the National Stock Exchange of India or the Bombay Stock Exchange with the mother company holding a controlling stake. It therefore does not come as a surprise that out of these six foreign multinationals, four have long had Indian managers at the helm, one recently appointed an Indian national for the first time, and only one has been and continues recruiting its managers from its global operations.

27 As seen above, it is clearly a home-grown elite that dominates the upper echelons of top management. This feature is confirmed by a study of the Tata group that came to a similar conclusion: “overall, the proportion of foreigners at the apex of Tata companies seems very low and stands in sharp contrast to the fact that in the FY2010–11, 58% of the Group’s total revenues came from international revenues” (Imbach 2012:102). While this indicates a rejection of the global-elites thesis with respect to India, it does

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not mean that no globalization effect is discernible. The fact that foreign multinationals in India seem to have top managers who were locally recruited, made their way up in the company and spent time abroad, implies they were valued for being locally rooted and global at the same time. However, the more surprising result appears below.

Table 2: Stays abroad to study or work (≥ 1 Year) of Indian Top Managers by Age Groups

40–49 50–59 60+ Total Age Group: (17) (50) (44) (111)

Study Abroad: Yes 76.5% 28% 40.9% 40.5% (≥ 1 Year)

Work Abroad: Yes 52.9% 24.0% 34.1 % 32.4% (≥ 1 Year)

Authors’ own data.

28 At first, it is interesting to note the distribution and the bulge amongst older and younger managers indicating that both were and are more likely to spend time abroad. Furthermore, there is a stark preference amongst Indian managers to study but not work abroad, a feature that may be changing amongst younger managers.18 Explanations can include the fact that it is only recently that Indian companies have global operations and that in traditional family-firm structures, members may have been sent abroad to study but were expected to return and learn the ropes of business. It is however, important to note that no significant correlation was detected between age and studies or work stays abroad. Older managers in India may have had more international exposure but the middle generation did not have the same opportunities due to the government’s socialistic and restrictive policies towards business and a generally closed economy. Older companies are likely to have older managers at the helm, thus reproducing the effect mentioned above.

3.2 Recruitment & Mobility in Indian Big Business.

29 To explain these findings we turn to our data on recruitment patterns and career mobility. There, we see a strong tendency towards the in-house career system, as presented below. The main explanation for such high figures of insider recruitment and in-house careers is the predominant family company in the Indian context. 45% of the companies in our sample are family owned, controlled or family-run. As the number of family companies declines, the percentage of insider recruitment drops as in the case of the 50–59 year olds’ cohort.

Table 3: Recruitment and Mobility of Top Managers in India

40–49 years 50–59 years 60 + years Total Age Groups (N) (17) (50) (44) (111)

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Insider Recruitment % 82.4 % 73.5 % 81.8% 78.2 %

Company Change (Yes) % 13.3% 37.2% 43.6 % 36.1 %

Authors’ own data.

30 Long tenure and in-house careers are strong features of the Indian sample, remaining quite stable over each of the age groups. Again, this is explained by the high number of family-owned companies (50 out of the total sample of 111) and, in the case of state-run companies (20 out of the 111 sample), the tendency of senior bureaucrats to be at the helm. The Indian Administrative Service (IAS) is highly prestigious and most senior executives of state-owned companies, having taken the very competitive IAS “Civil Services Examination,” gradually worked their way up the ranks.

31 However, the insider career and recruitment pattern is not an unusual phenomenon when compared internationally. Contradicting proponents of the “boundaryless career” (see Banai and Harry 2004 for the additional term “international itinerant”) is a 2012 study by the consultancy agency, Booz Allen Hamilton, which revealed that in this year, companies promoted people from within 71 per cent of the time; 26 per cent of incoming CEOs had worked at the same company for their entire career and 81 per cent of new CEOs hailed from the same country in which the company’s headquarters were located.19 As a result, the “Organization man” (harking back to the original William Whyte book published in 1956) still prevails, contradicting the vision of a protean career promoted by Hall (1976, 1996, 2002) as one where individuals follow their own values to guide their careers (“values-driven”), taking an independent role in managing their vocation (“self-directed”).

32 If we turn to independent variables that influence the length taken to reach a CEO position we find that neither an international career, nor study abroad, nor a PhD, nor having attended an elite university matters. Indian corporate families have long demonstrated a tendency to send the family business heir for an MBA abroad (Piramal 1997) and they, in turn, are likely to be fast-tracked to the CEO position. Education qualifications and preferences of top managers in India is therefore the third indicator examined below.

3.3 Education Background of Indian Top Managers.

33 From the education background of Indian top managers we see that this is clearly an elite group, in terms of access to education and career opportunities. Out of the top one hundred and eleven individuals, only 7 did not receive an education beyond formal schooling. These were all in the older age cohort and their biographies indicate reasons such as lack of means or the late 1940s turmoil leading up to India’s Independence and Partition of the Subcontinent.

Table 4: Educational Qualifications of Top Managers in India.

40–49 years 50–59 years 60 + years Total Degree (17) (50) (44) (111)

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BA Degree only 17.6 % 34.7% 46.5% 36.7%

MA degree 76.5% 59.2 % 27.9% 49.5%

PhD 5.9% 2% 11.6% 6.4%

Authors’ own data.

34 The table above shows a clear trend towards managers pursuing a further Master’s degree. This is supported by the argument that older managers were likely to begin their careers directly after a BA. If one turns to the subjects studied (table 5 below), there is a predominance of engineering or science degrees amongst the older generation but not a complete absence of commerce and management degrees in the same cohort. A small percentage within the older age group also holds MBAs, which is striking and suggests that Indian managers have been oriented towards formal management training over a longer period than might be expected.

Table 5: Subjects & Combinations of Subjects Studied by Indian Top Managers

40–49 50–59 60 + Total Subject years years years (111) (17) (50) (44)

Only an Engineering or Science degree 5.9% 38% 45.5% 36%

Engineering / Science degree followed by a Management 17.6% 16% 2.3% 10.8% or Commerce Degree

Only Business, Commerce or Economics degree 35.3% 36% 13.6% 27%

MBA (Yes) 58.8% 26% 6.8% 23.4%

Authors’ own data.

35 Amongst 50–59 year olds, a majority studied commerce or obtained management degrees, and the MBAs had already increased during this period. Finally, the youngest managers (40–49 years or younger), demonstrate a growing preference for the MBA, giving credence to the possibility that as more top managers obtain business degrees their action orientations are shaped by a transnational curricula and jargon of management. However, when the entire number of active managers for whom data could be collected is considered, only 23.4% per cent hold an MBA—a rather lower percentage. A 2012 study carried out by INSEAD, the Harvard Business Review and Business Today magazine noted that only 40 per cent of India’s top CEOs held an MBA degree, (a higher number due to the inclusion of CEOs from banking and IT in their sample).20 In their study of 374 CEOs from 202 publicly traded companies and ranked according to financial performance, only 2 out of the top 10 CEOs held an MBA degree. Furthermore, the study revealed that with an average age of 54 years, many CEOs obtained their MBAs from Indian colleges (the Indian Institutes of Management) during

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the 1980s, confirming our claim above that this is not a recent development in the Indian case.

3.4 Top Managers in India over time.

36 Breaking down the 2010 data into three age groups reveals the strengthening of a pattern where careers are mostly domestic and in-house; the recruitment of CEOs takes place from within the company’s ranks and the top manager’s education is increasingly moving towards degrees in commerce and formal management programs. Compared with data from a 1963 to 64 study involving managers who at the time were about 41 years old, this reveals interesting parallels. Adjusting to the structure of the 1963 data, the information is broken down according to type of company (state, private and foreign).21 Although the samples of the two datasets are different (in size and composition), we still believe that it gives us insight into trends regarding education and generational trade, during two different phases. While the data cannot be compared directly, it still helps us understand the history of business elites in India.

Bar Chart 1: Educational Qualifications of Top Managers in India, 1963 / 64.

1963 data from Jain (1971): Total Cases 1,982

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Bar Chart 2: Educational Qualifications of Top Managers in India 2010.

2010 authors’ own data. Total Cases 100.

37 In 1963, Jain noted that “a high level formal education (was) one of the basic requirements for entry into managerial positions” (Jain 1971:26) and particularly so in the public sector. This pattern is mirrored in the 2010 data as seen above. Turning to the subjects studied, most managers in 1963 / 64 trained in engineering, technology and natural sciences.

Bar Chart 3: Major Fields of Study of Managers in India: 1963 / 64.

1963 data from Jain (1971): Total Cases: 1,982

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Bar Chart 4: Major Fields of Study of Managers in India: 2010.

2010 authors’ own data: Total Cases: 100

38 Jain states that, regarding the art and science of management, “Indian managers are largely self-taught persons” but explains this as, partly due to the fact that until 1949 management and business administration were not even recognized as subjects of study in India (Jain 1971:31–33). Clearly this has changed in 2010 when commerce, accounting, management and business administration studies have increased in public, private and foreign companies. However, it is interesting to note that a management- type education in 2010 has not completely displaced engineering and sciences but rather, managers choose to supplement their degrees with an additional management qualification.

39 With regards to internationality, Jain points out that 17.1% of Indian managers held foreign degrees, usually at the graduate level and an additional 12.2% had attended training courses of various duration (3 months to 2 years) abroad. More than half of these went to England, a quarter to the United States and the remaining to various countries in Europe, Japan and the then-Soviet Union (Jain 1971:36–37). In 2010, Indian managers have clearly become more international with 42.1% holding foreign degrees and 34% having worked abroad.

40 Breaking down his data into four generations Jain observed that, (1) each succeeding generation has more education than the last, (2) the importance of a formal management education and professional training was increasing, including the option of taking short-term management courses, (3) the average tenure was getting shorter in terms of time taken to reach a top-level position due to the fact that managers were spending more time on education and (4) entry into managerial positions was occurring at a higher level, suggesting a move towards greater external recruitment of top managers (Jain, 1966:133–4). Our 2010 data confirms the first two observations by Jain. The Indian top manager is increasingly well educated and there is a marked change in the prevalent subject of study, from engineering and science to economics, accounting and commerce degrees. Over time, a larger and larger percentage opts for MBAs, mostly pursued abroad at elite business schools.

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41 However, on Jain’s remaining two observations there are marked differences with the 2010 data. At first, average tenure in 2010 remains high, at 29.31 years. Furthermore, while Jain’s data indicated an increase in external recruitment, we observe a strong predominance of in-house careers and insider recruitment for top-level managers. Additionally, Jain reports that in 1963 / 64 “only one third of Indian managers have worked for a single employee while many of them have worked for as many as four or more employees” (Jain 1971:166). In 2010, a clear majority, within each age group, worked for a single employee (See Table 3 above). On all three counts of average tenure, being an insider and the number of company changes, managers in India today pursue a stable and conservative career pattern.

4. Explanations and Contextualization of Findings

42 Returning to our initial discussion, whether a transnational elite of business leaders, is emerging as Indian companies go global, this section turns to an explanation of the findings. The typical career path of the contemporary Indian CEO in the manufacturing sector relies strongly upon dynamics of in-house tenure and employer loyalty and secondly, careers remain predominantly national rather than international both in terms of recruitment and mobility patterns. Thirdly, often, Indian top managers are highly qualified in terms of education and demonstrate a growing penchant for business and management programs, especially prestigious programs located abroad. Amongst the younger generation there is an increase in the option of stays abroad, not only for education but also for work.

43 To explain why the recruitment and career mobility patterns of top managers do not conform to neo-classical expectations of a unified and fluid labor market, we turn to the alternative explanation of segmented labor markets. Segmentation is described in terms of there being internal and external labor markets, the former being a labor market that exists inside the firm. Within large organizations (large in terms of number of employees), there is often an internal market where wage structures and employment policies are regulated and determined internally, conferring significant advantages to those already employed in the organization or the “insiders.” From the Indian case, two explanations emerge for why an internal market for top managers appears to prevail: (1) the historical and institutional development of India’s business system, and (2) organizational features of the company.

4. 1. The Indian Business System.

44 In a 2013 article and subsequent book on Asian Business Systems, Michael A. Witt and Gordon Redding examined the “institutional structures” of Asian economies. The main features of India in their study were the role played by the state, especially in terms of influencing capital allocation and the early emergence of a private sector (Witt and Redding 2013:285). Both factors help explain why the CEO career path in India did not develop a more international and transnational pattern but instead veered towards a national, in-house career model. This, even though the 1963 data considered in the earlier section, indicates that Indian big business can draw upon a valuable legacy of managerial professionalism.

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45 According to data from an article published by the economic historian, B.R. Tomlinson a number of British and American multinationals arrived in India during the 1920s and 1930s, setting up manufacturing subsidiaries.22 This explains Jain’s observation that chief executives in the early 1960s were surprisingly well educated for a developing economy. Jain notes, “In fact, he (the Indian manager) may have more education than his counterparts in the United States and Britain” (Jain 1966:125) since most companies were long established and not newly created by first-time entrepreneurs.

46 Despite this multinational head start, government policy began to change in the late 1950s with the aim of developing “a socialistic pattern of society,” introducing legislation such as the 1956 Industrial Policy Resolution giving more power to the government to direct and plan industrial development and identifying industries where the state would have exclusive responsibility and those where private enterprise could function. Several industries were left open to the private sector but the “license permit raj,” as it was called, required permits from the government, ensuring that the state occupied the commanding heights of the economy. Restrictions included controls on capital and imports, culminating with the Monopolies and Restrictive Trade Practices Act of 1969, which ushered in one of the most restrictive periods of the command and control economy in India. Despite increasingly stringent controls introduced in the late 1960s and 70s, India remained a “mixed economy” with private enterprise continuing to produce goods and services in a highly protected and restricted domestic market.

47 Continuity of the private sector alongside a dominant state resulted in what Witt and Redding refer to as “multiplexity” where multiple business systems exist within one economy. India and China are two of their prime examples to demonstrate how state- owned and private sectors coexist whilst following different rules of the game. Their line of argument makes the proposition that institutions may be flexible or weak enough to permit variance and the persistence of multiple business systems (Witt and Redding 2014:690). This angle is predominantly top-down, viewing the impact of government policies, regulations and institutions as determining a “business system”. However, their analysis does not explore the organizational structures enabling private enterprise to remain resilient in the Indian context, which is what we turn to in the next section.

4.2. Organizational resilience in the Indian corporate sector.

48 Despite changes in state policy and a restrictive institutional environment, the private sector and family companies and family business groups, have been extremely resilient in the Indian context.23 In part thanks to continuity in the legal framework, for instance, activities of Indian companies are regulated through the Companies Act 1956, whose roots go back to the Indian Companies Act of 1913. The 1956 Act aimed to ensure protection of creditors and shareholders as well as allow for greater government control over joint-stock companies in the public interest. Amendments to the 1956 act have targeted issues such as provisions regarding management, corporate government, investor rights and insolvency but concentrated ownership remains dominant. In some cases, family-held companies benefitted from working closely with the government during the time of licenses and restrictions, granting these companies a privileged and protected position in the domestic market.24 These companies nevertheless, such as

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Godrej, Birla and the Tata companies managed to withstand the changes and to compete with new entrants during the 1990s and 2000s including Infosys and Reliance (both, pioneers in terms of entering international capital markets during the 1990s).

49 While some business houses certainly benefitted, other Indian companies managed to prevail despite restrictions and constraints, both in the past as well as today in what continues to be described as an institutionally weak business environment.25 For example, a recent study demonstrates that most Indian firms rely on internal financing rather than external sources such as banks or financial markets (Franklin et al. 2012). The investigation, based on aggregate country-level data, large firm-level samples, and their own surveys of small and medium Indian firms, revealed the tendency to “rely mostly on non-legal deterrents such as loss of business and reputation” (Franklin et al. 2012:442). This points towards the persistence of more traditional methods and business practices that rely on mechanisms such as reputation, personal relationships and trust.

50 In another study, business journalist Sudipt Dutta who researches family business in contemporary India confirms the above reflections on financial structures and presents additional insights. Family and strong community links continue to aid in networking and capital mobilization for firms. An additional and interesting point is that despite differences in the way one family firm is run compared to another, there is a general tendency to concentrate investments in a smaller portfolio where management control becomes critical. Dutta argues that, “Indian family business retains control through chains of holdings where the wealth of the family remains under control but never gets appropriated to the family or the individual” (Dutta 2011:212). Management control is thus retained even if financial institutions, foreign collaborators or general shareholders have sizeable holdings. Other informal rules include the fact that a percentage holding of equity is not critical given that hostile takeovers within the Indian business community are extremely rare, as networks and reputation are so integral to inter-firm relations in India. The centrality of family-business groups, enduring resilience and density of interlocking networks in the Indian corporate sector has been confirmed in a 2016 publication by Naudet and Dubost on the deepening of interlocks among the top 50, 100 and 250 National Stock Exchange of Bombay companies between 2000 and 2012.

5. Conclusion: Globalization and Top Managers in India.

51 Hall and Soskice noted in their influential 2001 book on the “Varieties of Capitalism” that institutions prevail because of advantages that firms accrue through using national institutional settings and rules. Our paper demonstrates that it is not simply the rational calculus of actors that sustains organizational forms but also the social structures and selection mechanisms that reproduce them. In this paper the focus was on the mechanisms of selection that enabled companies and a managerial class to survive and persist over time—a class not defined by social background but by education and career. In comparison with the 1963 / 64 data our data confirms that education continues to be a very important selection mechanism for top managers and that there is an increasing trend towards management sciences. Career patterns, however, have not continued in the direction indicated by the 1963 / 64 data towards

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shorter tenure and greater inter-firm mobility. Within our database and a 2010 sample across the three age groups, the in-house career track, based on long tenure with few changes is remarkably stable and does not vary greatly across state, family and privately owned enterprises.

52 Of course, the 2010 data concentrates on the corporate elite of the manufacturing sector. Perhaps the picture would change if we incorporated the financial or IT sectors. However, this cannot be taken for granted. In a control study on Hong Kong’s banking sector, we found that while there is a bigger share of international managers, the number of global job hoppers is also very small.26 With an average of three country changes during a top banking manager’s career, most of these were carried out within one big bank.

53 Another reason why we chose to focus on India’s manufacturing sector is that it has played an important role in economic growth and international trade, both in the past and increasingly as big-business groups develop a global presence. If the globalization of enterprises leads towards global management then Indian companies should provide an excellent showcase. We operationalized “global management” in terms of career mobility and not global thinking because the latter ought to come naturally for CEOs of the Top 100 companies, running big-business groups with affiliated firms around the world. Most of these CEOs are frequent international travelers, spending a considerable number of their working hours abroad. If we relate our findings on India to other Asian economies, we find similar patterns in job mobility.

Table 6: Job Mobility in Asian Economies

Country (N) Foreign-born CEOs (N) Job Tenure/years Insider Recruitment %

China (155) 4% (4) 24 97%

Japan (104) 4% (5) 38 99%

Korea (121) 9% (14) 31 100%

India (100) 5% (5) 30 78%

Authors’ own data based on top 100 manufacturing companies in each of the countries.

54 As table 6 demonstrates above, an extremely long tenure, very low rate of outsiders or CEOs who have grown up abroad seem to be typical features amongst CEOS in Asia’s leading economies. India is no exception here, although the insider recruitment rates are slightly lower. Along these lines, India fits a more general Asian pattern, despite its other peculiarities and significant differences with other major economies in Asia.

55 In India, due to its democratic political system, even under a socialist and closed economy, the institutional environment evolved slowly and gradually and has not been a motor for drastic organizational change. All three organizational forms, state-owned companies, private and family-owned businesses have co-existed and continued during various phases of India’s economic development, adjusting to both state and market- driven incentives. Organizational features such as the long, in-house career path of the Indian top manager combined with high education qualifications have therefore been

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preserved. These features also make sense in an environment where networks, stakeholdership, trust, loyalty and reputation continue to play an important role given the country’s business conditions.

56 However, the preference to study and work abroad appears to be on the rise, as is the demand for management degrees. This could indicate that the grounds for a future wave of transnational careers and neo-liberal managerial orientations are being laid. However, the Indian case also represents the revival of a past trend that was interrupted during the 1970s and 80s. This implied continuity, despite change, is important to highlight for it reveals how strong organizational structures are in the face of macro developments. Currently, the labor market for Indian top managers remains very much Indian, with long job tenure and insider recruitment favored over job-hopping and global head-hunting at the level of the CEO.

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NOTES

1. We are grateful to the anonymous reviewers for their substantive comments and critique. 2. See the WTO’s International Trade Statistics 2014. 3. We use the term elite with reference to discussions about the emergence of a new world class of business elites (see Hartmann and Kopp 2001). 4. See International Management Studies, Heidelberg University, which brings together a number of related research projects: https://www.soz.uni-heidelberg.de/?page_id=1086 5. See Weber (1968:468–518), Kalberg (2001). 6. The focus on carrier groups is similar to the argument made by Hambrick and Mason (1984) in their seminal paper, "Upper Echelons: The Organization as a Reflection of Its Top Managers." 7. See for example Krichewsky’s work on CSR in India (2014). 8. For a summary of the study see, http://isbinsight.isb.edu/ranking-indias-transnational- companies/. Retrieved December 29, 2016. 9. http://www.moneycontrol.com/stocks/marketinfo/netsales/bse/index.html. Retrieved March 25, 2015. 10. The ranking used was the ET500 list of companies according to sales turnover: http:// economictimes.indiatimes.com/marketstats/pid-53,pageno-1,sortby- CurrentYearRank,sortorder-asc,year-2010.cms 11. We realise that creating age groups out of the single 2010 sample is an artificial way of capturing change but due to paucity of data, a time series analysis was not possible. 12. A 1966 article summarises the main findings in: Jain, Sagar C. 1966. “The Man in the Gray Flannel Achkan” Columbia Journal of World Business 1(4): 123–36. 13. For example, the unpublished but electronically available 1987 PhD thesis by Vyakarnam, Shailendra, “The Social Relevance of Postgraduate Management Education. A Case Study of India,” Cranfield University. Accessible at: https://dspace.lib.cranfield.ac.uk/handle/1826/4172 14. R. J. House, P. J. Hanges, M. Javidan, P. W. Dorfman & V. Gupta, eds. “Culture, Leadership, and Organizations: The GLOBE study of 62 societies.” Thousand Oaks, CA: Sage.

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15. Bruno Lanvin, Paul A. L. Evans. 2013. “The Global Talent Competitiveness Index 2013.” INSEAD, November; Michael A. Witt, Gordon Redding, eds. 2014. The Oxford Handbook of Asian Business Systems. Oxford University Press. 16. IBM (2011): “Capitalising On Complexity. Insights from the Global CEO Study.” IBM 17. Pohlmann (2014) 18. A trend that was also detected in the 2012 study on the Tata Group (Imbach: 105) 19. For the details of the 2012 report see: http://www.strategyand.pwc.com/global/home/what- we-think/reports-white-papers/article-display/time-for-new-ceos. Retrieved March 10, 2015. 20. For a brief overview of the study, see: https://hbr.org/2012/01/the-best-indian-ceo-list- youth. Retrieved March 24, 2015. 21. In the 1963 study, unlike our 2010 study, the definition of managers was broader. According to Jain, the sample included “all persons occupying positions higher than second level supervisors up to and including the managing directors or the chief executives of the concerns” (1971:18). 22. B. R. Tomlinson. 1978. “Foreign Private Investment in India 1920–1950.” Modern Asian Studies 12(4): 655–77. 23. According to The Oxford India Anthology of Business History, “in twenty-first century India, as many as 461 out of 500 of the most valuable companies remain under family control” (2011:202). 24. This has been documented by many including, Gita Piramal (1997), Gurcharan Das (2002), Vivek Chibber (2003). 25. See the March 2015 IMF country report No. 15 / 62 available at: https://www.imf.org/ external/pubs/ft/scr/2015/cr1562.pdf. Retrieved April 21, 2015. 26. Bitsch, K. 2016. “Auf den Spuren der globalen Finanzelite—Karriereverläufe und Werthaltungen von Top-Managern im Finanzsektor Hongkongs” (unpublished thesis).

ABSTRACTS

Much of the globalization literature and accompanying theory project that, as countries integrate into the global economy, they will converge towards a transnational and neoliberal version of capitalism. It is presumed that this happens with the rise of international companies, which along with a transnational class of managers, enable the spread of neoliberal management thinking. In the wake of liberalization policies and reforms as well as the globalization and growth of India’s economy, and using life course data for more than one hundred Indian top managers, including information on nationality, time spent working and studying abroad, education background, career and mobility patterns, we explore the evidence for the emergence of a transnational and neo-liberal business elite in India. In the Indian case, we find that top managers are not composed of “transnational rootless company hoppers” but are dominated by “nationally recruited company men.”

INDEX

Keywords: India, economic elites, transnational, globalization, manufacturing companies, life- course analysis, top managers

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AUTHORS

JIVANTA SCHOETTLI Visiting Research Fellow, Institute of South Asian Studies, National University of Singapore

MARKUS POHLMANN Prof., Dr., Heidelberg University (Germany), Max-Weber-Institute of Sociology

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Reproducing Elite Lives: Women in Aggarwal Family Businesses

Ujithra Ponniah

I am grateful to Surinder Jodhka, Jules Naudet and A. G. Ponniah for their discussions and patient reading of repeated drafts. I thank the three anonymous reviewers for their incisive comments. I thank my respondents for their time and for inviting a stranger into their homes and lives.

Introduction

1 This article argues that women along with their families play a major role in the functioning of family businesses through the reproduction of caste and kinship ties in the urban context. Until 2005, women were denied the right to inherit property under the Hindu United Family (HUF), a legal tax entity (Das Gupta 2013). In the popular imagination, women appear as consumers of branded items indicative of luxurious lifestyles, while in the everyday, their choices, negotiations, and power struggles are lost within the undifferentiated gender-blind institution of the family. Family businesses have been the forte of old mercantile caste groups (Jains, Marwaris, Agarwal, Sindhi, Natukkotai Chettiar, Khoja, Bohra, Parsi). These caste groups have been categorized as “upper” caste because of their historically-accrued economic and political capital. This paper focuses on a non-Brahmin elite caste: Aggarwal. Aggarwals have a visible presence especially in parts of North India and are pushing to be at the helm of state and economic affairs. However, they are often confused with their popular cousins, the Marwari, who have a longer community history and have received more academic attention (Timberg 1978; Hardgrove 2004; Birla 2009).

2 Studies argue that caste and family ties structure Indian family businesses (Tripathi 1984; Markovits 2008; Damodaran 2008). In the absence of financial intermediaries, the structuring role of caste and family extends to corporate boards and networks in globalized contexts (Naudet and Dubost 2016; Daljit and Saxena 2012; Khanna and Palepu 2000). While studies argue for the centrality of caste and family ties in family businesses, they treat caste as a finished identity with an a priori subjecthood

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(Bairy 2010). This identity which presents itself as a universal is also male-centric. Caste in its substantialized avatar has internal hierarchies and distinctions (Fuller 1996). This class-like hierarchy has led scholars to argue that the lives of “upper”-caste members cease to be caste-marked, and secular concerns of class animate their being (Beteille 1991; Srinivas 2003; Gupta 2004; Fuller 1996; Fuller and Narshiman 2015). A simultaneous increase in caste studies on Dalits leads to a “ghettoization” of caste around the figure of the Dalit (Bairy 2010:2). Caste then becomes synonymous with Dalits while the upper caste becomes caste-less. Through a focus on an urban “upper”- caste group, the Aggarwal, this paper explores the following question: how does caste, with its internal hierarchies and urban secularizing pulls, function as a socio-economic resource in family businesses?

3 This paper ethnographically demonstrates how women in family businesses help increase the cohesion and reproduction of caste and families in “modern” contexts through three strategies: first, forging fictive kinship ties across caste strata through what elite women understand as their “social work”; second, forging fictive kinship ties within one’s own caste stratum through sustained socialization that creates business opportunities; and third, helping to find status-appropriate marital matches factoring in the individuating desires of their children.

4 In-depth interviews were conducted with Aggarwal women in the 40s to 60s age group in an affluent South-Delhi neighborhood, which I will call Hill Lane.1 Roles in families are not just gendered but also vary according to one’s age. Other members of the respondents’ families (sons, daughters, and daughters-in-law) were also interviewed. Community and family events were attended. The first rounds of interviews were conducted from October 2014 to July 2015. The second round of interviews was conducted from March to July 2016, to confirm the main findings of the study.

Methodology: field and researcher

5 Amongst the neighborhoods of South Delhi, Hill Lane was selected as the field of study for the following reasons: post-holders and influential individuals in Aggarwal caste associations (Delhi Pradesh Aggarwal Sammelan (DPAS) and Akhila Bhartiya Aggarwal Sammelan (ABAS) in Delhi are based here; the women’s wing is the oldest and the most active (it has won awards); and a tabulation of house-owners according to surname given in the Resident’s Welfare Association (RWA) in 2014 shows that fifty-eight percent of residents in this neighborhood hail from the Aggarwal caste. Finding members of a caste group in urban residential pockets is corroborated by other studies in metropolitan cities (Dupont 2004; Vithayathil and Singh 2012). Caste-residential clusters for the lower caste can be read as segregation in which individuals have little choice. However, amongst the elite upper castes like the Aggarwal, the same phenomenon is the result of self-segregation. In retrospect, this is motivated by the amenities available in the vicinity like proximity to established schools, safety in the knowledge that there are other Aggarwal also buying land in the same area and fair property prices. Unlike what is commonly imagined, the neighborhood amongst the urban elites does not lead to anonymity and isolation. Within the heterogeneous neighborhood, the Aggarwal choose who they wish to socialize with in their everyday activities. The neighborhood as a field of activity through the interaction of their class-

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and caste-status generated the feeling of Aggarwal-ness and “ourness.” This was further asserted by naming public spaces after Maharaja Agrasen.2

6 Some of the Aggarwal families who live in Hill Lane had diversified out of the agrarian economy in their grandparent’s generation and moved to Delhi for higher education. Many families had moved to this neighborhood by the 1970s, while the women moved from parts of Haryana, Uttar Pradesh or other parts of Delhi after marriage. They were now second- and third-generation industrialists with manufacturing units (metal and plastic molds, iron meshes, temperature-monitoring devices) on the outskirts of Delhi and families with inter-generational professional firms (architects, real estate and lawyers). The number of those employed in their factories and professional firms varied. The location and size of a house announce the “household identity and activity.” It also “deeply affects subsequent self-representation and social relations outside the household and daily interaction within the household” (Zelizer 2005:243). According to the size and success of the business, families had well laid out houses with modern interiors, several servants and usually two to three cars. Floors were added to the house to accommodate the changes within the family. For example, if the family business was split between brothers and they were no longer on cordial terms, an extra floor was added with its separate entrance and kitchen. A separate floor was also added if the son in the family got married. However, then the kitchen continued to be common. Families also lived nearby in separate houses in the same neighborhood. Some of the Aggarwal family businesses in this neighborhood hold important positions in the Aggarwal caste associations and have been instrumental in building the Aggarwal community and identity in Delhi since the late 1970s.

7 As I met people in different Aggarwal circles in Delhi, I realized it would be difficult to interview families in the upper strata of the Aggarwal caste without sharing an enthusiasm for their associational activities. There are close to twenty-four Hindi Aggarwal newspapers and journals that are published in Delhi. I subscribed to some of these established newspapers and followed them regularly. Community events like the release of books on Maharaja Agrasen, internal award ceremonies, the new caste associations being set up in Delhi, marches and rath yatra (chariot journeys), the inauguration of cow hospitals and organization of Ramlila, and lifestyle festivals3 were regularly advertised in these newspapers. Events like parichay sammelan (a matrimonial event) and politicians wishing the Aggarwals in Delhi well on Maharaja Agrasen Jayanti were found in mainstream English and Hindi newspapers. The national visibility shows the community’s political and economic clout in the capital. Frequent meetings with people during these events gave me access to women and their families in Hill Lane.

8 The space of the caste associations and the events they organize in Delhi showed the different caste strata4 interacting with each other. Hindu religious events like Ramlila (a dramatic re-enactment of the Hindu god Ram’s life, ending with a tense battle between Ram and his nemesis Ravana), gowshalas (cowsheds), hospital and temple trusts, schools and colleges were funded by the first stratum of Aggarwal. They reside in parts of Civil Lines, Anand Vihar, and Punjabi Bagh and are amongst the first to migrate to Delhi at the beginning of the 20th century from parts of Rajasthan and Haryana (erstwhile Punjab). They migrated to Chandni Chowk which was the biggest wholesale market in India and referred to as the shehar (city). However, they slowly moved out of Chandni Chowk, as they found it was becoming overcrowded and its narrow streets too polluted. Finding a space to park was an issue. Some families also

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claimed they wanted to move, as they did not appreciate the increasing number of Muslim families in Chandni Chowk.5 They are referred to as Dili Walas (those who came to Delhi first and belong here) in inner circles. This reference distinguishes them as old and established families whose first generation had participated in the independence struggle. They are successful inter-generational family businesses and share a proximity with political leaders. They and their wives were however not visible in daily caste-association events. The second stratum are those living in parts of South Delhi, like the Aggarwal families in Hill Lane I describe above.

9 The third are those whose previous generation was involved in the agrarian economy, and they or their children migrated to Delhi around or after Independence. They attribute their move to the Partition and the ban on usury.6 Some of those who migrated to Delhi in the 1960s and 70s say it was because of a further weakening of their position in the agrarian economy after the Green Revolution, which led to the opening up of the “credit-production-trade” network and offered other avenues to secure a loan (Jodhka 1995). Some of them are first generation industrialists and live in parts of Pitampura, Rohini and Shalimar Bagh in North West Delhi.

10 The fourth are those that live across the river Yamuna in places like Laxmi Nagar and Shakarpur. Both these places are a commercial hub for small shops interspersed with residences. This area is crowded with Chartered Accounts (CA) and Company Secretary (CS) coaching institutes. Aggarwal run some of these, and many of those studying in these institutes are the children of those who own businesses in Laxmi Nagar and Shakarpur. Aggarwal own many shops selling hosiery, utensils, sweets and jewelry here. Aggarwal families moved here by the 1980s after living in different parts of Delhi. The Aggarwal caste association in this area has the highest number of registered members in Delhi (above 3,000 families in 2015). The second and third stratum do not have a separate women’s wing. Men and their wives, especially those in the fourth stratum, participate in the Delhi-level association events.

11 What emerges from this brief charting of different Aggarwal family-business strata is that affluence is decided on the basis of time and reason for migration, which generation moved out of the agrarian economy and nature, scale and success of one’s business and the manner in which one spent one’s resources. From the four strata discussed above, I categorize the first two as Aggarwal business elite. These two strata no longer have family or kin in rural areas. They and their families are now located in posh gated neighborhoods in Delhi or other metropolitan cities in India. Members (predominantly men) of their family have either studied in reputed Indian universities or studied abroad in the current or/and the previous generation. More importantly, they not only have inter-generational wealth and successful businesses but also invest in either strengthening the caste community or undertake philanthropic endeavors in the larger society. The Aggarwal business elite can then be characterized as those who have “solidarity within the group, social exclusivity, and a distinctive cultural identity” (Ostrower 1995:25).

12 In her historical work on the Marwaris of Calcutta, Hardgrove (2004:8) says when she had to capture the contemporary changes in the society, she employed “appointment anthropology.” Unlike a village ethnographer, whose geographical mobility would be restricted and could drop by at people’s homes without fixing prior appointments, the nature of an urban ethnography and especially one amongst the elite, requires the researcher to seek prior permission and to turn up for a scheduled meeting on time.

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Women did not participate in the paid labor force, and their role within the household was a supervisory one, as they had a generous array of cooks, gardeners, and drivers. However, they had a busy year marked by festivals, rituals, visits to and by extended kin, accompanying and helping their husbands in social and business gatherings. Power minefields within the family also had to be negotiated. Permissions from mothers-in- law and mothers were required to meet the daughter and daughter-in-law. The interconnected social space of the neighborhood and the community discouraged many respondents from speaking comfortably in our initial meetings. It also made it impossible to ask questions about financial matters, transactions, scale or the ups and downs in the family business. Women usually evaded the question politely or said only the men in the family had knowledge about such things.

13 In the initial phases of my research when my caste was asked, I would say I am a South Indian, which would be met with an immediate smile accompanied by a response, “oh you are a Madrasi.” The regional cultural identity of a “Madrasi” continues to evoke the impression of naivety, harmlessness, culture and education in North India. It is an identity which is opaque to caste and religious probing. It was assumed that I was a Hindu and I did not find it comfortable to correct this impression. The way I was perceived and the disarming role my Madrasi-ness played, made me question: How could a researcher hailing from an identifiable North Indian caste group—especially a “lower” one—from a minority religion and a lower class, study elite groups in urban spaces? Would in-depth interviews have to be replaced by distant survey methods, that permit the sociologist to stay within the defined role of researcher? Should sociologists/anthropologists constitute their field with archives, community publications, and journals alone while studying the elite? And should social units of analysis be clubs and trusts instead of the guarded Hindu joint family? Appointment anthropology and Madrasi-ness became not just practical considerations of the field, but became ways through which the sociologist negotiated her field constituted by elite respondents and in the process was constituted by/in it as a subject in return.

Women in the reproduction of caste and family businesses in urban India: An overview

14 Members of the Aggarwal caste in Delhi own industries, shops, trusts, schools, hospitals, printing presses, and restaurants. Numerous enterprises are named “Aggarwal” or “Gupta,” so much so that elderly men in caste associations were worried that these shops were run not by Aggarwals but Chamars7 who wish to benefit from the economic might of the community. In the process, elders feared lower castes would asperse the Aggarwal caste-name by diminishing the quality of products and services. In the 1970s, the Aggarwal caste associations were formed in Delhi by the former Haryana chief minister Banarsi Das Gupta. These organizations undertook the task of carving out an Aggarwal identity. They encouraged people to use Aggarwal in their surname as opposed to their got8 (clan) names, standardized the number of got to seventeen and a half and the spelling of Aggarwal with a double “g,” and finally fixed a story of descent from Maharaja Agrasen. In the process, they tried to differentiate themselves from the Marwari by their region of origin: the first hail from parts of Uttar Pradesh and Haryana, while the latter come from parts of Rajasthan, especially Mewar district.9

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15 According to Dumont’s (1980:222) thesis on “substantialization” of caste, vertical caste hierarchies are replaced by “impenetrable,” “inter-dependent” blocks as if caste was an “individual” competing with another. He argues that there is a move from “structure” to “substance” and a horizontalization of caste. Using the substantialization theory, Gupta (2005) argues that just like the Aggarwal every caste would take pride in their origin story and myth without arranging them in vertical hierarchies. Studies on caste take substantialization as a given and these are two of the many directions in which this phenomenon has taken caste studies: firstly, it is argued that substantialization causes castes to be internally heterogeneous. Differences get articulated in the language of culture which gets expressed only in the private sphere for it is not possible to defend them in public anymore (Fuller 1996; Fuller and Narasimhan 2015; Mosse 2012); secondly, caste appears in public only in the realm of politics (Beteille 1991, Srinivas 2003). Hence it is argued that caste has lost its importance for the “upper” castes and only determines the life chances of “lower” castes.

16 Internal heterogeneity within caste groups is critical to this article. Fuller and Narasimhan (2015) account for the internal hierarchies within the Tamil Brahmin caste through a neo-Weberian definition of “social class.” That is, a social class which is also a status group leads to the making of the middle-class-caste. Fuller and Narasimhan (2015) argue there is no upward or downward mobility between the white-collar, lower-middle caste and the professional and managerial, upper-middle class Brahmins. However, in this paper, the internal heterogeneity within the Aggarwal caste is captured using a sociologically neutral category: “caste stratum.” I argue that with an increase in internal differentiation and secularizing pulls of caste through changes in occupation, education, lifestyles, women’s mobility and income levels those who occupy the upper stratum within a caste work towards increasing caste cohesion. The stated aim of these efforts could be community building, providing self-definitions in the everyday or consolidating numbers in a democracy. However, caste cohesion, unlike among the professional middle-class Tamil Brahmins, facilitates inter-stratum mobility through marriage, and business networks.10 It shows that caste is a resource in the urban for those in the upper and lower echelons through “networks of caste and kinship” (Jodhka 2015:230; Rutten 2003).

17 In this paper, I argue that women facilitate the cohesion of caste and reproduction of family business through three strategies: inter-strata “social work,” intra-strata socialization and managing individuating aspirations of family members through marital choice. These roles are undertaken by women in certain caste/classes. This “politics of status maintenance” by women requires them to constantly socialise and form networks with caste others (Papanek 1979:778). Forging connections and networks is not a given but is achieved through “an endless effort at institutions … which is necessary to produce and reproduce lasting useful relationships that can secure material or symbolic profits” (Bourdieu 1986:246). Unpaid status-reproductive roles lead to the withdrawal of women from paid employment. (Papanek 1979; Mies 1982; Abraham 2013). For example, in her study of family businesses in Arni village in Tamil Nadu, Harris-White (2002) argues that women perform three reproductive roles: reproduce and manage the capital-managing male labor; provide food as part of wages for labor; and get their daughters strategically married for business interests. In his study of Jain family business in Jaipur, Laidlaw (1995:358) says that women keep long fasts, while wealthy merchants make donations recognizing

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them. In this way, the man’s generosity comes across as “an expression of piety” rather than a vulgar display of wealth. Women’s roles show that family businesses continue to function as an economic enterprise, where the family needs to behave as a social group (Fox 1969; Hardiman 1996; Bayly, Christopher A. 1983). However unlike in the 18th and 19th century, this social group has to accommodate the internal hierarchies within the caste group as well as the individuating aspirations of its members to sustain the unity of the economic enterprise.

18 Women’s lives are formed on the interface of overlapping and competing patriarchies of caste and class (Sangari and Vaid 1989; Rao 2003; Rege 2006) However, contemporary studies on upper-caste or elite women in India are scarce. In ethnographic studies, adopting upper-caste gender norms of “seclusion” or the “bourgeois housewife ethic” is seen as a means to upward mobility for the Dalit or non-Brahmin community (F. Osella and C. Osella 2000:79; Kapadia 1995; Still 2014; Heyer 2014). Chakravarthy (1993:580) argues that upper-caste women are objects of “moral panic” and “gateways” to the caste system. Upper-caste women in these studies appear as agency-less, acting on behalf of or acted upon by their husbands and families. Attentive to the meanings women ascribe to their actions and roles, this paper does not assume a narrative of victimhood or see women as “cultural dopes” (Kabeer 2000).

Forging fictive kinship ties across caste strata through “social work.”

19 This discussion of women’s “social work” focuses on two organizations: the Aggarwal caste associations in the neighborhood and Delhi; and the Rotary.11 Women attend events for both along with their husbands. However, they hold posts only in the women’s wings of caste associations and the Rotary. Caste associations are male-centric spaces, and the Aggarwal caste associations are no different. Women’s participation began as late as the 1990s, with the formation of a separate women’s wing. Along with this development, discussions on dowry-related deaths, expensive marriages, and female feticide began appearing in Aggarwal journals. Business castes have also been historically documented for their conservative position on women’s questions (Timberg 1978; Hardgrove 2004). It took the Marwaris in Calcutta a hundred years more than the Bengali Bhadralok to participate in the social reform debate (age of consent, widow remarriage, sati and women’s education). They chose to participate from within the space of their caste associations and only because the mercantile autonomy of the Hindu United Family was at stake (Birla 2009; Hardgrove 2004).

20 In this section, I focus on women’s participation in caste associations. It is noteworthy to discuss women’s participation, for this is the first generation of Aggarwal women in the 40s to 60s age group from business families who participate in these spaces along with their husbands in Delhi. Women in the generation before them were home-bound and took care of their families. In the generation after them (daughters and daughters- in-law) women socialize with their husband’s friends, occasionally volunteering with their mothers and mothers-in-law in activities of the association. At the Delhi level, the women’s wing is headed and constituted primarily by women from the second stratum and living in South Delhi. This selective particiation is because in the third and second stratum women are either discouraged by families or do not have the luxury of time as they shoulder most of the domestic responsibilities.

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21 Philanthropy has historically been associated with mercantile communities in India, serving different political functions across time. In pre-colonial India, donations and alleviating local distress helped merchants gain legitimacy within the local community, accrue abru (honor) and commercial benefits (Appadurai 1977; Bayly, Christopher A. 1983; Bayly, Susan 1989). In colonial India, there was a shift from gifting to charity and philanthropy that helped merchants distinguish themselves with the colonial government and contribute to the construction of local public culture and places (Frietag 1989; Rudner 1987). Ostrower (1995:17) defines philanthropy as “private giving for public purposes.” Christopher A. Bayly (1983), writing about high-status Khatri and Aggarwal merchants in 18th century India, argued that their sphere of business was not just the bazaar (market) but success in the entire society. The select society for this stratum of elite Aggarwal families was limited in scope and primarily to the caste associations. This involved both organizational and funding work and elite Aggarwal women describe their contribution as “social work.”

22 The Hindu religious festival of Teej was organized by the women’s wing of the Delhi caste association in the month of August. Yamini (62) headed the organizational committee in 2014. For elite women as organizers, the ritual significance of the event had decreased since the previous generation. Yamini had to look up the story behind the significance of the festival before writing her speech. Why did Yamini and the women’s wing then continue to spend their time and money organizing Teej at the Delhi level? Yamini says: Aggarwal women in parts of Rohini, Pitampura or Laxmi Nagar, are not allowed to step out of their homes. Even if their husbands come for the meetings they do not bring their wives. I made it a rule that men could not attend the Teej festival without their wives. Elite women like Yamini feel they provide the morally-sanctioned cultural spaces of socialization for the less fortunate Aggarwal women in Delhi whose mobility is limited to their household or their extended kin. As facilitators of women’s mobility “beyond their kitchen and families,” elite women forge fictive kinship alliances based on the common experiential identity of being a woman and Aggarwal. In the process, they also create aspirational standards on what it means to be an elite Aggarwal woman for such women from lower-caste strata.

23 Women also help their husbands in the organization of a daylong matrimonial event called Parichay Sammelan through the DPAS and ABAS. Parichay Sammelan is an annual event which is organized in the Talkatora stadium in Delhi. Eligible Aggarwal men and women register, go on stage and introduce themselves, while families sit in the audience deciding with their children which marriage “party” to approach. In 2014 and 2015, more than six hundred girls and boys registered for this event. Until the marriage alliance is finalized, the potential spouse, and his/her family is referred to as a “party,” signaling the transactional nature of the marital alliance. Aggarwal men as organizers of this event see it as a “revolutionary step” and use the language of promoting “choice” through endogamous marriage fairs. The elite women as volunteers share the feeling of benevolence of their husbands. Radhika (58) said: Finding a suitable match for your children is the hardest thing to do. In villages you have close family ties; you check the boy/girl’s family background. In cities, people don’t know enough people within their community. Matrimonial agencies charge so much money. We through the caste association provide this service free of charge.

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Radhika was aghast when I suggested the Parichay Sammelan as an avenue for finding a match for her daughter. It was understood that such services were for the lower stratum of Aggarwal who lacked suitable networks and capital in the urban milieu.

24 By volunteering their time and their husbands, by investing their money in such events, the elite women, apart from forging fictive kinship relations across the caste stratum also get to establish their family name and business affluence within their caste stratum. Women get an avenue to show off their creativity, avenues which were curtailed after marriage. They also get to exhibit their efficient management of help and other family members. For example, in the preparatory meeting of the event, held in South Delhi in 2015, the topic of discussion was far from the upcoming event. Women wanted the DPAS convener to deliberate on ways in which there could be a clearer demarcation of spaces between guests and servants at weddings and other events. What followed was a lengthy discussion on managing servants, their location vis-à-vis their employers, the number of servants each of them had, if the servants accompanied them on foreign trips and if their “modern” daughters-in-law deserved the assistance of servants. In this light banter was a public articulation of their status while judging the status, household, servant and daughter-in-law management of other women in the group. Bairy (2009:1) argues that caste associations in contemporary times are an “enunciatory space,” whose primary task is to speak as and on behalf of, a modern caste self. The caste associations do not just speak on behalf but are also sites for the constitution of the “modern” caste self. Projects of self-formation in the case of elite Aggarwal women play out by distinguishing themselves from internal (other elite Aggarwal women) and external others (non-elite Aggarwal women in the caste association). The elite self is made and unmade through women’s familial roles and their efficiency in managing them. Being elite is a relational process that requires constant investments and being an elite woman means being well-grounded in the family.

Forging fictive kinship within caste stratum through sustained socialization

25 Fictive kinship ties are strengthened not just across caste strata but also within a caste stratum through continuous socialization. The caste association and Rotary meetings institutionalized this socialization. For example, the DPAS organizes trips on an annual basis; there were some trips for which the cost per person was low enough for Aggarwal across caste strata to participate. The last such trip was to Vaishno Devi, a Hindu pilgrim site, during which enough people joined to fill seven bogies of a train. For the others in which the cost per person was high, only upper strata families participated. The last such trip was to temples in Nepal. A special train was booked starting from Safdarjung station. The head of a business group famous for a well-known chain of restaurants in India helped organize the rail requirements. The capability to organize trains exclusively for DPAS activities shows the political influence and resources the community has. This train had security guards and cooks, and did not stop to pick up other travelers. However, it stopped to meet members of Aggarwal associations in other states. Bharti (51) had gone on one of these trips and said: When you step out of the house, you need many comforts; especially we Banias do not eat pyaaz (onion) and non-veg. Some of us don’t eat lasun (garlic) either. That is

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why we have a special Maharaj (an upper-caste cook) to prepare our food. It is also good to meet our people in other places. Our Hill Lane, ABAS, and DPAS is all one, we keep meeting, seeing each other’s faces and we have all become a family (emphasis added). The comfort of socializing with people who share the same way of life, taste in food and values leads to the expansion of the family unit to embrace caste others within a caste stratum.

26 These informal spaces of socialization, involving men and their wives provide a relaxed atmosphere where business spills into the social and vice-a-versa. Informal environments created through socialization help in the discussion of business, reciprocation of favors, identification of further clients and strengthening of the economic by the affective. For example, Radhika’s husband was the president of the Rotary recently, and he organized a trip for forty families to the Jim Corbett Park. On the way home, the men traveled in a separate minibus, and Radhika says their pet topic was each other’s business developments, tenders, and contracts. One of the Rotary and Aggarwal caste association members was in the paper printing business and was having trouble sourcing material from Uttar Pradesh. The bus stopped in Moradabad, and amongst them, they found local contacts and sorted the problem immediately.

27 In business, caste and family ties structure social networks, channels of information and credit and generate a feeling of “trust” (Harris 2003). Caste membership was not a good enough reason to establish this selective trust. Trust shows a “nexus of relations” that are brought together through social obligations and “non-specific indebtedness” (Bourdieu 1986:252). These relationships get strengthened when women couch them in cultural, relational idioms sanctified by Hindu rituals. For example, Janaki and her husband Rajiv, who were new to the South Delhi circle of businesses, were asked by the ABAS President and noted Delhi businessman to join both the caste association and the Rotary circle to “make contacts and work for the community.” Janaki refers to the ABAS president as bhaiya (elder brother) and ties a rakhi (cotton bracelet) on Raksha Bandhan12 every year. She says her husband was a middle man in fixing big deals, in which significant amounts of money got exchanged against sureties. She says “trust” is crucial in this process. Before making any deal, her husband would first check with bhaiya (referring to the ABAS President) about the “party’s” market credibility. She says also that bhaiya’s standing behind her husband meant people had reciprocal “trust” in her husband’s credibility and work. Economic activity was not undertaken by isolated individuals but was embedded in social structures, historical and institutional contexts that facilitate and constrain actions (Polyani 1944; Granovetter 1992). The tenacity of caste comes in its capacity to reproduce through actively forged networks of fictive kinship ties in the urban.

Steering individuating desires and marital choices

28 As shown in the previous two sections, the social universe of the Aggarwal in Delhi is constituted by their caste and family ties. These networks also provide suitable marital alliances for children. Financial discussions in Aggarwal business families, unlike the Tamil Brahmins, are explicit (Fuller and Narasimhan 2015). These discussions precede the matching of kundalis (astrological charts). Families interested in a marriage alliance refer to each other as “party,” and only a successful pairing of “budget” leads to a change in the abstract category of “party” to a recognizable family. Without

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approaching an interested party, families usually have a sense of the budget the groom’s family would desire. Only if there was a match between the suggested and expected budget were marriage negotiations carried forward. Common family, friends and at times marriage brokers helped in the negotiation process. The budget refers to the money the bride’s family would be ready to invest in the wedding celebrations. The dowry could be given separately both in cash or kind from the total budget cited by the bride’s family. The dowry could also be a part of the budget, depending on the parties involved in the negotiation. The groom’s side decides how they would like the budget spent and divides it into sub-headings like caterers, venue, décor, clothes, and milni13 (coming together ceremony). The groom’s side could also take the entire amount and decide to organize the wedding themselves. For the Aggarwal elite in this stratum, dowries did not involve consumer durables; that was considered fit only for working class families. Their budgets were spent on expensive, elaborate weddings, a luxury car or perhaps furnished flats.

29 In this game of “cost analysis,” the wedding budget for the bride’s side exhibited: the life-long marriage savings of the family; the success of their own business (if they were a business-class family); money they would be ready to invest for the other daughters in the family (if there were any); and the resources they had to continue giving “gifts” to their daughters and in-laws for every small and big festival after marriage14 (Bourdieu 1976:551). A big marriage budget also allowed brides’ families to marry upwards. For example Kanika (52) came from a mixed family: her husband was a highly-paid professional in a private firm while her brother-in-law living in the same house, on a different floor, had his own business. She did not fit in the same stratum as women with intergenerational professional family businesses or those with manufacturing plants; however, her family had a good reputation and had been involved in the neighborhood caste association since the previous generation. Kanika knew all the other elite Aggarwal families through the caste association, kitty,15 and rotary circles. She wanted her daughter Arunima to marry into a business-class family. When Arunima informed Kanika about her Punjabi professional-class boyfriend in the neighborhood, Kanika managed to dissuade her from choosing him. Arunima was convinced by her mother, whose reluctance was not rooted in caste difference but in the fact that the boy did not earn enough to provide the lifestyle Arunima was used to and that Kanika desired for her. Studies on marriages in India argue that martial choices amongst the upper castes continue to be endogamous. At times they are expanded to embrace sub-castes or comparable castes (Nishimira 1998; Upadhya and Vasavi 2006). However, endogamous choices or weddings were read as an event in themselves. Behind such decisions lies a careful steering through the sociology of familial love and material security. Kanika found an affluent business-class family through her kitty party contact. She also found out the budget expectations, which matched theirs. Her daughter Arunima went on to become the youngest daughter-in- law in a business family in Delhi with four brothers and she was not allowed to continue working after marriage. Thus, through her neighborhood networks and a careful investment of the family’s savings, Kanika married her daughter upwards.

30 Similarly, for the groom’s side, the wedding budget reflected the market worth of their business and its potential growth; the credentials of their son; the size and location of their house; and the family reputation established through a grounding in the larger Aggarwal community. When it comes to marriages of sons, parents looked for alliances

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in the same class and status and not in one above them. This was despite the fact that “marrying up” would be a source of more economic and social capital for the business. This was because women realized that daughter-in-laws from families above them would be difficult to adjust to. Women secretly spoke of families in their strata who had gone on to marry above their means only to have unhappy daughters-in-law and ultimate separations. Daughters-in-law also came from professional-class families and the third stratum of Aggarwal (living in parts of Rohini, Pitampura) as long as their status was comparable, budgets matched and sons were happy with the choice. Aggarwal business families with successful businesses from the groom’s side were ready to contribute towards big budget weddings, as long as they and their families liked the girl.

31 Mothers helped strike a balance between the choices of children and business interests. As seen in other studies, marital choices amongst the Aggarwal business families in South Delhi were made through the joint involvement of parents and children (Uberoi 2006; Donner 2008). As friends and confidants of their children, mothers ensured that their choices were accounted for while still securing status-appropriate marriages. For example, Renuka’s (59) son, Piyush wanted a “modern” wife who would respect his parents, work with him and go partying with his friends. He came back from first “dates” arranged by parents unhappy with the women selected. Renuka had been in Delhi from the time of her marriage, without her mother-in-law’s supervision. She had an active social circle and did not want to “babysit her daughter-in-law.” She convinced her husband to select a daughter-in-law who was also a CA and could join the family business. Her daughter-in-law, Roshini, comes from a first-generation business family settled in Rohini.

32 Allowing daughters-in-law to work after marriage continues to be a contentious issue in business families. It is considered unsuitable to the status of the family, as work is associated only with profitable earnings and not self-growth or expression. Working daughters-in-law would also constitute a loss of the status reproduction roles expected of them. However, mothers-in-law realize that it would be counter-productive to the health of the family if educated daughters-in-law were actively discouraged. They encouraged daughters-in-law to pursue their hobbies by opening small projects on the side, like a design boutique, taking short-term courses like baking or joining the family business for a few hours. Daughters-in-law would then have the flexibility of work hours, keep the status of being the daughter-in-law of an elite family and be creatively entertained in the process. As opposed to their mother-in-law’s generation, in which one can see a mix of frugality and display of wealth, daughters-in-law have consumptive lifestyles characterized by frequent foreign travel (accompanying their husbands on business trips), shopping trips with their friends and mother-in-law and wearing expensive jewelry in social circles and gatherings. For example, Usha’s daughter-in-law, Roshini, says her life is about “kaho piyo aish karo, shopping karo, paisa udao (eat, drink, have a good time, shop and spend money).” Women in the mother and mother-in-law’s generation were allowed to wear suits much later in their lives. However, the restrictions on daughter-in-law’s clothing in Hill Lane were rare. They were allowed to dress according to their husbands’ friend’s circles. To be an elite daughter-in-law was then to lead a lifestyle that reflects the affluence of the family business.

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33 Higher education was a certain but risky requirement for the up-gradation of family capital. If the family could afford to invest and spare both their sons for higher education, then it would be undertaken. However, it was usually the younger son if he had a temperament for studies who was sent to study abroad; the elder son would have a basic degree and be involved in the day to day management of the business. Daughters were also sent abroad for short term courses. Pursuing higher education, however, posed a risk to the continuance of the family business. For example, when Usha’s younger son—sent to the US to contribute to their business of manufacturing plastic molds—seemed reluctant to come back, Usha was quick to sense it. Marriage alliances were sought and Rajat, her son, was married to Rachna on one of his visits to India. Rajat, in turn, came back to India to join the family business. Marriage is seen as a route for attaining social adulthood, responsibility and prioritizing the needs of the family above oneself.

34 With an increase in age of marriage, children’s education and modern (consumptive) lifestyles, the fear of splits in families leading to a split in the business was real. A ritual to keep families united, strengthen affective ties, ensure channels of communication are functioning and in the process ensure the health of the family business was to find time to spend together as a family. In the previous generation, spending time together was a given. All food was made at home, as women were frugal and also wary of eating food prepared by unknown castes. In the current generation, however, the home was no longer the primary site of socialization. Eating out and parties were frequent and children and parents had their independent circles of friend. The ritual of evening snack sessions, going on long dinners once a month, foreign trips together and celebrating festivals were some of the things women say they initiate to be a family in the everyday. Rituals helped the different family units in the joint family—which resided on separate floors and at times managed separate manufacturing plants—to set time apart for members of the nuclear family.

Conclusion

35 By focusing on women’s narratives from elite Aggarwal family businesses, this article shows how women, despite being invisibilized in family businesses, play an important role in their reproduction. An increase in internal heterogeneities in urban caste groups like the Aggarwal causes the upper strata to forge cohesion by strengthening inter-strata caste and family ties. Three strategies of reproduction used by women along with their families are discussed: inter-strata “social work”; intra-strata sustained socialization; and a negotiation of children’s individuation desires. This article shows how caste continues to act as a resource for the upper caste despite internal heterogeneities and the secularizing pulls of the urban.

36 As agents in the processual structuring of caste and family businesses, elite upper-caste Aggarwal women in the older generation are not passive. However, unlike Ostrander’s (1984) elite women, they do not sit on the boards of cultural and educational organizations. Their morally permissible sphere of socialization and mobility continues to be within extended caste and kinship networks. In the younger generation of women, however, there is a waning interest in these caste-marked spaces and an increase in individualized utilization of time and resources. Would this change the nature of capital dependence in family businesses brought about by the “modernity” of

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its caste-ed actors? Attention to changing elite gendered subjectivities and the new vocabularies of caste-ed selves reveals the secularizing pulls of capital on traditional institutions like Indian family businesses.

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NOTES

1. “Hill Lane” is a pseudonym for the studied South Delhi neighborhood. Names and identifiable markers of all respondents have been changed to maintain anonymity. 2. The Aggarwals draw their descent-based lineage back to Maharaja Agrasen. 3. The Punjabi Bagh Aggarwal women’s association organized an annual fair where Aggarwal, Jain and Punjabi women rented shops and sold things they had made or designed like jewellery, sarees, suits and bags. These were advertised as “lifestyle” festivals. 4. These strata are not as neatly defined, comprehensive or bound as might appear in the description below. They are based on the genealogical narratives of select Aggarwal families residing in each of these areas and hence do not claim to represent the entire Aggarwal population or their reasons for migration. 5. Chandni Chowk is a Lok Sabha constituency populated by Muslim and merchant-caste families. This claim by the Aggarwal should be read in the context of their increasing Hindu-ization and close proximity to the political Hindu right. 6. In 1934, Chhotu Ram a famous Jat leader contributed to the agrarian laws in Punjab. In that year he helped draft and pass the Punjab Relief Indebtedness Act and in 1936 the Punjab Debtor’s Protection Act to give peasants relief from the moneylenders (Gopal 1977). Money lending as a profession and Aggarwals by extension were severely affected by this. 7. Chamar is a blanket term used for Dalits working with leather and tanning Dalits. The Aggarwal use it derogatorily to refer to anyone who is a Dalit. 8. The eighteen Aggarwal gots are Garg, Bansal, Bindal, Bhandal, Dharan, Airan, Goyal, Goyan, Jindal, Singhal, Kansal, Kucchal Agrahari, Madhukul, Mangal, Mittal, Nangal, Tayal and Tingle 9. However, the neat distinction between Aggarwal and Marwari, , gets fuzzy in the everyday, with Marwaris actively participating in activities of the Aggarwal caste association, Aggarwal using varna (the four-caste classifications) category Vaish instead of the jati (the endogamous caste unit) category Aggarwal in public events to encourage Marwaris, Maheshwaris, and Jains to participate in their events and inter-marriages. The differences between Marwari and Aggarwal further get complicated with categories like “Marwari Aggarwal” or “Aggarwal Marwari.” 10. It would be erroneous to suggest a monolithic model for the diverse “upper”-caste groups, and I argue specifically for business castes and family businesses like the Aggarwal who unlike the middle class have a “narrow base of recruitment of caste” (Markovits 2010:128). 11. The Rotary Club is a part of the Rotary International, and in India, it has been divided into districts and zones. In the specific zone that my respondents belong to, membership is open to all; however, apart from two to three Punjabi families, the rest are all Aggarwal. Membership through invitation means that it is an intimate circle of known people. Rotary membership overlaps with that of the caste associations. Families with successful intergenerational industries,

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however, were reluctant to participate in Rotary meetings, considering it a waste of their time. It was the men in professional firms along with their wives who were more inclined to participate. 12. Raksha means to protect, and Bandan means a bond. It is a Hindu religious festival between a brother and sister. 13. When the groom’s family enters the venue for the wedding, they are greeted by members of the bride’s family. Usually, it was a meeting of the men from both sides, in which gifts (in the form of money in envelopes or clothing) were given to all the close family members of the groom’s side. 14. In Aggarwal family businesses, for every small and big festival the bride’s side sends gifts for their daughter and her in-laws. These “gifts” are expensive especially in the first year of marriage or after the birth of a child. They continued for the rest of the life of the bride though the value of the “gifts” given might decrease. Women as mothers ensure that appropriate “gifts” were sent on every occasion. 15. A kitty party is a women’s gathering that usually happens once a month. The “kitty” refers to the amount each woman contributes on a monthly basis. Once a year when it is her turn she gets a lump-sum amount. In the South Delhi neighborhood, there were a couples’ kitties, bhajan (session of religious songs) kitties, inter-generational mother-in-law and daughter-in-law kitties. Membership in these kitties required the husbands to be members of the Aggarwal association at the Delhi level. However, the lane kitties (involving members living in the same lane in the neighborhood) included neighborhood Punjabi women.

ABSTRACTS

This article explores the social reproductive roles performed by elite “upper”-caste Aggarwal women in family businesses in Delhi. With the substantialization of caste, there is an increase in heterogeneities within caste groups. By focussing on women’s associational and familial roles in a South Delhi neighborhood three strategies of reproduction are discussed: first, forging inter- strata fictive kinship ties for caste cohesion through women’s “social work”; second, forging intra-strata fictive kinship ties for business opportunities through sustained interactions; and third, steering the individuating aspirations of children around marital choices for the unity of the joint family and business. These strategies of elite reproduction highlight the secularizing pulls on gender and caste in urban contexts, despite the dependence of family businesses on caste and family ties. Furthermore, by focusing on women in family businesses, this article shows that while they are not passive victims of caste patriarchy neither are they invisible in the male- centric family businesses.

INDEX

Keywords: upper caste, elite, women, social reproduction, family businesses

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AUTHOR

UJITHRA PONNIAH Ph.D. Research Scholar at the Center for Study of Social Systems (CSSS), Jawaharlal Nehru University (JNU), New Delhi.

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Elite Delights: The Structure of Art Gallery Networks in India

Olivier Roueff

1 The transformations of contemporary art worlds around the globe are quite well known.1 The valorization of innovation over the classical canon became a norm in Europe at the end of the nineteenth century, when “modernist” artists began to rely on art dealers and art critics in order to differentiate their practice from handicrafts and functional purposes, and to pursue “art for art’s sake” against religious, political, and economic patronages. The “dealer-critic system” (Moulin 1967) evolved after World War II in Western areas, mainly through the rise of art museums and their curators (Heinich and Pollak 1989; Jeanpierre and Sofio 2015), whose authority played a key role in the economic valorization of the new “abstract” styles launched by avant-garde artists and their galleries (Crane 1987; Verlaine 2013). Since the 1970s, the game has become more complex with a lot of new players, both geographically (through globalization, still segmented between “East” and “West” (Crane 2016)) and functionally, with mainly economic actors: international fairs (Yogev and Krund 2012; Roux 2006); “big” collectors and auction firms (Moureau and Sagot-Duvauroux 2012; Quemin 2013); web dealers and web hierarchized databases (Moulin 1992; Moulin 2000) —all of whom impose more and more market logics and values (Borja and Sofio 2009).

2 But if galleries are less central than before, they are still at the core of the value process (Peterson 1997; Jyrämä and Äyväri 2010), especially for peripheral artists (Karttunen 2008). As gatekeepers (Hirsch 1972), they select aspiring artists (Finney 1993), shape demand through their clientele, and some even redefine their role to become art producers (gathering funds and coalitions around artistic projects). As such, galleries illustrate the ideal type of cultural intermediaries and their structural dilemmas: translating artistic value into economic price and vice versa; matching consumers’ tastes and artists’ innovations; combining artists’ interests and their own interests as entrepreneurs (Lizé, Naudier and Roueff 2011; Jeanpierre and Roueff 2014). In addition, art galleries are one of the main providers of symbolic goods for cultural elites, who dictate taste and lifestyle aspirations to the social groups that access cultural and economic capitals (Bourdieu 1979). This social role of art galleries is

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becoming increasingly true throughout the world with the globalization of art markets (Velthuis and Baia Curioni 2015). Their products are expensive and esoteric, and their buyers and collectors, as a ruling minority among upper classes, define aesthetic standards for their social group as well as for the broader middle classes (Jaffrelot and Veer 2008). Investigating art galleries and their aesthetic trends may thus offer some insight into shifting cultural standards among elites.

3 Within the body of existing work on contemporary art worlds, India has not yet been subject to much investigation. Important studies do exist, as shown above, but a systematic empirical inquiry into the Indian art world as a whole has yet to be made. The present article offers a step in that direction, through the statistical analysis of 101 Indian modern and contemporary visual art galleries and the 4,249 artists they present in their catalogs. Does the way galleries share artists reveal specific characteristics about the Indian art world? Is the usual opposition between “commercial” and “artistic” galleries relevant for contemporary India? What are the roles of auctions and international fairs? Do Indian galleries prefer to represent artists, or to store and exhibit their works? What insights do their strategies and hierarchies offer about the cultural standards of the Indian elite? In the first section, I will summarize the available literature about the Indian art world. Then data and methodology will be presented, along with the first results from bivariate analyses. The last section will offer a typology of Indian art galleries based on a network analysis: galleries are considered bonded when they share the same artist(s); a blockmodeling algorithm then calculates the best clusters of similar positions among this distribution of shared artists.2 The conclusion will then offer an interpretation of the cultural standards of Indian elites that can be derived from this analysis of visual art galleries.

What is known about the Indian art world?

4 A set of characteristics of the Indian art world can be gleaned from the few dedicated studies that have been done.3 First, galleries became major players only after Independence. But the market had already developed under colonial rule, mainly due to polycentric patronage structures. During the nineteenth century, with the creation of dedicated schools of art separate from handicraft (Calcutta, Bombay, and Madras in 1854) and of independent artist societies, artists began to free themselves from royal patronage and the demands of the colonial elites by moving from client to client. The most prominent artists circulated in foreign capitals (mainly London), which helped to connect Indian cultural circles with the aesthetic currents of Western modernism. Independence transformed the market by quickly reducing royal patronage in favor of large industrialists, and by promoting the creation of private galleries. However, public institutions of independent India (museums and universities) did not invest much in twentieth-century arts and never became canonization authorities to the extent that they did in other countries. Cultural nation-building was more focused on heritage museums than on the promotion of living artists enlisted in the struggle for Independence. Arts and crafts of the past were interpreted as evidence of continuities beyond the caesura of colonization, and the issue of promoting India as a modern society appeared to be a mere economic matter (Kapur 2000; Mitter 2007; Sinha 2009).

5 Nevertheless, a crucial point is rarely stressed: the Indian state actually plays a significant role in artist recognition—through art departments in public or approved

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universities, some of which are among the most renowned,4 and via the national and local academies (Lalit Kala Akademi) and their training centers, workshops, group exhibitions, awards, and scholarships. A look at the curricula of hundreds of artists selected for exhibitions or dictionaries quickly reveals that very few do not include at least one Akademi credential. Private foundations, providing orders, grants, and residencies, were for their part undeveloped until the 2010s.5

6 Since the 1990s, the market of informal sales, galleries, and auctions has formed the core of the Indian art world. By informal I mean sales that are not mediated by a gallery or another commercial organization; they involve a buyer and a seller only, who usually already know each other’s names (they are part of a “milieu,” an interpersonal network), or sometimes an interpersonal intermediary (a collector, an acquaintance for whom the sale is an occasional act). Thus, the share of informal sales is impossible to assess. It is probably less important in terms of business volume than in terms of coalitions of actors at the top of the market, and in terms of collective ideology. Indeed, it is often exaggerated by insiders. It helps minimize the influence of the commercial logic inherent to capitalist enterprise, as if gallery meant “purely economic” and informal meant “friendly and disinterested.” Above all, the phenomenon of informal sales draws a symbolic boundary between common people, who access works and artists through public places only (open galleries, museums, etc.), and the insiders, who are informed and integrated within interpersonal networks of cultural elites (Sooudi 2015; Sooudi 2012). Thus, regulars from the art world who frequent gallery openings and public auctions like to state that “real” value is built far from these semi- private but still much too public events.6 Galleries reflect this symbolic boundary by combining formal publicity and private informality in various ways. Some are accessible through appointment only. Most combine public exhibitions with invitational openings and private, “friendly” parties. Others develop formalized consulting or training for collectors, promising them visits to artists’ studios and private collections. There is an emerging market of consulting agencies for novice collectors attracted by the hope of inside access. Few art professionals disdain such services. In the biographies of critics, curators, gallery owners, academics, patrons, and so forth, the words “art consultancy” appear frequently. There is also an editorial market, with the proliferation of “introductions,” “dictionaries,” “top 10 or 100” of Indian arts.

7 Another structural feature of the Indian art world is the increasing role of its auction market. Nothing better illustrates its rise than the advent of “Indian modern art,” which has become a decisive aesthetic category. Khaire and Wadhwani (2010) showed that it did not exist in the 1980s. Galleries then managed to sell twentieth-century artists, especially to non-resident Indians, but it was still alongside antiques and traditional arts under the label of “Indian and Southeast Asian Art.” In the early 1990s, art historians and critics reconceptualized twentieth-century Indian art as “modernist,” claiming that its previous qualifications as “provincial” or “derivative” (of Western art) fell within a narrow ethnocentric vision of artistic modernism. On the contrary, they theorized, these works were the product of Indian modernism, a unique style expressing the modern Indian identity through the use of traditional visual themes and international aesthetic influences. The exhibition “100 Years of Indian Art” curated in 1994 by Geeta Kapur at the National Gallery of Modern Art is commonly

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considered a turning point—the canon of “Indian modernism” was enshrined in the main national museum.7

8 Aware of this opportunity, auction firms worked to make the new category available through press releases and auction catalogs, in order to promote a financial valuation of the concerned artists (the generations that arose in the 1940s to the 1960s). In 1989, Times of India celebrated its 150th anniversary by exhibiting its collection, part of which was auctioned by Sotheby’s in Mumbai. Christie’s then opened an office in Mumbai in 1994, and organized its first auction dedicated to “Indian arts” in London in 1995. The same year, Sotheby’s organized the first sale exclusively focused on the new category of “Indian modern art” in New York. But the world’s two leading auction firms did not really capitalize on the trend, and they would not again organize focused sales until 2003. In the meantime, in 2000, Osian, an auction firm specializing in India and Southeast Asia, and Saffronart, an auction firm specializing in India, were created. The latter developed a long-term strategy around “Indian modern art” in order to compete with Osian and the local branches of Sotheby’s and Christie’s. Between 1995 and 2001, the average selling price of a work of this category was 6,000 dollars; between 2001 and 2007, it reached 44,000 dollars. In 2007, the category was stable enough to be subdivided into subcategories, and adopted by foreign museums and galleries.

9 The last characteristic of the Indian art world that is usually emphasized is its segmentation around national boundaries. Although artists feed their work with all aesthetic currents of international art, the distribution channels of their works are either national or foreign. Market expansion in the 1990s and 2000s was mainly carried out within India, and consisted of works by Indian artists bought by Indian collectors. The small segment of Indian experimental artists circulating in foreign galleries and international fairs was not appealing to most Indian buyers. According to Artprice (2011), the hundred top-rated Indian artists in 2011 generated 97% of sales revenue in the United States and the United Kingdom.8 But the situation is somewhat evolving in favor of a double movement. On one hand, the valorization of Indian experimental artists through large group exhibitions in central foreign museums (see below) has also helped to make them visible in India, if only because their growing financial ratings lead galleries to integrate them into their catalogs, and auctioneers to include them in their sales.

10 On the other hand, the creation of international fairs in Delhi (India Art Fair, since 2008) and Kochi (Muziris Biennale, since 2012) has accelerated the connection between national and international networks, even if most actors feel it is still too slow. Vermeylen (2015) shows that only peripheral foreign galleries have participated in the India Art Fair more than once. Still, they make up 40% of the represented galleries. Similarly, 60% of the exhibited artists are Indian. Yet only 60% among them live in India, and that means 40% of all the artists are foreign. A number of galleries work to educate Indian customers about foreign artists, and foreign buyers about Indian artists. Furthermore, the few galleries that have reached international networks with “experimental” artists in previous years generally attend these national fairs, contributing to the connection.9

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Data collection as a heuristic process

11 Investigating the structure of Indian art galleries’ networks has two goals. First, it provides an empirical test of the three characteristics emphasized by the literature with respect to the Indian art world. Did the category “Indian modern art” reorganize how gallerists’ choose artists? Is the distinction between a national network focused on modern art and an international network focused on experimental art relevant? Is the gallery economy so dependent on the auction market?

12 Second, as the investigation is conducted systematically and on the broadest possible sample of modern and contemporary visual art galleries, it should provide a typology of Indian art galleries that exceeds usual representations, which are generally based on practical knowledge of only the most renowned galleries. Network analysis helps reformulate the normative distinction between “commercial” and “purist” galleries, or between economic interest and artistic disinterest, in terms of relationships between artists and galleries (Byrnstyn 1978; Moureau and Sagot-Duvauroux 2012). Gallery owners’ intentions are often opaque, especially in the field of contemporary visual arts where artistic and economic values tend to be more conflated than in literature or music. In the world of visual arts, gallery owners somehow stand apart from other actors (critics or museums vs. galleries or auctions), and their activities are almost always controversial—“commercial” or, worse, “shopkeeper” remain dismissive insults. But these two scales of value tend toward the same direction with relatively short time intervals. Indeed, artistic valorization raises prices, and in turn rising prices affect artistic reputation (Becker 1986; Velthuis 2005).

13 An important criterion for distinguishing gallery strategies is one of temporality and commitment toward artists. Galleries can provide artists with monetary and reputational resources by storing, exhibiting, or selling their works. The relationship is focused on the valorization of each work, and its temporal scope is limited to the period from the work’s acquisition to its (re)sale. Galleries may also represent artist interests with respect to the multiple resource providers in the art world. In such cases, the relationship is focused on the valorization of the artist, which impacts the value of his or her work, and the temporal scope extends to a more or less long sequence (a few years at least) in the artist’s career. Galleries usually combine both strategies—they have to value artists in order to sell their works, just as they have to sell works in order to enhance an artist’s reputation. But most galleries give priority to either works or artists, to the temporal horizon either of an act of sale or of a career process.

14 Presenting data collection is important because it offers initial insights. The collection process and the multiple choices made are part of the results. The network analysis is based on Indian art gallery catalogs. Two galleries are considered to be tied when they share at least one artist, and more or less tied according to the number of artists they share. The sample was formed in October 2014 with 101 galleries tied to 4,249 artists. Galleries were selected in two stages.10 Several queries were launched on a search engine (such as “art gallery [city]” for the six major cultural cities—Bengaluru, Chennai, Delhi, Kochi, Kolkata, Mumbai11). Only galleries displaying a list of associated artists were chosen (all except 3). The list was then compared with several text-based materials: dictionaries, magazines (Take on Art, ArtAsiaPacific, and Art & Deal), exhibition and auction catalogs, specialized websites (Asia Art Archive, Arslant, the index posted by the Khoj foundation, etc.).12 The four galleries not mentioned at least once in this

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vast literature were eliminated. That decision was a compromise between the desire to base the sample on the point of view of Indian art world actors, and the desire to obtain a substantially larger sample than only the most active or nationally recognized galleries. This sample can be regarded neither as exhaustive nor as representative because the reference population is unknown.13 But it covers a number of galleries that no other listing gathers and includes parts of the Indian art world’s margins. Indeed, no antique or handicraft shops were included, even if they do feature some works recognized as such by the art world. But many selected galleries complement their artistic activity with the trade of antiques and crafts, which may disqualify them as mere “shops” according to the most integrated members of the art world. As a rough estimate, the five editions of the India Art Fair held between 2008 and 2013 invited 87 different Indian galleries. The sample’s fourteen remaining galleries represent the margins of the Indian modern and contemporary art world.

15 The other part of the sample consists of all the artists that these 101 galleries displayed in their catalogs (in October 2014). Artists showcased in these catalogs represent very different relationships, degrees of economic and reputational risk, and commitment on the part of galleries. None were excluded, but for the analysis to be meaningful, they were coded into four categories: representation (of interest) when the artist is tied exclusively and permanently to a gallery,14 storage (of works) when a gallery has bought works from the artist in order to offer them for sale,15 exhibition (of works) when a gallery organizes exhibitions or makes its facilities and name 16 available for exhibitions,17 promise (of works) when a gallery’s catalog displays works and/or artists without representing, storing, or exhibiting them. Note that economic risk is not reputational risk: “stock” strategies need more business capacity but are less indicative of an intent to invest in emerging talents or uncommon aesthetics (stocks have to be sold one day), “representation” strategies imply a hazardous long-term commitment to develop new artists, and “exhibition” strategies make it easier to test innovations (they involve less time/money investment and therefore fewer consequences if they fail).

16 The latter category (“promise”) is problematic but important even if it concerns only a small part of the sample (only four of 101 galleries displayed exclusively “promise” relationships, accounting for 502 of the 9,879 bonds between artists and galleries). It refers to the promise made to potential buyers that the gallery is able to provide the works presented even if it has no link yet with the artist, the artist’s beneficiary, or the work’s owner. It therefore leads to bluffing techniques—presenting an inaccessible work to attract buyers and offer them other works. Almost all galleries use this technique, but few do so exclusively since it can create a perception of dishonesty. Even when genuine, it is still publicly considered to be illegitimate because it is seen as a one-way relationship, with no commitment from the gallery to the artist—with no economic or reputational risks. However, the promise of a gallery’s ability to offer a prestigious work to the public can be seen as a way of elevating the gallery’s market status, and that in turn is thought to contribute to the visibility and hence the reputation of the artist. Thus, some galleries tend to essentially promise renowned artists, helping to strengthen their membership in the artistic canon, while others promise mostly unknown artists, offering a kind of first step of public recognition.

17 This ambivalence toward the “promise” technique (frowned upon but used) reflects the fiduciary (or circular) nature of the construction of values in the art world (Bourdieu 1971). The act of claiming a recognized artist serves to certify the value of

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the gallery, and a gallery’s claim certifies the value of the artist: these value transfers do not necessarily imply a material exchange or risky commitment, but they do associate two names (the fundamental unit of value in the art world) in the same physical space of public visibility (websites, shop windows, printed catalogs). In the sample, galleries exclusively offering such relationships were classified as favoring “promise”; there are only four in total. The category allows us to observe, for example, a gallery’s degree of artistic recognition or participation in the auction market. But ideally every gallery should be characterized by the part left to such relationships: they almost all offer promises, in addition to the artists they represent, store, and/or exhibit. But, by definition, it is impossible to quantify these ties since it would require checking every promise work by work—the art of bluffing is based on this difficulty.

Galleries and artists in the sample: first insights

18 Several sets of information were then collected on the galleries and their artists. For galleries, in addition to the city: manager name and sex, the year of creation, participation in at least one of the five editions of the India Art Fair between 2008 and 2013, and the type of access to the catalog offered to the public (a shop in a mall, a shop on a city street, a room or a shop in a gated community residence, access by appointment only, or by a website only).

Table 1. Galleries’ main relationships with their artists by gallery director sex, access, period of creation, participation in the India Art Fair

Relationships (numbers) Total Representation Stock Exhibition Promise

Male and female 2 41 7

Directors’ sex Female 13 18 23 1 55

Male 11 1218 13 3 39

Appointment 2 3 5

Gated community 9 13 15 37

Access Mall boutique 3 57 15

Street boutique 12 13 15 1 41

Website 3 3

80- 1 4 5

80-91 2 2

Creation 91-00 2 65 13

00-08 7 5 4 1 17

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09+ 16 17 28 3 64

No 4 11 20 3 38 India Art Fair 2008-13 Yes 22 23 17 1 63

Total 26 34 37 4 101

19 Table 1 summarizes information about galleries. Several results immediately stand out. First, there is a strong correlation between participation in the India Art Fair and the types of bonds that exist between galleries and artists. Of “promise” galleries, three in four never participated in the fairs. More than half of galleries favoring “exhibition” never participated in the fairs. But that was only the case of a third of “stock” galleries, and of less than a fifth of “representation” galleries. A major indicator of the relative legitimacy of the different relationships between galleries and artists in the art world: the more gallery involvement, the more the relationship—in terms of artistic recognition—is perceived to be legitimate by market actors (galleries and collectors).

20 Second, Indian gallery managers are mostly women, this being especially true for “stock” and “exhibition” galleries. Occupations in the art world offer a legitimate way of working outside the domestic sphere for elite women, who tend to be more excluded from professional activities than men. The variation is difficult to interpret but two hypotheses suggest themselves. Gallery strategies that imply a lot of contact with artists and other actors, such as representation compared to exhibition and storage, are less likely to be open to women—a kind of “etiquette” hypothesis. Or: women are more represented than men in “stock” and “exhibition” galleries, which activity is more considered as economic, because these galleries are more often funded by industrial families, where women willing to have a professional activity are more often oriented toward “secondary” activities, like running a gallery. This could also explain why four couples out of seven manage “stock” galleries—but I do not have sufficient information on managers’ families to corroborate this explanation.

21 Third, in terms of access, the five galleries offering visits by appointment only are on the side of the riskiest relationships (stock and representation), and the galleries offering access only by internet are on the side of the least risky relationships (promise); “exhibition” galleries are logically concentrated on public modes of access (“street,” “mall,” “gated”).

22 Fourth, “representation” has increasingly become the preferred strategy, which correlates with recent changes in the Indian art world: what is sometimes seen as a kind of “professionalization” of Indian galleries relates to an increasing appropriation of the normative model that dominates renowned international fairs—the gallery with “its” pool of exclusive artists.

23 For artists, several sources were used. The Saffronart search engine—the main Indian auction firm—provided a list of artists already included in a sale and the highest sale price achieved by an artist, and year of birth. India Art Fair catalogs from 2008 to 2013 provided a list of the artists exhibited and/or represented at least once, artists who were considered worthy to contribute to the artistic reputation of the gallery—an artistic reputation indicator. The online index of activities organized by the foundation KHOJ, since its inception in 1997 to October 2014, provided a list of artists involved in

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the network that the foundation is building, focused on contemporary “experimental” art and favoring dependency on public and private patronage rather than on the auction market.

24 Artists were then classified according to their membership in three aesthetic canons attached to three successive periods. The Dictionary of Indian Art & Artists published by Pratima Seth (2006) provided a list of artists commonly accepted as belonging to the pantheon of modern art (176 of almost 500 artists included in the dictionary are part of the sample). This dictionary was chosen for its extensiveness, quality,19 and year of publication—2006, before the market boom and the internationalization of some contemporary artists. Covering the period from the 1890s to the early 2000s, the dictionary is logically centered on “modern” and “abstract” (see below) canons, although it also includes some pioneering figures of “experimental” art from the 1970s.

25 The catalogs of 15 international exhibitions on “Contemporary Indian Art” in foreign museums between 1998 and 201120 then provided a list of artists included in the pantheon of contemporary art labeled “experimental”21 here. Among 126 artists exhibited in at least one of these 15 shows, 67 were selected only once, 31 two or three times, 28 four times or more (up to 13 times)—and they are all part of the sample.

26 Since some artists are included in both “modern” and “experimental” lists, they have been classified in a third category. Indeed, they appear to be the “masters of Indian art” associated with the Independence period. The three resulting categories are roughly delimited, and are temporal more than aesthetic: “modern” refers to the styles invented before World War II (fauvism, cubism, surrealism, etc.), “abstract” to the styles invented in the 1940s and 1960s (abstract expressionism, lyrical abstraction, art brut, serial art, etc.), “experimental” to the styles developed beginning in the 1970s (conceptual art, minimalism, installation, happening, arte povera, feminist art, monumental works, etc.). Table 2’s caption provides some of the artist names. All statistical results presented further on confirm the relevance of this classification. Although it is aesthetically crude, it clearly distinguishes contrasting artistic profiles.

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Table 2.22 Artists’ membership to canons by higher bid at Saffronart’s auctions,23 birth period, participation at the India Art Fair 2008-2013, participation in Khoj’s activities

Some artist names might help readers frame the three periods. The 21 best sold artists in the “experimental canon”: Alwar Balasubramaniam, Anita Dube, Anju Dodiya, Bharti Kher, GR Iranna, Hema Upadhyay, Jagannath Panda, Jayashree Chakravarty, Jitish Kallat, Justin Ponmany, LN Tallur, NS Harsha, Nataraj Sharma, Rameshwar Broota, Ranbir Singh Kaleka, Rashid Rana, Shibu Natesan, Subodh Gupta, Surendran Nair, TV Santhosh, Thukral & Tagra. The 23 best sold artists in the “abstract canon”: Akbar Padamsee, Anjolie Ela Menon, Arpita Singh, Atul Dodiya, Bhupen Khakhar, Bikash Bhattacharjee, Chittrovanu Mazumdar, G Ravinder Reddy, Ganesh Pyne, Gulammohammed Sheikh, Himmat Shah, Jehangir Sabavala, Jogen Chowdhury, KG Subramanyan, Krishen Khanna, Manjeet Bawa, Nilima Sheikh, Paramjit Singh, Ram Kumar, S H Raza, Sudhir Patwardhan, Thota Vaikuntam, Tyeb Mehta. The 10 best sold artists in the “modern canon”: Amrita Sher Gill, B Prabha, KH Ara, KK Hebbar, Meera Mukherjee, NS Bendre, Nasreen Mohamedi, Rabindranath Tagore, Sakti Burman, VS Gaitonde.

27 Among the 4,249 artists, 176 belong to the “modern” cannon, 65 to the “abstract” cannon, and 100 to the “experimental” canon (Table 2). Their years of emergence are not surprising, with the pivotal period of the first half of the twentieth century, extended through the 1960s because successful pioneering innovations are always followed by dominance and imitation. The artists of the “abstract” canon are “stars” on the auction market: only two have never been auctioned by Saffronart, and a third obtained the highest prices. “Modern” and “experimental” canonized artists are auctioned in the same proportions (just over two thirds) but their prices are distributed very differently. “Modern” canonized artists sell comparatively more cheaply, with only 41% reaching the first price class. “Experimental” canonized artists sell generally cheaper than “abstract” artists but garner significantly higher prices than “modern” artists, with 39% reaching the two highest price classes.

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28 Finally, presence at a minimum of one India Art Fair (IAF) and at least one Khoj activity (workshop, exhibition, conference, training, etc.) confirms the relevance of the canon classification. Attendance at fairs concerns more than half of all canonized artists: it is a good index of artistic recognition. In addition, the relative presence of each canon reflects gallery strategies. “Modern” canonized artists place galleries inside the prestigious tradition of Indian art, but they are not distinctive and they are sold at comparatively low prices. That is why only 43% of these artists have been exhibited at IAF. “Abstract” canonized artists are the stars of sales: 83% have been exhibited at IAF. Finally, “experimental” canonized artists enable galleries to be part of recent dynamics and “trends,” but they are riskier (the canon is not yet stabilized) and their prices are lower than “abstract” artists: 77% of them have been exhibited at IAF. Fairs are par excellence the place for galleries to establish their reputation, embodying the association of artistic recognition and monetary value. Beyond differences between galleries, IAF reveals their three strata of strategies: a stable base of less profitable “modern” artists that provide an anchor for posterity; a profitable core of “abstract” artists who establish gallery reputations and garner high prices on the domestic market; a more evolving set of “experimental” artists put on the market in the hope of a value increase.

29 “Abstract” and “experimental” canonized artists differ both in terms of relative prices, as we have seen above, and even more so through their participation in Khoj activities. “Modern” canonized artists, mostly dead, obviously do not participate. However, few “abstract” canonized artists, who are mostly still alive (only 12 of the 65 had died before 2014) participate either—less than a quarter of them. While more than a half (55%) of “experimental” canonized artists have contributed at least once. The association with Khoj is an indicator of belonging to “experimental” networks that dominate the world of international contemporary art.

Methodology

30 A typology of galleries cannot be achieved through the study of correlations between the different variables taken by pairs—whether through bivariate or regression analyses. Geometric (or factorial) analysis would do in principle but only if more data were available regarding galleries and artists. For 65% of the artists sampled, no information other than their links to galleries is available. Geometrical analysis would only serve to oppose these artists against all others, from the least recognized (but still present in the fairs, Khoj activities, or Saffronart auctions) to the stars. In terms of galleries, only participation at the India Art Fair is indicative of value. To be sure, other information is discriminating, but only if associated with value indicators concerning their artists—and 65% of them do not have them. The only interesting test was to select a sub-sample of artists based on who had been auctioned by Saffronart at least once. A hierarchical cluster analysis (HCA) performed on a multiple correspondence analysis (MCA) confirmed the significance of each of the variables as well as their correlations as seen with previous bivariate analyses (see Appendix 1). But their interest is limited, if only because the number of available variables is relatively small; compared to bivariate analysis, the gain in synthesis is low. In addition, since most artists are associated with several galleries, it is difficult to include them in this type of calculation. More importantly, it reduces the analysis to the top of the market, or less

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than a quarter (23%) of the sample. This excludes one of the main distinctions between galleries: the proportion of artists not (yet) recognized in their catalog.

31 The only way to find distinctive groups of galleries from the whole sample is then to put aside gallery and artist characteristics, and to adopt Accominotti’s (2008) methodology, basing calculations on the bonds between artists and galleries. In other words, which galleries share artists through their catalogs, how many are shared, and whose artists are shared. Artist and gallery characteristics can then be reintroduced to interpret the resulting representation of gallery networks, despite the relative poverty of that information. As shown by Accominotti (2008), catalog choices are at the heart of galleries’ business, and the sharing of artists reflects proximities and distances in the art world. In the case studied by Accominotti, these proximities and distances are structured according to a hierarchy of reputational status on the market.

32 Once this methodological principle was established, a way of calculating these proximities and distances in the network still needed to be chosen. There has been no attempt here to study network properties (density, betweenness, etc.24). Rather, the aim has been to group galleries according to their relative distances in the network. Producing such an interpretable typology means choosing a method for partitioning the network. The tests revealed three interesting methods, each one producing information about the structuring of gallery space that others do not—it thus maximized the relatively poor amount of available information on gallery and artist properties. Two of the methods and their results are presented briefly in the appendices. The first method, presented above, is not a network but a geometrical analysis (multiple component analysis). It reveals the main independent factors differentiating the artists who have been auctioned by Saffronart at least once—their period of activity, and their market value (Appendix 1). The second method is based on degrees in gallery networks: clusters are calculated depending on the number of links each gallery has with other galleries through the sharing of the same artist(s). Degrees are a rough but interesting method: galleries are merely ordered according to their presence on the auction market, which is correlated with their relationship to canonized abstract and modern artists; meanwhile, galleries which least share artists may be either small commercial or regional dealers, or internationally renowned galleries representing experimental artists (Appendix 2). The third method, presented in the next section, is the most fruitful, offering a refined and multi-dimensional typology.

More or less equivalent positions

33 Blockmodeling gathers galleries that have a similar position with respect to all other galleries. The partition is thus based on the structural equivalence of positions in the network. The chosen algorithm25 calculates a similarity score between network nodes: two vertices are structurally equivalent if they are connected in the same way to the same other vertices. This means that two galleries may belong to the same class even if they share very few or even no artists; they just share the same artists with the same other galleries, and no artists with the same other galleries. A hierarchical classification tree was then produced, which was divided according to the desired number of classes. Mathematical indices are available but they are relatively redundant in light of a visual assessment of the relative distance between successive intersections

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of the tree. A second algorithm26 divides the chosen clusters and reduces 27 them according to several possible calculations—here, the aim was to find the most cohesive clusters, according to density based on the average value of each block. Table 3 shows the resulting typology of galleries with the characteristics most associated with each block—for the written descriptions above, some simple cross-tabulations are also used.

Table 3. A typology of 101 Indian art galleries through the network of their shared artists

Values are the categories that are significantly correlated to each blockmodel, according to Pearson’s residuals. It is based on chi-square but it measures the overrepresentation of each crossing of categories from variables (here, blockmodels and galleries’ or artists’ characteristics). It is usually considered as significant when over 1,96 or above -1,96. Here, the line through is for negative correlations. When residuals are between -1,96 and 1,96, positive correlations are still put in brackets when distinct from others (compare 0,12; -0,7; 0,85 to -0.24; -0,38; -0,27). Overlapping quartiles and clusters (italic) are not measured but result from the comparison between the lists of galleries belonging to each group. Percentages are those of equal classes (0/25/50/75/100%) or quartiles. Eg, Block 1 is significantly correlated with galleries where 25-50% or 50-75% of the artists were exhibited or represented at India Art Fairs between 2008 and 2013. It is also significantly correlated with galleries where 12-23% or 35-46% of the artists belong to the modern canon.

34 The first block considers established galleries. It represents 50 of the 101 galleries, and is the most heterogeneous. Established galleries are only those that determine the modal profile of the block. They opened before 2000, and they represent half of the galleries opened before 1980. They have large stocks that they regularly exhibit, with a high level of activity on the auction market (but they do not garner the highest rates). Many of their artists are thus part of the modern conceptual canon, but very few belong to the experimental canon, and very few are related to Khoj activities. Their presence at the India Art Fair is variable, from weak to strong. It reveals that sharing the same “auctionable” artists may be associated with artistic prestige, for old and established galleries (like those located in Kolkata, the previous cultural capital of colonial India), or with a peripheral position, for galleries merely focused on auction trade.

35 Galleries of block 1: Akar Prakar; Art Indus; Creativity Art Gallery; Idiyas Gallery; Janus Art Gallery; Tao Art Gallery; Art Elements; Art Heritage Gallery; Art Konsult; Art Musings; Chawla Art Gallery; Crimson Art Gallery; Delhi Art Gallery; Dhoomimal Art

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Centre; Emami Chisel Art; Forum Art Gallery; Galerie 88; Galleria; Gallery Art and Soul; Gallery Time & Space; Ganges Art Gallery; Genesis Art Gallery; Kumar Gallery; Prakrit Art Gallery; Pundole Art Gallery; Renaissance Art Gallery; Visions Art; Aakriti Art Gallery; Apparao Galleries; Art Alive Gallery; Arushi Arts; Center of International Modern Art; Cymroza Art Gallery; Gallerie Nvya; Gallery 7; Gallery Alternatives; Gallery Art Motif; Gallery Art Positive; Gallery Beyond; Gallery Espace; Gallery Kolkata; Gallery Sumukha; Gallery Threshold; Mon Art Gallery; Palette Art Gallery; Polka Art Gallery; Sarala’s Art Centre; Studio 3; The Arts Trust; The Viewing Room

36 The second block mainly encompasses purist galleries, which are concentrated in Mumbai and Delhi and represent a small number of artists in long-term relationships— representation is the main link with artists for all but 1 of the 16 galleries belonging to this block, which concentrates 57% of representation links. All galleries were created after 2000 and have a strong presence at the India Art Fair. Their artists are rarely auctioned but often participate in Khoj activities. They are also more likely to be members of the experimental canon, and overall they are rarely members of modern or abstract canons.

37 Galleries of block 2: Abadi Art Space; Ashish Balram Nagpal Galleries; Chatterjee & Lal; Exhibit 320; Experimenter; Galerie Mirchandani + Steinruecke; Gallery Maskara; GallerySKE; MK Search Art; Photoink; Project 88; Seven Art Limited; Talwar Gallery; Tasveer Gallery; Volte; Wonderwall

38 The third block is that of recognized galleries. Created after 2000, they are the most present on the auction market, often receiving the highest bids, so that many of their artists are part of the experimental and especially abstract canons—the most lucrative on the market, as seen above. They are also very present at the India Art Fair. Indeed, they tend to be less exclusively focused on auctions and sales than block 1, and have built an artistic reputation that makes them aesthetically prescriptive. It is in this sense that they combine work storage and artist exhibitions with long-lasting representation of some artists whom they accompany throughout their careers (which results in “no correlation” with any category), including some young, aspiring artists whom they launch on the market—hence the strong presence of artists contributing to Khoj activities.

39 Galleries of block 3: Amrita Jhaveri Projects; Chaithanya Art Gallery; Focus Art Gallery; Gallery Ragini; Shrine Empire Gallery; The Guild; The Loft at Lower Parel; Vadehra Art Gallery; Crayon Capital Art; Kashi Art Gallery; Sakshi Gallery; Latitude 28

40 The galleries of the fourth and fifth blocks are presented together as they show two similar profiles. Above all, they have in common their lack of artistic and economic resources, and thus can be considered peripheral galleries. They are small, young galleries absent from auctions and the Indian Art Fair, mainly located in the outlying cities of the Indian art world—galleries we can also call regional. Block 4 appears slightly “over” block 5 because three of its galleries present a slightly different profile: they are young but nevertheless have already accessed some works of the modern canon, and they represent some living artists dedicated to “modern” aesthetics. Thus, block 4 can be called peripheral, and block 5, regional.

41 Galleries of block 4: The Stainless Gallery; Artland; Dhoomimal Gallery; Gallery Sri Parvati; International Creative Art Centre; Kynkyny; Mahua; Nitanjali Art Gallery; The

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Faraway Tree; Verandah Art Gallery; Vinnyasa Premier Art Gallery; Masters Collection Art Gallery

42 Galleries of block 5: Body Tree Monastery of Art; Colors Corridor; Gallery G; Kamalnayan Bajaj Art Gallery; Kolkata Art House; Mirage Art Gallery; Studio Palazzo; Vernissage Gallery

43 Finally, the sixth block brings together three galleries with an original profile: they are recognized purist galleries which have access to international art networks—they can therefore be called international galleries. Two of them were established in Mumbai in the 1960s or after 2008, another in the 1990s in Delhi. Devoted India Art Fair attendees (they also frequent international fairs abroad), they have built their business around a group of artists they represent over time, who are very present in auctions, within the experimental canon (sometimes the abstract one), and among Khoj’s contributors at the same time.

44 Galleries of block 6: Chemould Prescott Road Gallery; Lakeeren; Nature Morte

45 The main interest of this partition by blockmodeling is that it crosses all variables in an interpretable manner. By assessing the galleries’ positions in the network structure of artists’ share, it reveals which galleries have similar strategies toward artists and similar ways of running their business, considered through all available variables. Degrees and Hierarchical Cluster Analysis (see Appendices) focus the partitioning on the following variables only: they better reveal the importance of the size of gallery catalogs (degrees), and of the time of entry in the field (HCA), but they lack the capacity of combining the other characteristics. The HCA also clarifies the intersection of period and market value.

46 That is why the three partitions largely overlap, but in different ways. The first quartile (lowest degrees) covers galleries that are exclusively members of blockmodels 2, 5, and 6 (and one from blockmodel 1): purist galleries and international galleries focused on exclusive representation, and regional galleries dealing with small distribution catalogs. Meanwhile, the HCA clearly distinguishes both types according to their auction market position. The second quartile includes most members of blockmodels 3 and 4, and 6 from blockmodel 1: recognized and peripheral galleries (and some established), all galleries that mix shared artists with their “own” artists (because they represent them exclusively, or because these are regional artists). The third and fourth quartiles gather almost all members of blockmodel 1 (and some from blockmodels 3 and 4): established galleries, those competing for the trade of “auctionable” artists, who are often shared, with their works being stored or exhibited.

47 The HCA distinguishes all these more or less valued galleries according to their period specialization (modern and abstract vs. experimental). All galleries of blockmodel 6 (international), almost all of blockmodel 3 (recognized), and a large part of blockmodel 2 (purist) are present in cluster 3 (valued experimental artists). All galleries of blockmodels 4 (peripheral) and 5 (regional) are present in cluster 1 (lesser valued artists, but auctioned at least once). Blockmodel 1 (established) is distributed over clusters 1 and 2, cluster 2 (valued modern or abstract artists) being almost completely filled with blockmodel 1.

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An art world centered on the auction of national decorative identity?

48 Blockmodeling thus offers a richer typology of Indian art galleries, synthesized in Table 3 and Figure 1—this latter also takes into account information from HCA and partition by degrees.

Figure 1. Graphic summary of Indian art gallery typologies

Legend:

Figure 1 is more reductive than Table 3, but may be easier to read. Intelligible graph

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making implies simplifying information. Here, the simplifying interpretation is oriented toward an emphasis on the most prominent properties of the data. In that sense, it makes the main correlations revealed by the analysis and synthetized by blockmodeling apparent. First, there is a strong relation, on one hand, between experimental aesthetics, representation of artists, and institutional networks (in the sense of a scale of recognition different from auction prices), and, on the other hand, between abstract aesthetics, storage of artists, and the auction market. Second, the India Art Fair is a place where all types of galleries gather, except some peripheral and regional ones. The fair represents a kind of compromise between market and institution, reflecting the compromises that galleries make every day as art intermediaries when they convert artistic value into economic value, and vice versa. Third, Indian art galleries seem to be merely focused on the auction market. Galleries are mainly ordered by their position on the scale of auction prices: at the top, on its margins, or outside (“outside” meaning what has been excluded from this simplified picture: international and purist galleries do participate in the auction market, but they also deal with another scale of value, where artistic reputation through institutional and international networks appears as a bet on future economic valorization and/or aesthetic canonization).

49 These results offer substantive insight into the Indian cultural elite, based on the assumption that art galleries are one of the providers of symbolic goods for the “happy few” that prescribe aesthetic norms to cultural and economic upper classes (Bourdieu 1979). First, the symbolic, social, and economic boundary between “Indian modern art” (which includes both modern and abstract canons) and international “experimental” art engenders an ambiguous image of Indian cultural elite standards. On the one hand, it appears as a collective ability to define its own aesthetic norms, independently from Western prescriptions. From that perspective, the Indian state, its focus on heritage more than living artists, and its decisive role in training and legitimizing young, aspiring artists, may play an important role despite the denegation of most of the market’s private actors—an ideological disqualification of public institutions that is commonly considered a common value of new upper classes (Fernandes 2000). On the other hand, the Indian market for modern and contemporary art is quite small considering the size of Indian upper classes, and its focus on “Indian modern art” may merely be the result of its relative proximity (compared to experimental art, which often does not fit in a living room) to traditional crafts, antiques, and classical decorative features—the “heritage” part of the market that feeds into the ruling elite’s status signals. In other words, modern and contemporary visual arts may reveal only a part of the symbolic goods that constitute the Indian elite’s decorative standard.

50 Second, the expansion of the market, beginning in the 2000s and despite the 2008-2011 crisis, means that more and more money is being invested in the arts—visual artworks are also financial assets, and the weight of the auction market makes this particularly true for India. This may be another explanation for the collective preference for Indian modern art. As financial assets, art works that remain inside the national boundaries are more accessible, and easier to buy and sell. Modern art can also be used to launder money—perhaps another social role of the arts for some elites. By definition, such a claim is almost impossible to investigate. But legal cases regularly show that visual artworks are an effective way of laundering money, simply because there is no

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standardized scale of price (the social arbitrariness of cultural taste makes it easy to overvalue works), and a strong stability of recognized artists (the first good sale makes them sure bets).

Conclusion

51 Existing analyses of the Indian art world tend to focus on the top of the art market, basing themselves entirely on qualitative data. Some are thus more refined than this study. However, they miss what systematic quantitative data, which include the margins of the market, can offer: an empirically grounded description of the main structuring factors of this social world. Future analysis may obviously benefit from qualitative inquiries: about informal transactions and sociability, about the relations with buyers and collectors, about the chains of cooperation needed for making, carrying, promoting, selling, and exhibiting works, about aesthetic subdivisions and innovations, etc. But the main weakness of the present study—as I see it—is the relative poverty of its information. I hope to convince readers that statistical tools used with large sets of data can produce knowledge from a small number of rough variables. Still, completing the data with systematic information would enrich the results. I propose three avenues for further inquiry. First, “regional”, “peripheral”, and many “established” galleries are mainly described here by their distance from the top of the auction market. Better indicators may be found by studying the careers of the artists they propose, by gathering information about the sales they actually achieve, and by studying their local networks of partners (artists, carriers, critics, patrons, etc.) and of buyers and collectors. Second, a better understanding of the social role of providing symbolic goods to cultural elites could be gleaned from systematic data about gallerists: their social background, their careers, their other activities in and outside the art world, and so forth. Third, buyers are only known through a handful of big collectors and patrons—the noble part of art buying—while the art business is far larger than their market share. The importance of the auction market, and its concentration inside national boundaries, is likely the result of a growing demand for decorative goods from hotels, restaurants, malls, official halls, and company offices. An empirical and systematic investigation of these fields would enrich our knowledge of the Indian art world and its place in the sociology of Indian elites.

Appendix 1. Geometrical data analysis of the social space of artists auctioned by Saffronart

52 The subsample includes 954 artists who were auctioned by Saffronart at least once. The factorial space is built from 6 active variables with 23 categories.

Active variables Categories Numbers

Higher bid’s level at Saffronart one 608

two 134

three 90

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four 65

five 57

19th C. 14

1900-45 172

1960s 436 Born 1970s 269

1980s 57

NA 6

no 529 IAF 2008-13 yes 425

no 873 Khoj activities yes 81

Experimental 70

Abstract 63 Canon Modern 122

no 699

Representation 243

stock 545 Most frequent link with galleries Exhibition 153

Promise 13

53 The Multiple Components Analysis (MCA) results in 17 axes (or factors). Axes 1 and 2 explain 26% of the whole inertia: 15.5% for axis 1, and 10.4% for axis 2 (the next axes explain less than 7% each).

54 The first axis is correlated with economic and artistic value indicators: auction bids, attendance at fairs, kind of link with galleries, attendance at Khoj activities. This axis opposes artists with high value (high prices, legitimized by fairs and Khoj, recognition assured through canons), for whom galleries take long-term risks (representation link), against artists with low value and less involving links with galleries (promise, exhibition, less often stock). Members of the “abstract” canon are correlated with higher values, as “auction stars” (all price categories are located on the same side of the axis, other value indicators on the other side).

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55 The second axis is correlated with temporal indicators: birth period, membership in an aesthetic canon. On one side, the oldest artists included in the “modern” canon, and less often in the “abstract” canon. On the other side, the youngest artists pertaining to the “experimental” canon. The artists absent from the three canons are at the middle of the axis, without any correlation with other categories. Concerning kinds of relationships with galleries, representation and exhibition of still-active artists are opposed against stocks and promises of works from dead or less active artists.

First and second axis of the ACM on auctioned artists28

56 The ACM confirms the results of the bivariate analysis, the relative independence of value and time indicators included. The variable “canon” is also correlated with both axes because it is a mixed indicator, of both recognition and generation.

57 Galleries are projected as 41 supplementary variables—as one artist is linked with 41 galleries. Four groups appear:

58 At the “reputed” side of the first axis: GallerySKE, Volte, Lakeeren, Shrine Empire Gallery, Nature Morte, The Loft at Lower Parel, Vadhera Art Gallery, Palette Art Gallery, Chemouls Prescott Road Gallery, then Sakshi Gallery, Gallery Maskara, Gallery Ragini, Visions Art, Chaithanya Art Gallery, Exhibit 320, Talwar Gallery…

59 At the “low value” side of the first axis: Mon Art Gallery, Gallery Sri Parvati, Body Tree Monastery of Art, Mirage Art Gallery, The Viewing Room, Kolkata Art House, Gallery G, Gallery Sumukha, Studio Palazzo, International Creative Centre, Vinnyasa Premier Art Gallery, Focus Art Gallery, Gallery Time & Space, Ganges Art Gallery, Masters Collection of Art Gallery, Gallery Kolkata…

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60 At the “classical” side of the second axis: Visions Art, Gallery 88, Ganges Art Gallery, Mon Art Gallery, Sarala’s Art Centre, International Creative Art Centre, Gallery 7, Genesis Art Gallery…

61 At the “contemporary” side of the second axis: Project 88, The Stainless Gallery, Talwar Gallery, The Loft at Lower Parel, Vadhera Art Gallery, Gallery Ragini…

62 The partitioning of the cloud of individuals can be anticipated from the simplicity of the graphic projection of the ACM. Indeed, a Hierarchical Cluster Analysis (HCA) reveals three clusters which are strongly cohesive and clearly delimited29: “experimental” canon artists, “modern” and “abstract” canons artists, artists without recognition.

HCA clusters and active variables of the ACM

Clusters Total 1 2 3

Experimental 4% 1% 94% 100%

Abstract 3% 86% 11% 100% Canon Modern 3% 97% 0% 100%

no 88% 8% 4% 100%

Representation 42% 26% 32% 100%

stock 67% 29% 4% 100% Most frequent link with galleries Exhibition 100% 0% 0% 100%

Promise 62% 38% 0% 100%

one 77% 20% 3% 100%

two 79% 12% 9% 100%

Higher bid’s level at Saffronart three 48% 32% 20% 100%

four 17% 45% 38% 100%

five 0% 54% 46% 100%

no 80% 18% 2% 100% IAF 2008-13 yes 48% 32% 20% 100%

no 71% 26% 3% 100% Khoj activities yes 12% 2% 85% 100%

Born 19th C. 0% 100% 0% 100%

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1900-45 5% 93% 2% 100%

1960s 76% 12% 12% 100%

1970s 85% 0% 14% 100%

1980s 96% 0% 4% 100%

NA 67% 33% 0% 100%

Total 66% 24% 10% 100%

63 With 66% of the sub-sample, cluster 1 contains 88% of artists without reputation (yet already auctioned at least once by Saffronart). These are also the most often exhibited artists—and not stored or represented. They are over-represented among the least valued categories: low auctions, no fairs or Khoj activities. Finally, they are among the youngest, with 96% under 34, 85% under 44, and 76% under 54. If some of them are still in a position to be valorized in the future, many have already reached a career stage in which it has become unlikely.

64 With a quarter of the sub-sample, cluster 2 includes almost all recognized artists considered “modern” and 86% of recognized artists considered “abstract.” They tend to receive the highest bids (they represent half of the two highest classes of price), which probably explains their over-representation among the “promise” type of relationship with galleries—and less often the “stock” type. They are potentially lucrative artists on the market, attracting both galleries able to build up stocks and those trying to seduce buyers with promises of access to highly-rated works. For the same reason, they represent almost all artists born before 1945, they are over-represented in fairs, where they provide a classical base for galleries, and they rarely attend “experimental” Khoj activities.

65 With 10% of the sub-sample, cluster 3 encompasses almost all the artists of the “experimental” canon. Again, the strongly over-represented properties are consistent. These artists represent 85% of the artists associated with Khoj, and they are often presented at fairs, although relatively less than the more established artists. They allow the galleries to promote their ability to discover and promote new talents. They are also almost all related to their galleries by “representation” relationships specific to emerging careers as well as to “experimental” networks and aesthetics. Finally, they are more often born in the 1960s and 1970s rather than in the 1980s. Most young artists have not had time yet to access the “experimental” canon (which is defined by the presentation at a minimum of one of the 15 exhibitions on “Contemporary Indian Art” in foreign capitals between 1998 and 2011)—they are thus part of cluster 1.

66 Most artists are linked to several galleries, especially those who have already been auctioned. That is why no gallery is exclusively associated with a specific cluster. All catalogs include artists from the three clusters; only the proportions vary and sometimes they are not decisive. With such a weak result, the simplest criterion is sufficient to propose an indicative distribution of galleries. The membership of galleries is thus deduced from the most represented cluster among its artists (even

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when two clusters show few differences). Like any statistical classification, and therefore even more here, the distribution includes a lot of outliers.

67 Cluster 1: Aakriti Art Gallery, Abadi Art Space, Apparao Galleries, Art Alive Gallery, Art Elements, Art Konsult, Artland, Arushi Arts, Ashish Balram Nagpal Galleries, Body Tree Monastery of Art, Chaithanya Art Gallery, Chawla Art Gallery, Colors Corridor, Creativity Art Gallery, Crimson Art Gallery, Cymroza Art Gallery, Exhibit 320, Focus Art Gallery, Forum Art Gallery, Galleria, Gallery Art Positive, Gallery Beyond, Gallery G, Gallery Kolkata, Gallery Ragini, Gallery Sri Parvati, Gallery Sumukha, Ganges Art Gallery, Genesis Art Gallery, International Creative Art Centre, Kamalnayan Bajaj Art Gallery, Kolkata Art House, Kynkyny, Mahua, Masters Collection Art Gallery, Mirage Art Gallery, MK Search Art, Mon Art Gallery, Polka Art Gallery, Prakrit Art Gallery, Renaissance Art Gallery, Sarala’s Art Centre, Studio 3, Studio Palazzo, Tasveer Gallery, The Arts Trust, The Faraway Tree, The Stainless Gallery, The Viewing Room, Verandah Art Gallery, Vernissage Gallery, Vinnyasa Premier Art Gallery, Wonderwall.

68 Cluster 2: Akar Prakar, Amrita Jhaveri Projects, Art Heritage Gallery, Art Indus, Art Musings, Center of International Modern Art, Delhi Art Gallery, Dhoomimal Art Centre, Dhoomimal Gallery, Emami Chisel Art, Gallery 7, Galerie 88, Gallery Alternatives, Gallery Art and Soul, Gallery Art Motif, Gallery Espace, Gallerie Nvya, Gallery Threshold, Gallery Time & Space, Idiyas Gallery, Janus Art Gallery, Kumar Gallery, Nitanjali Art Gallery, Photoink, Pundole Art Gallery, Tao Art Gallery, Vadhera Art Gallery, Visions Art.

69 Cluster 3: Chatterjee & Lal, Chemould Prescott Road Gallery, Crayon Capital Art, Experimenter, Galerie Mirchandani + Steinruecke, Gallery Maskara, GallerySKE, Kashi Art Gallery, Lakeeren, Latitude 28, Nature Morte, Palette Art Gallery, Project 88, Sakshi Gallery, Seven Art Limited, Shrine Empire Gallery, Talwar Gallery, The Guild, The Loft at Lower Parel, Volte.

Appendix 2. More or less shared catalogs: a partition by degrees

70 This network partition is the simplest. It is based on the degrees of network vertices, divided into quartiles. In other words, a score is calculated based on the number of galleries with which each gallery shares at least one artist. The resulting distribution of galleries is divided into four classes of equal size.30 The information is basic: some galleries have a relatively exclusive catalog, others a relatively shared catalog. With such crude criteria, some resulting groupings are surprising. But the logic of the distribution is still revealing.

Degrees - 1st quartile Over-representation of

Galleries Director’s sex male

Main link with artists representation

City Mumbai / Delhi

Access street

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Creation after 2000

Indian Art Fair 2008-2013 low & high

No auction very high

Higher bids low

Khoj activities high Artists Modern canon low

Abstract canon low

Experimental canon high

71 Abadi Art Space; Ashish Balram Nagpal Galleries; Body Tree Monastery of Art; Chatterjee & Lal; Chemould Prescott Road Gallery; Colors Corridor; Exhibit 320; Experimenter; Galerie Mirchandani + Steinruecke; Gallery G; Gallery Maskara; GallerySKE; Kamalnayan Bajaj Art Gallery; Kolkata Art House; Lakeeren; Mirage Art Gallery; MK Search Art; Nature Morte; Photoink; Project 88; Seven Art Limited; Studio Palazzo; Talwar Gallery; Tasveer Gallery; The Stainless Gallery; Vernissage Gallery; Volte; Wonderwall.

72 The first quartile consists of the most exclusive catalogs. It includes some isolated peripheral galleries and some galleries dedicated to international experimental art and, more specifically, to the promotion of innovative artists who are not, or not yet, on the auction market. Thus, these last galleries are relatively new, often located in the art districts of New Delhi (Hauz Khas Village and Lado Sarai) or Mumbai (Colaba and Kala Ghoda), and they prefer strong and lasting relationships with a small number of artists that they represent exclusively. These artists have rarely been (already) auctioned, have often taken part in Khoj activities, and are among the most often incorporated into the experimental canon (i.e. presented in foreign exhibitions of contemporary Indian art). Attendance at the India Art Fair is itself divided between the few peripheral galleries that do not have access to financial and curricular resources to be invited and/or pay fees, and the galleries that are already recognized by their peers—these galleries define the cluster’s characteristics and have the highest degrees. In sum, sharing few artists with other galleries means either the margins of the Indian art world, or an artistic strategy based on representation and a lesser presence on the Indian auction market.

Degrees - 2nd quartile Over-representation of

Galleries Director’s sex female

Main link with artists exhibition

City Chennai/Bengaluru/Kochi

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Access all except street

Creation nineties / after 2008

Indian Art Fair 2008-2013 mid

No auction high

Higher bids mid

Khoj activities low Artists Modern canon high

Abstract canon mid

Experimental canon low

Akar Prakar; Amrita Jhaveri Projects; Art Indus; Artland; Chaithanya Art Gallery; Creativity Art Gallery; Dhoomimal Gallery; Focus Art Gallery; Gallery Ragini; Gallery Sri Parvati; Idiyas Gallery; International Creative Art Centre; Janus Art Gallery; Kynkyny; Mahua; Nitanjali Art Gallery; Shrine Empire Gallery; Tao Art Gallery; The Faraway Tree; The Guild; The Loft at Lower Parel; Vadehra Art Gallery; Verandah Art Gallery; Vinnyasa Premier Art Gallery.

73 The second quartile mainly includes small and new or established regional galleries. Their main activity is to exhibit artists with little reach, whose aesthetics are relatively accessible (especially modern or the most assimilated part of the abstract canon), and among whom only the stars of regional styles have access to auctions. Apart from these prevailing regional galleries, some significantly different galleries are located at the top of the quartile—Vadehra Art Gallery, The Loft at Lower Parel or Shrine Empire Gallery, for example. These galleries are actually central, present on the auction market through highly rated artists and visible through the promotion of the experimental artists they represent—this mix of highly and little shared artists is probably the reason why they are located here, and not in higher levels of degrees.

Degrees - 3rd quartile Over-representation of

Director’s sex male

Main link with artists stock / exhibition

City Bengaluru/Kolkata/Kochi Galleries Access mall / street

Creation before 1980 / nineties

Indian Art Fair 2008-2013 high

Artists No auction low

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Higher bids high

Khoj activities low

Modern canon very high

Abstract canon high

Experimental canon mid

Art Elements; Art Heritage Gallery; Art Konsult; Art Musings; Chawla Art Gallery; Crayon Capital Art; Crimson Art Gallery; Delhi Art Gallery; Dhoomimal Art Centre; Emami Chisel Art; Forum Art Gallery; Galerie 88; Galleria; Gallery Art and Soul; Gallery Time & Space; Ganges Art Gallery; Genesis Art Gallery; Kashi Art Gallery; Kumar Gallery; Masters Collection Art Gallery; Prakrit Art Gallery; Pundole Art Gallery; Renaissance Art Gallery; Sakshi Gallery; Visions Art.

74 The third quartile consists mainly of galleries that look like the previous ones but access the central auction market and thus share significantly more artists with other galleries. They are more established—the oldest galleries are included here—and, in addition to organizing exhibitions, they have an important stock of works. They are also often present at the India Art Fair as their artists are well listed at Saffronart, but they are rarely involved in Khoj experimental activities. Finally, their artists mostly feature in the modern canon, although some fall within the categories of abstract and experimental. Their recruitment pool seems to be made up of all works circulating with good ratings on the market. Most galleries appearing here have been central galleries of the market for several decades, or are more recent galleries whose primary business is to deal a large stock of works at auctions: they have in common the same kind of shared (and well-sold) stocks.

75 The over-represented cities are “regional” (as opposed to Mumbai and Delhi) but, compared to those over-represented in the second quartile, Kolkata and Chennai replace Bengaluru and Kochi. Kochi is a peripheral city but its three galleries have benefited from the very “experimental” Kochi-Muziris Biennale which has been organized since 2012 (two editions at the time of data collection). Bengaluru is meanwhile the rising city of Indian art, with a relatively small number of galleries (eight) but some of which are well considered and integrated into national and international circuits, mostly “experimental.” Chennai appears then as peripheral: its nine galleries are mid-sized (four of them belong to the second quartile). Kolkata, as a former political and cultural capital, is home to 17 galleries represented on all profiles (and thus slightly over-represented in the third quartile). They rarely run artists on the circuits of national and international experimental art but some of their artists belong to central aesthetic schools in the history of Indian art. Defined as “regional”, they are nevertheless part of the national pantheon. This small geographical differentiation may explain the differences between the second and third quartiles. They are perhaps not only galleries of the same profile at different stages of integration within the central market, but also galleries benefiting from regional traditions that are themselves more or less present on the central market.

Degrees - 4th quartile Over-representation of

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Director’s sex female

Main link with artists stock / exhibition

City Delhi Galleries Access gated / mall

Creation nineties / 2000s

Indian Art Fair 2008-2013 very high

No auction mid

Higher bids high

Khoj activities mid Artists Modern canon mid

Abstract canon high

Experimental canon low

Aakriti Art Gallery; Apparao Galleries; Art Alive Gallery; Arushi Arts; Center of International Modern Art; Cymroza Art Gallery; Gallerie Nvya; Gallery 7; Gallery Alternatives; Gallery Art Motif; Gallery Art Positive; Gallery Beyond; Gallery Espace; Gallery Kolkata; Gallery Sumukha; Gallery Threshold; Latitude 28; Mon Art Gallery; Palette Art Gallery; Polka Art Gallery; Sarala’s Art Centre; Studio 3; The Arts Trust; The Viewing Room.

76 The fourth quartile mainly includes the central galleries of the auction market—whose summit is occupied by artists belonging to the abstract canon. These galleries are relatively recent and concentrated in New Delhi, nearly all present at the India Art Fairs, and they combine the storage of highly rated works and the exhibition of young, aspiring artists—hence the relatively high rate of absence at auctions and of artists contributing to Khoj activities, and their rare inclusion in the experimental canon. Here we find a kind of statistical basis for the usual opposition between New Delhi, seen as the capital of the established market, and Mumbai, considered the capital of experimental and international contemporary art.

77 The main interest of this partition by degrees is to make the relative independence of artistic reputation and price level on the auction market apparent. That independence should be understood more as a temporal distance between artistic fame and price increase than as a causal independence. Degrees reflect galleries’ positions vis-à-vis artists’ auction value: some artists are renowned and highly priced (fourth quartile), some artists are mainly auction products, more or less renowned and “regional” (second and third quartile31), some artists are either peripheral or young, aspiring artists seeking “experimental” artistic reputation and, maybe in the future, high prices (first quartile).

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NOTES

1. This study was possible thanks to Christine Ithurbide, Jules Naudet, and the welcome of the staff and director, Leïla Choukroune, of The Centre for Social Sciences and Humanities in New Delhi. It was funded by the National Institute for Social and Human Sciences (French National Center for Scientific Research) and by Université de Vincennes Saint-Denis (Paris 8). I also thank the anonymous reviewers and Alexis Pernsteiner for their useful comments and advice. 2. Appendices present two other methods for partitioning the galleries’ networks and their results. 3. For contemporary art, I rely mainly on Ithurbide (2010; 2012). 4. Art departments at Jawaharlal Nehru University and Delhi University, Kala Bhavan in Santiniketan, Maharaja Sayajirao University in Baroda, Sir JJ School of Arts in Mumbai. 5. It would be interesting to study the impact of artistic requests for humanitarian operations, whether state or non-governmental. Workshops and exhibitions are frequent and sometimes offer artists occasional income and/or value signals for resumes. 6. As a foreign outsider, I repeatedly heard during interviews, conversations, or even during the presentation of my inquiry at a conference, that “there is Husain and Husain” (or other stars’ names)—that is, certain “common,” “decorative,” “vulgar” works are intended for public galleries and auctions, and other “valuable,” ”unique” works are intended for "friends" (i.e. members of elite interpersonal networks). Another “secret” concerns the production of avatars, a way of profiting from the previous “secret”: when a work sells “well” (i.e. at a high price, and to a famous collector), the artist produces several similar works (neither copies nor series, which lead to lower prices; the same with small differences), either by anticipation or at the request of some buyers. 7. A list of the artists (as well as the exhibition archive) can be found here: http:// www.aaa.org.hk/Collection/CollectionOnline/SpecialCollectionItem/3853 8. The figure is probably overstated due to the lower representation of Indian companies in the Artprice database. 9. According to Srabjee (2011): in 2006, Nature Morte and Bose Pacia participated in Art Basel; in 2008, GallerySKE in Frieze; in 2009, Project 88 in Frieze ("Section Frame"); in 2010, Experimenter in Frieze ("Section Frame"); the same year, at Art Basel, Nature Morte and Bose Pacia were in the "Main Section," Chemould Prescott Road and Sakshi Gallery in the "Art Features" section, Chatterjee & Lal and GallerySKE in the "Art Statements" section. If still rarely, their artists are increasingly reported by foreign galleries—the first is probably Subodh Gupta, via Pierre Huber (Geneva), at The Armory Show in 2002, in 2005 in Frieze, in 2006 in Art Basel. 10. Informative interviews were also conducted with six central and peripheral gallerists in Delhi. 11. Ahmedabad, Hyderabad, and Pune were first included, but their galleries were never part of the multiple lists consulted in later phases. The final sample therefore reflects the “Indian art world” as merely seen from its core (or its national “summit”), and fails to represent completely the country’s numerous “regional” artistic networks.

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12. I thank the staff of the Foundation for Indian Contemporary Art’s Reading Room at Vadhera Art Gallery Bookstore in Delhi as well as Peter Nagy and the staff of the gallery Nature Morte for their welcome and assistance. 13. One hundred and one galleries may seem like a small number considering the size of the Indian population (1.25 billion in 2011), and compared, for example, to the 2,191 contemporary art galleries in France (for a population of 66 million) (Rouet 2013). But the true population of reference is probably also quite low. In India, the market for modern and contemporary art is far smaller than the market for decorative visual arts, crafts, antiques, and traditional handicrafts. 14. Exclusivity is mostly limited to a territory (India, a city), sometimes to a period (at least several years), sometimes to a sample of an artist’s works (monumental works excluded, agreement for direct sales, etc.). 15. Sometimes, storage does not imply the purchase of works: the risk is then to dedicate part of the stockroom (and all implied expenditures) to them. 16. If it does not use its name, the gallery takes no reputational risk: there is no commitment to the artist. 17. The gallery is then paid through a commission on the sale. 18. One gallery is run by two male partners; they are counted as one "male." 19. The author has been collecting information since 1993, contacting about 2,000 artists either directly or through a questionnaire. Her selection was based on exhibitions: at least five individual shows and several collective shows “in reputed art galleries,” except for artists who were active before the development of galleries, and for young artists who have not yet had time for five individual shows. 20. See bibliography. 21. The size of the sample made the collection of data on foreign galleries impossible. Foreign galleries represent an important variable for peripheral markets (Karttunen 2008). But the association between the “experimental” canon and internationalization is assumed here based on other studies (Vermeylen 2015; Velthuis and Baia Curioni 2015) and interviews. 22. The following table does not include the relationship between galleries and artists. It is possible to characterize each gallery unequivocally based on the highest degree of risk even if several types of relationships are invested (as is often the case). This is not possible for artists who have different relationships in various galleries since the distribution is not linear. That variable will be included in network analyses, since they focus on the 9,879 links between 1 artist and 1 gallery. 23. Classes are calculated based on the Fisher-Jenks algorithm (function “classIntervals” in Robert Bivand’s package “classInt” for R software): given a predefined number of classes, it finds the smallest intra-class variance, and the biggest inter-classes variance. The highest price is 115,125,001 rupees. 24. These measures, uninformative aside from the fact that they establish the existence of a structured and therefore sociologically relevant network, are available from the author. 25. Function equiv.clust of package sna for R software. 26. Function blockmodel of the same package sna for R. 27. In the sense of removing part of the statistical "noise" in favor of network prominent properties. 28. The ACM was realized with the package explor for R. 29. The classification tree shows a gap between 3 and 4 clusters. 30. Quartile, albeit crude, proved sufficient: smaller quantile or partition by k-means (minimizing the distance of each point belonging to a class from the average score for this class) do not provide additional information. With an odd number of galleries (101), and several galleries located on the maximum value of the first quartile, the classes are actually unequal:

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they include 28 galleries for the first quartile and 24, 25, and 24 galleries for the subsequent quartiles. 31. My hypothesis is that these two quartiles represent the large market of “decorative” works for hotels, restaurants, offices, official halls, and so forth.

ABSTRACTS

In recent years, researchers have expressed renewed interest in the visual arts, which can be seen as one of the main providers of upper-class symbolic goods and status signals for cultural elites. India has not yet been included in that body of work. Although important insights do exist on India, a systematic empirical inquiry has yet to be made. The present article offers a step in that direction, through the statistical analysis of 101 Indian galleries and the 4,249 artists they present in their catalogs. Does the way galleries share artists reveal specific characteristics about the Indian art world? Is the usual opposition between “commercial” and “artistic” galleries relevant for contemporary India? What are the roles of auctions and international fairs? Do Indian galleries prefer representing artists, or storing and exhibiting their works? What insights do their strategies and hierarchies offer about the cultural standards of Indian elites? This article offers a typology of Indian art galleries based on a network analysis (blockmodeling). It reveals a hierarchized system, the weight of the auction market, and a strong economic and aesthetic boundary between international experimental art and national modern art.

INDEX

Keywords: art galleries, network analysis, cultural intermediaries, Indian art world, art fairs and art auctions

AUTHOR

OLIVIER ROUEFF Research Fellow in sociology at the CRESPPA-CSU (French National Center for Scientific Research)

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