Economic Modernization in Late British India: Hindu-Muslim Differences

In South Asia, Muslims made the transition to modern economic life more slowly than Hindus. In the first half of the twentieth century, they were less likely to use large-scale and perpetual commercial organizations and less likely to serve on corporate boards. Providing evidence, this article also explores the institutional roots of the difference in communal trajectories. Whereas Hindu inheritance practices favored capital accumulation within families and the preservation of family fortunes across generations, the Islamic inheritance system, which the British helped to enforce, tended to fragment family wealth. The family trusts (waqfs) that Muslims used to preserve assets across generations hindered capital pooling among families; they were also ill suited to profit-seeking business. Another key difference is that while Hindus generally pooled capital within durable joint-family enterprises, Muslims tended to use transitory Islamic partnerships. Hindu family businesses facilitated the transition to modern corporate life by imparting skills useful in large and durable organizations.