Commercial Journey Of Mumbai: The Financial Capital Of India

Commercial Journey Of Mumbai - The Financial Capital Of India Featured Image District Mumbai

In this blog post of District Mumbai: We bring to you the early entrepreneurial & commercial journey of the city of Mumbai, from the 17th to the 20th century that led it to ultimately becoming the financial capital of India. Mumbai city that we know today as the financial capital of India and one of the top global financial centres, has come a long way from where it started-off with a population of mere 5,000 native Koli’s (Fishermen Community). It’s been quite a journey for our dear city, we’ve tried to present this elaborate journey in concise.

Back then, Mumbai was referred to as Bombay. To make this post more accurate, we’ve taken references from the work and thesis of some of the scholars on the subject from the said era.

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In 1920’s, India had recently begun to organize its industries along western lines, though it still retained its principal non-mechanical characteristics of the old economic order and its labour intensive methods of production and distribution. While in England, the Industrial Revolution had probably been completed (1760-1830), it had just started making its appearance in the vast landmass of India.

During that time in India, there were already a few centres where the western industrial system, with its good and bad sides, was in full force; of such places Bombay was the largest and most important. The Island of Bombay, was separated from the main land by a narrow channel, which was later bridged, situated at latitude 18° 53′ and longitude 72° 52′ on the south western coast of India. Back then, it was eleven and a half miles in length and three to four miles in breadth, covering a total area of 22 square miles. With its then population of nearly 12,50,000 people, it constituted the second city in the British Empire and the first in India.

Trade In Ancient Times

The western coast of India was visited in ancient times by Egyptian, Greek and Arab merchants; and later by enterprising Portuguese, French, English traders and trading companies.

The East India Company Takes Control Of Bombay

In 1509 the Island of Bombay, which consisted then of a population of less than 5,000 Koli’s (Fishermen), was ceded to the Portuguese by the Muslim Sultans Of Gujarat. Charles-II of England obtained it as a part of the dowry of his wife Catherine, from the Portuguese in 1664. The Island of Bombay eventually made it over to the East India Company at a petty rent of GBP 10 a-year in 1668. From that time onwards, Bombay only increased in commerce, finance, industry and population.

Trade Grew Under East India Company

After 1757, the East India Company began its political conquests in India, and Bombay was made the capital of its southwestern possessions. The commerce of the Company increased as the demand for Indian cotton grew in England.

Trading Challenges Faced By East India Company In Bombay

During that period, the whole territory adjacent to Bombay was under the native Maratha rulers; this was an obstacle in the Company’s way of securing cotton of Berar Province (Hyderabad Assigned Districts), an important cotton producing region of the central provinces in India.

After thirty years of warfare, the East India Company defeated the native Maratha rulers completely in 1818 and became master of the whole territory called the Deccan; which later formed the Bombay Presidency with Bombay as its capital.

Why Britishers Preferred Bombay Over Other Ports?

As stated by Shri. Dinkar Laxman Kanade in his thesis, the city of Bombay owes its prosperity to its geographic position and magnificent harbour. At that point of time, the western sea coast of India possessed a few other ports but it was Bombay which had a relatively large, deep and well protected network of roads; and of course due to its location, it offered one of the most splendid harbours of the world. The increasing commerce of Bombay had attracted enterprising people of the various native communities.

Trade & Financial Activities Peculiar To Bombay

The commerce and trade in other big cities of India was mostly in the hands of the Europeans, due to lack of enterprise skills on the part of the natives; but in Bombay it was quite the opposite, the Indians always managed to hold a large and very important share in the trade of Bombay.

Even at that time in Bombay, the Parsis, the Muslims and the Hindu’s did not show themselves inferior to the Europeans in commercial enterprise. The increasing commerce necessitated a modern credit system. The Bank of Bombay, a Government bank, was started in 1840; and soon several commercial and other banks with native capital were established.

Impact Of Opening Of The Suez Canal

In 1838 regular monthly steamship communication was established between Bombay and England by the overland route of Suez Canal.

It became easy to bring coal from England to India, where there was no coal mining at that point of time. The opening up of the Suez canal in 1868 made transportation between Europe and India cheaper than before. The introduction of coal into India meant the foundation of factories employing steam power and the beginning of railways.

Great Indian Peninsular Railway

The Great Indian Peninsular Railway was projected in 1844, and with a 20-mile long line from Bombay to Thane, the first railway ever constructed in India was opened up in 1853. Since then, the progress of railways had been steady; and by 1920 the total railway mileage of India amounted to 33,000 miles. Bombay was linked by rail to all parts of India. Back in the day, Peshawar and Rameshwar: the northern and southern ends of the country, could be reached in 48 hours from Bombay.

Impact Of Great Indian Peninsular Railway

The spread of railways brought a great increase to the commerce of Bombay; it subsequently gave a stimulus to the introduction of industries on western lines and provided cheap means of drawing labour from the rural districts to supply the demand of Bombay for skilled and unskilled labour.

Revival Of Bombay’s Cotton Industry

The enterprising men of Bombay took this opportunity to start cotton textile mills. The Industrial Revolution in England had severely affected the Indian cotton industry; though for various reasons the hand-loom of India managed to survive the competition of foreign machineries.

However, the Charkha (hand spinning-wheel) succumbed before foreign imported spinning machines. This had caused millions of persons to be thrown out of work; because before the importation of machine-made yarn, the thread was usually spun manually using Charkha. Spinning was said to be, probably the only industry in India which was performed by persons of all castes and there seem to be no caste restrictions on the profession.

Post introduction of foreign machineries, there was no hope of reviving the old hand spinning-wheel. A Parsee merchant of Bombay, Mr. C. N. Daver, started the first cotton spinning mill in 1851. At first the number of cotton mills increased slowly, but an outside incident helped to foster a rapid increase of the textile industry in Bombay.

Impact Of The American Civil War

The American Civil War in 1861 decreased the supply of cotton from America to England, and consequently, England’s demand for the Indian cotton rose very high. In Bombay, cotton prices increased ten times or even more in one or two years; and the native merchants dealing in the cotton export trade made high profits. Many of them invested their profits in the textile industry; thus a great impetus to Bombay industry was received from an unexpected source.

The impact was such that by 1920, more than half of the cotton yarn and cloth spun and woven in India was manufactured in Bombay. The following figures show the growth of her cotton mills :

In 1918 Bombay had 86 cotton mills with 2,994,575 spindles and 53,205 looms. The number of hands employed was 118,303 daily. Since 1918 the number of spindles and looms continued to increase but the exact number is not known.

Advantages Of Cotton Manufacturing In Bombay

Bombay possessed all the necessaries and many advantages for successful cotton manufacturing, and these were:

  1. The supply of raw material;
  2. The home market;
  3. Temperature with necessary humidity;
  4. A sufficient labour supply.

Opening Of Opium Trade With China

Another fact that helped to increase the cotton industry of Bombay was the opening up of the opium trade with China. This trade brought very high profits to the Bombay merchants, and they invested these in the development of industry. Thus, while in India for many years, the large capital necessary for starting modern industry was lacking, some outside forces and incidents enriched the Bombay merchants and increased the cotton textile industry of India.

Bombay Eventually Excelled In Exports

The first builder of a dockyard (1692) in Bombay was a native Parsee Gentlemen, Mr. Wadia. Since then, many docks of modern type started coming up along the coast of Bombay. The work of building new docks and managing old ones, was done by the Bombay Port Trust, which maintained a permanent staff of 15,000 employees back then. The Port Trust also had built two dry-docks, which were occupied by as many as 268 vessels by 1920-21. During the same period, Bombay became the first city of India where the industries were being financed by Indian firms.

  • The following figures show the number and tonnage of vessels engaged in foreign trade only which entered into the Bombay docks:
YearExport (In Rupees)Import (In Rupees)
80 Years Of Import & Export Progress From Bombay (From 1840 To 1920-21)

The enormous increase in the export and import trade of Bombay during the period of 1840 to 1920, shows the commercial progress made by the city during that era. Back then, there were only 3 main ports in India which were conducting export and import trade with other countries; among them Bombay occupied the 1st position.

Back then, the bulk of the exports consisted of raw materials such as: cotton, oil-seeds, animal skin, wheat and cotton-yarn. Among the imports, were items such as: finished cotton-goods, rock-oil, sugar and other finished articles which were important commodities.

Bombay’s One Big Disadvantage

Bombay had one big disadvantage though, the difficulty of obtaining coal; but that difficulty was being rapidly removed by the use of electricity produced by hydro-powered plants in the high mountains, at a distance of about 80 miles away from Bombay.

By 1920’s, half of the mills in Bombay were powered by electricity. After the completion of the Tata hydro-electric works, Bombay & its nearby regions started receiving abundant power supply; and with this, various projects for new industries in and around Bombay were afloat. Eventually, the city started expanding across the length and breadth.

Bombay Became Major Employment Provider

Thus, the increasing commerce, the cotton industry, the large dockyards, the railway workshops, the gas and electric works, the building trade, the postal and telegraph systems, the municipal works and the Government concerns like printing press, steamship-lines, etc. in Bombay were constantly demanding both skilled and unskilled labour from across the country- which had vast rural population mainly engaged in agriculture.

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District Mumbai is a blog aimed at highlighting unfiltered candid emotions, flavours & experiences in and around the majestic city of Mumbai. A city, of million dreams, a city which never sleeps, a city that doesn’t stop, a city which never bent, a city so motivating, a city that inspires millions of people from all over India and across the world; Welcome! This is Mumbai, Or As the locals fondly call it, “Amchi Mumbai”.