Which of the following is a basic characteristic of traditional trading networks?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Trading and banking activities were organised through caste and kinship relations.
Option (1) They only dealt in cash payments. — Incorrect. Traditional trading communities had their own systems of banking and credit. The hundi, a bill of exchange like a credit note, let a merchant in one place pay through a merchant in another, so trade did not rest on cash alone.
Option (2) Traditional banks were basically nuclear family firms. — Incorrect. In traditional merchant communities such as the Nakarattars, the banks were basically joint family firms, so that the structure of the business firm was the same as that of the family. ‘Nuclear’ is the one word that makes the line wrong. Read every word of an option before you mark it.
Option (3) Trading and banking activities were organised through caste and kinship relations. — Correct. Trade took place primarily within the caste and kinship networks of these communities, which is why a hundi issued in one part of the country would be honoured by a merchant elsewhere. Among the Nakarattars, trading and banking activities were organised through caste and kinship relationships.
Option (4) The economic activities of these groups represented a kind of ‘European capitalism’. — Incorrect. In one view the activities of the Nakarattars represented a kind of indigenous capitalism; this raised the question whether forms of capitalism existed apart from those that arose in Europe. So they were seen as different from European capitalism, not a copy of it.
Note: Options (2) and (4) come from the paragraph on the Nattukottai Chettiars (Nakarattars) in the section ‘Caste-based markets and trading networks in precolonial and colonial India’ of the chapter ‘The Market as a Social Institution’. This paragraph was there in the pre-rationalised NCERT; it has been deleted from the NCERT book (2025-26) (and was not in the 2023-24 NCERT either), though the chapter and the section are still there.
NCERT (2025-26): “Caste-based markets and trading networks in precolonial and colonial India … These traditional trading communities or castes had their own systems of banking and credit. For instance, an important instrument of exchange and credit was the hundi, or bill of exchange (like a credit note), which allowed merchants to engage in long-distance trade. Because trade took place primarily within the caste and kinship networks of these communities, a merchant in one part of the country could issue a hundi that would be honoured by a merchant in another place.” NCERT (Pre-rationalised): “…The Nattukottai Chettiars (or Nakarattars) of Tamil Nadu, provide an interesting illustration of how these indigenous trading networks were organised and worked. A study of this community during the colonial period shows how its banking and trade activities were deeply embedded in the social organisation of the community. The structures of caste, kinship, and family were oriented towards commercial activity, and business activity was carried out within these social structures. As in most ‘traditional’ merchant communities, Nakarattar banks were basically joint family firms, so that the structure of the business firm was the same as that of the family. Similarly, trading and banking activities were organised through caste and kinship relationships. For instance, their extensive caste-based social networks allowed Chettiar merchants to expand their activities into Southeast Asia and Ceylon. In one view, the economic activities of the Nakarattars represented a kind of indigenous capitalism. This interpretation raises the question of whether there are, or were, forms of ‘capitalism’ apart from those that arose in Europe (Rudner 1994).” |