The basic concept of the Indian family business or Family Business in India in its rawest form has probably existed from its very beginning. There was always a system of giving and take to maintain and preserve the balance of the universe. In the present modern world, family-run businesses form the base of the economy, and everything and everyone is directly or indirectly dependent on it. Business, in its primitive form, was the barter system. The barter system worked on exchanging things, rather than money. It was the basis of the economy of the society and worked well at maintaining prosperity and harmony.
Family Business in India
A particular family handles such a business for generations. Family members do most of the work, and the ownership and responsibilities always remain with the family members. In a way, it can be said that family businesses are better because the sentiment and bonding of family and togetherness forever persists. Thus, there is more guarantee of reliability, trust and cooperativeness with the family business system in India.
Family Business in India has played a significant role in the world economy over the centuries. The last couple of centuries saw the emergence of family businesses across all major countries across the world. And these businesses contributed to the collective GDP by leaps and bounds. Even in India, the situation is similar. Wealthy families like Tata, Birla, Ambani form an active part of the Indian economy. The Indian family businesses are unique as compared to the rest of the world. The reason for this can be traced back to the ancient Indian culture and values as well as the class division of ancient Indian society.
Evolution of Family Office Business in India
1. Role of the Class Division System
The ancient Indian society has a more intellectual and sophisticated version of the division of labour. All the people living in the community were given specific tasks and duties based on their proficiency and skills. According to these tasks, they were divided into four basic classes. These four classes were the brahmins, the Kshatriyas, the vaishyas and the Shudras.
The brahmins included priests mostly who were in charge of the religious duties and education. The Kshatriyas were warriors and kings whose function was to govern and protect the people. The vaishyas were the traders and craftsmen while the Shudras were the serving class of healthy people. These vaishyas were the most primitive businessmen in India and even then handled a significant portion of the economy. This was the beginning of the family business system in India, and these businesses grew multifold over time.
2. The functioning of the Indian Family Business System
Indian society worked on the principle of Niyamadhyayanam. It is the practice of children taking up the work of their parents and the skill and work passing on from generation to generation. People taught their skills and crafts to their children as a legacy, and the ancient art and crafts continued for generations, preserving the tradition. It was the beginning of the family business system. The vaishyas taught their skills in craft and trade to their children, and all generations of a family continued it, making these Family businesses in India the backbone of the economy.
3. The Emergency of Family Businesses into Power
Firstly, with the arrival of British rule in India, the driving wheel of the economy was taken away from the hands of these thriving family businesses. The British introduced India to other forms of livelihood, including services and jobs. It also played a significant role in taking the focus and charm away from the practice of the family business. Nonetheless, this Family Business in India persisted. A few healthy families as such had emerged by the beginning of the twentieth century. They were fighting for their economic freedom against the British colonial rulers.
India gained its independence in 1947, and the British withdrew. Indian family businesses thus became the new stable, thriving powers in the field of economy as the final result of decades of aristocratic skills, investment and struggle for their rights. It included some of the most influential and wealthy families who are continuing to rule the business world even now. Because of the wave of modernisation and globalisation, the British had brought with them, the art of business no longer remained limited to the vaishyas. Many people from different classes had entered the sphere of trade and commerce. It resulted in many small businesses, as well.
Firstly, the working mechanism of Family Business in India had always been hereditary even somewhat similar to the system of monarchy in away. One family member comes up with a good idea, persisted and built an empire. Patriarchy thrived, and the owner usually went to the hands of the eldest son. The latter waited in line for the current owner’s death to take over. However, all of this changed with economic liberalisation.
4. Effect of Liberalisation
In 1991, the economic policies of India were changed to make the system more market based and involve more private and foreign investment. It grew the GDP by a significant factor. Still, it put an end to the hierarchy and innate nature of the older Family Business system in India to a great extent. However, more entrepreneurs and their DNA created smaller but dynamic family businesses. The competition also increased, and more family businesses sprung around. Lastly, even today, 70% of companies in India are, in a way, family-owned businesses.
Nevertheless, the family business model is still the largest management model in India. The family business in India stands on the strong base of ancient Indian principles and values, which form the strength of each generation’s legacy-making them unique and successful.