A peek inside the thriving Tamil economy some 800 years ago

By | 01.01.2018

The 1,000 years from the age of Sangam literature to the end of the Chola empire were truly the millennium of the Tamil merchants. The resilience of the Tamil merchants, mercantile institutions and trade over more than a 1,000 years, notwithstanding social and political change within the region and in the larger world of maritime commerce, can be attributed to several factors.

The Tamil region had extensive trade links even prior to its recorded history. The internal economy of Tamilakam had a strong link with overseas markets, and the region enjoyed a favourable trade balance from its external trade. This advantage was clearly derived from the high level of demand in markets around the world for the textiles produced in Tamilakam and in India as a whole, as well as for commodities like pepper.

In turn, many commodities were also imported into Tamilakam, ranging from tin, lead, and copper used in coinage and metal work and horses to high-value products like coral and aromatic substances. Without such a range of imports, the imports which comprised a high share of precious metals would have resulted in inflationary pressures and destabilized the economy. The economy was also not excessively or exclusively oriented to overseas trade. The export trade was grounded in a large volume of internal trade within the region, as well as overland and coastal trade with other parts of India.

The economy thus had the stability of an adequate level of effective domestic demand which was a prerequisite for long-term economic viability. The growth of trade was built on urbanisation and growth of cities. In the Sangam age, urbanisation was restricted to ports and inland capitals. Nevertheless, these were vibrant centres of economic activity, bustling with traders, shops and bazaars functioning throughout the day and late into the night. Many levels of trading were carried on in cities. Most local traders were actually vendors selling their wares on the streets. But shops existed at a higher level of retail activity involving greater capital. Overseas trade called for large amounts of investments and reserves of capital, not only because the goods traded tended to be high-value goods but also since each merchant would be dealing in large import or export shipments.

These merchants should correctly be regarded as the merchant capitalists of their day. The pace of urbanisation increased during the medieval period reflecting the expansion of economic activity and trade, as well as the development of merchant institutions. The consolidation of political authority under the Tamil kingdoms created a qualitatively different environment in several ways.  Foreign traders were allowed to come and trade in peace. During the ancient period, Tamil polity was fragmented and the region was ruled by many small chieftains and war lords. Trade continued with little disruption not because general peace and order prevailed in Tamilakam, but because, despite frequent wars and conflicts, the rulers did not impede trade with extortionate demands and oppression. Foreign traders were allowed to come and trade in peace and they often stayed for long periods in the ports and also in inland cities without hindrance.

During the medieval period, the situation changed because the political environment stabilised after the emergence of strong kingdoms in Tamilakam, first under the Pallavas and Pandyas, and later especially under the Cholas. The two most distinctive institutions of Tamil polity that came to the fore during this period were the corporate assemblies of the villages and towns and the regional assembly with their broad-based membership and democratic functioning; and the temple.


Society was thus characterised not by sharp polarisation but by integration. The temple developed as a dominant and integrative institution during this period. It was a major player in the economy in its own right. More importantly, it became a depository institution which attracted donations of gold, money, land, and livestock as well as deposits of money. Both were circulated in the local economy on well-specified terms of interest to be paid in kind to maintain temple services, and in the process the temple became the medium for redistributing the surplus which came under its control. By participating in donations and temple management, merchants and the larger associations of nagaram (the assembly of town and merchants) and guild earned social acceptance and recognition.

While nagarams were concerned with local trade, guilds like the Five Hundred were important in itinerant trade because they offered more security to their members. Trading in the pre-medieval and medieval period was predicated on minimising risk—the risks of unknown market conditions and the physical risks of itinerant trade. This was solved through forming collective associations which offered security to members, and the long-term viability of the associations is clearly evident from their continued strength even after the decline of the Chola Empire. Guilds were especially visible in overseas markets in South-East Asia and Sri Lanka. All itinerant trade involved physical danger and risk, and guilds employed armed warriors to protect their interests. However, collective institutions accommodated the independence of individual merchants, and there is little evidence that guild members traded as a group; the advantage of guild membership was that it served to provide a larger identity and implicit security to member merchants. The Chola state pursued an aggressive military policy of conquest which also served to promote mercantile interests. Even though its primary motivation was imperial expansion, the enlarged Chola state offered greater opportunities to merchant groups to penetrate into other regions and overseas markets. Merchants were generally well regarded in Tamil society. 

Further, the treasure captured during military expeditions found its way to temples in the form of donations which were circulated in the local economy. Last, and perhaps most important, merchants were generally well regarded in Tamil society. The degree of social acceptance was an important psychological factor which helped the merchants to function in strength.


When the state was powerful, it gave active support to merchants. But even in times of political instability, trade continued to grow—as happened in Tamilakam throughout the 13th century. This was in part due to the fact that lesser chiefs understood that their interests would be better served in the long run when merchants were not victimised and trade could be carried on without undue demands or pressures. The development of strong corporate institutions which could function with great autonomy irrespective of the state ensured that merchants could continue to trade without serious disruptions.

In the final analysis, the social, political and institutional environment was more crucial for the perpetuation of trade and business in the medieval period than any strategy of business as such. This account of the merchants still leaves many questions unanswered. How did merchants participate in maritime trade? Did they own ships or did they carry their goods on ships owned by others? Alternatively, did they send their cargo as consignments with the vessel owners to be sold in overseas markets either through their own correspondent merchants or by the ship’s captain? We cannot really answer these questions, nor can we answer questions about the functioning of capital and credit markets and related business practices.

Excerpted from Kanakalatha Mukund’s book The World of the Tamil Merchant with permission from Penguin India. Feature image by Richard Mortel on Flickr, licensed under CC BY 2.0. We welcome your comments at ideas.india@qz.com.