Introduction

Underdeveloped countries are greatly handicapped by shortage of capital for industry and enterprise. Finance is the prime maker of growth. Anyway, capital for industry and entrepreneurial zeal were severely and conspicuously scarce in India when the East India Company (1600-1874) stepped into this country. It was very difficult to raise capital on private initiative in the days of the Company rule and, thereafter, because of damped forces of demand and supply capital remained shy.

Naturally, under the circumstance, the state is supposed to act as a godfather for promoting and financing industries. Since India was under the British rule for almost 200 years (1757-1947), the British Government, found it unprofitable and unnecessary to go for industrialization in India. However, imperialist capital came in this country as a matter of colonial policy—the policy of subordination of Indian to British capital. It was only after the First World War (1914- 1918), that state patronage for industrial development was visible as Britain’s supremacy all over the globe came under serious threat.

Against this backdrop, a “new” pattern was evolved to overcome the obstacles of (i) shortage of entrepreneurship; (ii) non-availability of, mainly, venture capital; and (iii) dearth of managerial skill and knowhow.

This new pattern of industrial organisation that evolved came to be known as the Managing Agency System (MAS)—a peculiar business entity in the early years of the nineteenth century. Before we embark upon this form of industrial organisation, we will make a brief review of the industrial development during the British rule.