Why Gujaratis may be the most successful people in business in the world

As British imperialists were trudging through African jungles to secure their newly conquered empire, some of the empire's subjects were also roaming far and wide, under the cover of the Union flag. One was Allidina Visram, from Kutch, in what is now the Gujarat state in India.

He arrived penniless in Zanzibar (now part of Tanzania) on the east African coast in 1863, aged 12. He opened his first small shop 14 years later and soon afterward spotted his great opportunity. He opened a store at every large railway station along the 580 miles of railway track being laid down through Kenya to Uganda in the early 1900s. He then opened more stores at Jinja on Lake Victoria.

Flush with success, Visram was later joined by another Gujarati, Vithaldas Haridas. He arrived in 1893 and was, if anything, even more adventurous than his mentor.

Gujaratis have never been put off by small matters such as distance or temperature. Nowadays they form one of the most prominent immigrant communities in Canada, and at the other end of the Earth they constitute a large proportion of the 155,000 immigrants of Indian origin in New Zealand. And at all points of the compass in between, from Fiji to Britain, from Myanmar to Uganda, they have built flourishing communities.

Everywhere, Gujaratis are to be found running businesses, from corner shops to hotels, from tech start-ups to some of the world's largest conglomerates. Like the Jews, Chinese, English, Scots and Lebanese, they have come to form an impressive global commercial network. In proportion to their numbers (about 63 million live in India, and there could be anything from 3 million to 9 million abroad), they could even claim to be the most successful. They bestride entire sectors of the global economy and have been at least partly responsible for the rise and fall of nations. Their influence on some advanced economies is now substantial.

Consider the United States. Having arrived in numbers from the 1960s onward, Gujaratis now run about one-third of all its hotels and motels. Furthermore, this was achieved mostly by just one group, essentially an extended family, the Patels, who hail originally from a string of villages between the industrial cities of Baroda and Surat.

Like other South Asians, they highly value degrees in medicine and engineering. But they have the added knack of turning a degree into a business opportunity. Thus they own almost half (12,000) of America's independent pharmacies (as well as one of the biggest chains in Britain, Day Lewis). There are thousands of Gujarati doctors in America, and they are quicker than most to start up their own practices. Bhupendra Patel, for instance, studied medicine in Baroda before coming to America in 1971. He set up a practice four years later. His classmates were certainly impressed; out of 120 of his peers, 90 came to America in his wake.

For Gujaratis, enterprise is virtually a cultural obligation and has always earned the most respect. Starting a small corner shop is seen as more impressive than holding a mid-level management job in somebody else's company.

For many Gujaratis the point of acquiring knowledge is to attain practical goals, particularly business goals. Ethnic-Indian Americans have applied their practical knowledge to Silicon Valley; they are responsible for about a quarter of all start-ups there, and a quarter of those are thought to be Gujarati.

Around the globe, they have come to wield huge influence in the diamond business. An impressive 90 percent of the world's rough diamonds are cut and polished in the Gujarati city of Surat, a business worth about $13 billion a year, and Indians, predominantly Gujaratis, control almost three-quarters of Antwerp's diamond industry. Like the motel owners, the great majority of diamond processors come from just one community, almost all of them tracing their origins back to one otherwise-obscure city in the north of Gujarat state called Palanpur.

Unsurprisingly, given their success abroad, they have been at the forefront of India's own recent economic surge, too. The three wealthiest Indian businesspeople — Mukesh Ambani, Dilip Shanghvi and Azim Premji — are Gujarati. With just 5 percent of India's workforce, Gujarat produces 22 percent of the country's exports. Reliance, one of India's largest private conglomerates, is Gujarati-owned. The industrial centres of Ahmedabad and Surat dominate India's synthetic textile sector. One of the world's biggest denim factories is in Ahmedabad, which is also home to some of India's pharmaceutical giants. All this has produced handsome revenue for the state's coffers, and with it the sleek new roads that persuaded many Indians to vote for the former chief minister of Gujarat, Narendra Modi, as prime minister in 2014.

As the state of Gujarat accounts for about one-fifth of India's coastline, perhaps it was inevitable that its peoples should be merchants and travelers. Its position also helped: It is well-situated for the Persian Gulf and Africa and routes to Southeast Asia.

Under the influence of Muslim traders, and Persians invading from the north, many Hindus were converted to Islam. They now constitute the Muslim sects of the Bohras, Khojas and Memons. This was an important part of the development of a commercial ethos in Gujarat, as after conversion to Islam these communities were relieved of the Hindu restriction on "crossing the sea."

As well as the accident of geography and the virtues of religion, other significant ingredients in the rise of Gujarati mercantilism were the institutions known as majahans, the equivalent of European guilds. These developed in the early Mogul period, in the 16th century, and they regulated trade and settled disputes within the various trading communities, such as the cloth or grain merchants. The mahajans provided a system of self-regulation, says S.P. Hinduja, a professor of sociology at Delhi University, but they were also "multiethnic and multireligious," binding together the Muslims, Hindus, Jains and others into one commercial class.

Jain preachers drew up rules for business practice that emphasized nonviolence and honesty. Keeping a low profile has been another Gujarati characteristic. The region's politicians, such as Mohandas (Mahatma) Gandhi, Muhammad Ali Jinnah — the founder of Pakistan — and Modi, are renowned throughout the world, but its entrepreneurs often remain invisible, which is exactly the way they like it.

Trust and honesty remain essential to Gujarati-dominated industries. Mehta, himself a Jain from Palanpur, whose diamond company has a turnover of $1.8 billion and offices from Antwerp to Tokyo, says that, despite the size of the business, it is still "all based on handshakes and words, with no contracts." In order to make the system work, he explains, diamond merchants prefer to deal with "the people they trust" — this usually means a group within the Gujaratis, in this case their fellow Jains from Palanpur. This is a big part of the reason why the subgroups of Gujaratis, such as the Patels and the Jains of Palanpur, have each congregated in one trade, and why most Gujarati businesses, except the very largest, remain run by families.

Traditionally, most of the finance to start a business comes from within the family, or at least the community. Business failure is also largely handled within families.

"Ethical business practices based on fair trade and honest dealings gave Gujarati traders a reputation of being trustworthy," write Achyut Yagnik and Suchitra Sheth, two historians of the region. So when the Portuguese, Dutch and then the British started arriving in India from the 16th century they used Gujaratis as their principal trading partners. The headquarters of the British East India Company was originally at Surat. It was the Gujaratis' relationships with the East India Company, and later the British crown, that were the biggest influences in shaping their contemporary trading empire.

They expanded by following the Union flag to the farthest corners of the British Empire. Hundreds of thousands emigrated to east and southern Africa in particular, but also to Malaysia, Burma, Singapore and beyond. When the occasional colonial official cared to lift the hood on Queen Victoria's empire, he usually found Gujaratis running the engine.

While other Indians arrived in the outposts of empire to labor on sugar plantations or build railways, Gujaratis such as Allidina Visram, the shopkeeper in east Africa, opened the stores that serviced the laborers. So commercially driven were the ethnic-Indian Ugandans, of whom about three-quarters were Gujarati, that at the peak of their success, in the mid-20th century, they contributed about one-fifth of Uganda's GDP despite numbering only about 100,000 out of a population of 8 million. One of their number was the singer Freddie Mercury, born on Zanzibar in 1946.

Gujaratis enjoyed similar success in other colonies of the British Empire, notably Kenya and South Africa. Memons, in particular, prospered in Burma, trading mainly in teak, rice and tea. Considering how well the Gujaratis did out of the empire, it seems only natural that a Jain from Palanpur, Sanjiv Mehta, should now own the East India Company itself. He snapped up the moribund company in 2005 and has opened a posh store bearing its name in London's West End. It sells fine crockery, traditional marmalades and, inevitably, tea. To guilty Britons the company is redolent of imperial exploitation, but to Mehta it is more of a brand "known all over the world, the Google of its age." The world's first joint-stock company has come round full circle.

The intimate connection with the British, however, came at a price. The Gujaratis were identified as little more than colonial satraps by indigenous Burmans, Ugandans and others. So once the British left, they were often targeted by the first post-independence politicians, asserting their nationalist credentials.

In Burma (now Myanmar), the military regime that took over in 1962 nationalized all foreign businesses, forcing hundreds of thousands of Indians out of the country. In Uganda, in 1972, the deranged dictator Idi Amin abruptly gave the country's 60,000 South Asians, mostly Gujaratis, 90 days to leave. The consequence, as elsewhere, was precipitous economic collapse. In 1997 a new Ugandan president, Yoweri Museveni, came to Britain to ask the exiles to return and rebuild the country. The generals who governed Myanmar never did so, to their country's enduring cost.

Uganda's loss was Britain's gain. Stripped of most of their money and possessions by Amin, about 27,000 Indian refugees, mostly Gujaratis, arrived in Britain and set about building their fortunes a second time.

Will Gujaratis around the globe continue to enjoy the same success in the future? The state their forebears came from has seen an uptick in sectarian violence between Hindus and Muslims in recent years, particularly in 2002, and this has, to an extent, damaged the religious and ethnic tolerance on which so much of their commercial ethos was built.

Some fear, too, that their utilitarian approach to learning might become a disadvantage; it is Bangalore and Hyderabad that have pulled ahead in India's latest high-tech businesses. But, as the Gujaratis like to point out, they do the business, not the tech. As there have been gaps in the market during the past millennium, so there will be gaps during the next millennium — and Gujaratis will be there to exploit them.

Copyright 2013 The Economist Newspaper Limited, London. All Rights Reserved. Reprinted with permission.