Which of the following statements about 'Agency Houses' is/are correct? 1. They were important commercial formations in the late eighteenth and nineteenth century India. 2. The operation of managing agencies remained confined to Calcutta. Select the correct answer using the code given below.

Correct — A, 1 only. Agency houses were indeed the leading commercial firms of late-eighteenth and nineteenth-century India: Company servants and free merchants pooled private capital in partnerships that financed indigo, opium, shipping, banking and later tea and jute, and out of them grew the managing agency system that ran Indian industry into the twentieth century. Statement 2 fails on the geography — Madras had Parry's from 1788 and Binny's from 1797, Bombay's cotton mills were run by managing agents such as Tata Sons and Killick Nixon, and Ahmedabad had its own. Calcutta was the largest centre, never the only one.

• (b)2 only — Statement 2 is the false half, so it cannot be the only correct one. Managing agencies operated from Bombay, Madras and Ahmedabad as well as Calcutta.
• (c)Both 1 and 2 — Statement 1 is right but statement 2 is not; agency work spread to every port city where European capital and Indian industry met.
• (d)Neither 1 nor 2 — Statement 1 is plainly correct — the agency houses were the dominant commercial formation of the period — so 'neither' is wrong.

An agency house was a partnership firm that acted as agent, banker and shipper for other people's trade. They arose in the last quarter of the eighteenth century as the East India Company's monopoly loosened, and the surplus of Company servants and private traders went into indigo, opium, insurance and shipping. Their successor institution, the managing agency, contracted to manage a mill or a company for a commission and so controlled industries far larger than its own capital.

The trap here is that the story is usually told from Calcutta — the great crash of the 1830s that took down Palmer & Co and Alexander & Co is a Calcutta crash, and Carr Tagore & Co is a Calcutta firm. A statement that sounds like the textbook narrative is not the same as a true one, and 'remained confined to' is the kind of absolute an examiner plants to be broken.

• Parry & Co was started at Madras in 1788 by Thomas Parry, and Binny & Co at Madras in 1797 — both outside Calcutta and both eighteenth-century.
• The Calcutta agency houses collapsed in the commercial crisis of 1830-33, which shifted ground to newer firms.
• Managing agencies ran the Bombay and Ahmedabad cotton mills and the Bengal jute and tea companies, taking a commission on output or profit.
• The managing agency system was finally abolished by amendment of the Companies Act, taking effect in 1970.

• Absolute words in a statement — 'only', 'confined to', 'never' — are usually where a two-statement item is decided.
• Assuming a nineteenth-century commercial story must be a Bengal story.

Usually as a two-statement item where one half is textbook-true and the other over-claims a monopoly for Calcutta.

No directly related past PYQ was found.

• practice — not a real PYQ

  The managing agency system in India was finally abolished with effect from which decade?

  • (a)The 1930s
  • (b)The 1950s
  • (c)The 1970s
  • (d)The 1990s

  Answer(c) The 1970s — an amendment of the Companies Act ended the system with effect from 1970.

• practice — not a real PYQ

  Parry & Co and Binny & Co, two of the oldest agency firms in India, were founded in which city?

  • (a)Calcutta
  • (b)Bombay
  • (c)Madras
  • (d)Surat

  Answer(c) Madras — Parry's from 1788 and Binny's from 1797.