Note: This chapter is not part of the CBSE Class 12 Sociology syllabus for 2026-27 (CBSE has deleted it). Students of other boards should check their board’s latest syllabus.
- Why sociologists study markets differently from economists, and what it means to say an economy is “embedded” in society
- How a weekly village market (haat) works as a social institution, not just an economic one
- How caste and community shape who trades in what: the Nakarattars, the Marwaris, and other trading communities
- Marx’s view of capitalism, and what “commoditisation” means with real Indian examples
- Weber’s idea of a “status symbol”, and why people buy things for more than their use
- What liberalisation and globalisation changed in India’s markets, and the debate over whether that change has been good
1 What Do We Mean by “The Market”?
In everyday speech, “market” can mean several different things. Notice that all
four everyday meanings below point to something specific: one particular market you
could go and visit or one particular kind of trade.
1.1 Four everyday meanings
A physical place
The market next to the railway station, the fruit market, the wholesale market.
A gathering of people
Not the place but the buyers and sellers themselves: a weekly vegetable market may set up in a different village each day of the week.
An area or category of trade
“The market for cars” or “the market for readymade clothes”: a whole line of business, not one stall.
Demand for something
“The market for computer professionals”: how much a product or a skill is wanted.
But sociology also uses “the market” in a much bigger, general sense: with no
particular place, gathering, or trade in mind at all. In this sense, “the market”
is almost equivalent to “the economy”: the entire spectrum of economic activities
and institutions in a society.
A market, in the sociological sense, is not only a place of buying and
selling: it is the whole set of institutions and social relationships through
which goods, services and labour are exchanged.
We are used to thinking of the market as an economic institution, but it is
also a social institution, comparable to caste, tribe or family.
the chapter’s central argument
2 Sociological Perspectives on Markets and the Economy
Economics studies how markets work in a modern capitalist economy: how prices
are set, what an investment is likely to do, why people save or spend. Sociology
asks a different question: what larger social forces shape the market itself?
2.1 Adam Smith and the “self-running” market
In 18th-century England, the earliest economics was called
“political economy”. Its most famous early thinker was
Adam Smith (1723-90), whose book The Wealth of Nations tried to
explain the market economy that was just emerging. Smith argued that a market
economy is really a huge chain of individual exchanges, millions of separate
deals, that automatically create an ordered, working system, even though not one
of the individuals involved intended to create that system.
Modern economics grew from Smith’s ideas and treats the economy as a separate
part of society, working by its own laws, apart from the wider social or political
setting. Sociologists take the opposite approach.
Embeddedness is the sociological idea that economies are not separate,
self-contained systems: they are “embedded” in society. Markets are constructed
in culturally specific ways, are often controlled by particular social groups or
classes, and are closely connected to other institutions and social structures.
The NCERT book does not name any one sociologist as the source of the word
“embedded” in its running text: it simply says sociologists often express the
idea this way. The economic sociologist most closely associated with this idea,
Karl Polanyi, appears only in the chapter’s reference list, not in the body text.
Know the idea and the word “embedded”, but don’t assume the book expects you
to name Polanyi for it.
The chapter illustrates embeddedness with two real examples: a weekly tribal
market, and a “traditional business community” and its trading network.
inside the wider economy, which itself sits inside society’s caste, kinship and
cultural relationships. Pull the market out of this picture and it stops
working the way it actually does in India.
2.2 A weekly tribal market: Dhorai, Bastar
In most agrarian societies, periodic markets, weekly or less frequent,
are central to social and economic life. A weekly market (haat) brings
together people from surrounding villages to sell farm or forest produce and buy
manufactured goods they cannot get at home. It also attracts traders, moneylenders,
entertainers and astrologers from outside the area.
A haat is a periodic (usually weekly) rural market that brings together
local people and outside traders: in remote and forested areas it is often the
main institution for both economic exchange and social life.
In hilly, forested and adivasi areas, where settlements are scattered and roads
are poor, the haat is not just about trade. For many visitors, the main reason to
come is social: meeting relatives, arranging marriages, exchanging gossip.
A study of a weekly market in Bastar district (home to the Gond adivasi
community) shows exactly this pattern. Buyers at the market are mostly
adivasis; sellers are mainly caste-Hindu traders. Forest officials
also come to trade with adivasis working for the Forest Department. Goods
exchanged include manufactured items (jewellery, pots, knives), non-local food
(salt, turmeric), local farm produce, and forest produce (tamarind, oil-seeds).
Adivasis earn cash from forest and farm produce and from wage labour, and spend
most of it in the market on cheap trinkets, jewellery and manufactured cloth.
“Dhorai on non-market days … hardly exists at all; but Dhorai on a market
day might be a totally different place.”
Box 4.1, describing the market village of Dhorai, North Bastar, Chhattisgarh (Gell 1982)
2.3 Caste-based trade in precolonial and colonial India
An older view of Indian economic history said the economy was unchanging until
colonialism arrived: that villages were self-sufficient and traded mainly through
non-market exchange. Recent historical research has revised this view.
Older view
- India = ancient, self-sufficient village communities
- Economies organised mainly through non-market exchange
- Economic change began only with colonialism
Revised view (recent research)
- India’s economy was already extensively monetised in the late precolonial period
- Non-market systems, like the jajmani system (a traditional exchange of goods and services between caste groups, without money changing hands), existed alongside sophisticated trading networks
- Precolonial India already had well-organised manufacturing, merchant groups, trading networks and banking
India was, for centuries, a major manufacturer and exporter of handloom cloth
(cotton and silk) and other goods like spices, in great demand in Europe. Merchant
communities ran their own systems of banking and credit: the most important
instrument was the hundi.
A hundi is a bill of exchange, like a credit note, that let a merchant
in one part of the country issue credit that a merchant in another part would
honour, because trade ran through the same caste and kinship networks.
The Nakarattars ran a caste-based banking system. Loans and deposits
moved between members based on caste-defined social relationships: business
territory, residential location, descent, marriage, and shared cult membership.
Unlike a modern bank, there was no government-controlled central authority:
reputation, sound decisions and reserve deposits shared across the community
gave the public confidence in each individual Nakarattar as a representative of
the whole caste (Rudner 1994).
3 Social Organisation of Markets: “Traditional Business Communities”
Caste and the economy are closely linked in India: in landholding, occupation,
and also in trade. In fact, Vaisya is one of the four varnas (the
traditional broad caste categories: Brahmin, Kshatriya, Vaisya and Shudra),
showing how important trade has been in Indian society since ancient times.
But like other varna identities, “Vaisya” status is often claimed or
aspired to rather
than fixed: some groups, such as the Banias of North India, have a long trading
history, while other caste groups have taken up trade and claimed Vaisya status
while moving up socially.
| Community | What the book says about them |
|---|---|
| Banias (North India) | A Vaisya community with a long-standing trading occupation |
| Parsis, Sindhis, Bohras, Jains | Other communities in trade, with their own distinct religious/community identities: not all “Vaisya” |
| Nakarattars (Tamil Nadu) | Ran a caste-based banking and moneylending system (Box 4.2) |
| Marwaris (settled across India) | Rose to prominence during the colonial period, especially in Calcutta; today control more of India’s industry than any other community |
| Banjaras | A marginalised “tribal” group who controlled the long-distance salt trade in the colonial period: proof that a trading community did not always hold high social status |
The table above stands in for a map of “trading regions”. Be ready to name a
community and what it traded in. Learn the table, not a map.
Why does trade cluster by caste? Because business runs through caste and kinship
networks: a trader trusts people from their own community more than outsiders, so
trade tends to stay within the network. Over time this creates something close to a
caste monopoly in particular lines of business.
3.1 Colonialism and the emergence of new markets
Colonial rule caused major upheavals in production, trade and agriculture. The
best-known example is the decline of the handloom industry, as markets were
flooded with cheap machine-made textiles from England. Although a complex,
monetised economy already existed before colonialism, most historians treat the
colonial period as the real turning point.
Before colonisation
- India was a major supplier of manufactured goods (handloom cloth) to the world market
After colonisation
- India became mainly a source of raw materials and agricultural products, and a consumer of England’s manufactured goods
New groups, especially Europeans, entered trade, sometimes alongside existing
merchant communities and sometimes forcing them out. But the market economy’s
expansion also gave some merchant communities new opportunities. The clearest
example is the Marwaris.
The Marwaris are probably India’s most widespread and best-known business
community: from leading industrial families like the Birlas to small
shopkeepers in bazaars across the country. They became a successful trading
community specifically during the colonial period, especially by settling
in colonial cities like Calcutta. Like the Nakarattars, their success rested on
extensive social networks that created the trust their own banking system
needed. Many became moneylenders and, by acting as bankers, even helped the
commercial expansion of the British in India (Hardgrove 2004). After
Independence, some Marwari families became modern industrialists, and today
Marwaris control more of India’s industry than any other community.
4 Understanding Capitalism as a Social System
Karl Marx, one of the founders of modern sociology, was also a major
critic of capitalism. He understood capitalism as a system of commodity
production, production for the market, carried out through wage labour.
According to Marx, all economic systems are also social systems.
Each mode of production creates specific relations of production, and these give
rise to a particular class structure. The economy is not made of things:
it is made of relations between people, connected through the process of
production.
4.1 Commoditisation and consumption
Commoditisation (or commodification) is the process by which something
not earlier bought and sold in the market, whether a thing, a skill, or a
service, becomes a commodity that can be bought and sold.
According to Marx and other critics of capitalism, commodification often has
negative social effects. The book gives several examples, from the disturbing to
the everyday:
Human organs
The sale of kidneys by poor people to rich patients needing transplants is controversial: many believe human organs should never become commodities.
Human labour vs slavery
Selling people as slaves is now considered immoral, but selling one’s own labour for a wage is accepted everywhere in capitalist society: Marx says this acceptance is unique to capitalism.
Marriage
Marriages were once arranged only by families; now professional marriage bureaus and websites do this for a fee.
Social skills and education
Private institutes now sell “personality development” and spoken-English courses: skills once taught only within the family. Private schools, colleges and coaching classes commodify education the same way.
The book’s own running example of a recently commodified item is bottled
water (Activity 4.2): it was not sold at all until fairly recently in the
book’s own telling. Use this example if asked for one; don’t invent a different
one from outside the book.
Consumption in modern society is not just economic: it carries symbolic
meaning too. Max Weber, one of the founders of sociology, first pointed out
that the goods people buy and use are closely tied to their social status.
A status symbol (Max Weber) is a good whose ownership signals a
person’s social or economic standing: for example, the brand of cell phone or
the model of car someone owns, among India’s middle class today.
5 Globalisation: Interlinking of Local, Regional, National and International Markets
Since the late 1980s, India entered a new phase of economic history: a shift
from state-led development to liberalisation. This shift also brought in
the era of globalisation: the world becoming increasingly interconnected,
not just economically but also culturally and politically.
Globalisation covers several trends together: rising international
movement of goods, money, information and people, plus the technology
(computers, telecommunications, transport) and infrastructure that make this
movement possible.
A slump in the US economy, such as after the 9/11 attacks on New York’s
World Trade Centre, can cause job and business losses in India’s software
industry. That is exactly what “markets around the world are becoming
integrated” means in practice.
India’s software services and BPO (Business Process Outsourcing)
industries, such as call centres, are major channels connecting India to the
global economy: Indian companies provide low-cost labour and services to
customers in developed Western countries. There is now, in effect, a global
market for Indian software labour.
5.1 When culture itself becomes a market
Under globalisation, it is not just money and goods that circulate rapidly:
people, cultural products and images do too, drawing things that were once
outside the market into it. Two book examples: the marketing of Indian
spirituality and knowledge systems, like yoga and ayurveda, in the West;
and the growth of international tourism.
The annual fair at Pushkar, Rajasthan, remains a major social and
economic event for local pastoralists and traders who come to buy and sell
camels and livestock. But it is now also marketed internationally as a major
tourist attraction: made more appealing because it falls just before Kartik
Purnima, when Hindu pilgrims bathe in the holy Pushkar Lake. Hindu pilgrims,
camel traders and foreign tourists all mingle at the fair, exchanging livestock
and money along with cultural symbols and religious merit.
Camels and traders gathered at the Pushkar fair, the traditional livestock market that
has itself become a tourist product (Box 4.3).
5.2 Debate on liberalisation: market versus state
India’s globalisation has come mainly from liberalisation, a set of
policies started in the late 1980s.
Liberalisation is a package of policies: privatising public sector
companies, loosening government control over capital, labour and trade, cutting
tariffs and import duties, and making it easier for foreign companies to set up
in India. Using market processes instead of government policy to solve
economic, social or political problems is also called marketisation.
Arguments made FOR liberalisation
- Private industry is seen as more efficient than government-run industry, so growth and prosperity follow
- Foreign investment is expected to help growth and employment
- Privatisation is expected to increase efficiency and reduce the government’s burden
- Sectors like software/IT and some agriculture (fish, fruit) can gain from access to a global market
Arguments made AGAINST liberalisation
- Some argue the overall impact on India has been, or will be, negative: costs outweighing benefits
- Sectors like automobiles, electronics and oilseeds struggle to compete with foreign producers
- Farmers now compete with imported agricultural produce, while support prices and subsidies have been reduced
- Privatisation has cut jobs in some sectors and grown less secure, unorganised-sector employment
Do not write that liberalisation has been “all good” or “all bad”. The
book is explicit that its impact has been mixed: some sectors gain, others
lose. An answer that only lists benefits, or only lists harms, will not score full
marks.
Agriculture is the book’s clearest example of the costs. Indian agriculture used
to be protected by support prices (the price at which government agrees to
buy farm produce, guaranteeing farmers a minimum income) and subsidies
(government paying part of the cost of inputs like fertiliser or diesel).
Liberalisation opposes this kind of government interference, so support prices and
subsidies were reduced or withdrawn: leaving many farmers unable to earn a decent
living, now that cheaper imported farm produce is allowed into Indian markets.
The book itself points you onward: “See the chapters on agrarian change and
industry in the other textbook for Class XII, Social Change and Development
in India.” That means Book 2, Social Change and Development in India, Chapter 4 (rural society) and Chapter 5 (industrial society): this
chapter only introduces the market-versus-state debate; those chapters carry
it further.
6 In Summary
India today has many different kinds of markets: from the village haat to the
virtual stock exchange. These markets are themselves social institutions, linked
to caste, class and other parts of the social structure. Exchange carries social
and symbolic meaning far beyond its economic purpose. And under liberalisation and
globalisation, the ways goods, services, cultural symbols and money circulate keep
changing: from a local village market all the way up to a global trading network
like the Nasdaq.
- The market is an economic institution AND a social one, comparable to caste, tribe or family
- Adam Smith saw the market as a self-running system of individual exchanges; sociologists say economies are “embedded” in society
- A haat (like Dhorai, Bastar) shows a market doing social work, meeting kin, arranging marriages, not just economic work
- Caste shapes trade: Nakarattars (Tamil Nadu banking), Marwaris (rose in the colonial period, now control the most industry), Banjaras (salt trade despite low status)
- Marx: capitalism = commodity production + wage labour; two classes (capitalists, workers); surplus value
- Commoditisation = something not previously a commodity becomes one: organs, marriage bureaus, personality-development courses, bottled water
- Weber: goods signal social status: “status symbol”
- Liberalisation (from the late 1980s) → globalisation; impact on India has been mixed: gains for some sectors, losses (especially in agriculture) for others
- Can I explain, in my own words, why sociologists say markets are “embedded” in society?
- Can I name two ways caste shapes who trades in what, with one example each?
- Can I define commoditisation and give two examples the book uses?
- Can I list two arguments for and two arguments against liberalisation?