Any general account of capitalism in India needs to be mindful of two characteristics of the region. First, Indians have been doing business with the outside world for millennia. Second, there was an extraordinary degree of regional diversity within the Indian subcontinent. Capitalism tends to enter comparative economic history in three different ways: as a mode of production in orthodox Marxism; as international trade in the world systems analysis; and as institutions in current discourses on international development. A quick glance at the map of the Indian subcontinent shows that its topography would have presented any long-distance trader living before the age of steam with a great advantage and a great disadvantage at the same time. In the 1990s, contributions on new institutional economic history emphasized the importance of social norms, and suggested that the formation of a bureaucratic state and social norms could lead to different, sometimes alternative, frameworks of regulation and in turn of capitalism.

During the eleventh and twelfth centuries, most of Europe was distinctly backward and peripheral by comparison with areas south of the Mediterranean and in the Middle East, which were highly commercialised and urbanised and under Muslim control. There were two distinctive core areas for urban growth: northern Italy and the territories bordering the southern part of the North Sea and the English Channel and extending up the Rhine. The most fundamental stimulus to urban and commercial growth was that of rural development and population increase. The interaction between local resources and lordship shaped patterns of urban growth, especially for small towns. Some of the largest and most populous cities owed their standing to their handling of a transit trade and to their role as centres for collecting and redistributing goods. The rapid growth of towns promoted commercial solutions to the basic problems of supply, and this in turn encouraged specialised agriculture.

At the turn of the fifteenth century, India's mercantile marine, largely in the hands of Gujarati Muslim merchants, appears to have been deployed principally in the middle Indian Ocean, dominating the sea-lanes between Cambay and Malacca. European trade in the Indian Ocean remained part of the traditional structure, which was enriched and strengthened through European skill and enterprise. On the eastern side, Pulicat and Negapatam were the principal ports of southern Coromandel. Of India's exports to the markets of the Indian Ocean three points are worth noting. First, as to India's major export, which was textiles throughout our period, the mass of it was of the coarser kind. Secondly, India exported common foods like rice and pulses, wheat and oil, for which there was considerable demand. Thirdly, the pattern of Indian exports like most other things, appears to have remained stable throughout the period. The vitality of Indian shipping notwithstanding, investment in shipping was not popular among Indian merchants.

In so far as the foreign trade of the Indian sub-continent is concerned, the aspirations and the activities of the Estado da India represented several institutional innovations. As a result of the Portuguese naval watch, at the end of the sixteenth century few Indian ships could venture to east Africa, the Spice Islands, or to China and Japan unless, the shipowners entered into indirect partnerships with Portuguese officials or merchants in Goa. Both the coast of Coromandel and the Gujarat plains in western India produced a wide variety of patterned cotton fabrics which found specialized markets in the islands of south-east Asia. During the eighteenth century, India's foreign trade underwent a considerable expansion as a result of the tripartite participation of the Dutch, English, and the French. It is inconceivable that European trade with India, in general for that matter, could have been sustained on a large scale for any length of time without the discovery of American silver-mines.