The title of this essay comes from a tweet on December 18 by Sanjeev Sanyal—India’s principal economic advisor to the finance ministry—who said that at an event, former prime minister of Portugal Jose Manuel Barroso told him that, like the Chinese who talk about “socialism with Chinese characteristics”, India should start talking about “capitalism with Indian characteristics”.

The phrase stayed with me because in my 2015 book, Recasting India, I tried to describe why Indian capitalism was different, and why, despite significant challenges, it was flourishing. My broad argument was that capitalism in India—for all the talk of the rising number of billionaires—was really driven by countless small- and medium-scale entrepreneurs whose energy, guile, and vitality in the markets empower and enrich millions.

So, when I heard this phrase, I wondered what this could mean—what could capitalism with Indian characteristics look like, and how can India seed, own and disseminate this idea?

The idea to spread, according to me, is that capitalism or trade—indeed trade with the world—is not a new idea in India. Even a perfunctory glance at the work of researchers like Jonathan Kenoyer or Thomas Gensheimer show important trade networks even at the time of the Indus Valley Civilisation, for instance, with Mesopotamia.

This tradition flourished throughout Indian history, whether it was trade links between Kashmir and Rome during the Kushana period or the trade routes of the southern kingdoms, the Cholas, the Chalukyas and the Pandyas, or the trade between the Western world and the Mughal empire, there has never been a time when India was not fruitfully engaged with doing business with the world. We became wealthy on the back of trade and were colonised by traders lured by that wealth.

It is easily forgotten today that one of the more recent high points of Indian civilisation, the Bengal Renaissance, was led not only by educationists, litterateurs and social reformers, but one of its pioneering lights was a businessman—Prince Dwarkanath Tagore—who had interests in coal and shipping, jute, and banking.

The imagination of India as a great trading, open-for-business country only stuttered with the proliferation of socialism post-independence—some of this, no doubt, was needed to fulfil infrastructural needs that post-colonial private industry may have not had the capacity to fulfil, but the stifling of industry went far beyond the brief. It is worth reminding ourselves, and the world, that not only the ancient and medieval Indians but the founding fathers of the modern Indian nation rejected ‘socialism’ as a criterion in the country’s constitution, with B.R. Ambedkar famously arguing in November 1948 that “if you state in the Constitution that the social organisation of the State shall take a particular form, you are, in my judgement, taking away the liberty of the people to decide what should be the social organisation in which they wish to live”.

The word socialism was of course introduced into the Constitution in August 1976 during the Emergency when there were no opposition members in Parliament. The first act of the idea of capitalism with Indian characteristics must be to respect and reaffirm Ambedkar’s wisdom and remove this word from the Constitution.

The other fundamentally sound idea about the operation of business and markets that comes from Indian history, and ought to form a pivotal pillar in the definition of capitalism with Indian characteristics, is to be found in the Arthashastra—one of the most evolved treatises of governance ever written.

The Arthashastra sees the king or the head of government and the landowner, the owner of capital, if you will, in a society where land was the predominant item of value as ‘co-sharers’—there is no concept of the ‘Oriental despot’ here, no idea that all that the king gazes upon belongs to him.

There is an important lesson against governmental overreach in that which every entrepreneur immediately understands—nothing kills the animal spirits of capitalism like excessive regulation.

When a piece of land is up for sale, and here we are talking mostly about farmland, it is the relatives of the family, neighbours and creditors (in that order) who have the right to buy the land first. Why is this so? This is because of a communitarian understanding of the market, which appreciates that farmland is vitally connected to families in this environment, and therefore, while the market must function freely, it must also bear in mind the well-being of the community. There are moral limits to the markets embedded in this model.

The third pillar of capitalism with Indian characteristics comes from the idea of guilds or groups of supra-regional merchants who strengthened the power of trade using an idea we mistakenly think of as contemporary—networks. The Chola kings, for instance, had the backing of a powerful guild called (with suitable mysteriousness) The Five Hundred, which, in turn, got royal protection for its support.

Some of the most successful, and sustainable, models of capitalism today understand this guild effect—see, for instance, the wealth of the German mittelstand—medium-sized companies—and their focus on quality and community.

My argument is this: it is India, and not the U.S., that represents the future of capitalism. As dynamic and admirable as it is, U.S.-style capitalism has broken its ties with communities that sustained and turbo-powered it and is focused today on monopolistic firms with shadowy accounting that are fuelling inequality and anger at home and abroad. Capitalism needs a new direction, a new soul—and this could well come from India.

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