East India Company

From Trade to Territory of Class 8

  • In 1600, the East India Company acquired a charter from the ruler of England, Queen Elizabeth, granting it the sole right to trade with the East. With this charter the Company could venture across the oceans, looking for new lands from which it could buy goods at a cheap prices, and carry them back to Europe to sell at higher prices. The Company did not have to fear competition from other English trading companies. Mercantile (A business enterprise that makes profit primarily through trade, buying goods cheap and selling them at higher prices) trading companies in those days made profit primarily by excluding competition, so that they could buy cheap and sell dear.
  • By the time the first English ship sailed down the west coast of Africa, round the Cape of Good Hope, and crossed the Indian Ocean, the Portuguese had already established their presence in the western coast of India, and had their base in Goa. Vasco da Gama, a Portuguese explorer, had discovered the sea route to India in 1498. The Dutch too were exploring the possibilities of trade in the Indian Ocean. Soon the French traders arrived on the scene.

east India company

  • The problem was that all the companies were interested in buying the same things. Competition amongst the European companies inevitably pushed up the prices at which these goods could be purchased, and this reduced the profits that could be earned. The only way the trading companies could flourish was by eliminating rival competitors. This led to fierce battles between the trading companies. They regularly sank each other's ships, blockaded routes, and prevented rival ships from moving with supplies of goods. Trade was carried on with arms and trading pasts were protected through fortification. This effort to fortify settlements and carry on profitable trade also led to intense conflict with local rulers.


  1. The first English factory was set up on the banks of the river Hugli in 1651. This was the base from which the Company's traders, known at that time as "factors'", operated. By 1696 Company began building a fort around the settlement. Two years later it bribed Mughal officials for giving the Company zamindari rights over three villages. It also persuaded the Mughaf emperor Aurangzeb to issue a farman granting the Company the right to trade duty free.
  2. The Company tried continuously to press for more concessions and manipulate existing privileges. Aurangzeb's farman, for instance, had granted only the Company the right to trade duty free. But officials of the Company, who were carrying on private trade on the side, were expected to pay duty. This they refused to pay, causing an enormous loss of revenue for Bengal.


Through the early eighteenth century, the conflict between the company and the Nawabs of Bengal intensified. The Nawab's of Bengal refused to grant the company concessions, demanded large tributes for the Company's right to trade, denied it any right to mint coins, and stopped it from extending its fortifications.

Accusing the Company of deceit, they claimed that the company was depriving the Bengal government of huge amounts of revenue and undermining the authority of the Nawab. The company on its part declared that the unjust demands of the local officials were ruining the trade of the company. It was also convinced that to expand trade it had to enlarge its settlements, buy up villages, and rebuild its forts. The conflicts led to confrontations and finally culminated in the famous Battle of Plassey.


  1. The Company worried about its power, and started interfering in the political affairs of Bengal. An infuriated Siraj-ud-daulah asked the Company to stop meddling in the political affairs of his dominion, stop fortification and pay the revenues. After negotiations failed, the Nawab marched with 30,000 soldiers to the English factory at Kassimbazar, captured the Company officials, locked the warehouse, disarmed all Englishmen, and blockaded English ships. Then he marched to Calcutta to establish control over the company's fort there.
  2. On hearing the news of the fall of Calcutta, Company officials in Madras sent forces under the command of Robert Clive, reinforced by naval fleets. Prolonged negotiations with the Nawab followed. Finally, In 1757, Robert Clive led the Company's army against Sirajuddaulah at Plassey. One of the main reasons for the defeat of the Nawab was that the forces led by Mir Jafar, one of Sirajuddaulah's commanders, never fought the battle. Clive had managed to secure his support by promising to make him Nawab after crushing Sirajuddauiah. The Battle of Plassey became famous because it was the first major victory the Company won in India. It was fought on 23 June 1757.
  3. After the defeat at Plassey, Mir Jafar was made the Nawab. Soon the Company discovered that the puppet Nawabs were not always as helpful as the Company wanted them to be. What could the Company do ? When Mir Jafar protested, the Company deposed him and installed Mir Qasim in his place.
  4. When Mir Qasim complained, he in turn was defeated in a battle fought at Buxar (1764), was out of Bengal, and Mir Jafar was reinstalled. The Nawab had to pay Rs. 500,000 every month but the Company wanted more money to finance its wars, and meet the demands of trade and its other expenses. It wanted more territories and more revenue. Mir Jafar died in 1765. The victory of battle of Plassey turned the history of India and a mere trading company became a ruling force in Bengal. Having failed to work with puppet Nawabs, Ciive declared: "We must indeed become nawabs ourselves."
  5. Finally, In 1765 the Mughal emperor appointed the Company as the Diwan of the provinces of Bengal. The Diwani allowed the Company to use the vast revenue resources of Bengal. This solved the major problem of purchasing the goods. Earlier Company had to buy the goods with gold and silver imported from Britain. The outflow of gold from Britain slowed after the Battle of Plassey, and entirely stopped after the assumption of Diwani. Now revenues from India could finance Company expenses. These revenues could be used to purchase cotton and silk textiles in India, maintain, Company troops, and meet the cost of building the Company fort and offices at Calcutta.


  • The Company acquired more power and authority. Each company servant began to have visions of living like nawabs. After the Battle of Plassey, the actual Nawabs of Bengal (real rulers before the Battle of Plassey) were forced to give land and vast sums of money as personal gifts to Company officials. Robert Clive himself amassed a fortune in India. When in 1767 he left India his Indian fortune was worth Pound 401, 102.
  • However, not all Company officials succeeded in making money like Clive. All of them were not corrupt and dishonest. Those who managed to return with wealth led flashy lives and flaunted their riches. They were called " Nabobs" an anglicized version of the Indian word nawab.
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