British India

27.3: British India

27.3.1: The East India Trading Company

For about 250 years, the British East India Company evolved from a company chartered by the British Crown to trade with the East Indies into de facto British administrator of India, which set off the era of British colonization of the Indian Subcontinent.

Learning Objective

Describe the East India Trading Company

Key Points

  • After 1588, London merchants presented a petition to Queen Elizabeth I for permission to sail to the Indian Ocean. Permission was granted to several ships, but in 1600 a group of merchants known as the Adventurers succeeded at gaining a Royal Charter under the name Governor and Company of Merchants of London trading with the East Indies. For 15 years, the charter awarded the newly formed company a monopoly on trade with all countries east of the Cape of Good Hope and west of the Straits of Magellan.
  • English traders frequently engaged in hostilities with their Dutch and Portuguese counterparts in the Indian Ocean. The Company decided to gain a territorial foothold in mainland India with official sanction from both Britain and the Mughal Empire. The requested diplomatic mission launched by James I in 1612 arranged for a commercial treaty that would give the Company exclusive rights to reside and establish factories in Surat and other areas. While Portuguese and Spanish influences in the region were soon eliminated, competition against the Dutch resulted in the Anglo-Dutch Wars of the 17th and 18th centuries.
  • In an act aimed at strengthening the power of the EIC, King Charles II granted the EIC (in a series of five acts around 1670) the rights to autonomously acquire territory, mint money, command fortresses and troops and form alliances, make war and peace, and exercise both civil and criminal jurisdiction over the acquired areas. These decisions would eventually turn the EIC from a trading company into de facto an administrative agent with wide powers granted by the British government.
  • In 1698, a new “parallel” EIC was established. The two companies wrestled with each other for some time but it quickly became evident that in practice, the original company faced scarcely any measurable competition. The companies merged in 1708 by a tripartite indenture involving both companies and the state. With the advent of the Industrial Revolution, the EIC became the single largest player on the British global market. With the backing of its own private army, it was able to assert its interests in new regions in India without further obstacles from other colonial powers.
  • In the hundred years from the Battle of Plassey in 1757 to the Indian Rebellion of 1857, the EIC began to function more as an administrator and less as a trading concern. The proliferation of the Company’s power chiefly took two forms: the outright annexation of Indian states and subsequent direct governance of the underlying regions, or asserting power through treaties in which Indian rulers acknowledged the Company’s hegemony in return for limited internal autonomy.
  • In the aftermath of the Indian Rebellion of 1857, under the provisions of the Government of India Act 1858, the British government nationalized the EIC. The Crown took over its Indian possessions, its administrative powers and machinery, and its armed forces. The EIC was officially dissolved in 1858 and the rebellion also led the British to reorganize the army, the financial system, and the administration in India. The country was thereafter directly governed by the Crown as the new British Raj.

Key Terms

British Raj
The rule of the British Crown in the Indian subcontinent between 1858 and 1947.
Battle of Plassey
A decisive victory of the British East India Company over the Nawab of Bengal and his French allies on June 23, 1757. The battle consolidated the Company’s presence in Bengal, which later expanded to cover much of India over the next hundred years.
Indian Rebellion of 1857
A rebellion in India against the rule of the British East India Company from May 1857 to July 1859. It began as a mutiny of sepoys of the East India Company’s army in the cantonment of the town of Meerut and soon escalated into other mutinies and civilian rebellions. It led to the dissolution of the East India Company in 1858. India was thereafter directly governed by the Crown as the new British Raj.
East India Company
An English and later British joint-stock company formed to pursue trade with the East Indies but actually trading mainly with the Indian subcontinent and Qing China. The company rose to account for half of the world’s trade, particularly in basic commodities including cotton, silk, indigo dye, salt, saltpetre, tea, and opium. It also ruled the beginnings of the British Empire in India.
Government of India Act 1858
An Act of the Parliament of the United Kingdom (21 & 22 Vict. c. 106) passed on August 2, 1858. Its provisions called for the liquidation of the British East India Company, which had been ruling British India under the auspices of Parliament, and the transference of its functions to the British Crown.

 

Founding of East India Company

Soon after the defeat of the Spanish Armada in 1588, London merchants presented a petition to Queen Elizabeth I for permission to sail to the Indian Ocean. Permission was granted and in 1591, three ships sailed from Torbay around the Cape of Good Hope to the Arabian Sea on one of the earliest English overseas Indian expeditions. In 1596, three more ships sailed east but were all lost at sea. In 1599, another group of merchants that eventually became known as the Adventurers stated their intention to sail to the East Indies and applied to the Queen for support of the project. Although their first attempt had not been completely successful, they nonetheless sought the Queen’s unofficial approval to continue, bought ships for their venture, and increased their capital.

The Adventurers convened again a year later. This time they succeeded and on December 31, 1600, the Queen granted a Royal Charter to “George, Earl of Cumberland, and 215 Knights, Aldermen, and Burgesses” under the name Governor and Company of Merchants of London trading with the East Indies. For 15 years the charter awarded the newly formed company a monopoly on trade with all countries east of the Cape of Good Hope and west of the Straits of Magellan. Anybody who traded in breach of the charter without a license from the Company was liable to forfeiture of their ships and cargo (half of which went to the Crown and the other half to the Company), as well as imprisonment at the “royal pleasure.”

 

Early Operation

Between 1601 and 1608, four voyages left Britain to establish trade with East Indies. Initially, the company struggled in the spice trade because of the competition from the already well-established Dutch East India Company. The East India Company (EIC or the Company) opened a factory in Bantam on the first voyage and imports of pepper from Java were an important part of the Company’s trade for 20 years. In the next two years, it established its first factory in south India in the town of Machilipatnam in Bengal. The high profits reported by the Company after landing in India initially prompted King James I to grant subsidiary licences to other trading companies in England. But in 1609, he renewed the charter given to the EIC for an indefinite period, including a clause that specified that the charter would cease if the trade turned unprofitable for three consecutive years.

English traders frequently engaged in hostilities with their Dutch and Portuguese counterparts in the Indian Ocean. The Company decided to explore the feasibility of gaining a territorial foothold in mainland India with official sanction from both Britain and the Mughal Empire, and requested that the Crown launch a diplomatic mission. In 1612, James I instructed Sir Thomas Roe to visit the Mughal Emperor Nuruddin Salim Jahangir to arrange for a commercial treaty that would give the Company exclusive rights to reside and establish factories in Surat and other areas. In return, the Company offered to provide the Emperor with goods and rarities from the European market. This mission was highly successful.

 

Expansion

The Company, which benefited from the imperial patronage, soon expanded its commercial trading operations, eclipsing the Portuguese Estado da Índia, which had established bases in Goa, Chittagong, and Bombay. Portugal later ceded this land to England as part of the dowry of Catherine de Braganza, kind Charles II’s wife. The EIC also launched a joint attack with the Dutch United East India Company on Portuguese and Spanish ships off the coast of China, which helped secure their ports in China. By 1647, the company had 23 factories and 90 employees in India. The major factories became the walled forts of Fort William in Bengal, Fort St George in Madras, and Bombay Castle. With reduced Portuguese and Spanish influence in the region, the EIC and Dutch East India Company entered a period of intense competition, resulting in the Anglo-Dutch Wars of the 17th and 18th centuries.

In an act aimed at strengthening the power of the EIC, King Charles II granted the EIC (in a series of five acts around 1670) the rights to autonomously acquire territory, mint money, command fortresses and troops and form alliances, make war and peace, and exercise both civil and criminal jurisdiction over the acquired areas. These decisions would eventually turn the EIC from a trading company into a de facto administrative agent with wide powers granted by the British government.

 

Monopoly

The prosperity that the officers of the Company enjoyed allowed them to return to Britain and establish sprawling estates and businesses and obtain political power. The Company developed a lobby in the English parliament. Under pressure from ambitious tradesmen and former associates of the Company, who wanted to establish private trading firms in India, a deregulating act was passed in 1694. This allowed any English firm to trade with India unless specifically prohibited by act of parliament, thereby annulling the charter that had been in force for almost 100 years.

By an act passed in 1698, a new “parallel” East India Company (officially titled the English Company Trading to the East Indies) was floated under a state-backed indemnity of £2 million. The two companies wrestled with each other for some time, both in England and in India, for a dominant share of the trade. It quickly became evident that in practice, the original company faced scarcely any measurable competition. The companies merged in 1708 by a tripartite indenture involving both companies and the state. Under this arrangement, the merged company lent to the Treasury a sum of £3,200,000 in return for exclusive privileges for the next three years, after which the situation was to be reviewed. The amalgamated company became the United Company of Merchants of England Trading to the East Indies.

With the advent of the Industrial Revolution, Britain surged ahead of its European rivals. Britain’s growing prosperity, demand, and production had a profound influence on overseas trade. The EIC became the single largest player on the British global market. Following the Seven Years’ War (1756–63) and the defeat of France, French ambitions on Indian territories were effectively laid to rest, thus eliminating a major source of economic competition for the EIC. The Company, with the backing of its own private well-disciplined and experienced army, was able to assert its interests in new regions in India without facing obstacles from other colonial powers, although it continued to experience resistance from local rulers.

 

Changing Political Role

In the hundred years from the Battle of Plassey in 1757, in which the EIC defeated the ruler of Bengal Nawab and his French allies and consolidated the Company’s presence in Bengal, to the Indian Rebellion of 1857, the EIC began to function more as an administrator and less as a trading concern. The proliferation of the Company’s power chiefly took two forms. The first was the outright annexation of Indian states and subsequent direct governance of the underlying regions, which collectively comprised British India. The second form of asserting power involved treaties in which Indian rulers acknowledged the Company’s hegemony in return for limited internal autonomy. In the early 19th century, the territories of these princes accounted for two-thirds of India. When an Indian ruler who was able to secure his territory wanted to enter such an alliance, the Company welcomed it as an economical method of indirect rule that did not involve the economic costs of direct administration or the political costs of gaining the support of alien subjects. In return, the company pledged to defend its allies.

This Company painting probably depicts William Fullerton of Rosemount, who joined the East India Company’s service in 1744, by Dip Chand, c. 1760-64.: Company style or Company painting is a term for a hybrid Indo-European style of paintings made in India by Indian artists, many of whom worked for European patrons in the British East India Company or other foreign Companies in the 18th and 19th centuries. The style blended traditional elements from Rajput and Mughal painting with a more Western treatment of perspective, volume, and recession. 

In the early 19th century, the Indian question of geopolitical dominance and empire holding remained with the East India Company. The Company’s independent armies, with some locally raised irregular forces, expanded to a total of 280,000 men by 1857. First recruited from mercenaries and low-caste volunteers, the Bengal Army eventually became composed largely of high-caste Hindus and landowning Muslims. Within the army, British officers always outranked Indians, no matter how long their service. Indian officers received no training in administration or leadership so they would remain dependent on the British officers. During the wars against the French and their allies in the late 18th and early 19th centuries, the EIC’s armies were used to seize the colonial possessions of other European nations, including the islands of Réunion and Mauritius.

 

Indian Rebellion of 1857

The Indian Rebellion of 1857, which eventually led to the dissolution of the EIC,  had diverse political, economic, military, religious and social causes. A direct trigger wad the grievances of the sepoys, a generic term used for native Indian soldiers of the Bengal Army, against the EIC administration, caused mainly by the ethnic gulf between the European officers and their Indian troops. The spark that led directly to a mutiny in several sepoy companies was the issue of new gunpowder cartridges for the Enfield rifle. In 1857, British officers insisted that the new cartridges be used by both Muslim and Hindu soldiers, but the cartridges were made from cow and pig fat. Loading the Enfield required tearing open the greased cartridge with one’s teeth. This insulted both Hindu and Muslim religious practices. Underlying grievances over British taxation and recent land annexations by the EIC were ignited by the sepoy mutineers and within weeks, dozens of units of the Indian army joined peasant armies in widespread rebellion. The old Muslim and Hindu aristocracies, who were seeing their power steadily eroded by the EIC, also rebelled against the British rule.

In the aftermath of the Rebellion, under the provisions of the Government of India Act 1858, the British government nationalized the EIC. The Crown took over its Indian possessions, its administrative powers and machinery, and its armed forces. The EIC was officially dissolved in 1858 and the rebellion led the British to reorganize the army, the financial system, and the administration in India. The country was thereafter directly governed by the Crown as the new British Raj.

Capture of the last Mughal emperor Bahadur Shah Zafar and his sons by William Hodson in 1857, by Robert Montgomery Martin, c. 1860.: The East India Company had a long lasting impact on the Indian Subcontinent. Although dissolved following the Rebellion of 1857, it stimulated the growth of the British Empire. Its armies were to become the armies of British India after 1857, and it played a key role in introducing English as an official language in India.

Attributions