The English East India Company had very humble beginnings in India. By 1623 it had established factories (trading posts) at Surat, Broach, Ahmedabad, Agra, and Masulipatam. From the very beginning, it tried to combine trade and diplomacy with war and control of the territory where their factories were situated.
Conditions in the south were more favorable to the English as they did not have to face a strong Indian government there.
The great Vijayanagar Kingdom had been overthrown in 1565 and its place taken by a number of petty and weak states. It was easy to appeal to their greed or overawe them with armed strength.
The English opened their first ‘factory’ in the south at Masulipatam in 1611. But they soon shifted the centre of their activity to Madras, the lease of which was granted to them by the local Raja in 1639.
The Raja authorised them to fortify the place, administer it, and coin money on condition of payment to him of half of the customs revenue of the port. Here the English built a small fort around their factory called Fort St. George.
Interestingly enough, from the very beginning this company of profit-seeking merchants was also determined to make Indians pay for the conquest of their own country.
For example, the Court of Directors of the Company wrote to the Madras authorities in 1683: we would have you to strengthen and fortify our Fort and Town (Madras) by degrees, that it may be terrible against the assault of any Indian Prince and the Dutch power of India.
But we must needs desire you so to continue your business (but with all gentleness) that the inhabitants may pay the full charge of all repairs and fortifications.
The island of Bombay was acquired by the East India Company from the British government in 1668 and was immediately fortified.
In Bombay the English found a large and easy-to-defend port. For that reason, and because English trade was threatened at the time by the rising Maratha power, Bombay soon superseded Surat as the headquarters of the Company on the west coast.
In Eastern India, the English Company had opened its first factories in Orissa in 1633. In 1651 it was given permission to trade at Hugli in Bengal. It soon opened factories at Patna in Bihar, Balasore in Orissa and Dhaka and other places in Bengal. It now desired that in Bengal too it should have an independent settlement.
It dreamt of establishing political power in India which would enable it to compel the Mughals to allow them a free hand in trade, to force Indians to sell cheap, and buy dear, to keep the rival European traders out and to make its trade independent of the policies of the Indian powers.
Political power would also make it possible for it to appropriate Indian revenues and thus to conquer the country with its own resources. Such plans were explicitly put forward at the time.
In 1687, the directors advised the governor of Madras to: establish such a policy of civil and military power and create and secure such a large revenue to maintain both as may be the foundation of a large, well-grounded, secure English dominion in India for all time to come.
In 1689 they declared: The increase of our revenue is the subject of our care, as much as our trade: ’tis that must maintain our force, when twenty accidents may interrupt our trade; ’tis that must make us a nation in India.
Hostilities between the English and the Mughal emperor broke out in 1686 after the former had sacked Hugli and declared war on the emperor.
But the English had seriously misjudged the situation and underestimated Mughal strength. The Mughal Empire under Aurangzeb was even now more than a match for the petty forces of the East India Company. The war ended disastrously for them.
They were driven out of their factories in Bengal and compelled to seek refuge in a fever-stricken island at the mouth of the Ganga. Their factories at Surat, Masulipatam, and Vishakhapatam were seized and their fort at Bombay besieged.
Having discovered that they were not yet strong enough to fight the Mughal power, the English once again became humble petitioners and submitted “that the ill crimes they have done may be pardoned”.
They expressed their willingness to trade under the protection of the Indian rulers. Obviously, they had learnt their lesson. Once again they relied on flattery and humble entreaties to get trading concessions from the Mughal emperor.
The Mughal authorities readily pardoned the English folly as they had no means of knowing that these harmless-looking foreign traders would one day pose a serious threat to the country.
Instead they recognised that foreign trade carried on by the Company benefited Indian artisans and merchants and thereby enriched the State treasury.
Moreover, the English, though weak on land, were, because of their naval supremacy, capable of completely running Indian trade and shipping to Iran, West Asia, Northern and Eastern Africa and East Asia. Aurangzeb therefore permitted them to resume trade on payment of Rs 150,000 as compensation.
In 1698, the Company acquired the zamindari of the three villages Sutanati, Kalikata, and Govindpur where it built Fort William around its factory. The villages soon grew into a city which came to be known as Calcutta.
In 1717 the Company secured from Emperor Farrukh Siyar a farman confirming the privileges granted in 1691 and extending them to Gujarat and the Deccan.
But during the first half of the eighteenth century Bengal was ruled by strong Nawabs such as Murshid Quli Khan and Alivardi Khan.
They exercised strict control over the English traders and prevented them from misusing their privileges. Nor did they allow them to strengthen fortifications at Calcutta or to rule the city independently. Here the East India Company remained a mere zamindar of the nawab.
Even though the political ambitions of the Company were frustrated, its commercial affairs flourished as never before. Its imports from India into England increased from £500,000 in 1708 to £1,795,000 in 1740. British settlements in Madras, Bombay and Calcutta became the nuclei of flourishing cities.
Large numbers of Indian merchants and bankers were attracted to these cities. This was due partly to the new commercial opportunities available in these cities and partly to the unsettled conditions and insecurity outside them, caused by the break-up of the Mughal Empire.
By the middle of the eighteenth century, the population of Madras had increased to 300,000 of Calcutta to 200,000 and of Bombay to 70,000.
The Charter of 1600 granted the East India Company the exclusive privilege of trading east of the Cape of Good Hope for a period of 15 years.
The Company was a strictly closed corporation or a monopoly. In India, a factory of the Company was generally a fortified area within which the warehouse (stores), offices and houses of the Company’s employees were situated. It is to be noted that no manufacture was carried on in this ‘factory’.
The Company’s servants were paid very low salaries. Their real income, for which they were so keen to take service in India, came from the permission the Company granted them to carry on private trade within the country while trade between India and Europe was reserved for the Company.