The Mughal Empire

European Trade Companies in Mughal India: From Traders to Territorial Powers

The arrival of the European trading companies in India from the early sixteenth century onward was a major chapter in Mughal history, and the gradual transformation of these companies from commercial visitors into territorial powers was developments of the seventeenth and eighteenth centuries. The Mughal state was by the late eighteenth century unable to prevent the companies from acquiring the substance of sovereign power. The present page treats the Portuguese Estado da India, the English East India Company, the Dutch VOC, the French Compagnie des Indes, the smaller Danish and Ostend companies, the trading posts and their privileges, the grant of the diwani in 1765, and the broader process by which the trading companies became territorial powers. The diplomatic context is treated in the Mughal diplomacy page, and the longer-term consequences are surveyed in the British conquest of India page.

The Portuguese Estado da India

The Portuguese were the first Europeans to reach India by sea, and the Estado da India was established by Vasco da Gama and his successors in the early sixteenth century, a century before the European trading companies in the Mughal-era sense. The Portuguese did not establish a company; they established a royal enterprise, administered from Goa after 1510, and the Portuguese strategy was to control the sea routes, to monopolize the spice trade, and to extract commercial concessions from the coastal rulers. The Portuguese established fortified posts at Goa, Daman, Diu, and Bassein.

The Portuguese were the dominant European presence in the Indian Ocean in the sixteenth century, but their position was increasingly challenged by the arrival of the English and the Dutch, by the loss of posts to local rulers, and by the unification of the Mughal state under Akbar the Great, which restricted Portuguese freedom of action on the western Indian coast. The Estado da India remained in India until 1961, but was by the seventeenth century a small and declining presence. The Portuguese role was, however, foundational: they established the pattern of fortified coastal trading posts, missionary activity, intermarriage with the local population, and the Luso-Indian culture, all taken up by the later companies.

The English East India Company

The English East India Company was founded by royal charter in 1600, and the company’s first voyage to India was in 1608. The company established its first trading post at Surat in 1612, expanded to Madras after 1639, and to Bombay after 1668. The company established a fourth major post at Calcutta after 1690.

The English East India Company was a joint-stock company, financed by English merchants, governed by a court of directors in London, and operating in India through a president and council at each major post. The most important treaty was the farman of 1717, by which the emperor Farrukhsiyar granted the company the right to trade freely in Bengal, to be exempt from the customs duties in return for a fixed annual payment, and to be subject to the company’s own courts.

The English company’s relations with the Mughal state deteriorated sharply in the mid-eighteenth century. The company was increasingly involved in the politics of the regional succession in Bengal, and the company’s victory at Plassey in 1757 and the installation of Mir Jafar as nawab marked the beginning of the company’s territorial role.

The Dutch VOC

The Dutch Vereenigde Oost-Indische Compagnie was founded in 1602, and the Dutch were the most successful European traders in the seventeenth century. The Dutch established a substantial presence on the Indian coast, with principal posts at Surat, Pulicat, Negapatnam, and Cochin, and the Dutch enjoyed a substantial share of the Indian Ocean trade, particularly the spice trade of the east Indies. The Dutch presence in India was, however, concentrated in the south and on the western coast, and the Dutch did not develop the political and territorial involvement that characterized the English East India Company in Bengal. The Dutch position declined in the eighteenth century as the English extended their reach, and the Dutch possessions were largely lost to the English during the Napoleonic wars.

The French Compagnie des Indes

The French Compagnie des Indes was founded in 1664 under the patronage of Colbert, and the French established their principal Indian posts at Pondicherry, Chandernagore, Mahé, Karikal, and Yanam. The French company was, throughout the seventeenth and eighteenth centuries, the principal European rival of the English company, and the Anglo-French rivalry in India, the Carnatic Wars of the 1740s and 1750s, was a major feature of the eighteenth-century political landscape. The ambitious plans of Dupleix, the French governor, to establish a French-controlled Indian empire were only frustrated by the British victories under Clive.

The French position in India was decisively weakened by the Seven Years’ War of 1756–1763, in which the French lost their principal Indian possessions to the British. The French retained Pondicherry, Chandernagore, Mahé, Karikal, and Yanam as trading posts, but the French never recovered their political position in India.

The Smaller Companies

The Danish Asiatisk Kompagni was founded in 1616, with a principal post at Tranquebar from 1620, surviving until 1845. The Ostend Company, founded in 1722 from the Spanish Netherlands, was suppressed in 1731 under British and Dutch pressure. The Swedish East India Company, founded in 1731, traded principally with China. The smaller companies did not develop the political role of the English and the French.

The Trading Posts and the Privileges

The European companies operated in India through a network of fortified trading posts, the factory in the English terminology, the factorij in the Dutch, the comptoir in the French, the feitoria in the Portuguese. The factory was a substantial walled enclosure, containing the offices, the warehouses, the residences, the chapel, and the kothi or Indian merchants’ quarter, and the factory was governed by a president or director and a council of senior factors.

The companies acquired substantial privileges from the Mughal authorities. The farman of 1717 granted the English company the right to trade freely in Bengal, and a series of parwanas and sanads granted the Dutch, the French, and the smaller companies similar privileges. The privileges included the right to trade at a fixed customs rate, the right to be exempt from the jurisdiction of the local qazis and faujdars, the right to maintain a military guard, and the right to build fortified factories. The privileges were, in theory, revocable.

The Grant of the Diwani 1765

The decisive moment in the European presence in India was the grant of the diwani of Bengal, Bihar, and Orissa to the English East India Company in 1765. The diwani was the right to collect the land revenue of the three provinces, and the grant was made by the emperor Shah Alam II to the company’s governor, Robert Clive, at Allahabad, in the aftermath of the Battle of Buxar.

The grant of the diwani was, in substance, the foundation of the British Indian empire. The company, which had been a trading body with a substantial Indian presence, became the effective ruler of three of the richest provinces of the Mughal empire, with a revenue far larger than the company’s commercial turnover, with a monopoly of state power, and with the right to maintain a large military force. The grant of the diwani is treated in detail in the British conquest of India page.

From Traders to Territorial Powers

The transformation of the European trading companies from commercial visitors into territorial powers combined several elements. The first was the military: the companies maintained their own troops, generally Indian sipahi under European officers, and the companies were increasingly drawn into the local politics of succession and rebellion. The second was the fiscal: the companies acquired the right to collect the revenue. The third was the judicial: the companies acquired the right to be subject to their own courts. The fourth was the diplomatic: the companies negotiated treaties with the Indian rulers. The fifth was the symbolic: the companies adopted the styles and the ceremonies of the Indian sovereign, modelled on the Mughal court ceremonial treated in the Mughal court ceremonial page.

The transformation of the companies was completed in the late eighteenth and early nineteenth centuries, when the British Crown assumed the administration of India from the East India Company in 1858. The British Indian administration preserved substantial elements of the Mughal administrative tradition, the mansabdari ranks, the qazi’s courts, the faujdar’s districts, and the diwan’s revenue, well into the nineteenth century.

Sources

  • P.J. Marshall, Bengal: The British Bridgehead (The New Cambridge History of India II.2, 1987), ch. 1.
  • Om Prakash, European Commercial Enterprise in Pre-Colonial India (The New Cambridge History of India V.2, 1998).