British Trading Companies and East India Company


How British Trading Companies and East India Company rule and settled in India.

Establishment of Company Rule in India

Vasco da Gama landed at Calicut in 1498 and marked the beginning of the European era in Indian history. By the sixteenth century, the Portuguese had established their colony in Goa. In the next century, India became a popular destination for a large number of European traders, adventurers, and missionaries from England, Spain, France, Holland, etc.

     The age of Imperialism in India began with the weakening and eventually, the disintegration of the Mughal Empire. The lack of a strong central authority led to the emergence of many independent states that revolted against the weak successors of Aurangzeb. They were the states of Bengal, Awadh, Hyderabad, and Mysore. The Sikhs, the Marathas, the Jats, and the Rajputs also set-up their own kingdom. Hence, the stage was set for the European to take advantage of this situation.

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Many European trading companies established their centers in coastal areas of India. The trading centers were called factories – the places where ‘factors’ or ‘officials’ worked. Some of the factories were fortified as a safeguard from the rival trading companies. They bought spices, cotton textiles (handloom), indigo (for drying) and saltpeter (raw material for making gum powder) at cheap rates from India and sold them in Europe and America at a high price. The huge profit margin led to a competition among the foreign trading companies.

   Eventually, the other trading companies had to grow out to the English and the French companies, who remained the main rivals in India.

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The history of the world has not witnessed a more amazing story than that of the establishment of the British Empire in India. It was not the result of a deliberate effort but a series of episodes that finally led to the political dominance of India by the East India Company.

 The East India Company set-up trading posts in Surat and the three presidency settlement at Fort William in Bengal, Fort St. George in Madras and Bombay Castle. They established friendly relations with the local princes to further their profits. The Indian rulers signed alliances to secure the help of the English military to settle their internal rivalries. Taking advantage of the situation, the British introduced the policy of ‘Divide and Rule’. As a result, the Indian princes became mere puppets in the hands of the English.


How could a trading company become an imperial power? The real answer is that the East India Company became an imperial power to protect its trading interests from other European traders. It began as a trading company, took over political control and became the ruler of entire India. The aim of the Company was to gain a monopoly of the entire trade in the East. The Company came into conflict with other foreign traders and hence, built up its own military ad administrative departments. It became such a strong force that it took over the governance of Bengal, Madras (now Chennai) and Bombay (now Mumbai). Gradually, the trading company transformed into an auxiliary government and military power that ended only in 1858.

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