The rise and fall the British East India Company (1600-1858) is the story of what happens when business greed weds political power. The EIC turned ruthless plunderer after its first territorial control in Bengal in 1757 and was behaving like a savage until its fate was sealed by the 1857 rebellion. Its sudden demise in 1858 was a befitting karmic justice, although it formally died in 1874. Today’s global multinational corporations are no different, but good that they don’t keep private armies now!
When someone talks about the British conquering India, it gives the erroneous impression that the British government sent its military to occupy India and colonized it. However, the reality is far more unusual. It was a company of greedy British merchants that took first territorial control in India, in the Bengal province in 1757. And in less than fifty years it had stamped its authority on the Mughal king sitting in Delhi. By 1857, the company’s territories expanded to include what was the entire spread of the Mughal Empire in its heyday. Along the way, the British government steadily tightened its grip on the Company through changes the Company Charter and finally used the uprising of 1857 as an excuse to bring India under the control of the British parliament. However, the purpose of occupation remained the same – plunder of India to enrich Britain which continued until the British left India in 1947.
Despite centuries of Islamic oppression, India was still a prosperous society by western standards and contributed 25% towards global GDP. The image on the left above tells what was reported in the British parliament in 1835; it also shows the wicked English thinking.
Founding of the British East India Company
East India Company Logo
Throughout its life the East India Company (EIC) justified the fact that its birth in 1600 resulted from the nexus of business, state and church. In September 1599, a group of 80 merchants petitioned Queen Elizabeth I to start a company. It was born next year as the ‘The Company of Merchants of London trading into the East Indies’ when Queen issued a royal Charter, giving them a monopoly for 15 years over “trade to the East”. So, it did not come up as the usual family partnership, the norm in those days – but as a joint-stock company that could issue tradable shares in the open market to other investors. Such mechanism is capable of realizing much larger amounts of capital. The Charter also gave the company the right “to wage war” where necessary, although it did not mention anything about holding territories overseas. The Company was also informally called Honorable East India Company (HEIC) or often John Company. Later in 1708, it merged with another company to officially become the United Company of Merchants of England Trading to the East Indies. [read more about it later]
Even at birth the EIC had 125 shareholders and a capital of 72,000 pounds. It was a huge sum for a rather poor country like England in those days. The Company was owned entirely by the shareholders and managed by a governor with a board of 24 directors. Being a dividend paying company, maximizing profits for its shareholders was its chief motive. Thus, it is not surprising if the Company officials turned into ruthless plunderers after gaining territories in India.
The money-power relation has always worked the same way. Even today, we see the corporate-government nexus working to maximize corporate profits around the world. More often than not, even when there is functioning electoral democracy, it is the interests of the mega corporations that shape government decisions. Public uprising is perhaps the only way to tame and shame such companies, as was shown in the events of 1857 in India.
Nevertheless, the EIC impacted several historical events such as the Boston Tea Party (1773) and the Opium Wars (1839-1860).
Two Phases of the Company
The East India Company’s period in India between 1612 and 1858 can be conventionally divided into two historical periods.
- During 1612–1757, the East India Company acted as pure trader and to facilitate its operations set up townships in several locations in coastal India with the consent and implied non-interference of native rulers. Its rivals were the trading companies of Holland and France. By the mid-18th century, the EIC had set up three “Presidency towns”: Madras, Bombay, and Calcutta.
- During, 1757–1858, the Company steadily acquired control over large parts of India, now called “Presidencies.” However, the Company also increasingly came under British Crown’s oversight while gradually losing its mercantile privileges.
European Trade with East Indies
Europeans had been trading with the East Indies societies for centuries and spice trade was an important part of commerce. For the traders of the time, East Indies generally meant the region in the East direction including India, China, South Asia and East Asia. European traders knew of the riches of East Indies societies and wanted additional routes of access than the existing land routes (Silk Road and others) that were dangerous and expensive. That significantly raised the cost of items from the Eastern lands. However, until 15th century, those were only the known routes and were controlled first by the Arabs and later by the Turks.
Vasco da Gama reached India in 1498 via sea way
However, in 1498 the Portuguese explorer, Vasco da Gama found the sea way going in the East direction and became the first European to reach India by sea. He landed in Calicut on 20 May 1498. Discovery of the sea route meant that European merchants could bypass the hostile land route and trade directly with the East Indies via the sea way. Trading through this new and cheaper route boosted the economy of the Portuguese Empire. It gave Portugal a commercial monopoly on commodities from the East for several decades. It would be a century later before other European powers were able to challenge Portugal’s monopoly and naval supremacy.
India – A ‘Colony of Exploitation’; not of Settlement
If the imperial British could not impose the myth of terra nullius (a Latin expression meaning “nobody’s land”) – as they did in Canada, Australia, New Zealand, the Cape, and the Caribbean – it was due to India’s large population and sophisticated social, political and economic structures. As a result, the EIC could not achieve the absolute level of control over the resources of land and labor. Therefore, for the British India was a ‘colony of exploitation’, rather than one of settlement. India’s value lay primarily in the profits that could be made by controlling its internal markets and international trade, manipulating farm production and, above all, collecting tax revenue. Therefore, they had enough to plunder in India to cover the cost of all their military and administrative expenses and yet enrich Britain, but did not ultimately settle in India.
1608 – Arrival in India & Expansion
The British traders entered quite late into trade with the East Indies. When its started, the Portuguese and the Dutch were well established in this region. The first Company ship ‘Hector’ arrived in India at Surat in 1608; it was Company’s 4th voyage. It was an era of multinational competition. They defeated the Portuguese in a maritime battle in 1612. In 1615, Sir Thomas Roe met the Mughal Emperor, Jahangir (1605-1627) as emissary of King James I and gained the right to establish a factory at Surat. In return, the Company offered to provide choicest goods to the Emperor. The Mughal court possessed a wealth and magnificence to overshadow anything that Europe had seen at the time, and India’s natural produce and its artisans was coveted all over the world.
The original object of the EIC was to break the Dutch monopoly of the spice trade in the East Indies. But in 1623, the British traders were massacred at Amboina in Indonesia by the Dutch; thus, conceding defeat they decided to concentrate on India.
It 1639 the Company established its first permanent base in Madras. Next it settled in Bombay in 1668 and then in Calcutta in 1690. These three settlements intended as trading outposts where merchants could warehouse imported and exported goods.
In 1717, the Company bribed a weak and short-lived Mughal Emperor to give them a farman in Bengal—a decree that gave the Company the rights to trade duty free in return for a small annual fee to the Mughal court. This made it impossible for other European powers to compete with the British there. This privilege was also resented by the local Bengali rulers because it deprived them their revenue share and because it was granted by a distant and powerless Mughal ruler sitting in Delhi with barely any authority in the province. Despite persistent protests from the local nawab, the British increased their trading presence in Bengal. It made military clashes eminent.
An important event took place in the Battle of Madras in 1746 where the French soldiers came equipped with rapid firing guns. It puzzled the local Nawab and he soon retreated despite a much bigger army. This was the first battle in South Asia in which European weapons proved dramatically decisive. In future, superior military technology would play decisive role in the British expansion. By around mid 1700s, the combined military strength of Britain and France had surpassed the Mughal Empire.
By the 1740s rivalry between the British and the French was becoming acute. The French had made a base in Pondicherry, less than 100 miles from Madras. However, in the 7-year war between 1756 and 1763, the EIC effectively stumped out the French threat. This laid the foundation for Colonial monopoly of East India Company in India.
The EIC retained Monopoly by Bribing the Government
A new public discourse emerged towards the end of 17th century: “that all British subjects had an equal right to trade to the East Indies unless prohibited by act of Parliament.” Thus, a group of wealthy merchants, not associated with EIC, was allowed to form a company – a rival of EIC. However, it could hardly stay in business and had to be merged with the EIC in 1708. In the coming decades, the EIC did everything it could to keep off attempts of Parliament control on it, given the immense profit potential in the East Indies. Thus, it paid the government an extra amount of interest-free £1,200,000 in exchange of renewal of charter until 1726. Then again it contributed liberally for renewal until 1766. Then yet again it loaned liberally to secure the charter until 1783.
In brief, the EIC repeatedly bribed the government to maintain its monopoly of trading in the East Indies.
First Territorial Control – the Battle of Plassey, 1757
A key factor that helped the British occupation of India was that the Mughal Empire was declining after the death of Aurangzeb in 1707 and India was a fragmented country without a controlling central authority. Many local rulers started acting independently and often clashed for dominance. In such an environment they all noticed emergence of British military power which gained further importance after the Persian Nadir Shah defeated Mughal ruler in 1739 and plundered Delhi and emptied the treasury. Some rulers came forward to forge formal alliance with the British and others were forced to accept British authority. In 1740, the Nawab of Bengal became practically independent of Delhi. His death in 1756 his grandson Siraj ud daula became the Nawab of Bengal.
Nawab, Siraj ud daula was irked by the British who had built Fort William in Calcutta without his permission. He decided to challenge the increasing power of the British. So, in 1756, Siraj attacked the British Fort with an army of 30,000. Around one thousand British settlers evacuated, along with the military commanders, leaving around one hundred men behind. Nawab’s soldiers easily conquered the fort and locked remaining British men into a small basement. It resulted in deaths of most prisoners but around 20 survived. The incidence was reported by a survivor in a highly horrifying manner. It created a stir in Britain and the angered public demanded recapture of the Fort.
Loss of Calcutta meant a serious financial setback for the Company promoters because the province of Bengal was the most advanced industrial (textile) region in India. In 1750, on the strength of Bengal India accounted for 25% of world economic production contrasted to England’s 1.9%. Indian textiles had penetrated so fully in the British society that Indian names – such as bandana, calico, taffeta, and chintz – had entered into English language. Moreover, apart from textile manufacturing, the fertile soils of the Ganges River Basin in Bengal assured outstanding agricultural production.
British troops led by Robert Clive were depatched from Madras. They quickly retook the Fort William. But few months later in 1757, the Bengal Nawab returned with a large army, along with offer of military support from the French. Clive indulged in treachery and bribery. He made a secret pact with Nawab’s closest aide, Mir Zafar, who agreed to betray Siraj ud daula during battle and, in return, he would be made the Nawab. What followed was a sham battle and sensing betrayal Siraj fled. Mir Jafar kept his promise and Clive fulfilled his side of the bargain. Siraj was soon found and killed. Clive immediately plundered the Siraj’s treasury, leaving the new Nawab, Mir Jafar, with nothing.
Thus, the Company transformed itself from being traders to rulers in Bengal. This marked the beginning of British rule in India and the credit goes to the neurotic trickster Clive. In 1764-65, the Company won another important battle at Buxar after which the exiled Mughal Emperor Shah Alam had to sign a decree authorizing the Company to collect revenue in Bengal, Bihar and Orissa. Shah Alam became a pensioner of the Company and the Nawab of Awadh became their ally.
These two battles made the East India Company the tax collector of 10 million Bengalis. It came to possess a vast stretch of territory that included parts of current states of Maharashtra, Gujarat, Goa, Karnataka, Tamil Nadu, Orissa, West Bengal, Bihar and Uttar Pradesh. All Frenchmen were expelled from Bengal. Within a few years, Bengal would account for 50% of all Company trade, but Clive wanted more.
Bengal and Bihar came under the dual system of administration initiated by Robert Clive whereby the Company exercised Diwani rights (control over revenue and finances) while Nizamat (general administration and policing etc) rested with the puppet Nawabs. This system not only created confusion but also angered the public that was exploited by both the Company and the nawabs.
Pillage of Bengal – Ruthless Corporate Greed
Now the tax revenues passed to the Company. Clive got his pound of flesh from the Nawab in terms of 234,000 pounds and was awarded an annual salary of 30,000 pounds per year. He also took a Jagir (an endowment of tax revenue for life) for himself, at the age of 33. This made him one of the richest Britons in the world. Needless to say, hefty revenue from Bengal also greatly increased the military might of the Company.
With around 2 million pound annual revenue surplus (an incredible sum in 1760), the Company shares prices skyrocketed making the shareholders ecstatic. If the Hindi word ‘loot’ for booty became a part of English vocabulary it only pointed to what the Company was doing in India. Everyone from the lowest rank soldier to the general could expect to become rich should he survive a war in India.
From its power base in northeast India, the Company expanded its territory quickly by playing local Indian princes and nawabs off each other. The Company replicated the model in Bengal elsewhere, creating compliant puppet rulers so that it could rule territory efficiently and inexpensively. Throughout India, the Company used the name and authority of the decaying Mughal Empire for political cover. The Company emulated the Mughal revenue system by relying on local rulers to collect taxes.
Now that taxing Indians was giving them money they stopped using silver from England to pay for the trade. Bengal became the imperial “golden goose” for the conquerors. The first years of EIC rule were notorious for their corruption and profiteering – often described as ‘rape of Bengal’. Individual nabobs (as EIC employers were derisively dubbed) amassed massive personal fortunes.
For Bengalis the Company control was a total disaster. The most productive region in India was quickly reduced to poverty. Primarily due to their savagery, the Bengal famine of 1769-70 killed several million Indians – about a third of the provincial population. Rather than taking steps to curb starvation the Company actually raised land taxes and reduced wages. It never slackened its tax collection efforts and encouraged growing non-food crops (including opium) in place of the desperately needed rice.
Some Company officials even made fortunes exploiting people’s hardships; they hoarded food grains and sold at exorbitant prices – typical mentality of greedy and immoral traders. The Company officials even boasted that they had increased revenues even during the famine! Such was the barbarism of the foreigners who came posing as ‘developed’ and ‘civilized’ humans. An old Mughal official in Bengal wrote in his diaries: “Indians were tortured to disclose their treasure; cities, towns and villages ransacked; jaghires and provinces robbed: these were the ‘delights’ and ‘religions’ of the directors and their servants.”
Company rule also ruined the local industry and manufacturing of high quality goods. It only allowed export of low-value raw materials, such as raw cotton, opium, indigo, and tea and flooded the market with British products. Its prosperous weavers and artisans were coerced “like slaves” by their new masters. Taking advantage of its monopoly on trade, the Company forced weavers to accept extremely low wages and the textile industry declined. By the middle of the 19th century, the Company had effectively de-industrialized Bengal. However, corruption was so wide spread that the Company was at the brink of financial bankruptcy in the early 1770s. In August 1772, the East India Company applied for a loan of One Million Pounds to the British government.
It must be underlined that until 1772, EIC’s policies were influenced by shareholder’s meetings, where votes could be bought by the purchase of Company shares. This led to government intervention through the 1773 Act. Then, in future it gradually lost both its commercial and political control and in 1834 it became merely a managing agency for the British government of India.
The Regulating Act of 1773 Clipped Wings of EIC
It must be the corporate jealousy that back in England, there were people who were suspicious of the meteoric rise of the Company. In 1772, the British parliament was forced to investigate Company’s finances and the how it assumed the role of ruler when the mandate was for trading. Now it came out in open that the Company servants had become extremely corrupt and many of them had retired in Britain with heaps of wealth and lived like Indian Nawabs (often mocked as ‘English Nabobs’). It also came to light that many servants including Clive had even received Jagirs. Clive put on a cocky defense and despite winning a knighthood and a seat in the House of Lords, he remained a villainish figure embittered by the public recriminations. Finally, unable to face illness and opium addiction he committed suicide in 1774. It was a befitting karmic justice for the unthinkable suffering he caused to countless innocent people.
Anyway, Parliament put restrictions on the Company and assumed some supervisory role through the Regulating Act of 1773. Prime Minister North’s government began moves towards government control because keeping India under the belt was of national importance. This was the first step to the eventual Crown control of India that happened in 1858. Naturally, shareholders in the Company opposed the Act. The EIC was still a powerful lobbying group in Parliament despite its financial problems. The Company was annually paying 4 lakh pounds (around 46 million pounds in today’s equivalent) to the government to maintain the monopoly but had been unable to meet its commitments since 1768.
This regulating Act prohibited Company servants from receiving gift, rewards or bribes from Indians. It laid the foundation for a centralized administration in India by bringing presidencies of Madras and Mumbai under Bengal. The Governor of Bengal became the Governor General of Bengal with an executive council of 4 to assist him. Thus, Warren Hastings became the first Governor General. It also established a supreme court at Fort Williams in Calcutta where British Judges would administer the British legal system.
In a further blow to the Bengali textile industry, the regulations also included a 80% tax on imported Indian cotton to protect the incipient British textile industry. Bengali textile exports slowed and opium soon became the main export (illegally traded to China). Even with the new regulations, the East India Company continued to expand in India.
The importance of India for the British government can be seen from the fact that the William Pitt’s India Act of 1784 established government authority over political policy making by requiring approval from a Parliament regulatory board.
Quick Expansion of EIC
The journey from Calcutta in 1757 to Delhi in 1803 was truly stupendous from the colonizers’ perspective. In fact, within few years of Plassey, the multinational corporation had created an army of 20,000 locally recruited Indian sepoys to become an aggressive colonial power. And when it captured Delhi in 1803 from the Marathas it was owner of a huge army of 260,000 which was twice the size of the British army and was mightiest in Asia in terms fire power. At this stage, it had also created a vast administrative network in India and was generating nearly half of Britain’s trade. And, all this was the result of the boardroom thinking in its London office!
Back in Europe, collapse of the Napoleon empire in 1812, further strengthened England in its colonial expansion. Despite an incomplete conquest, the Company ruled most of India by the early 1800s. They fought long and protracted wars against the Marathas and the ruler of Mysore, just as the Mughals had done. But they could only subdue the Sikhs in the Punjab, the last holdout, in 1848.
The Charter Act of 1813 – EIC loses Trade Monopoly
Rise of Napoleon Bonaparte after the French revolution (1789-1799) had brought hard days to the English businessmen. His ‘Continental System in Europe’ prohibited the import of British goods into French allies in Europe. So, British traders were seeking entry into Asia by dissolving the monopoly of the EIC. They were also enthused by the Free Trade theory of Adam Smith that had become quite popular in those days. Thus, they were arguing that ending the monopoly of EIC in India would improve the growth of British commerce and industry.
Thus, through the Charter Act of 1813 Company’s monopoly of Indian trade was ended and other British merchants were allowed to trade in India, though under a strict license system. Then under the 1833 Charter Act, it lost its China monopoly also. Now it was turned into a mere administrative body for the British territories in India. The Act, for the first time, explicitly defined the constitutional position of British territories in India. It also turned India into a British colony and unified colonial administration under one control. It also asked the Company to set aside at least rupees one lakh for educating Indians under them.
The Act of 1833 permitted the Britishers to settle freely in India and allowed Christian missionaries to operate in India and appointed Bishops for the British India. However, Indians saw it as ‘loot’ of another kind, a religious plunder of Indian society. In fact, in 1835 Macaulay introduced English education system aiming to completely destroy Indian society by destroying its traditional education system. His intent is shown in the video below:
Increasing Mistrust of the British
Missionaries’ deceptive conversion gimmicks alienated Indians, although many fell into their trap. Most became suspicious that the British government was trying to Anglicize India. The policy of taxing lands belonging to Temples and Mosques also supported their fear.
With most of the country under their control and lording over 200 million people, the British now became increasingly ruthless in their manipulatory tricks in order to seize those few states that remained even notionally independent. Their exploitative policies like the Doctrine of Lapse and direst annexation that had dislodged a large number of rulers. For instance, Rani Lakshmi Bai’s adopted son was not permitted to sit on the throne of Jhansi. Rulers of Satara and Nagpur also met similar fates. Jaitpur, Sambalpur and Udaipur were also annexed. Thus, most rulers were living in apprehension and fear. Annexation of Awadh had left thousands jobless and made the State a hotbed of discontent.
Heavy taxation and the harsh methods employed to collect revenue were resented everywhere. It was creating poverty and landlessness when people were unable to pay loans taken from money lenders. Large numbers of sepoys were drawn from the peasantry; they were also affected by it.
British policies completely destroyed the traditional economic structure and they were dumping British manufactured goods in India, ruining local industry. Indians were reduced to mere suppliers of raw materials for British industries and consumers of British goods. The famine in the Agra region (1837-38) was met by their typical ‘look the other way approach’ and let people die.
Britishers’ conduct was openly racist and Indian soldiers were treated poorly and paid less. They were required to serve in faraway places and in 1856 an Act was passed so that they could be even send to outside Indian borders. Changes in the Army structure had reduced the pay and promotion opportunities of Indian soldiers. There was significant alienation of the natives while the Company lords enjoyed cocky isolation.
All these policies had left people in deep anger. Now the stage was set for revolution.
The First War of Independence, 1857
The uprising of 1857 was an expression of spontaneous anger against the colonial exploitation that had been simmering in the masses for a long time. Only a spark was needed to ignite the fire. The spark came in the form of greased cartridges given to soldiers for their rifles. A rumor spread that the cartridges of the new Enfield rifles were greased with the fat of cows and pigs. Before loading them in the rifles the sepoys had to bite off the cover on the cartridges. Both Hindu and Muslim sepoys not only refused to use them for religious reasons but they felt highly offended. The first soldier to protest was Mangal Pandey; he was hanged within weeks.
On April 25, 1857, 85 soldiers in Meerut refused to use the cartridges but they were put in jail. Indian soldiers killed their British officer and freed their colleagues and marched to Delhi where they were joined by more soldiers. They seized Delhi and declared the Mughal emperor, Bahadur Shah Zafar the Emperor of Hindustan. The British recaptured Delhi few months later in September and deported the old king to Rangoon where he died in 1862. His sons were shot dead, ending the Mughal dynasty. But the rebellion had spread to several areas and the violence continued for over one year. Lord Canning declared peace on July 8, 1858.
This rebellion of Indian soldiers can be easily called the first war of India’s independence. It truly shook the foundation of the British rule and gave the worst nightmare to the rulers who were living in hallucination of being invincible. It gave a ‘death blow’ to the mighty Company and ended whatever was left of the Mughal rule in Delhi. The British government took over Company’s armed forces, territories and possessions through the Government of India Act of 1958. Thus began the period of high imperialism in India – the British Raj.
The British government abolished the Doctrine of Lapse and started involving Indians in administration. They continued to rule for another nine decades year until 1947, but the relationship between rulers and ruled had changed forever.
The East India Company continued its paper existence for another 17 years. It was finally dissolved on 1 June 1874, through the East India Stock Dividend Redemption Act, and its shareholders received compensation from Parliament.