From Trade to Territory

The Company Establishes Power

Aurangzeb was the last of the powerful Mughal rulers. He established control over a very large part of
the territory that is now known as India. After his death in 1707, many Mughal governors (subadars) and
big zamindars began asserting their authority and establishing regional kingdoms. As powerful regional
kingdoms emerged in various parts of India, Delhi could no longer function as an effective centre.

By the second ha lf of the eighteenth century, however, a new power was emerging on the political
horizon – the British. Did you know that the British originally came as a small trading company and were
reluctant to acquire territories? How then did they come to be masters of a vast empire? In this chapter
you will see how this came about.

Fig. 1 – Bahadur Shah Zafar and his sons being arrested by Captain HodsonAfter Aurangzeb there was no
powerful Mughal ruler, but Mughal emperors continued to be symbolically important. In fact, when a
massive rebellion against British rule broke out in 1857, Bahadur Shah Zafar, the Mughal emperor at the
time, was seen as the natural leader. Once the revolt was put down by the company, Bahadur Shah
Zafar was forced to leave the kingdom, and his sons were shot in cold blood.

East India Company Comes East

In 1600, the East India Company acquired a charter from the ruler of England, Queen Elizabeth I,
granting it the sole right to trade with the East. This meant that no other trading group in England could
compete with the East India Company. With this charter the Company could venture across the oceans,
looking for new lands from which it could buy goods at a cheap price, and carry them back to Europe to
sell at higher prices. The Company did not have to fear competition from other English trading
companies. Mercantile trading companies in those days made profit primarily by excluding
competition,so that they could buy cheap and sell dear.

Fig. 2 – Routes to India in the eighteenth century

Mercantile – A business enterprise that makes profit primarily through trade, buying goods cheap and
selling them at higher prices

The royal charter, however, could not prevent other European powers from entering the Eastern
markets. By the time the first English ships sailed down the west coast of Africa, round the Cape of Good
Hope, and crossed the Indian Ocean, the Portuguese had already established their presence in the
western coast of India, and had their base in Goa. In fact, it was Vasco da Gama, a Portuguese explorer,
who had discovered this sea route to India in 1498. By the early seventeenth century, the Dutch too
were exploring the possibilities of trade in the Indian Ocean. Soon the French traders arrived on the
scene.

The problem was that all the companies were interested in buying the same things. The fine qualities of
cotton and silk produced in India had a big market in Europe. Pepper, cloves, cardamom and cinnamon
too were in great demand. Competition amongst the European companies inevitably pushed up the
prices at which these goods could be purchased, and this reduced the profits that could be earned. The
only way the trading companies could flourish was by eliminating rival competitors. The urge to secure
markets therefore led to fierce battles between the trading companies. Through the seventeenth and
eighteenth centuries they regularly sank each other’s ships, blockaded routes, and prevented rival ships
from moving with supplies of goods. Trade was carried on with arms and trading posts were protected
through fortification.

This effort to fortify settlements and carry on profitable trade also led to intense conflict with local
rulers. The company therefore found it difficult to separate trade from politics. Let us see how this
happened.

East India Company begins trade in Bengal

The first English factory was set up on the banks of the river Hugli in 1651. This was the base from which
the Company’s traders, known at that time as “factors”, operated. The factory had a warehouse where
goods for export were stored, and it had offices where Company officials sat. As trade expanded, the
Company persuaded merchants and traders to come and settle near the factory. By 1696 it began
building a fort around the settlement. Two years later it bribed Mughal officials into giving the Company
zamindari rights over three villages. One of these was Kalikata, which later grew into the city of Calcutta
or Kolkata as it is known today. It also persuaded the Mughal emperor Aurangzeb to issue a farman
granting the Company the right to trade duty free.

Farman – A royal edict, a royal order

The Company tried continuously to press for more concessions and manipulate existing privileges.
Aurangzeb’s farman, for instance, had granted only the Company the right to trade duty free. But
officials of the Company, who were carrying on private trade on the side, were expected to pay duty.
This they refused to pay, causing an enormous loss of revenue for Bengal. How could the Nawab of
Bengal, Murshid Quli Khan, not protest?

Fig. 3 – Local boats bring goods from ships in Madras, painted by William Simpson, 18
How trade led to battles

Through the early eighteenth century the conflict between the Company and the nawabs of Bengal
intensified. After the death of Aurangzeb, the Bengal nawabs asserted their power and autonomy, as
other regional powers were doing at that time. Murshid Quli Khan was followed by Alivardi Khan and
then Sirajuddaulah as the Nawab of Bengal. Each one of them was a strong ruler. They refused to grant
the Company concessions, demanded large tributes for the Company’s right to trade, denied it any right
to mint coins, and stopped it from extending its fortifications. Accusing the Company of deceit, they
claimed that the Company was depriving the Bengal government of huge amounts of revenue and
undermining the authority of the nawab. It was refusing to pay taxes, writing disrespectful letters, and
trying to humiliate the nawab and his officials.

Fig. 4 – Robert Clive

Puppet – Literally, a toy that you can move with strings. The term is used disapprovingly to refer to a
person who is controlled by someone else.

The Company on its part declared that the unjust demands of the local officials were ruining the trade of
the Company, and trade could flourish only if the duties were removed. It was also convinced that to
expand trade it had to enlarge its settlements, buy up villages, and rebuild its forts.

The conflicts led to confrontations and finally culminated in the famous Battle of Plassey.

The Battle of Plassey

When Alivardi Khan died in 1756, Sirajuddaulah became the nawab of Bengal. The Company was
worried about his power and keen on a puppet ruler who would willingly give trade concessions and
other privileges. So it tried, though without success, to help one of Sirajuddaulah’s rivals become the
nawab. An infuriated Sirajuddaulah asked the Company to stop meddling in the political affairs of his
dominion, stop fortification, and pay the revenues. After negotiations failed, the Nawab marched with
30,000 soldiers to the English factory at Kassimbazar, captured the Company officials, locked the
warehouse, disarmed all Englishmen, and blockaded English ships. Then he marched to Calcutta to
establish control over the Company’s fort there.

On hearing the news of the fall of Calcutta, Company officials in Madras sent forces under the command
of Robert Clive, reinforced by naval fleets. Prolonged negotiations with the Nawab followed. Finally, in
1757, Robert Clive led the Company’s army against Sirajuddaulah at Plassey.

Fig. 5 – The General Court Room, East India House, Leadenhall Street
The Court of Proprietors of the East India Company had their meetings in the East India House on
Leadenhall Street in London. This is a picture of one of their meetings in progress.

One of the main reasons for the defeat of the Nawab was that the forces led by Mir Jafar, one of
Sirajuddaulah’s commanders, never fought the battle. Clive had managed to secure his support by
promising to make him nawab after crushing Sirajuddaulah.

The Battle of Plassey became famous because it was the first major victory the Company won in India.

Source 1:

The promise of riches

The territorial ambitions of the mercantile East India Company were viewed with distrust and doubt in
England. After the Battle of Plassey, Robert Clive wrote to William Pitt, one of the Principal Secretaries
of State to the English monarch, on 7 January 1759 from Calcutta:

But so large a sovereignty may possibly be an object too extensive for a mercantile Company … I flatter
myself … that there will be little or no difficulty in obtaining the absolute possession of these rich
kingdoms: ... Now I leave you to judge, whether an income yearly of two million sterling with the
possession of three provinces … be an object deserving the public attention ...

After the defeat at Plassey, Sirajuddaulah was assassinated and Mir Jafar made the nawab. The
Company was still unwilling to take over the responsibility of administration. Its prime objective was the
expansion of trade. If this could be done without conquest, through the help of local rulers who were
willing to grant privileges, then territories need not be taken over directly.

Soon the Company discovered that this was rather difficult. For even the puppet nawabs were not
always as helpful as the Company wanted them to be. After all, they had to maintain a basic appearance
of dignity and sovereignty if they wanted respect from their subjects.

What could the Company do? When Mir Jafar protested, the Company deposed him and installed Mir
Qasim in his place. When Mir Qasim complained, he in turn was defeated in a battle fought at Buxar
(1764), driven out of Bengal, and Mir Jafar was reinstalled. The Nawab had to pay Rs 500,000 every
month but the Company wanted more money to finance its wars, and meet the demands of trade and
its other expenses. It wanted more territories and more revenue. By the time Mir Jafar died in 1765 the
mood of the Company had changed. Having failed to work with puppet nawabs, Clive declared: “We
must indeed become nawabs ourselves.”

Finally, in 1765 the Mughal emperor appointed the Company as the Diwan of the provinces of Bengal.
The Diwani allowed the Company to use the vast revenue resources of Bengal. This solved a major
problem that the Company had earlier faced. From the early eighteenth century its trade with India had
expanded. But it had to buy most of the goods in India with gold and silver imported from Britain. This
was because at this time Britain had no goods to sell in India. The outflow of gold from Britain slowed
after the Battle of Plassey, and entirely stopped after the assumption of Diwani. Now revenues from
India could finance Company expenses. These revenues could be used to purchase cotton and silk
textiles in India, maintain Company troops, and meet the cost of building the Company fort and offices
at Calcutta.

Source 2

The Nawab complains

In 1733 the Nawab of Bengal said this about the English traders:

When they first came into the country they petitioned the then government in a humble manner for
liberty to purchase a spot of ground to build a factory house upon, which was no sooner granted but
they built a strong fort, surrounded it with a ditch which has communication with the river and mounted
a great number of guns upon the walls. They have enticed several merchants and others to go and take
protection under them and they collect a revenue which amounts to Rs 100, 000 … they rob and plunder
and carry great number of the king's subjects of both sexes into slavery into their own country …

Company officials become “nabobs”

What did it mean to be nawabs? It meant of course that the Company acquired more power and
authority. But it also meant something else. Each company servant began to have visions of living like
nawabs.

After the Battle of Plassey the actual nawabs of Bengal were forced to give land and vast sums of money
as personal gifts to Company officials. Robert Clive himself amassed a fortune in India. He had come to
Madras (now Chennai) from England in 1743 at the age of 18. When in 1767 he left India his Indian
fortune was worth £401,102. Interestingly, when he was appointed Governor of Bengal in 1764, he was
asked to remove corruption in Company administration but he was himself cross-examined in 1772 by
the British Parliament which was suspicious of his vast wealth. Although he was acquitted, he
committed suicide in 1774.

However, not all Company officials succeeded in making money like Clive. Many died an early death in
India due to disease and war and it would not be right to regard all of them as corrupt and dishonest.
Many of them came from humble backgrounds and their uppermost desire was to earn enough in India,
return to Britain and lead a comfortable life. Those who managed to return with wealth led flashy lives
and flaunted their riches. They were called “nabobs” – an anglicised version of the Indian word nawab.
They were often seen as upstarts and social climbers in British society and were ridiculed or made fun of
in plays and cartoons.

Source 3

How did Clive see himself?

Consider the situation in which the victory at Plassey had placed me! A great prince was dependent on
my pleasure; an opulent city lay at my mercy; its richest bankers bid against each other for my smiles; I
walked through vaults which were thrown open to me alone, piled on either hand with gold and jewels!
Mr Chairman, at this moment I stand astonished at my moderation.