The rise and fall of the British East India Company

The East India Company was founded on the 31st of December 1600, with the goal of establishing trade relations between England and the East Indies.

The company was established by a group of more than 200 English merchants who appealed to Queen Elizabeth I, who was then the queen of England.

As a result, the Queen issued the company with a Royal Charter, allowing it to monopolise trade in the Far East.

The company established its initial trading post in Bantam on Java, Indonesia, in 1602.

This was followed by another post in the Moluccas, also known as the Spice Islands.

Both of these early posts were part of the company's efforts to break into the lucrative spice trade dominated by the Dutch and Portuguese.

Then, the company then began to expand its operations, eventually establishing a network of trading posts across the Indian subcontinent.

The East India Company faced significant challenges during its expansion into India, especially from the powerful Mughal Empire. 

In 1615, King James I of England sent Sir Thomas Roe to the Mughal Emperor, Nur-ud-din Salim Jahangir, to negotiate a formal commercial treaty.

Roe's mission was to secure permission for the Company to establish itself in India and gain valuable trading rights.

Initially, the Mughals were reluctant to allow the British entry, but they eventually accepted the terms, which promised the Mughal court exclusive European manufactured goods.

This agreement was a turning point for the Company’s influence in India, which had previously been limited despite its early attempts to operate in the region.

The Company had already begun setting up trading posts by 1607, but its real influence started after Jahangir’s acceptance.

The first post was established in Surat in 1612, followed by others like Masulipatnam on the Andhra Coast and Madras in 1639.

Madras, which was initially called Fort St. George, became a critical hub for British activity in southern India.

By 1647, the Company had a strong foothold, operating 23 factories across India, including major ones in Bengal and Madras.

At this time, it was heavily involved in the trade of cotton, silk, dyes, saltpetre, and tea, which were in high demand back in Europe.

In 1661, the Company expanded further when the city of Bombay came under British control when the city had been part of the dowry given to Charles II when he married Catherine of Braganza.

In 1668, Charles transferred Bombay to the East India Company, which quickly set up a new factory there, which strengthening their presence along the western coast of India.

This acquisition added another vital point to their growing network of trading posts.

In 1670, the English king, Charles II, passed several laws to strengthen the British East India Company's position in India, granting the company more autonomy and privileges.

These laws allowed the Company to expand into additional territories, mint its own currency, and construct fortresses.

Consequently, this gave it the tools to grow its influence across the subcontinent.

As a result of these developments, the Company saw immense success in the textile industry, becoming a global leader in the trade of Indian goods during the 17th and 18th centuries.

Most of all, the British East India Company created private armies to secure its interests and enforce its will throughout India.

European powers operating in the region, including the British, recruited local Indian soldiers known as sepoys.

These sepoys fought for European colonial powers and trading companies, allowing the British East India Company to maintain military control over vast areas of India.

The company quickly grew in power and influence, and by the mid-1700s, it had become one of the most powerful organisations in the world. 

On 23 June 1757, the British East India Company defeated the Nawab (the title of the Muslim ruler) of Bengal, Siraj-ud-Daulah, and his French allies in the Battle of Plassey.

The French had chosen to assist the Nawabs, who had their own economic motivation in the area, but their defeat in the battle only reduced their power in the country.

The British East India Company's victory in the Battle of Plassey was crucial for two reasons: it provided the company a foothold in Bengal from which to extend throughout India, and it secured its future.

Next, the Battle of Wandiwash in 1760 was a decisive conflict between the British and the French in India, which ended French ambitions in the region and secured British dominance in South Asia.

This didn't, however, stop further military actions by the Company. For example, at the Battle of Buxar in 1764, Major Hector Munro and the British East India Company defeated the combined forces of the Nawab of Bengal, the Nawab of Awadh, and the Mughal Emperor Shah Alam II.

Their victory led to the Treaty of Allahabad in 1765, which granted the Company rights over Bengal, Bihar, and Orissa to collect revenue in these provinces (known as 'Diwani rights').

As the East India Company expanded its operations, the British government began to grow concerned about its increasing power.

The Company now had immense control over the economy of eastern India, and British officials began to recognize that a private enterprise held unprecedented power over vital territories.

So, the British government and the East India Company established a dual system of control in 1765 by Robert Clive.

This system divided responsibilities between the British East India Company, which obtained the Diwani rights (revenue collection) for Bengal, Bihar, and Orissa, and the Nawab of Bengal, who retained the Nizamat rights (civil administration).

Unfortunately, this system led to widespread corruption and inefficiency, as the Company held power without responsibility, while the Nawab had responsibility without resources.

By the early 1770s, financial instability within the East India Company had reached a crisis point.

Following years of costly military campaigns and administrative mismanagement, the Company faced the threat of bankruptcy in 1772.

In addition, a famine in Bengal from 1769 to 1773, which was worsened by the Company’s oppressive tax policies, highlighted the urgent need for reform.

As a result, the parliament stepped in with the Regulating Act of 1773, which created a council appointed by the British government to supervise the Company's activities in India and appointed a governor-general to manage its affairs.

It was hoped that the new structure would prevent future crises and ensured that the Company's operations would align with British national interests.

At that point, the city of Calcutta, now known as Kolkata, became the headquarters of the British East India Company in 1772 and the first Governor-General of India was Warren Hastings (1773–1785).

He laid the administrative foundations for British rule in India by reforming the tax system and judicial institutions during his tenure.

Then, in 1784, Prime Minister William Pitt issued the 'India Act', which established government oversight over the British East India Company's political affairs in India by creating a Board of Control to supervise civil and military decisions, while the Court of Directors managed commercial activities.

The act aimed to address the shortcomings of the earlier Regulating Act of 1773 by placing ultimate authority with the British government.

Therefore, the British East India Company ruled India as a sort of colony. Because of this, historians have dubbed it 'Company Rule'.

By the early 1800s, the East India Company’s revenue from India had grown immensely, generating £22 million annually.

This meant that it was a crucial revenue stream for financing Britain's growing global empire.

However, the company's power began to decline in the early 1800s, due to a number of factors including internal corruption and external pressure from other European powers. 

The British East India Company's rule over India came to an end with the Indian Rebellion of 1857.

The rebellion was sparked by a number of factors, including the company's high taxes, its mistreatment of Indians, and its policy of favouring Europeans over Indians.

Even though the British East India Company had at least 267,000 troops under its command by 1857, the rebellion quickly spread across the country.

The Company’s forces struggled to regain control, and British military intervention became necessary to suppress the rebellion.

By the time the conflict ended in 1858, the British government had already decided that direct control over India was essential to prevent further instability.

So, finally, the parliament introduced the Government of India Act of 1858, which transferred all its powers, territories, and assets to the British Crown, and placed India directly under the rule of Queen Victoria.

After 1858, the Company still existed in a legal sense, but it had no political authority.

It managed some of its remaining commercial interests, though these were gradually reduced over the next few years.

By 1873, the East India Company had been formally dissolved. This began the period of Indian history known as the British Raj, which ruled over India until 1947.

During this time, the British government controlled India's economy, politics, and society.