The British East India Company and India: A History

For most of the period between 1600 and 1858, India was governed by a joint-stock company. The British East India Company — chartered by Elizabeth I in 1600, restructured by Oliver Cromwell in 1657, and dissolved by Parliament in 1858 — was, in its mature form, one of the most powerful corporations the world has ever seen. It commanded an army larger than that of most sovereign states, it ruled perhaps 200 million Indians, and it generated a private income that allowed its directors to dominate British politics. As the historian Philip Stern puts it in The Company-State (2011), the EIC was “a corporation that acted like a state, and a state that acted like a corporation.” Understanding the Company is essential to understanding British India.

The Founding and Early Years

The East India Company was founded on 31 December 1600, with a royal charter from Queen Elizabeth I. The charter granted the company a monopoly on English trade with the East Indies, and it was supported by a group of London merchants led by Sir James Lancaster and William Cavendish. The company’s early ventures focused on the spice trade of the East Indies, and its ships competed with the Dutch and Portuguese for the trade of the Malay Archipelago. The Dutch East India Company, founded in 1602 and armed with the kind of state backing that the English company envied, displaced the English from the East Indies after the 1623 Amboyna massacre, and the English company turned to India.

The company was one of several chartered companies that the English crown licensed for overseas trade. The 1657 charter from Oliver Cromwell gave it a permanent place in the English trading system, and the 1660s Restoration settlements put the company on a stable legal footing.

The Early Trading Posts

The company established its first Indian trading post at Surat in 1612, and gradually built a network of factories at Madras (1639), Bombay (1668, transferred from the Portuguese as part of the dowry of Catherine of Braganza), and Calcutta (1690). The factories were fortified trading posts, governed by factors who operated under the company’s regulations and the protection of the local Indian rulers. The early trade focused on Indian textiles, particularly calicoes and muslins, and on spices from Southeast Asia. The company was the principal European partner of the Mughal Empire, and its fortunes were closely tied to the politics of the Mughal court.

The company’s presence in Bengal, in particular, became increasingly important from the late seventeenth century. By the early 1700s, Bengal was supplying more than half of the company’s purchases, and the Bengal textile industry was producing some of the most remarkable cloth in the world. The company did not invent the Mughal textile economy; it redirected it.

The Transformation to Territorial Power

The transformation of the East India Company from trader to territorial ruler began in the mid-eighteenth century. The Battle of Plassey of 23 June 1757, in which Robert Clive’s small East India Company force — perhaps 3,000 men, of whom 800 were European — defeated the Nawab of Bengal, Siraj-ud-Daulah, was the decisive event. As the historian C. A. Bayly argued in Empire and Information (1996), Plassey was as much a media event as a military one: the company had paid for much of the nawab’s army to stay out of the battle, and the contest was decided in the tent rather than the field.

The 1765 grant of the diwani, or the right to collect revenue, in Bengal, Bihar, and Orissa, given by the defeated Mughal Emperor Shah Alam II to the company at Allahabad, gave the company the financial resources to underwrite further expansion. The subsequent wars of expansion brought the major Indian powers under British control: the Anglo-Mysore Wars (1767–1799) defeated Hyder Ali and Tipu Sultan; the Anglo-Maratha Wars (1775–1818) broke the Maratha Confederacy; and the Anglo-Sikh Wars (1845–1849) annexed the Punjab.

The Company as Ruler

In the late eighteenth and early nineteenth centuries, the East India Company became the de facto ruler of much of India. Warren Hastings, the first governor-general of Bengal (1773–1785), established the institutional framework of company rule. The Regulating Act of 1773 and Pitt’s India Act of 1784 created the system of dual control, with the governor-general in Calcutta exercising day-to-day authority and the Board of Control in London overseeing political decisions.

The system of subsidiary alliances, in which Indian rulers accepted British military protection in return for the payment of tribute and the surrender of foreign policy, was the principal method of expansion in this period. As the historian Sushil Chaudhury has shown, the alliances looked like diplomacy and behaved like conquest: the British Indian Army, paid for by the alliance subsidies, was the largest standing force in South Asia by 1800.

The Economic Impact

The economic impact of East India Company rule on India was profound and controversial. The company imposed a revenue system that extracted large sums from Indian agriculture, and it monopolised the production and trade of important commodities such as opium, salt, and indigo. The deindustrialisation of India, particularly the decline of the Indian textile industry, was a long-running historical process, although its causes are debated. The classic account, P. J. Marshall’s Bengal: The British Bridgehead (1987), attributes the decline more to global market shifts than to company policy; the more critical Indian nationalist account, represented by the work of R. C. Dutt and more recently by the Subaltern Studies historians, blames company monopoly and British tariff policy.

The Bengal Famine of 1770, which killed perhaps 10 million people — a third of the population of the province — was the most catastrophic single event of company rule. The famine was not, in the main, a natural disaster; it was the consequence of a revenue system that extracted grain the population could not spare. As the contemporary critic Alexander Dow wrote: “the peasants of Bengal are reduced to a state of slavery the most humiliating and complete.”

The Indian Rebellion of 1857

The Indian Rebellion of 1857 was the most serious challenge to East India Company rule. The rebellion, which began with a mutiny of Indian sepoys in the service of the company, spread across northern and central India and threatened the very existence of British rule. The rebellion was triggered by several factors, including the introduction of the new Enfield rifle cartridges greased with animal fat (rumoured to be pig and cow fat, which offended both Hindu and Muslim soldiers), the annexation policies of Lord Dalhousie, and the broader grievances of the Indian population. As the historian William Dalrymple has argued in The Last Mughal (2006), the rebellion was also a reaction to the systematic destruction of the old Mughal order by British modernisation.

The rebellion was suppressed by the summer of 1858, but it led directly to the dissolution of the company and the establishment of the British Raj. The reprisals were severe: rebel villages were destroyed, captured sepoys blown from cannon mouths, and entire populations displaced. The violence of 1857 was, in the judgment of the historian Kim Wagner, “a counter-insurgency that was also a racial war.”

The Dissolution of the Company

The East India Company was formally dissolved by the Government of India Act of 1858, which transferred the powers of the company to the British Crown. The last vestiges of the company, including its commercial functions, were wound up by stages, and the company was finally dissolved as a legal entity in 1874. The British Raj, governed by a viceroy and a council, replaced the company as the instrument of British rule. The company’s archives, libraries, and buildings were transferred to the new government, and many of its officers joined the new Indian Civil Service.

The dissolution marked the end of an era in the history of the British Empire, and it inaugurated the period of direct imperial rule that lasted until 1947. The new model — Crown rule, an Indian Civil Service recruited by competitive examination, and an Indian Army under the Commander-in-Chief — would last, in its broad outlines, until 1947.

The Legacy of the East India Company

The legacy of the East India Company is still debated in modern India and Britain. The company was a forerunner of the modern multinational corporation, and its chartered structure, joint-stock ownership, and territorial ambitions make it a frequent reference point in discussions of corporate responsibility. In India, the company is remembered both as an instrument of British imperial rule and as a period of modernisation, and the company’s role in the Bengal Renaissance and in the introduction of Western education is still a matter of historical debate. The company remains one of the most studied and most controversial institutions in the history of the British Empire.

Historiographical Note

The historiography of the EIC has been transformed. The nineteenth-century Whig tradition, represented by James Mill’s History of British India (1817), treated the Company as a vehicle of British progress. The twentieth-century nationalist and Marxist revisions — from R. C. Dutt to A. L. Basham — turned that picture on its head. The most influential work of the last forty years has been C. A. Bayly’s Empire and Information (1996) and the more recent work of Philip Stern, Lakshmi Subramanian, and the contributors to the New Cambridge History of India. The current debate, exemplified in the work of William Dalrymple and the writing of the Subaltern Studies group, concerns the degree to which the Company can be understood as a state rather than a business.

In this Section

Other Sections