Updated: Dec 31, 2020
The British East India Company, sometimes referred to as "John Company," was a joint-stock company which was granted an English Royal Charter by Elizabeth I on December 31, 1600, with the intention of favoring trade privileges in India. The Royal Charter effectively gave the newly created The Honourable Company of Merchants of London Trading into the East Indies (HEIC) a 15 year monopoly on all trade in the East Indies.
The Company transformed from a commercial trading venture to one which virtually ruled India as it acquired auxiliary governmental and military functions, until its dissolution in 1858. Increasingly, the company had been compelled to promote the material and moral progress of its Indian subjects, as, while trade remained the main goal of Empire, the British started to justify imperialism by speaking of a duty to “civilize” and “educate.” Servants of the company, though, could make vast amounts of money and were highly paid while their counterparts at home received modest salaries. The Utilitarian philosopher, John Stuart Mill, who worked for the company, defended its record and argued that it ought to continue to govern India, since it was above party-politics and completely devoted to Indian affairs while London was too distant from India to administer it properly. The company's policy of annexing Indian states whose rulers they considered “corrupt” (or when they refused to recognize a ruler's heir) was one of the main causes of the revolt of 1857–1858. Technically, the company had always governed as agent of the Moghul Emperor. The last emperor was deposed and exiled after lending nominal leadership to the revolt. After this anti-British rebellion (or First War of Indian Independence), the British government decided that direct rule would be more appropriate.
A close study of the history of the company shows how the British imperial project was re-imagined over the course of its history. It began unashamedly as a money-making, commercial activity but increasingly re-conceived itself as a moral enterprise. This was arrogant but it resulted in many initiatives, such as education provision and measures aimed at creating social equality that raised many people out of poverty and imbued them with a sense of shared values and human dignity. The eminent British historian, Thomas Babbington Macauley (1800–1859) made his fortune from a few years spent in the company's service, and advised in his 1835 Minute on Indian Education that official funds should only be spent on English and Western education in India to produce a class of persons who would be racially Indian, “but English in taste, in opinions, in morals, and in intellect.” Such people would also be loyal to the British out of recognition of their superior moral worth. He claimed to never have met anyone who believed that, “the Arabic and Sanscrit poetry could be compared to that of the great European nations.” The founding fathers of independent India later said that they admired English literature for its concern for liberty, justice, and the underdog. However, they found the British hypocritical, since they applied these high ideals at home and not in India.
The company was founded as The Company of Merchants of London Trading into the East Indies by a coterie of enterprising and influential businessmen, who obtained the Crown's charter for exclusive permission to trade in the East Indies for a period of 15 years. The company had 125 shareholders, and a capital of seventy-two thousand pounds. Initially, however, it made little impression on the Dutch control of the spice trade and at first it could not establish a lasting outpost in the East Indies. Eventually, ships belonging to the company arrived in India, docking at Surat, which was established as a trade transit point in 1608. In the next two years, it managed to build its first factory (as the trading posts were known) in the town of Machilipatnam in the Coromandel Coast in the Bay of Bengal. The high profits reported by the company after landing in India (presumably owing to a reduction in overhead costs effected by the transit points), initially prompted King James I to grant subsidiary licenses to other trading companies in England. But, in 1609, he renewed the charter given to the company for an indefinite period, including a clause which specified that the charter would cease to be in force if the trade turned unprofitable for three consecutive years.
The company, under such obvious patronage, soon managed to eclipse the Portuguese, who had established their bases in Goa and Bombay, which was later ceded to England as part of the dowry of Catherine of Braganza (1638–1705) Queen consort of Charles II of England. It managed to create strongholds in Surat (where a factory was built in 1612), Madras (Chennai) in 1639, Bombay in 1668, and Calcutta in 1690. By 1647 the company had 23 factories and 90 employees in India. The major factories became the walled forts of Fort William in Bengal, Fort St. George in Madras, and the Bombay Castle. In 1634 the Mughal emperor extended his hospitality to the English traders to the region of Bengal and in 1717 completely waived customs duties for the trade. The company's mainstay businesses were by now in cotton, silk, indigo, saltpeter, and tea. All the while, it was making inroads into the Dutch monopoly of the spice trade in the Malaccan straits. In 1711 the company established a trading post in Canton (Guangzhou), China, to trade tea for silver. In 1657 Oliver Cromwell renewed the charter of 1609 and brought about minor changes in the holding of the company. The status of the company was further enhanced by the restoration of the monarchy in England. By a series of five acts around 1670, King Charles II provisioned the company with the rights to autonomous territorial acquisitions, to mint money, to command fortresses and troops, to form alliances, to make war and peace, and to exercise both civil and criminal jurisdiction over the acquired areas. The company, surrounded by trading competitors, other imperial powers, and sometimes hostile native rulers, experienced a growing need for protection. The freedom to manage its military affairs thus came as a welcome boon and the company rapidly raised its own armed forces in the 1680s, mainly drawn from the indigenous local population. By 1689 the company was arguably a "nation" in the Indian mainland, independently administering the vast presidencies of Bengal, Madras, and Bombay and possessing a formidable and intimidating military strength. From 1698 the company was entitled to use the motto "Auspico Regis et Senatus Angliae" meaning, "Under the patronage of the King and Parliament of England."
At this time, Britain and France became bitter rivals, and there were frequent skirmishes between them for control of colonial possessions. In 1742, fearing the monetary consequences of a war, the government agreed to extend the deadline for the licensed exclusive trade by the company in India until 1783, in return for a further loan of £1 million. The skirmishes did escalate to the feared war, and between 1756 and 1763 the Seven Years' War diverted the state's attention towards consolidation and defense of its territorial possessions in Europe and its colonies in North America. The war also took place on Indian soil, between the company troops and the French forces. Around the same time, Britain surged ahead of its European rivals with the advent of the Industrial Revolution. Demand for Indian commodities was boosted by the need to sustain the troops and the economy during the war, and by the increased availability of raw materials and efficient methods of production. As home to the revolution, Britain experienced higher standards of living and this spiraling cycle of prosperity. Demand and production had a profound influence on overseas trade. The company became the single largest player in the British global market, and reserved for itself an unassailable position in the decision-making process of the government.
However, the company continued to experience resistance from local rulers. Robert Clive led company forces against French-backed Siraj Ud Daulah to victory at the Battle of Plassey in 1757, thereby snuffing out the last known resistances in Bengal. This victory estranged the British and the Mughals, who had been served by Siraj as an autonomous ruler. But the Mughal Empire was already on the wane after the demise of Aurangzeb, and was breaking up into pieces and enclaves. After the Battle of Buxar, the ruling emperor Shah Alam gave up the administrative rights over Bengal, Bihar, and Orissa. Clive thus became the first British Governor of Bengal. Haider Ali and Tipu Sultan, the legendary rulers of Mysore (in Carnatic), also gave the British forces a tough time. Having sided with the French during the war, the rulers of Mysore continued their struggle against the company with the four Anglo-Mysore Wars. Mysore finally fell to the company forces in 1799, with the slaying of Tipu Sultan. With the gradual weakening of the Maratha Empire in the aftermath of the three Anglo-Maratha wars, the British also secured Bombay and the surrounding areas. It was during these campaigns, both of Mysore and of the Marathas, that Arthur Wellesley, later Duke of Wellington, first showed the abilities which would lead to victory in the Peninsular War and at the Battle of Waterloo. A particularly notable engagement involving forces under his command was the Battle of Assaye.
Thus, the British had secured the entire region of Southern India (with the exception of small enclaves of French and local rulers), Western India, and Eastern India. The last vestiges of local administration were restricted to the northern regions of Delhi, Oudh, Rajputana, and Punjab, where the company's presence was ever increasing amidst the infighting and dubious offers of protection against each other. Coercive actions, threats, and diplomacy aided the company in preventing the local rulers from putting up a united struggle against it. The hundred years from the Battle of Plassey in 1757 to the anti-British rebellion of 1857 were a period of consolidation for the company, which began to function more as a nation and less as a trading concern.
In the eighteenth century, opium was highly sought after by the Chinese so in 1773, the company assumed the monopoly of opium trading in Bengal. Company ships were not allowed officially to carry opium to China, so the opium produced in Bengal was sold in Calcutta on condition that it be sent to China.
Despite the official Chinese ban on opium imports, which was reaffirmed in 1799, opium was smuggled into China from Bengal by traders and agency houses averaging nine hundred tons per year. The proceeds from drug-runners at Lintin were paid into the company’s factory at Guangzhou (Canton) and by 1825 most of the money needed to buy tea in China was raised by the opium trade. In 1838 the Chinese imposed a death penalty on opium smuggling which was then close to 1,400 tons per year, and sent a new governor, Lin Zexu, to curb smuggling. This finally resulted in the Opium War of 1840, eventually leading to the British seizing Hong Kong.
The efforts of the company in administering India emerged as a model for the civil service system in Britain, especially during the nineteenth century. Deprived of its trade monopoly in 1813, the company wound up as a trading enterprise. In 1858 the company lost its administrative functions to the British government following the 1857 uprising by the company's Indian soldiers, usually called the Sepoy Mutiny. One cause of this was the company's policy of annexing Princely States with which they enjoyed a treaty relationship when they decided that the ruler was corrupt, or because they did not recognize the heir to the throne (such as an adopted son, who could succeed under Hindu law but not British law). There was also a rumor that Britain intended to flood India with Christian missionaries and that pork and beef grease was being used to oil the new Enfield rifle that had been issued to the Indian troops. Technically, the company was always subject to the Moghul Emperor but because the last Emperor lent his name as leader of the revolt, he was deposed and exiled. Indians point out that this was actually a mutiny, rather than an Indian revolt against the British, since the Emperor could hardly “mutiny” against himself. India then became a formal Crown Colony.