INDIA

The establishment of a colonial relationship between Britain and India through the medium of a trading company had a long gestation period of over a century and a half. The complete formalization of this relationship, with the British crown assuming direct responsibility for the Indian dominions, took yet another century.

It was on the last day of the year 1600 that a charter granted by Queen Elizabeth I incorporated some 219 members under the title of The Governor and Company of Merchants of London Trading into the East Indies. This was the body that came to be known as the East India Company. The trade carried on by the company between Europe and Asia increased rapidly, and by the end of the seventeenth century, the value of this trade almost equaled that carried on by its principal rival, the Dutch East India Company. By about 1740, the English had decisively forged ahead of the Dutch, a lead they retained through the rest of the eighteenth century. It was, however, only in 1765 that the company became the instrument for establishing a colonial relationship between Britain and India.

Like other Europeans, the principal interest of the English in the East, initially at least, was to procure pepper and other spices for the European market. The first two voyages were, therefore, directed at Bantam in Java, where a trading station was established in 1602. But given the strong presence of the Dutch East India Company in the Indonesian archipelago, the English found it prudent to move gradually out of the region and concentrate on India. An imperial edict conferring formal trading rights on the company was obtained from the Mughal emperor and a trading station established at Surat in Gujarat in 1613. A station had earlier been established in Masulipatnam on the southeast coast of India in 1611. The company's trade extended into Bengal in the early 1650s with the establishment of a trading station at Hughli.

The spectacularly growing role of textiles and raw silk in the exports from Asia made India central to the company's trade, accounting for as much as 90 percent of the total exports from Asia at the turn of the eighteenth century. While the company, by and large, concentrated on Euro-Asian trade, its servants, acting in their private capacity together with a limited number of British citizens residing in the company's settlements in India, carried on a substantial amount of port-to-port trade within Asia.

The increase in the output of textiles and the other export goods in the subcontinent in response to the rising demand for these goods by the English and other East India companies would seem to have been achieved through a reallocation of resources, a fuller utilization of existing productive capacity and an increase over time in the capacity itself. The English and other European companies' trade would thus have become a vehicle for an expansion in income, output, and employment in the sub-continent. The principal underlying circumstance behind this positive state of affairs was the fact that the relationship between the Indian intermediary merchants and artisans on the one hand and the European trading companies including the English Company on the other had been entirely free of coercion and determined exclusively by the market forces of supply and demand. The growth of the Europeans' demand for Indian textiles and silk at a rate consistently higher than the rate of growth of their supply had increasingly turned the market into a sellers' market.

This scenario, however, underwent a substantive modification during the second half of the eighteenth century. It began when the English East India Company assumed political leverage in different parts of the subcontinent. The process began in southeastern India where the English and the French became allies of contestants for the succession of the Nawab of Arcot and the Nizam of Hyderabad. War ebbed and flowed across southern India with little intermission from 1746 until complete English victory brought the fighting to an end in 1761. British victory meant that the territories of the English-backed Nawab of Arcot became a client state of the English East India Company. Much more fundamental in importance was the incorporation of Bengal as a province under actual British rule. The 1765 Treaty of Allahabad was an outcome of the battle of Plassey in 1757 and that of Buxar in 1764. According to this treaty, the Mughal emperor conferred on the East India Company the diwani, or the responsibility for the civil administration of Bengal; at the same time, the wazir of Awadh accepted a British alliance and a British garrison. This settlement gave the British rule over some 20 million people in Bengal, together with access to a revenue of about £3 million, and it brought British influence nearly up to Delhi.

The acquisition of political leverage by the East India Company brought to an end the level playing field that the intermediary merchants and artisans doing business with it had hitherto enjoyed. Through an extensive misuse of its newly acquired political power, the company subjected suppliers and artisans to complete domination, imposing upon them unilaterally determined terms and conditions, which significantly cut into their margin of profit.

Seemingly paradoxically, while the East India Company's exports from India were undergoing a substantial increase during the second half of the eighteenth century, the import of bullion by the company into the subcontinent to pay for the goods purchased was practically coming to an end. The explanation lies in good measure in the substantial quantities of rupee receipts obtained by the company locally against bills of exchange issued to English and other private European traders, payable in London and other European capitals. Another source used for the purpose was the surplus from the provincial revenue of Bengal. Such a diversion of the revenue was obviously unethical, and indeed the Parliamentary Select Committee of 1783 indicted the company for these practices. By 1765, a sizeable territorial dominion had been established and the East India Company had become a regional Indian power of consequence. From this beginning, British power was to engulf the whole of the Indian sub-continent within a hundred years, with the crown assuming direct responsibility for the Indian dominions in 1858, following the Indian mutiny and the liquidation of the East India Company.

INDIA

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