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Unit 1
Advent of European Trading Companies

Learning Outcomes

Upon the successful completion of the unit, the learner would be:

  • Introduced to the intricacies of the establishment and functions of the European companies in India
  • Exposed to the role of European companies in establishing a colonial empire in India
  • Made aware of the rivalries of the European companies in establishing their trade monopoly in India


India was thrown open to colonial rule in the second half of the eighteenth century. After the discovery of a new sea-route to India in 1498, all the major European powers of the sixteenth and seventeenth centuries tried their chance to conquer territories and establish their rule by monopolising trade. The Europeans were well aware of the Indian wealth and entered India during the Mughal period. The role played by the European trading companies were very crucial for the success of the ambitious imperial powers in the early phase of their invasions.

The Portuguese, the Dutch, the Spanish, the French and the English trading companies were set up, and factories and forts were built to protect and safeguard their territories. In their fight for monopoly in trade and expansion of their empire, the English East India Company became victorious. Their factories were the centres of their further territorial expansion and defense as well. With the battle of Plassey (1757) and the battle of Buxar (1764), the Company started their rule in India. As a result, from a self-sufficient and flourishing economy, India had become a mere market for European products. The economy which was well-known for its handicraft industries in the fields of cotton and silk textiles, metal, precious stone works, etc., were pauperized and had become only a supplier of raw materials for English factories in England. In this unit, let us discuss the advent of the European trading Companies and their role in establishing a colonial empire in India.

Key Words

Armada, Casa da India, Colonisation

1.1.1 Advent of the European Trading Companies in India

From the time immemorial, India maintained trade relations with European countries through several routes. Indian textiles and spices were in huge demand in the European market. The European trade in Asia was carried out by Arab merchants and navigators who bought goods from India and sold them to the Europeans. The Indian goods, especially spices, were carried to the Persian Gulf and from there to the Mediterranean. In order to avoid the intervention of these Arab intermediaries and establish their own trade relations, the European merchants sought to find a new sea-route to India from fifteenth to seventeenth centuries. This period is known as the ‘Age of Exploration or discovery’. In 1498, Vasco da Gama of Portugal successfully landed in Calicut, which was an epoch-making event in the history of India.

The expeditions through land and sea led to growth in world trade. The European traders established direct trade with India as they discovered a sea-route between Europe and India. It also laid the foundation for the European colonial empires. The Portuguese possessed naval superiority and established forts in India to control the Indian Ocean trade. The European countries, such as Dutch, Spain, France and England reached India through the sea, following the Portuguese. All those countries established their trading companies in India to facilitate the trade. However, it was the British East India Company (1600 CE) which was the last to enter India and became successful in colonizing India. Let us have a detailed look at the establishment and functions of the European companies in India.

1.1.2 The Portuguese in India

As mentioned in the previous section, Portugal was the first European country which discovered a sea-route to India and established trade with India in 1498. The initial aim of the Portuguese was to acquire the monopoly of the spice trade. The Portuguese ruler , Dom Manuel sponsored the trip of Vasco da Gama to India. Gama conducted his maiden journey to India in three ships along with 170 men, sailing around the Cape of Good Hope in Africa. They were warmly welcomed by the Zamorin, the ruler of Calicut. On August 29, 1498, when he returned from India , his ships were loaded with cargo 60 times more than the cost of his entire journey. As a result of Gama’s successful expedition, Portugal sent 1200 men in 13 ships under Pedro Alvarez Cabral. Later, Gama made his second trip to Calicut on October 29, 1502, bringing a fleet of 20 ships. Gama then moved to Cochin from Calicut. During that period, Arabs dominated the trade in India. Gama realised the necessity to break the Arab dominance in order to promote European trade. Hence, he exploited the hostility between the rulers of Calicut and Cochin towards the advantage of the Portuguese trade. He founded a factory in Cochin and a prison in Cannanore before leaving for Portugal. Establishment of the Portuguese East India Company

The Portuguese trade in India was administered by the trading company, Casa da India (1500), which was under the direct control of the Crown. It was the first joint stock company to perform trade operations in India. The yearly Indian armadas of the Portugal were managed by the Casa. However, when the Casa faced a challenging financial situation, King Sebastian of Portugal issued a decree in 1570, which authorised any Portuguese citizen to trade in India. These free trade decrees were replaced by a new system of annual monopolies in 1578. Then the Casa transferred Indian trading contracts to a private Portuguese merchant consortium, providing them with a monopoly for a year. However, in 1597, this annual contract system was abolished and the royal monopoly was reinstated.

Image: Depiction of the 2nd Portuguese India Armada ,fleet of Pedro Alvares Cabral, 1500 Source: Wikipedia

Towards the end of the sixteenth century, the Dutch and British East India Companies began to exert a greater influence on the Indian subcontinent and other parts of the East Indies. This led the Portuguese ruler to attempt various agreements to safeguard the Portuguese colonial empire in those areas. He established the Conselho da India in 1605 to place the matters of the Portuguese India under the control of the Habsburg crown. However, the council was later abolished in 1614. The Consolidation of the Portuguese Empire in India

Meantime, the Portuguese decided to appoint a Viceroy to manage their affairs in India. The first Viceroy, Francisco de Almeida, who developed so-called “Blue Water Policy,”added a large number of ships to reinforce the Portuguese naval force. He wrecked the ships of Zamorin and those sent by the Sultan of Egypt. The Portuguese dominated Indian ocean with their naval superiority. They promoted a cartaz system, a naval trade license or pass issued by the Portuguese to control maritime trade. Those who did not purchase the cartaz were threatened by them to disrupt the trade through violence. Under this system, the Portuguese demanded money from the traders as payment for protection against piracy.

With the support of the Cochin ruler, Almeida constructed fortresses in places, such as Cochin, Cannanore and other areas along the Malabar coast. Afonso de Albuquerque (1509–1515), the successor of Almeida, is considered the founder of the Portuguese empire in India. In 1510, he overthrew Yusuf Adil Khan, the ruler of Bijapur and seized Goa. Albuquerque converted Goa into a commercial centre and built the Portuguese settlements. He channelled the ship routes through Goa. He also promoted the marriage of Indian women with Europeans and settling down in areas under Portuguese authority.

Image: Afonso de Albuquerque
Source: Wikipedia

Under Albuquerque, the Portuguese expanded their territories through the conquest of Malacca (in Malaya) and obtained access to the trade route between India and China, Cairo and Mecca. Albuquerque further extended the empire to Hormuz (1515) in the Persian Gulf and to the spice Islands in Indonesia (East Indies).

The Portuguese established trade settlements at Goa, Cochin, Daman and Diu. Antonio de Noronha and Nino da Cunha were the two other Portuguese governors, who had a significant role in the consolidation of the Portuguese empire in India. From 1529 to 1538, Nino da Cunha served as the governor of Portuguese territories in India. In 1534, he persuaded Bahadur Shah to sign the Treaty of Bassein. Bassein and Diu came under Da Cunha’s control in 1534 and 1537, respectively. Antonio de Noronha, the Portuguese Viceroy appointed in 1564, captured Mangalore and constructed a portuguese fort in 1568.

Portuguese fort at Diu

Towards the middle of the sixteenth century, the Portuguese strengthened control over Ceylon, through constructing a fort in Colombo. However, the Dutch overthrew them from Ceylon. They also took control of the Portuguese fort on the Malabar Coast in India. Furthermore, in 1662, the Portuguese handed over Bombay, which was under their control, to King Charles II of England, as dowry for marrying a Portuguese princess. Eventually, the Portuguese dominance was then confined to Goa, Daman and Diu as they lost all their possessions in India. Religious Policy of the Portuguese in India

As we have discussed, the initial interest of Portuguese lay in the spice trade and adventure. Gradually, they began to propagate their religion. In order to break the Arab dominance in the Indian Ocean, they perpetuated animosity toward the Arabs and wrecked their ships. Furthermore, the Portuguese King directed the sailors to declare war on the Muslim dominance in the sea. They burned ships returning from Mecca and drowned a vessel carrying spices for Egypt’s Mamluk Sultan. Apart from these, large-scale brutal conversion of non-Christians to Christianity and Latinisation of the non-Catholic group had occurred. There were instances of Portuguese atrocities towards the non-Christians.

The Roman Catholic Basilica of Bom Jesus, 16th Century, Goa,

The harsh religious policy of the Portuguese invited the wrath of the Indians. To propagate religion and educate priests, the Portuguese established numerous churches and seminaries in Kerala. The propagation of Christianity was intensified with the arrival of the Jesuits. Around the coastal area in the southern part of Kerala, St. Francis Xavier baptized and converted the fishermen , lower castes and backward sections of society to Christianity

1.1.3 The Dutch East India Company and its trade in India

The Dutch East India Company or Verenigde Oostindische Compagnie (VOC), also known as the United East India Company was a chartered company established in 1602, to meet the expanding demand for Indian spices from Asia. It was the amalgamation of the group of companies launched by traders and individuals who were interested in trading with the East. The functions of the Company include the ability to wage war, imprison and execute convicts, negotiate treaties, strike Company’s own coins and establish colonies. However, the Dutch East India Company was more interested in the profitable spice trade with the islands of the East Indies such as Java and Sumatra. However, they were soon pushed out by the other European companies.

Source: Wikipedia

A fleet of Dutch naval troops led by Captain Admiral Steven van Der Hagen left Netherlands in December 1603, sailed through the ocean and arrived in India in 1604. In India, the Mughals granted them permission to set up factories and conduct trade. After a treaty was signed between the Zamorin of Calicut and Admiral Van der Hagen, the commander of the Dutch navy, the Dutch East India Company began to trade in India on November 11, 1604. The Zamorin intended to use the Dutch to drive the Portuguese off the Malabar coast. The Dutch, who desired the same thing as well as exclusive trading privileges, agreed to assist one another. Even though, they attempted two times to overthrow the Portuguese, in 1604 and 1639, both the efforts failed. Malabar remained under the Portuguese rule. The Dutch settlements in India

The Dutch established themselves on the Eastern coast of India, lured by the textiles of the Coromandel coast. The Dutch drove away the Portuguese, who had ruled Pulicat since 1502 and constructed Castle Geldria, which remained as their headquarters in the Coromondal coast. Meanwhile, the Vijayanagara rulers permitted them to construct their first factory in 1608, at Pulicat. They also established some factories and trading stations in places such as Masulipatnam. In addition to cotton textiles, they were interested in trading silk and indigo. They traded Coromandel Chintz, a calico fabric with a floral pattern that was used to produce traditional dresses for Dutch women. It was the costliest among their goods. Some scholars point out the active engagement of the Dutch in slave trade as there are evidence on bringing people from places, such as Bengal, Kayalpattinam and Tengapattinam to Pulicat.

Trading post of the Dutch East India Company in Hooghly, Bengal by Hendrik van Schuylenburg ,1665 CE

Source: Wikimedia common

The Dutch established their trading depots all over India in the following few years, from Surat in 1616 to Bengal in 1627. The Dutch depots include Broach, Cambay, Ahmedabad, Nagapatnam, Masulipatnam, Cochin, Chinsura, Agra and Patna. Moreover, the Dutch East India Company undertook control of the Spice Islands of Indonesia. They compelled the Portuguese to surrender Ceylon in 1658 after seizing Malacca from them in 1641. Although the Dutch succeeded in the Spice Islands, they faced defeat by the British in India.

In 1661, the entire Malabar region was conquered by the Dutch East India Company from the Portuguese. In the following year, Quilon and Cochin were captured. Once they had gained control, they refused to cede any further area to Zamorin, who permitted the British to build a factory in 1664. Furthermore, the Dutch acquired the trade monopoly in pepper after the defeat of the Portuguese. They acquired Pondicherry from the French in 1693, which was further taken back by the French in 1699. In the seventeenth century, the Dutch appeared to be indomitable. Fourth Anglo-Dutch War and the Decline of the Dutch East India Company

The Dutch East India Company entered a phase of decline towards the mid-18th century. Out of several factors that led to its collapse, the political developments had a major impact on their decline. The military power of the Company in controlling trade began to weaken. Moreover, in 1741, they fought a battle with Martanda Varma, the ruler of Travancore, known as the battle of Colachel. The Dutch endured a humiliating loss at the hands of the Marthanda Varma. After this setback, they never recovered their authority and influence in Malabar. Eventually, they were compelled to hand over control of the pepper trade to the Travancore kingdom.

The capture of Kochi and victory of the Dutch V.O.C. over the Portuguese in 1663
Source: Wikipedia

In addition, the Fourth Anglo-Dutch War (1780–1784) led to the downfall of Dutch East India Company. Consequently, the British naval force destroyed their ships. They also took control of Dutch trading posts in India. Hence, the Dutch East India Company faced a huge setback in settling their loans and the company went bankrupt in 1799. Its holdings were handed over to the Dutch Crown. Consequently, the Dutch possessions in India, including most of the industries and trading posts were closed. Later, on March 1, 1825, as part of the Anglo-Dutch Treaty, all Dutch possessions in India were relinquished to the British.

1.1.4 Establishment of French Settlements in India

As early as 1527, the French made an effort to establish a trade relationship with India. The French began their economic activities through the French East India Company, which was founded in 1664. It was founded to compete with the English and Dutch trading companies in the East Indies. King Louis XIV granted them the charter to conduct trade in the Eastern Hemisphere. It was formed by merging the earlier trading companies. This commercial enterprise was an initiative of King Louis XIV, in contrast to other European powers that entered India through private trading companies. Jean Baptiste Colbert, the French finance minister, played a crucial role in launching the French East India Company. The French East India Company founded trade centres in Surat, Pondicherry near Madras, Chandernagar in Bengal and Mahe near Mysore.

The British and French East India Companies had become the two principal European commercial enterprises in India by the 18th century. The two companies competed over trade and power. Both the French and the English were eager about dominating the growing trade with India. Moreover, the English and the French were rivals in Europe and engaged in numerous wars. Their political enmity in Europe was reflected in their commercial rivalry for domination in India. The Carnatic region, which is located along the Coromandel coast, was the site of the conflict between the two East India Companies.

Map of French India
Source: Wikipedia

In 1602, French traders reached Madagascar, Africa. Despite having colonised Madagascar, they were forced to abandon the island except for a small coastal trading post. On September 4, 1666, Aurangzeb granted a firman to Berber, a French agent in India. Later, in December 1668, Surat witnessed the establishment of the first French factory, much to the dismay of the Dutch. The French opened a second factory at Masulipatnam within a year.

WColbert deployed a fleet to India under the command of Jacob Blanquet de la Haye after realising the necessity of their presence in India. In 1672, the French were successful in driving the Dutch out of San Thome in Mylapore. The local governor, Sher Khan Lodi, who represented the Sultan of Bijapur, was persuaded by the French to support them against the Dutch. Meanwhile, the Golkonda Ruler, who was a longstanding rival of Bijapur, became friends with the Dutch. Sher Khan Lodi was the one who suggested Pondicherry (also known as Puducherry) as a viable location for their settlement. Francis Martin was appointed as the Governor of Pondicherry and made Pondicherry the centre of French settlements in India.

It was a difficult task for the French to seize Pondicherry, as they had to face their major competitors, the Dutch. Since 1672, France and Holland had been at war continuously. The French were short on resources in India because they had diverted their resources to Chandranagore, another French outpost in Bengal. As a result, Pondicherry was an easy target for the Dutch in 1693 and remained with them for almost six years. Later, Pondicherry was reverted to the French in 1697 by the Treaty of Ryswick and officially handed over to Francis Martin in 1699.

Illustration of Pondicherry in 18th century
Source: Wikipedia

The French captured Mahe in 1725, and Karaikal in 1739. In the Bengal region, the French also had success, and they founded their settlements in Qasim Bazaar, Chandranagore, and Balasore. Another efficient French administrator in Pondicherry was Pierre Benoit Dumas (1668–1745). However, the English posed a threat to the French and they subsequently lost to the English.

1.1.5 The Danes in India

In India, Tarangambadi or Tranquebar in TamilNadu, Serampore in West Bengal, and the Nicobar Islands were Danish and Norwegian colonies until 1813. The Danish King, Christian IV, established the Danish East India Company on March 17, 1616, through the charter. The Danish traders were not in favour of the company. The initial expedition of the Danes to Ceylon was commanded by Admiral Ove Gjedde in 1618. However, in Ceylon, the Danes were unable to secure any trading agreements. Moreover, the Portuguese sank their main ships near Karaikkal while on their return from Ceylon.

The Danish succeeded in establishing a factory at Masulipatnam despite their engagement in the Thirty Years War and the financial damage they endured. At Balasore and Pipli, small trading outposts were built. Even though the Danish investors did not favour the Danish East India Company, King Christian IV supported it. However, it was abolished after his death in 1648 by his son , Frederick.

In 1696, a second Danish East India Company was founded and the trade between Tarangambadi and Denmark was restored. They also built numerous new trading outposts. Moreover, three more adjacent villages of Tarangambadi were given as gifts by the Nayak ruler of Thanjavur. The Danish missionaries who were protestants arrived in 1706. Although the Danish established themselves in the Andaman and Nicobar islands by 1755, they were forced to leave the islands in 1848 because of the spread of malaria. The Napoleonic wars severely affected the Danish as the British damaged their possessions. Tranquebar and other settlements were transferred to the British in 1845 in addition to Serampore in 1839.


  • Age of discovery or exploration
  • Advent of European Trading Companies
  • trade relations of India with European countries
  • Arab merchants
  • European merchants
  • Direct trade of Europeans with India
  • the discovery of a new sea route between Europe and India
  • In 1498, Vasco da Gama of Portugal, Voyage through sea
  • Trading companies of European countries like Dutch, Spain, France and En-gland in India
  • European Companies
  • Portuguese Companies
  • Casa da India (1500) and the Portuguese East India Company (1628)
  • The Portuguese
  • first to start a joint stock company to trade in India
  • India armadas.
  • Consolidation of the Portuguese empire
  • religious policy
  • The Dutch East India Company
  • functions of the Company
  • profitable spice trade with the islands of the East Indies
  • Dutch settlements in India
  • Anglo- Dutch war
  • decline of the Dutch East India Company
  • The French East India Company
  • Competition with the English and Dutch trading companies in the East In-dies- French settlements in India
  • The Danes in India

Objective type questions

  1. What was the role of Arab merchants in European trade with India?
  2. Who were the first Europeans to discover a sea- route to India?
  3. When did Vasco da Gama of Portugal set his foot in Calicut?
  4. Which were the other European countries who reached India after the Portuguese?
  5. Who were the last among the Europeans who entered India for trade purposes during the colonial period?
  6. Which royal trading house managed the monopoly of Portuguese trade?
  7. Which Portugal King issued a decree opening up trade in India to any private Portu-guese national in 1570?
  8. When did the Portuguese replace the free trade decree by a new system of annual monopolies?
  9. When was the annual contract system abandoned and the royal monopoly resumed by the Portuguese?
  10. What was the other name of Dutch East India Company?
  11. When was the Dutch East India Company established?
  12. What was the main agenda of the French East India Company in India?
  13. Which ruler chartered the French East India Company for the purpose of trading in the eastern Hemisphere?
  14. What is cartaz system?
  15. Which were the major Portuguese settlements in India?

Answer to Objective type questions

  1. They acted as middle- men who bought goods from India and sold them to the Europeans.
  2. The Portuguese.
  3. 1498.
  4. Dutch, Spain, France and England.
  5. Britain and the British East India Company (1600 CE).
  6. Casa da India (1500).
  7. King Sebastian.
  8. 1578.
  9. 1597.
  10. The United East India Company.
  11. 1602.
  12. To compete with the English and the Dutch trading companies in the East Indies.
  13. King Louis XIV.
  14. A naval trade license or pass issued by the Portuguese to control maritime trade.
  15. Goa, Cochin, Daman and Diu.


  1. Discuss the impact of the advent of European companies on the Indian Economy.
  2. Elucidate the causes for the outbreak of the First Carnatic War.
  3. Describe the commercial situation in India prior to the arrival of the European companies.
  4. Trace the course of the rivalries between the European companies in India.

Suggested Reading

  1. Bipan Chandra, History of Modern India, Orient Black Swan, India, 2018.
  2. Ishita Banerjee-Dube, A History of Modern India, Cambridge University Press, New York, 2014.
  3. Sekhar Bandyopadhyay, From Plassey to Partition, Orient Longman, New Delhi, 2004.