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Unit 2
British East India Company & Early Settlements

Learning Outcomes

Upon the completion of the Unit, the learner will be:

  • introduced to the establishment and functions of the British East India company.
  • able to get an outline of the rivalry between the British East India Compa-ny and other European trading companies in India.
  • familiarised with the significance of various battles fought between the European countries in India and the treaties signed.


Even though the Portuguese, the Dutch, the French and the Danes established their trading centers, the British, who entered last, succeeded in colonising India. Between the second half of the 17th and the middle of the 18th centuries, India became the centre of British trade. At its foundation in 1600, the East India Company was granted a monopoly over all English trade with Asia through a royal grant. Indian commodities like indigo, saltpetre and handwoven textiles were in demand in Europe. For the East India Company, cotton textile trade was crucial in India. As cotton textiles were most easily available for export in Bombay, Madras, and Calcutta, the company established their major settlements in these locations. As a result, these places expanded from mere factories to commercial centers as Indian traders and artisans began to set up their base in these areas. In this Unit, we will discuss the growth of the British East India Company, its relationship with other European companies and its activities in India.

Key Words

Trading settlements, Factories, Carnatic Wars, Anglo- French rivalry


We are well aware that India was under British rule for many years. The British had an intention of colonising India to flourish their economy. They were not concerned about the course of the Indian economy. They had taken steps to ensure the development and progress of the interests of their homeland.Such steps transformed the Indian economy and reduced the country to a supplier of raw materials and a consumer of finished goods. The colonial exploitation which continued for over two centuries led to the deprivation of the Indian economy as India had to face a daunting task to recover from the economic toll of colonial rule. It is crucial to examine this interaction between the colonisers and their colonies in order to comprehend the present developments. Let us have a look at how the British established themselves in India.

1.2.1 Establishment of the British East India Company

Masulipatam in 1676
Source: Wikipedia

In 1599, a group of merchants known as Merchant Adventurers formed an English company as a joint-stock company. In 1600, they were given exclusive access to trade in the East by Queen Elizabeth through a charter that authorised English trade with eastern countries like South Africa. In 1608, Captain William Hawkins, the representative of the British East India Company was sent to the court of the Mughal emperor Jahangir to get sanction to build a factory at Surat. As a result, the emperor gave a royal farman permitting the British to open factories at the western Later, in 1615, Sir Thomas Roe, obtained the farman to establish factories throughout the Mughal empire. At Surat, the East India Company established its first factory and it remained as their centre of trade till 1687. A factory, in those days, was not a place where goods were manufactured, but it consisted of a warehouse, an office and residential quarters.

By 1623, the British established factories at Surat, Agra, Ahmedabad, Broach and Masulipatnam.

Although they initially entered India as traders, they soon realised that ruling the country would be more lucrative. Up until 1900, the East India Company held its dominance in India. Their ultimate aim in the first half of the 18th century was to trade with India and generate revenue. This changed in 1650 when a new group of British traders acquired control of the guards and sought political control to secure easy accessibility to the Indian market and keep rival Europeans out.

Meanwhile, Madras emerged as a significant British trading centre. In 1668, King Charles II transferred Bombay to the Company. Moreover, the company opened a trading centre in Fort William, Calcutta. Hence, by 1700, the East India Company expanded its trading activities by setting up three significant factories in Madras, Bombay, and Calcutta.

1.2.2 Growth of the British East India Company in India

In North India, the British attempts to fortify Surat ended up in conflict with the Mughal authorities. However, in South, the conditions were ideal for the British as they lacked a strong authority. In 1565, the Vijayanagar empire was disintegrated into petty states and hence it did not pose a threat to the British. Hence, in 1611, they built their factory at Masulipatnam, which was the first British factory in the South. Later, they focused on Madras which they received on lease from the ruler of Chandragiri in 1639. They were granted permission to construct Fort St. George in Madras.

Fort. St. George , an 18th century engraving
Source: Wikipedia

However, in 1645, the Golkonda ruler occupied the territories under the Company’s administration in Madras. Then in 1687, Aurangzeb captured Golkonda and established Mughal sovereignty over the Company holdings. However, the English continued to enjoy their privileges. Eventually, Madras became the British headquarters on the Coromandel Coast, replacing Masulipatnam. In 1668, Bombay, which was received as dowry to Charles II from the Portuguese, was transferred to the Company for a yearly rent of 10 pounds.

The Company was granted the authority to raise their military forces and the right to declare war on or negotiate peace with powers in Asia, America and Africa, under the Charter of 1683. Madras became a presidency in 1652 and 1684. Three villages in the Madras region were granted to the Company again in 1693, and five additional villages were granted in 1702.

1.2.3 The British East India Company in Bengal

Calcutta from Hughly River by William Hodges. C1789
Source :

The British had a prolonged struggle in Bengal to secure trading privileges. Even though Shah Shuja, the second son of Shajahan and the Governor of Bengal, granted the Company trading powers, but there was no official validation of these privileges. Only in 1680, the British acquired trading privileges in Bengal. The Company declared war on the ruler who represented the Mughals as local authorities intervened with the British’s trading privileges. When peace was finally restored in 1690, the Company built its first settlement at Sutanuti, which would later become Calcutta. In return for a Rs1200 annual payment, the Company acquired the zamindari rights of the villages—Sutanuti, Kalikata, and Gobindpur—in 1698. The factory which they fortified in 1696, Fort William, was transformed into the administrative centre of the presidency in 1770.

1.2.4 The Anglo-French Rivalry and the Carnatic Wars

As mentioned in the previous unit, by the 18th century, the British and the French East India Companies had emerged as the two major European trading companies in India. Moreover, they were equally determined to monopolise the flourishing trade with India. In Europe, the English and the French were rivals and fought several wars during the mid – eighteenth century.. This political conflict in Europe further aggravated their commercial rivalry for supremacy in India.The conflict between the two East India Companies occurred in the Carnatic region which lies along the Coromandel coast. The three wars (1746–1763) that the British fought with the French to consolidate their power are known as the Carnatic wars. The First Carnatic War (1740-1748)

In 1740, war broke out in Europe over the problem of succession to the Austrian throne. The conflicts between Britain and France in Europe also resulted in conflicts over colonial possessions in North America and India. Hence, India was affected by the Austrian War of Succession and the Seven Year’s War in Europe.

Meanwhile Dupleix, the French Governor in India, captured Madras in India. Then, the British appealed to Anwar-ud-din, the Nawab of the Carnatic, to secure Madras. The Nawab sent an army against the French. However, the well- equipped French army completely defeated the large army of the Nawab and pushed them to San Thome. This caused heavy casualties to Nawab’s force on the banks of river Adyar.This is known as ‘the Battle of San Thome and Adyar’.

As soon as war erupted, Dupleix pleaded with Morse, the governor of Madras, to maintain neutrality. However, the conflict was sparked when a British navy led by Commodore Barnett siezed a few of the French ships carrying Indian goods. Dupleix was startled by the event and sought the assistance of Anwar-ud-din, the Nawab of Carnatic, to prevent war with the British. Hence, it remained peaceful for a while.

The surrender of Madras by the British
Source: Wikipedia

When the War of Austrian Succession ended in 1748, India also achieved peace. The Treaty of Aix-La Chapelle (1748) was signed by France and England and it concluded the first Carnatic war. The British and French agreed to end their war in India as a result of this treaty. While the French received the territories of North America, the treaty restored Madras to the English. Thus ended the First Carnatic War without any territorial gain on either side. The war, however, had raised the prestige of the French. It had also demonstrated the superiority of western method of warfare over that of the Indian. The Second Carnatic War (1749 – 1754)

While the British and the French remained peaceful in Europe, they could not coexist peacefully in India. The Second Carnatic War was the result of the English and French interference in local politics with a view to gaining substantial profits. The Governor-General of French India, Joseph Dupleix, intended to use the army to establish French predominance in the Deccan. Hence, he intervened in the succession conflicts in both Hyderabad and Arcot.

Dupleix meeting Muzaffar Jang
Source: Wikipedia

Furthermore, in 1748, the death of Nizam -Ul-Mulk, the ruler of Hyderabad, and the release of Chanda Sahib by the Marathas became golden opportunities for Dupleix. In Hyderabad, a bitter contest for the throne ensued between Nasir Jang and Muzaffar Jang. Nasir Jung, Nizam’s son, ascended the throne after his father’s death. However, he was challenged by Muzaffar Jung, grandson of Nizam. Meanwhile, similar circumstances occurred in the Carnatic region where Chanda Sahib plotted against Nawab Anwarudeen as he contested the latter’s claim to the throne.

Dupleix decided to enhance French power by taking sides in these conflicts between rival claimants. His objective was to set up puppet governments that would support the French against the British. He signed two secret treaties with Muzaffar Jang and Chanda Sahib, claimants to the thrones of Hyderabad and the Carnatic respectively. In December 1750 while Muzaffar Jang ascended the throne of Hyderabad with the help of Dupleix, the French army killed Nasir Jang.

The Nawab of Arcot and Nizam rewarded Dupleix for his support. When Muzaffar Jang sought for protection, a French force under General Bussy, which was stationed in Hyderabad, provided him protection. Nevertheless, Muzaffar Jang was killed. After Muzaffar Jang’s death, Salabat Jang, the brother of Nasir Jang, was placed on the throne. In return, Salabat Jang gave four districts in the Andhra region known as the Northern Sarkars to the French Company.

Meanwhile, in the Carnatic region, Chanda Sahib received the assistance of Dupleix. Hence, Chanda Sahib defeated and killed Anwar- ud din in ‘the Battle of Ambur’ (1749) and became the Nawab. Muhammad Ali, the son of Anwar-ud-din, escaped to Tiruchirappalli. Chanda Sahib rewarded the French with a grant of eighty villages as a reward. The French had achieved tremendous success both in Hyderabad and the Carnatic. French candidates had been put on the thrones of both the places. In addition, the French had got jagirs, huge sums of money and the Northern Sarkars.

However, the success of Dupleix did not go unnoticed by the English. After Anwar-ud-din was killed in the battle, to curtail the French dominance, the British supported Muhammad Ali to become his successor. Hence, they decided to place Mohammad Ali on the throne of Arcot. The wars were won by the British under the capable generalship and cunning of Robert Clive. While the Nawab and the French paid much attention to Tiruchirapalli, Clive stormed and captured Arcot, the capital of the Carnatic. In the war that followed, Chanda Sahib was defeated, captured and executed. Mohammad Ali became the ruler of Carnatic.

Robert Clive

Britain and French, counterparts in Europe, were not in favour of the conflicts in which their companies are involved in India. The French Government initiated peace negotiations.The French company criticised Dupleix for heavy losses in the company and recalled him from India. He was then replaced by Charles-Robert Godeheu, who signed the Treaty of Pondicherry (1755) with the British. As per the treaty, the English and French had no right to involve themselves in political affairs of the Indian subcontinent. They could only be engaged in trading activity. The Northern Sarkars was the only territorial gain that the French made after the Second Carnatic War. The Second Carnatic War restored the prestige of the British and established their control over the Carnatic. The Third Carnatic War (1756 – 1763)

Map of India in 1763( i.e, during the seven years war)
Source: Wikipedia

In 1756, hostilities between England and France broke out in Europe with the Seven Years War (1756-1763). In India, it culminated in the third Carnatic War between these rivals. The French Government sent Count de Lally to replace Dupleix. Meanwhile, Clive was replaced by Eyre Coote. In order to strengthen his position in Pondicherry, Lally recalled Bussy from Hyderabad. Meanwhile, the British at once secured Northern Circars and Masulipatanam, which were the French possessions, from the Nizam of Hyderabad. Later, in 1760, the French were completely destroyed at the Battle of Wandiwash (1760) as Lally was finally defeated by Sir Eyre Coote. As a result, the French lost all of her possessions to the British and the latter remained the sole masters of India.

Vandavasi fort ( site of batttle of Wandiwash)
Source: Wikipedia

The war in India ended with the end of the war in Europe. The French influence in Indian politics disappeared after the third carnatic war. Even though they restored their possessions at Chandranagore and Pondicherry in India following the Treaty of Paris (1763), they were not allowed to fortify them. Moreover, the French dream of establishing an empire in India was shattered. The French settlements were confined to Pondicherry, Yanaon, Karaikal , Chandranagore and Mahe and Northern Circars passed into the hands of the British. Consequently, the English East India Company emerged as the strongest power in South India. They gained political and economic advantages without being challenged by any other foreign power.

1.2.5 Reasons for the success of the British East India Company

  • The British East India Company was a private enterprise owned by British merchants capable of taking risks. The British Government did not interfere in the affairs of the Company. The French East India Company, on the other hand, was a Government concern. The French Government was not willing to finance the Company’s heavy war expenses.
  • The British Company was financially much stronger than the French. After the conquest of Bengal, it had huge resources at its command. The French Company suffered from lack of re-sources.
  • The superior naval strength of the British contributed enormously to their success. A strong Brit-ish navy helped the Company to bring reinforcement from home. Moreover, their supplies landed at their naval base in Bombay. The French naval base in distant Mauritius caused considerable delay and put them at a disadvantage.
  • The French generals quarreled among themselves. But the British generals offered united resistance to the French. There was hardly any coordination between the French army and the navy.
  • The recall of Dupleix proved disastrous to the French. Possibly, he alone could have given the leadership which the French Company urgently needed.


  • Establishment of English East India Company
  • setting up of first factory at Surat
  • British trading settlements Madras, Bombay
  • Establishment of a trading centre at Fort William in Calcutta
  • Three important factories in Madras, Bombay and Calcutta
  • Growth of English East India Company
  • Queen’s permission and exclusive rights to trade with the east
  • Royal Farman by Jahangir to Captain Hawkins
  • Establishment of factories on the western coast
  • Sir Thomas Roe
  • Construction of Fort St. George at Madras
  • Arrival of the French under the leadership of Dupleix
  • Interference in the affairs of the local princes
  • Victory of English in war
  • Treaty of 1754
  • Recall of Dupleix from India
  • Battle of Wandiwash
  • Defeat of the French
  • Ascendency of Siraj-ud-Daulah to the throne
  • Battle of Plassey in 1757
  • Defeat of Siraj-ud-Daulah
  • Defeat of Mir Qasim in the Battle of Buxar in 1764
  • East India Company’s rule in India
  • Farman of Faruukhsiyar
  • Anglo-French Struggle causes and effect
  • First Carnatic War (1740 – 1748)
  • Events and results
  • Treaty of Aix-La Chapelle
  • Second Carnatic War (1749 – 1754)
  • Causes and events
  • Treaty of Pondicherry
  • Third Carnatic War (1756 – 1763)
  • Seven Years’ War- Causes, events and results
  • Treaty of Peace of Paris
  • Reasons behind the success of English and the failure of French East India Company

Objective type questions

  1. When was the English East India Company established in India?
  2. Where did the English East India Company set up their first factory in India?
  3. Which ruler transferred Bombay to the Company in 1688?
  4. Where were the three important factories of the English East India Company located during the 1700s?
  5. Which Mughal ruler issued a trade license granting the British East India Com-pany permission to live and trade in the Mughal Empire?
  6. When did the Battle of Wandiwash happen and who was defeated in it?
  7. When did the Battle of Plassey happen and who was defeated in it?
  8. When did the Battle of Buxar happen and who was defeated in it?
  9. Which treaty concluded the first Carnatic war?
  10. Who was the Governor-General of French India during the second Carnatic war?
  11. Who signed the Treaty of Pondicherry?
  12. Who won the third Carnatic war?
  13. When was the French East India Company formed?
  14. Where did the French East India Company establish their trade centres?
  15. Which French Governor captured Madras?
  16. When did the war of Austrian Succession end?
  17. Which French Governor signed secret treaties with Muzaffar Jung and Chanda Sahib?
  18. Which region was given by Salabat Jang to the French Company?
  19. Which was the capital of Carnatic and who captured it?
  20. Which European war corresponds to the third Carnatic war?
  21. Who defeated Count De Lally in the Battle of Wandiwash?
  22. When did the Battle of Wandiwash happen?

Answer to Objective type questions

  1. 1600
  2. Surat
  3. King Charles II
  4. Madras, Bombay and Calcutta
  5. Farrukhsiyar
  6. 1760, The French
  7. 1757, Siraj-ud-Daulah
  8. 1764, Mir Qasim
  9. The Treaty of Aix-La Chapelle
  10. Joseph Dupleix
  11. Charles-Robert Godeheu
  12. The British
  13. 1664
  14. Surat, Pondicherry near Madras, Chandernagar in Bengal and Mahe near Mysore
  15. Dupleix
  16. 1748
  17. Dupleix
  18. Four districts in the Andhra region known as the Northern Sarkars
  19. Arcot, Robert Clive
  20. Seven years’ War
  21. Sir Eyre Coote
  22. 1760


  1. Discuss the role of the British East India Company in establishing British suprem-acy in India.
  2. Briefly explain the cause and effect of the Anglo French rivalry in the Carnatic region.
  3. Mention the factors that led to the success of British East India Company against the French East India Company in India.
  4. Examine the effect of the third Carnatic war on French power 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.