In a nutshell: the East India Company

It was a company of traders and merchants but it became an imperial power, which ruled much of India with its huge army.

In a nutshell: the East India Company © Getty Images

What was the East India Company?

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The EIC was an English, and later British, trading corporation that grew to be an imperial power in India.

How did the EIC start?

The company began in 1600 with a group of English merchants wanting to take advantage of the vast profits that could be made from trading spices from the East Indies (modern-day Indonesia). These spices were in huge demand in Europe.

The merchants were granted a charter by Elizabeth I, which gave their new company monopoly rights over trade in the region. But when they arrived in the East Indies, the company’s representatives discovered that the Dutch and Portuguese had already sewn up the spice trade, with few opportunities for newcomers.

Instead, the company turned their attention to India, attracted by its high-quality textiles.

What kind of organization was the company?

The first voyages were funded separately, but within a few years, the EIC had become a joint stock. As with today’s multinational corporations, shares could be bought and sold, and shareholders in the company received dividends.

The flag of the East India Company © Getty Images
The flag of the East India Company © Getty Images

How did the EIC become established in India?

In the early 17th century, much of India was ruled by the Mughal dynasty, whose power and wealth easily eclipsed that of the English crown.

The Mughals saw little threat from the English and so allowed them to set up small coastal outposts. From there, the EIC traded a variety of products, including textiles, which fetched high prices in England.

When did the EIC take on an imperial role?

Until well into the 18th century, its main focus was trade, but two important factors caused that to change. Firstly, internal divisions saw the Mughal empire weaken and disintegrate, resulting in a power vacuum. Secondly, throughout the 18th century, Britain was engaged in a long series of wars with France, which led to clashes in India where the countries jostled for influence.

The EIC always had small groups of soldiers to protect their trading areas, but as India became more uncertain and hostile, the company built up an army that would eventually number over 200,000 men. This force, largely compromising Indian soldiers, enabled the company to become an imperial power.

In 1757, the EIC defeated the ruler of Bengal at the Battle of Plassey, following the capture of a company settlement at Calcutta the year before. Within a few years, the company assumed control of Bengal and gradually expanded, conquering one province after another until it dominated the Indian peninsula. As it took over territories, the company realised it could make a great deal of money from taxes and customs duties, which soon rivalled trade in importance.

An engraving of Indian troops, the 'sepoys', in the East India Company's service, c1820s. (By Frederic Shoberl, from his work The World in Miniature: Hindoostan)
 An engraving of Indian troops, the ‘sepoys’, in the East India Company’s service, c1820s. (By Frederic Shoberl, from his work The World in Miniature: Hindoostan)

Were the EIC’s activities limited to India?

Although India was its main focus, the company was active in other parts of Asia as well. Singapore was founded as a colony by the EIC in the early 19th century. They also traded extensively with China, which produced tea and porcelain.

In order to pay for goods, company traders illegally exported Indian opium into China, setting off a chain of events that eventually led to the Opium Wars.

How did the EIC end?

By the mid-19th century, the EIC had lost many of its trading privileges, and its main role was to administer India for the British government. This unusual situation had long caused unease in Britain, leading to several laws being passed to regulate the company’s behaviour.

In 1857, a major rebellion broke out in India against British rule. It was only suppressed with a tragic amount of bloodshed.

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This was the final straw for the British government, who stepped in to take direct control of India, leaving the EIC with little remaining purpose. The company was formally dissolved in 1873.

This article was first published in the February 2016 issue of History Revealed.