The English East Company had very humble beginnings in India. Surat was the center of
its trade till 1687. Throughout this period the English remained petitioners before the Mughal authorities. By 1623 they had established factories at Surat, Broach, Ahmedabad, Agra, and Masulipatam. From the very beginning, the English East India Company tried to combine trade and diplomacy with war and control of the territory wherever their factories were situated. Thomas Roe wrote to the Company authorities and gave guarantee to the English authorities about the future British relations with India. He wrote, “I know these people are best treated with the sword in one hand and the Caducean (a rod carried by a messenger) in the other.”

Further he added that the English should depend “upon the same ground that we began and by which we subsist, feat.”
Eventually, the Portuguese lost all their possessions in India except Goa, Diu and Daman. The success of the Portuguese also principally due to the rich cargoes of spices, calicoes, silk, gold, pearls, drugs, porcelain, and were high profits made. These stimulated the England merchants
to participate aggressively in profitable commerce. Among the British private traders there were many aggressive people who were quick to advise the company to use its resources and manpower for an active intervention in Asian affairs. Even among the directors of the company there were bold men who thought of the land revenue resources in India through capturing of territorial conquest. Sir Josiah Child, East India Company director, who first proclaimed such intentions of the company even dared to wage a war against the Great Mughal in 1686. In 1625 the Company’s authorities at Surat made an attempt to fortify their factory but the chiefs of the English factory were immediately imprisoned by the local authorities of the Mughal Empire. Similarly, when the Company’s English rivals made piratical attacks on Mughal shipping, the Mughal authorities imprisoned in retaliation with the President of the Company at Surat and members of his Council and released them only on payment of £18,000. Simultaneously the conditions in the South India were more encouraging to the English as they did not have to face a strong Indian Government there. The great Vijayanagar Kingdom had been overthrown in 1565 and its place was taken by a number of small and weak states. It hence became easy to British appeal to their appetite for territorial expansion with armed strength. The English opened their first factory in the South at Masulipatam in 1611 and later, they soon shifted the center of their activity to Madras the lease of which was granted by the local Raja of Vijayanagaram in 1639. Madras then had a coastal strip which was six miles long and one mile broad. The Raja authorized them to fortify on condition of payment of half of the customs revenue of the port to him. Here, the English built a small fort around their factory called Fort St. George. By the end of the 17th Centurythe English East Company has established its sovereignty.


ROLE OF EAST INDIA COMPANY IN TRADE

The Charter of 1600 granted the East India Company an exclusive privilege of trading of
East of the Cape of Good Hope for a period of 15 years. The Charter provided for the management of the Company by a committee consisting of a Governor, a Deputy-Governor, and 24 members to be elected by a general body of the merchants forming the Company. This committee, later
known as the Court of Directors and its members were called as Directors. The East Indian Company soon became the most important trading company of England. Between 1601 and 1612 its rate of profit came to nearly 20 per cent per annum mainly derived both from trade and from piracy. In 1612 the Company made a profit of £ 1,000,000 on a capital of £ 200,000. The
rate of profit that was made by the Company was very high during the entire of the 17th
century. But the Company was a strictly closed corporation or a monopoly. A non-member of the company not allowed to trade with the Eastern territories or to have share in its high profits.

However, from the very beginning English manufacturers and the merchants who could not secure a place in the ranks of the monopoly companies carried on a vigorous campaign against the East India Company. Even influential economic thinker, Adam Smith attacked on the Company’s monopoly. But the monarchs threw their influence behind the big companies who gave heavy
bribes to them and to other influential political leaders. From 1609 to 1676, the Company gave loans amounting to £ 170,000 to Charles II, and in return, Charles II granted it a series of Charters confirming its previous privileges, empowering it to build forts, raise troops, make war and peace with the powers of the East, and authorizing its servants in India to administer justice to ail Englishmen and others living in English settlements. Along with these, many members of the British Parliament were shareholders of the company’s monopoly. As a result to this, nthey made the reforms in 1770s,1780s, and 1790. Finally, the Company acquired extensive military and judicial powers.

Many English merchants continued to trade in Asia in spite of the monopoly of the East
India Company. They called themselves the Free Merchants while the Company called them as Interlopers. These Interlopers in the end compelled the Company to take them into partnership. As result of a change that occurred in 1688 when the Parliament became the supreme in England due to the Glorious Revolution-1688 which overthrew the Stuart king, James II and invited William III and his wife Mary to be the joint sovereign of Britain. The “Free Merchants”
now began to press their case on the public as well as in the Parliament. The Company defrauded itself by giving heavy bribes to the King, his ministers, and members of the Parliament. In one year alone it spent £80,000 on bribes, giving the King £ 10,000. In the end, they secured a new Charter in 1693.

Soon after this disgrace, in 1694, the House of Commons passed a Resolution that “all
subjects of England have equal rights to trade in the East Indies, unless prohibited by Act of Parliament.” The rivals of the Company founded another Company known as the New Company. It gave a loan of £2,000,000 to the Government at a time when the Old Company could offer only £700,000. Consequently, the Parliament granted the monopoly of trade with the East to the New Company. The Old Company refused to give up its profitable trade so easily. It bought large shares in the New Company to be able to influence its policies. At the same time its servants in India refused to let the servants of the New Company carry on trade there. Both
companies faced ruin as a result of their mutual conflict. Finally, in 1702, the two decided to join forces and together formed a united company. The new company was called as “The Limited Company of Merchants of England trading to the East Indies”. It came into existence in 1708.
Gradually, the East India Company grew its power and established the status of a sovereign state in India. The organization of its factories in India too changed and developed accordingly. By the late seventeenth century, the Portuguese lost their hold in Persia, Ceylon, and Bengal.
The English had been more or less driven from the Indonesian pepper trade by the Dutch and were keen to strengthen their hold in India. As an outcome of this, the emergence of three territorial base that the English East India Company found themselves in secure possession of Madras (c. 1640), Bombay (c. 1660) and Calcutta (c. 1690). The British mercantile trade operated within a broad framework of mercantilism particularly by favoring the exporting goods that too finished products while discouraging exports of raw materials. To protect their own market monopoly for finished goods, imports of a certain types of luxuries goods were discouraged and
sometimes banned. British Government as a part of this broader policy colonies were not allowed to enter into any foreign trade directly with another European country. Great importance is attached to the state and it became the center of all economic activities. The control and regulating
mechanism of the British Government was essential for the attainment of the most favorable balance of trade. However, British monopolistic mercantilist polices could not continue for a long time.

In England, Adam Smith who was proponent of free trade and other intellectuals’ started
against mercantilism since the late 17th century. The spirit of monopoly and regulation was gradually dying out as non-company members wanted to participate in the trade with India. Later, the growth of industrial revolution changed the character of ownership and control. Commercial capitalism of the mercantilist period was transformed into industrial capitalism
accompanied by many technological changes that took place during the process of production.