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date: 04 December 2020

Origins of British Indiafree

  • Tirthankar RoyTirthankar RoyDepartment of Economic History, London School of Economics and Political Science


The origin of British India can be traced to warfare in 18th-century Europe and India, trade-related conflicts and disputes, and the East India Company’s business model. The state that emerged from these roots survived by reforming the institutions of capitalism, military strategy, and political strategy. As the 19th century unfolded and its power became paramount, the Company evolved from a trading firm to a protector of trade. The rapid growth of the three port cities where Indo-European trade and naval power was concentrated exemplifies that commitment. But beyond maintaining an army and protecting trade routes, the state remained limited in its reach.

British India emerged in the third quarter of the 18th century in the form of territories acquired by the British East India Company. The Company (as it was called) was established as a trading firm in 1600, with a licensed monopoly to trade in the Indian Ocean. Negotiating rights to trade in India and staving off rivals and private traders pushed it intro playing a political role from to time. In the mid-18th century, the Company engaged more frequently with politics in India as the Mughal Empire collapsed and rivalries and conflicts among Indian states succeeded that power. One outcome of these engagements was the acquisition by the Company of several large independent states. This is how the British rule began.

The origin of the British Empire in India can be described as a sequence of three stages. The first one of these, 1765–1784, saw the East India Company officers acquire territories, experiment with systems of rule, and face charges of a conflict between private and public interest. In 1784, the British Parliament began to oversee Indian administration. In the second stage, 1784–1813, the private mercantile interest behind political decisions receded completely, and institutional and military reforms set out the framework of imperial rule. In 1813, the charter to trade in India as a monopoly ended, and in 1857, the Indian Mutiny broke out. During the third stage, that is, between 1813 and 1857, the key political processes that had contributed to the origin of the British state in India were more or less over. But the Company’s legacy for the evolution of governance and society was still much in evidence. The British Indian territories were transformed into a colony of the British Crown in 1858. Crown rule ended in August 1947 with the Partition of India into two independent nations, India and Pakistan.

The origins of British India are discussed in the context of the changing economic and political conditions of the late 18th and early 19th centuries. With reference to the most consequential political events, attention falls mainly on the first two of the three periods, that is, on 1765–1813. With reference to the many-sided legacy of the Company on the shaping of British rule and Indian society under it, the third period (1813–1858) enters the discussion.

Formally, the British Empire in India started in 1765, when the Mughal Emperor Shah Alam the Second (1728–1806) delivered to the East India Company the right to collect the revenues of Bengal, Bihar, and Orissa, which formed nominal provinces of the Mughal Empire. The act entailed transfer of civil and military powers as well, but it would be decades before the process was finished.1

The emergence of a distinctly British rule in India took shape through four subsequent processes of change that would take at least half a century to work themselves out. One of these processes was warfare. Anglo-French military competition in Europe spilled over into Indian politics. Further, the end of the Mughal Empire caused the competition for power in Europe and that in India among the successor states to become entangled. The second process consisted of administrative, institutional, and military reforms in Bengal. The third process occurred in Britain. Between 1772 and 1784, parliamentary acts enabled the legislature to have oversight of Indian governance, creating the framework of a British Indian governmental system that would remain in place until the interwar period. The fourth and final change occurred in the identity of the East India Company, which transformed itself from a trading firm to a facilitator of trade.

A general account of the origin of British India, therefore, can be presented in four sections—the overlap between warfare in Europe and in India, institutional reform, the emergence of a governmental system with two heads (one in London and the other in Calcutta), and the mutation of the Company. The combination of these four elements distinguishes the origin of European rule in India from the emergence of European empires in the New World, Africa, and Southeast Asia, where one or the other of the elements was absent. A fifth section considers the recent scholarship that reinterprets the significance of the origin of British India in global political history and Indian history.


The geography of the Indian subcontinent accounts for the coexistence of two distinct types of political power in the region around 1700, one operating from the interior—mainly the Indo-Gangetic Basin—and the other operating from the coasts. The former earned revenue from agricultural taxes, was “agrarian” in this sense, had extensive bureaucracy managing the fiscal system, and relied for its military enterprise on soldiers contributed by semi-independent warlords who held land grants. The Mughal Empire, which ruled the Indo-Gangetic Basin area for nearly two hundred years (from Babar’s conquest of northern India in 1526 to c. 1720) was the most powerful agrarian state in South Asia at the start of the 18th century. But again owing to geography, specifically the high cost of transportation and moving armies, the states located in the Indo-Gangetic Basin had limited control over the several thousand miles of the littoral that had made India a trading point in the Indian Ocean. Although the Mughal state did eventually control two ports, Surat in Gujarat and Hooghly in Bengal, it did not control the crucial trading zone in Coromandel, and its interest in the sea and maritime trade was indirect at best. The coastal world was divided into smaller states that relied on revenue from commerce and built partnerships with ocean-going merchants.

The political balance between the coasts and the interior changed in the 18th century. Two movements, which were at first independent and then reinforced each other from the second quarter of the 18th century, were responsible for this change. One was the collapse of the Mughal Empire in the interior, and the other was the ascendance of the East India Company on the coasts of Bengal and Coromandel. The two movements intersected in a series of conflicts, directly between rival powers struggling to extend their power base to the Indo-Gangetic Basin, and indirectly between the British and French forces who took opposite sides in some of these battles.

The Mughal Empire began to crumble away in the second quarter of the 18th century. The governors, or Nawabs, of three large provinces—Hyderabad, Bengal, and Awadh—became effectively independent. The west was ruled by Rajput states and the Western Deccan by the weak state of Bijapur, but in the south, the states left behind by the Mughal Emperor Aurangzeb’s unfinished conquest of South India had never been administratively or politically integrated into the empire.2 These regions had poorer land and poorer states, but they had reorganized their military machine. Emerging stronger from the failure of the Mughal conquests, the Marathas of Western Deccan expanded into the Indo-Gangetic Basin in search of revenue, and farther south, Mysore, under the military commander Hyder Ali, expanded toward the western coast with the same purpose. None of these states was yet secure, fiscally speaking (see Map 1).

Map 1. India c. 1770.

Until 1740, the ascent of the European merchant firms on the coasts was on a parallel trajectory that intersected little with state formation in the interior. But the Europeans had the resources necessary to join military campaigns on a small scale. Since its foundation in 1600, not only had the East India Company accumulated great power and wealth in London, but it had also come to possess a large commercial infrastructure financed by the profits of overseas trade, consisting of ports, docks, warehouses, and overseas settlements. In India, the Company had managed to establish three ports where it functioned as landlords. Of these three ports, Calcutta, located in Bengal, was rapidly growing in population in the 1740s, thanks to the migration of wealthy Bengali merchants from the western borders of the state where they were targets of attacks by the Maratha force stationed in central India. The Company’s own trading operations were gravitating from western and southern India toward Bengal, thanks to an interest in cotton textiles manufactured in Bengal.3

The firm operated under a royal charter that granted it monopoly of trade, but the monopoly was not always enforceable. Private merchants defied it and could get away with doing so because policing power was vested with the local kings, who did not see it as their duty to defend an order of the English king. Besides, private traders sometimes formed clandestine business partnerships with Company employees. The London directors knew this, but beyond occasional token penalties could do little to curb conflicts of interest. The cleavage between the head office and the branches in India thus widened. It widened further as Bombay, Madras, and Calcutta enlarged as settlements and turned the branch officers from mere employees to quasi-sovereigns.

As the backdrop to these developments, rivalries with the French East India Company broke out in the wake of the War of the Austrian Succession (1740–1748) and the Seven Years War (1754–1763).4 The rivals joined opposite camps in a power struggle in Carnatic, a militarily weak kingdom located strategically near British Madras and French Pondicherry. The French factor as present in another theater of statemaking, Bengal, where the Company ran into a dispute with the local Nawab and allied with Indian merchants and bankers to overthrow the regime. After initial reverses against the French in the south and the Nawab of Bengal in the east, success on the battlefield and secret diplomacy led to the establishment of the Company as the ruler of Bengal (1757–1765) and as a de facto ruler of the Carnatic (1760). The transformation empowered the militaristic group among the Company’s officers who operated the branches, led by Robert Clive (1725–1774) and a small band of other officers who received generous “gifts” from the local potentates. It also helped the Company as a trading firm, which could fund its exports partly from the revenues, rather than from the silver that had to be imported from home.

The next major territorial acquisitions occurred in the south. The Nizams of Hyderabad were Mughal governors who established a virtually independent rule by the third decade of the 18th century. Having suffered Maratha raids and a series of inconclusive engagements with the Marathas, the Nizam formed an alliance with the French. When the French became friendly with the two rival powers, Mysore and Maratha, the Nizam allied with the English (1766), handing over the “Northern Circars,” a large chunk of coastal Coromandel, to the Company, ostensibly to enable the English to pay for their troops. In 1803, districts in the west and south of the state, including the fertile Raichur Doab, were also handed over.5

These two modes of acquisition—represented by Bengal on the one hand and Northern Circars on the other—set the pattern of territorial acquisition by the Company in India.6 It could arm-twist weak or insecure states into delivering power, and it could take sides in local rivalries and gain from military victories. The second of the three Anglo-Maratha wars (1803) was fought on behalf of an Indian ally against a combined Indo-French rival force. The same pattern repeated in the Anglo-Mysore wars at the turn of the 19th century, and as late as 1846 in the Anglo-Sikh wars. The two earlier battles occurred during the Napoleonic wars, and although the French were not officially involved in fighting the British in India thereafter, a number of French commanders and gunners continued to work as mercenaries in India.

Between 1775 and 1818 (the year of the third Anglo-Maratha war), the Rohilla Afghans, the Marathas, and Mysore had to give up lands to the British, mainly by the second mode of acquisition. In a similar fashion, the Sikh wars in 1846 delivered Punjab to British control. These conflicts notwithstanding, the British Indian state and the Indian princes maintained a relationship of mutual regard for each other’s sovereignty between 1818 and 1848. For a period of eight years (1848–1856), the implicit contract broke down, when British India asserted its right to annex a princely state if the ruling prince seemed to be governing badly, and worse, if he died without a male heir (“the doctrine of lapse”). The acquisition of Awadh by diktat (1856) followed much arm twisting.

By 1856, the map of British India was firmly established. Sixty percent of the land area and a somewhat higher percentage of the population belonged in the British ruled-territory (see Map 2). The British controlled the coastline, possessing all consequential ports and the coastal trade routes. The remaining 40 percent of the area was governed by several hundred large and small principalities, some of which had nonaggression treaties with the British. The others were too small to matter, or so the British rulers thought—to their detriment, as we shall see.

Map 2. India c. 1900. Shaded areas represent states.

Institutional Reform

As opposed to the land-based empires, or states that depended on agricultural taxes, the British Empire, thus, was a “maritime empire,” one that emerged from Indian Ocean trade and financed its military enterprise initially by commercial income. As the Company acquired territorial states, it needed to change itself from a maritime into an agrarian state. In the process, British India followed a pathway distinct from its rival or partner Indian princely states. It created a standing army financed by the central treasury, as opposed to armies maintained by feudal land grantees.7 This move made it militarily powerful in relation to its neighbors. To achieve this end, the Company brought land taxation under closer central control, partly by means of interventions in landed property rights. In the process of the reforms, old feudal lords and warlords either lost their hold on land or had to reinvent themselves as a demilitarized landlord class. Because of these two changes, the bureaucracy and the army expanded in scale and capability.8

In the 1770s, reforms in civil and criminal law marked the first decisive steps with which the Company assumed control over general governance of the region, even though the process was a protracted one. Until the reform of 1772, governance was divided between the court of the Bengal Nawab and the Company’s establishment in Calcutta. The division of authority was a convenient arrangement for the handful of the Company’s officers who led the coup in Bengal; they could extort protection money from the nobility, and recycle land tax into trading investment. But the diarchic rule cost the population dearly during a famine in 1770, when relief was compromised by the mutual distrust in which the two heads of the government held one another.

Strengthening the institutional foundations of the state had been initiated by a new breed of governors, especially, Warren Hastings (1732–1818) and some of his associates. Hastings was governor general in India from 1773 to 1785. His appointment by the Company’s directors to this position was a political decision, and a reaction to the scandals that had tainted the Company’s extortionate regime in the first seven years of its existence. An old India hand, Hastings was fluent in the Mughal court language, Persian, and had more friends among his former Indian associates than in the Company’s establishment in Calcutta. He set out to implement a long-held belief that British rule in India should build on Indian norms of statecraft, rather than on British norms. Law was the immediate field of application for the idea. The problem was that there was no such thing as the law of the land in India at that time. An Indianized version of sharia governed the Muslims, and a mix of unrecorded customs and precepts governed the Hindus and other communities. State courts in pre-British Bengal recorded and settled cases that belonged in the former category.

To realize his idea, then, Hastings ordained that documented religious codes would be the basis for civil law in the matter of property, succession, inheritance, testament, and contracts. Religious books did in fact contain statements that could be read as law. But these were written in Sanskrit, Persian, and Arabic, the knowledge of which was confined to a small elite. The state, therefore, needed to establish seminaries and colleges to train legal experts. A hierarchical system of courts was established to try cases according to these laws—a rather artificial project. The law codes were written by experts on religion, with little or no input from precedence, juristic principles, and lawyers. Where Indian experts were concerned, the priestly classes had more say on law than did legal professionals. When disputes occurred between members of different religions, which was inevitable in the cosmopolitan trading ports, Hindu and Muslim law was of little use. As the 19th century rolled on, the judges and lawyers followed these codes less and less. Departures were frequent, and on a number of occasions led to legislation that created a secular system of legal reference in parallel with, and not overturning, the older religious references. The coexistence of multiple references was a major reason for an explosion of appellate cases in the 19th century, which increasingly clogged the Indian legal system and slowed it down.9

A second area of the Company’s institutional intervention was the assignment of property rights in land. Ownership and succession broadly followed the aforementioned religious law. But to whom would agricultural property belong? In Hastings’s time, land in Bengal was cultivated by peasants but controlled by magnates known as “zamindars,” who held tax-farming contracts under the old regime. Several of the zamindars were wealthy as well as armed. The weak state of the Nawab of Bengal had tried to establish jurisdiction over them, not very successfully. The Company faced the same challenge, that of subduing the zamindar militarily and yet using the zamindar to collect taxes. The state relied on the tax-farming contracts until 1793, when a radical new system was introduced. Known as the Permanent Settlement, the new system ended revenue farming contracts, fixed land tax in currency forever (hence, “permanent”), made the state the collector of taxes, declared the zamindars the proprietors of their estates, and gave the courts of law, rather than the government, the charge of enforcement of property rights.

A variety of motivations could have led to the move. An English belief that security of property would make efficient cultivators out of the zamindars played a role. In the process, the state would be able to collect its due, even from recalcitrant zamindars, because the zamindars in turn gained by making a potentially bigger profit margin from the difference between collection from improved land and the payment of a fixed tax to the state. The alternative, which was the delivery of a property right to the cultivating peasant, was practically impossible because the Company did not yet have much information on the identity of the peasants. Politically, a deal with the zamindars was expedient in the presence of many external threats. Big landlords enjoyed considerable political authority in their own domains, and some were still well armed.

Along with these factors, certain statements made by individual administrators suggested a hope that the move would weed out the bigger landlords who were armed and dangerous. Something like this did happen. Whether due to the high levels of taxes fixed or the landlords’ own incompetence, the Permanent Settlement resulted in large-scale sales of landed estates, as well as a rapid subdivision of property. Numerous court cases between 1793 and 1830 concerned indebted estates, division, and transfer of control of zamindari property. The Company did manage to raise its revenue significantly. The system, therefore, was extended from Bengal to the Northern Circars.10

Still, the idea of dealing with rural magnates was not a popular one with a later generation of land administrators. By 1810, many believed that the Permanent Settlement had done an injustice to the cultivator, who was exposed to the threat of eviction and extortion by the legal owner. Around 1800, shortly after a large territory in south Deccan was acquired from Hyderabad and the same question of assignment of property appeared, the Scottish administrator Thomas Munro (1761–1821) decided to depart from the Bengal precedence. Unlike in Bengal, which was part of the fertile Indo-Gangetic Basin, in the dry lands and arid uplands of the peninsula, a landlord class vested with fiscal powers was rare. Land management had earlier been conducted through the agency of paid officers of the state, who were sometimes peasants themselves. Their bosses lived in hill forts and had little direct contact with land. Far from dealing with them, the Company attacked and removed as many of them as possible. In these areas, the state delivered proprietary rights to the peasants on a contractual basis. There were local records of landholding used for the purpose, but the records were far from reliable. Munro thus went beyond this brief, and also conducted surveys of the living standards of ordinary people, but as far as we know, these surveys have not yet been recovered in the archives. When the question of land reform came up again in 1818 in territories newly acquired in western India from the defeated Maratha principalities, the same principle, now known as ryotwari, or settlement with cultivators, was applied.11

Imperialist Regulation

Mercantile interests and individual opportunism were the driving forces behind the mid-18th-century battles that established the Company in a position of power in India. These interests caused a scandal in Britain, and helped Adam Smith make a powerful case against monopoly power in general and the East India Company in particular. By contrast with the results of the battles fought in the 1750s and 1760s, the British political interest prevailed over merchant interest in the battles that took place between the Third Anglo-Mysore war (1799) and the Third Anglo-Maratha war (1818)—both imperialist wars.

The transition from merchant power to state power owed much to two related tendencies. The first was the disputed nature of the Company’s right to sovereignty in a foreign land. Who was the real ruler of the Indian territories—the king, Parliament, or a trading firm? The question had been around ever since the Company leased land to set up ports. These decisions were controversial, not only on the sovereignty issue but also because the London directors did not like the expenditure involved.12 In the 1770s, the sovereignty issue needed an urgent resolution.

The second tendency was the controversy surrounding the conjunction of commerce and governance. The establishment of a Company state in Bengal was initially a convenience for the Company’s own transactions. The Bengal revenues partially obviated the need for silver imports to finance its exports of cotton textiles from Bengal. This arrangement, though short-lived because the Company soon reduced its trading commitments and focus on fighting, still reinforced the view in London that a coterie of merchants had created a corrupt rule in Bengal and were running it in the name of the Crown. In response to these criticisms, a weak form of parliamentary regulation was introduced in 1772, followed by a stronger version in 1784, which created the body (Board of Control) that would establish parliamentary oversight of the Company’s rule in India.

With these moves came the establishment of two heads of government: one located in Britain and the other in India. During the 19th century, both heads were maintained from Indian revenues; the one in London required the government of India to make a sterling remittance out of its budget. Around 1900, Indian publicists started attacking this payment, calling it a “drain.” To this remittance were to be added other remittances on account of public debt, railway construction, military pensions, and business enterprise. This large net payment for services was balanced against a surplus of commodity exports over imports. To maintain smooth operation of the economic system, London regulated monetary and currency policy, whereas the Indian administration was in charge of fiscal policy. Both maintained a conservative stance and were averse to changing the rules of the game. As a result, the government remained small (the revenue to national-income ratio was a low 3–5 percent for almost the entire time the British ruled India). British India thus came to inherit a small if militaristic state, dangerously conservative in its outlook on spending money for public investment and social welfare, and keen to maintain flows in trade and services.

The 1784 India Act formally inaugurated this political-economic setup. What happened to the Company thereafter?

The East India Company

The Company was the wealthiest and most powerful firm of its time, but not the most loved one in its home country. A merchant firm ruling a foreign country was seen as an anachronism in Britain. The Company was intermittently in financial trouble after it became a ruler of Bengal. The renegotiation of its charter in 1793 and 1813 were occasions for fierce debates between its own directors and the large number of private merchants who wanted trade and shipping to be free of the monopoly. During the Napoleonic wars the monopoly ceased to be enforceable, and it was withdrawn in 1813.

By the end of the wars, the Company had effectively withdrawn from trade. In the last quarter of the 18th century, the textile export business declined, and the Company’s exports narrowed to more or less one product, Dhaka muslin. In the 1810s and 1820s, it briefly tried to revive its commercial fortunes by entering the growing cotton export trade, but discovered that procuring cotton from the interior was not the government’s cup of tea.

The Company’s commercial legacy was already far-reaching. The key to that legacy was the growth of cosmopolitan trading and financial towns with access to Atlantic trade, and protected by a powerful navy. A large number of private partnership trading houses established branches in Calcutta, Bombay, and Madras, in collaboration with a counterpart firm in London or Liverpool, to conduct trade in opium, indigo, tea, and cotton. These European and occasionally Indo-European partnerships campaigned for the end of the Company’s monopoly, although they were also close to the government in India and occasionally advised administrators and acted as creditors to the government. Of the varieties of articles that they traded, opium and tea were special because they both brought China and India into a direct trading relationship. Opium, in effect, paid for the Company’s purchases of Chinese tea. Until 1833, the Company retained its monopoly of China trade.

The government was deeply involved in the new trading order. Opium was cultivated under government license in Bihar (the licensing system came in to operation between 1772 and 1786). In central India, opium was legally grown in the territories of the princely states. In Bihar, the government collected a tax on the profits; in central India, it collected a transit tax. In China, the Company’s protection and diplomacy were crucial to the trade. In turn, the opium revenues were an important item of government income until the 1870s.

With respect to cotton, the government policy was to encourage large-scale cotton plantations on the American pattern, but these efforts did not become profitable for the entrepreneurs. A modified form of the plantation system was more successful in indigo. A number of European individuals set up indigo factories in the lower Bengal districts, leased on land from the landlords, or entered into sale contracts with the peasants; the leaves were processed in factories to produce indigo. Toward 1850, some of the planters, as they were called, had become landlords as well. The government was less involved in the indigo trade, but did get drawn into legislation on contracts in light of the disputes that occurred in indigo sales.13

The three ports had also started to import cotton yarn and piece goods in large quantities. The effect of these businesses upon trade volumes was not very large until 1831, but shipping tonnage rose more than ten times, from fewer than 300,000 tons of cargo from the three leading ports in 1831 to more than three million tons in 1858. A significant part of the gains from this trade was captured by Parsi and Gujarati merchants in Bombay, and a mix of Indian and European merchants in Madras and Calcutta. Although the Company no longer ran India directly, the lower reaches of the imperial establishment still contained people with a commercial bent. Until 1833, some private merchants formed partnerships with servants of the Company, thus securing a degree of political and policing power in the countryside. The Company’s servants deposited their savings for remittance in the Calcutta banks. Cotton trade, likewise, was organized by Indian merchants based in Bombay.

The cosmopolitanism of the port cities was an outcome of trade, not imperialism. By the end of the 18th century, Europeans had been living and dying on Indian soil for two hundred years. The majority of European migrants to India were single, male, and outside of public administration. A small number of them lived inside the Company establishments, called factories, and a much larger number lived in urban neighborhoods, sometimes in makeshift townships that sprang up near the ports, working as traders, mercenary soldiers, artisans, shipwrights, and sailors, and marrying Indian women. The majority of the women came from families located low in the Indian caste hierarchy, thereby downgrading the social status of the Indo-European population among the European and Indian elites alike. Sometimes they came from the Company’s own establishment, being individuals whose indenture of employment had expired but who did not wish to return to Britain.

Via trade and migration, the British Indian port cities emerged as sites where European and Indian ideas came into contact. Some of the contributors to the intellectual exchange were government employees, though the knowledge they created did not necessarily serve governance, nor were they always sponsored by the state. The European administrators and military personnel included individuals like William Jones (1746–1794), H. T. Colebrooke (1765–1837), William Roxburgh (1751–1815), and Francis Buchanan (1762–1829), who gathered and analyzed information on such diverse fields as medicine, botany, chemistry, meteorology, cartography, mineralogy, and livelihoods. Merchants joined in the intellectual exchange, too. James Prinsep (1799–1840), the son of the merchant and indigo planter John Prinsep (c. 1748–1830), worked on metrology, Indian history, and languages, and was a particularly active member of the Asiatic Society of Bengal, started in 1772.

For some of these individuals, indigenous law and the study of classical Indian languages formed a major pursuit because they served roles that required this knowledge. For the contemporary Indian merchants and landlords like Dwarkanath Tagore (1794–1846) and Radhakanta Deb (1784–1867), who emerged as major sponsors of intellectual exchange in the early 1800s, legal scholarship and classical languages were of little interest. They were more interested in English education and scientific education. They sponsored a number of schools, colleges, and newspapers in the cities. A rich associational culture developed through these efforts. Their enthusiastic funding for a more global and useful type of education was reinforced by the failure of the Hastings project within the courtroom and by influential writings of British publicists like Thomas Babington Macaulay (1800–1859) about the need for westernized education in India.

While law was the main field of state intervention around 1800, by the 1840s, the rulers of India were thinking of far-reaching investment projects such as railways, the telegraph, and universities. Out of a chaotic series of local initiatives on irrigation canals, embankments, and road building, a public goods policy took shape. Unlike in the early 1800s when public works addressed mainly military issues, the discussions and campaigns for railways or education in the 1840s looked to the future and referred to the welfare of the whole population of British India. The state’s capacity to fund such initiatives was limited, and so was the scale of the effort. The railways, therefore, began as a private investment with a minimum rate of profit guaranteed by the state.

No matter which social class they inhabited, the entire population of Europeans and Indo-Europeans faced the prospect of annihilation in the summer months of 1857. The Indian Mutiny broke out in May of that year in isolated military camps, and before it was suppressed in the monsoon months of 1858, had developed into a broad front of armed and civilian resistance to the Company’s rule over Indian territories. The rebellion was fought mainly by professional soldiers of the Indian infantry regiments. Civilian rebellion was sporadic. Merchants and bankers rarely joined the rebellion; most appeared to subvert it.14 Because of these differences, a single theory of the rise and fall of the rebellion is unlikely to be sufficient. There was dissatisfaction within the army. Until the final Maratha wars, the distance between the Indian soldiers and the European commanders in the Company army had been relatively close. In the thirty years of peace that followed, the hierarchy hardened. The “doctrine of lapse” (annexation of a princely state with no male heir) fed resentment toward the British, and may have made the revolt especially violent in the newly acquired territories like Awadh and Jhansi.

The rebellion led to major shifts in governance and policy.15 Although the Company was no more than a symbolic ruler of India, it was on trial again in 1858 and accused of historic wrongs, such as neglecting diplomacy, favoring merchants at the expense of peasants, and going too far with institutional reform on occasion. In December 1857, when the prospect of Crown rule over the Indian Empire became real, the Company commissioned its employee John Stuart Mill to write a petition in its defense. Mill’s report made the case that the Company deserved gratitude for making the Indian empire possible after the loss of the American colonies, and that it had matured enough in the previous half century to design a pragmatic institutional policy in India that no government could improve. Mill’s plea did not succeed because it left the mutiny unexplained, among other reasons.

Long before the takeover of Indian administration by the Crown (1858), the key foundations of British India had been securely laid. The Mutiny changed little of that foundation. The state that operated from the foundation was small, militarist, and conservative. It did not, and could not, do very much except maintain the revenue and the military setup, and indirectly help trade continue. Its minimalism faced criticism, but not a serious political crisis, not even during the famines of 1876, 1896, and 1898, when the limits of state capacity were painfully exposed. On the other hand, by encouraging trade, industry, wealth accumulation, and in turn, the demand for political representation, the regime also weakened its moral right to maintain an elitist rule.

Discussion of the Literature

Other than a substantial volume of works dealing separately with the Company, the Indian Ocean trade, warfare in Europe, Parliamentary Acts, and Indian regimes, the scholarship on the origins of British India also explores the links among some of these elements. Although all of these works would in some fashion discuss the origins, the latter interpret it directly. Instead of conducting an all-encompassing review, this article focuses on the recent interpretive work on four questions specifically: Why did the Indian Ocean trade lead to a European empire in South Asia? If there was a causal link between trade and empire, was it to be found in the type of firm that the Company was or in the economic environment in which it operated? Did British India in its origin represent a British rule or an Indian type of rule? So far as early British India reshaped the institutions of capitalism, did the process have any implications for inequality between colonial and free nations?

A question often asked is why trade led to an empire. Was there something inherent in the business of the Company that made its mutation into a political power likely, even inevitable? By the nature of the question, the answer has to be somewhat speculative. The East India Company, of course, was a highly political entity since its inception. It operated under a royal charter, maintained a small-scale military infrastructure, and sought the help of the Royal Navy in the late 18th century. Philip Stern has shown that the Company saw itself as a political intermediary between Britain and India long before the conquest of Bengal.16 Whereas Indian states of the past had a tenuous access to the seaboard, the Company controlled the seaboard, which made it an effective negotiator with the Mughals. But having the power to protect profits and using power for territorial acquisition are two different things.

Did the Company’s territorial acquisition happen by design or by accident? Two quite different perspectives exist on the question, depending on how we read the Company as a firm. If we see the chartered companies as a command-and-control system, the steps toward territorial expansion would seem to have been taken in full knowledge of the London directors and under their command.17 Others, such as Holden Furber, suggest that there was a split personality within the management.18 The London directors of the firm were merchants and bankers, and conservative in outlook. The outstation branches, by contrast, were peopled with factors or employees-cum-traders, soldiers, and sailors, men of an altogether different class of British society. They were physically as well as temperamentally closer to those Indians on whom the firm’s activities depended, and negotiated with the latter all the time. They understood political risks and opportunities better than the directors. The disintegration of the Mughal Empire and warfare in Europe changed the risks and opportunities, affecting the actions of these people. The empire, in this fashion, emerged from the limited ability of the directors to direct their employees.

Recent scholarship places more emphasis on the context of commerce in 18th-century India. As Sudipta Sen has shown, Indians and Europeans did not always share the same cultural assumptions about commodities, exchange, and markets.19 Economic historians suggest that their interests were sometimes in conflict. The trade that the outstation officers managed could not get anywhere without the agency of a large number of Indian associates, working as bankers, subcontractors, transporters, and wage workers. These relationships were not regulated by law and broke down frequently.20 Breach of contract was pervasive, and so was distrust between Indians and Europeans. These problems were compounded for the European private traders who took more risks and procured goods like silk or indigo from the interior of the country. They relied on the protection afforded by the Company, but this was an indirect guarantee at best. At a time when territorial powers were weaker than before, any trader would want to assume a share in power in order to protect trade.

Did the Company state in the late 18th century represent continuity with the Indian model of statecraft or discontinuity, a fundamentally European type of state? Arguments can be found on both sides. Without doubt, the Company state in its origin relied on elements of statecraft that were indigenous. It had a strong desire to make friends with, and utilize the skills of, the Indian educated and courtly elite. Its adoption of indigenous religious codes as the basis for a lex loci reinforced the desire. Its army recruited Indian soldiers in the main.

Yet in law, in the army, in political strategy, and in the revenue system, the Company made changes that cannot be easily understood as following an established precedent. Two recent works on the Company’s state in Bengal suggest that the instruments and the ideology of rule were invented, often from Indian ingredients, but that the final outcome was neither Indian nor European. Robert Travers shows that the early colonial political thought represented a field of discourse distinct from either Indian or contemporary British ones, and involved a stylized reading of Indian history.21 Jon Wilson interprets the debates on law differently: They reflected the process of “inventing” a bureaucratic state where the model did not exist before, either in Europe or in India.22

The military success of the Company over its Indian rivals in the 18th century must be explained with reference to decisions that had no indigenous precedent. The success was owing to a standing army, whereas the rivals relied on armies contributed by locally powerful people. In turn, whereas the latter strategy meant giving away more fiscal rights to the warlords, which weakened the state and made it ever more reliant on contributory armies, the Company gained more strength by neutralizing these armed intermediaries.23 In negotiations with potential allies, too, the Company followed a path that was seen by its rivals as a distinct one.24 In short, its use of military-fiscal centralization to a more effective degree than that of the indigenous states of the time represented a distinctly European strategy.

A third large question has emerged recently in global economic history in relation to a literature that draws a causal connection between colonial rule and the economic institutions of capitalism, and, in turn, between colonialism and the origin of modern world inequality. Did British India represent a distinct form of European empire when compared with, say, Spanish America, Dutch Indonesia, or colonialism in Africa and Southeast Asia?

The British Indian Empire was distinctive in relation to other European empires of its time or later. A substantial literature on the settler empires in the New World define their key characteristics with reference to “extractive” institutions, including land-grab and coercive labor regimes.25 Extraction in this sense would have been impossible for the East India Company because it emerged in a milieu where strong states and institutions were already present. On land rights, legislation did not discriminate between people by the ethnicity of the right holder. If anything, expatriate landholding rights were weak compared with indigenous rights until well into the 19th century. Europeans could not own or purchase farmlands, for example, until the late 1830s, eighty years after colonization had begun. Agricultural land was owned by peasants and landlords, and the British legislated on these rights in such a manner that any land transfer, because it would involve a complicated legal process, became progressively rare. Only in the case of tea and coffee cultivation were forest lands leased out by the government to plantation companies, but these actions neither explicitly favored the European nor involved transfer of property rights held by Indians before the lease. In the case of labor servitude, the British imperial rule consistently legislated in favor of contractual rather than servile labor, though in practice the distinction could be hard to maintain, especially when contracts were protected by means of penal law.

By contrast with the settler economies where the extraction of natural or labor resources shaped policy and the nature of rule, empires in India and Indonesia originated in international trade. In both regions, economic policy was formed of metropolitan decision making (rather than settler agency) and commercial orientation (rather than natural resource orientation). Beneath this broad similarity, there were significant differences between these cases. Dutch colonial policy in Indonesia, as illustrated by the cultivation system, was predicated on a state that found it hard to pay for itself with local fiscal resources. British India did not have that problem. Having inherited moderately well-off agrarian states, it found itself in command of sufficient resources to pay for its own army, even though there was little left over for doing anything else. In its property laws, British India consistently maintained an attitude of regard toward the peasant. Colonial power having emerged from the bed of international trade, power was institutionalized differently in British India than it was in the settler economies. Power was institutionalized not in the form of microeconomic regulations that settler societies saw develop, but in macroeconomic management—in fiscal and monetary policy.

Primary Sources

The main repository of primary sources relevant to the subject is the India Office collections of the British Library. However, the contents and sources of the documents vary greatly, so that a description of some of the broad types of sources is in order.

A substantial part of the official documents is available in digital versions of the Parliamentary Papers (see “Links to Digital Materials”). The relevant reports will make for a long list. The most important in information content are the two sets of Select Committee inquiry reports on the East India Company instituted in 1772 and 1782–1783, each followed by legislative intervention to regulate the Company’s governance of the Indian territories. The second set contains reports on the system of justice in Bengal, and describes the new rule of law. A similar report was prepared for Madras in 1797. In 1812, a substantial (more than a thousand pages) inquiry on land tenure was published, entitled “The Fifth Report from the Select Committee on the Affairs of the East India Company”; it also contains a systematic account of the emergence of British India. This was the fifth report in a series instituted to review the Company’s charter. Thereafter, large-scale inquiries on the origins of British India were rare. One exception was the Law Commission, which reviewed the progress of legislation in a series of reports, the first of which was published in 1842.

Continuing with the Parliamentary Papers, negotiations between British India and the princely states are dealt with in a set of minor reports. One example is “Copies of All Treaties, Engagements, or Correspondence, between the British Government in India and the King or Mogul at Delhi,” published in 1805. Two reports published in 1801 and 1802 concern “the Nabob of Carnatic.” Compilations of treaties with princely states were republished in 1818, 1819, 1825, and 1856.

The Company’s own correspondence and trade records (such as the Consultation Books) shed some light on frictions that arose in its economic operations, which had indirect political repercussions. But directly, these resources are not very useful on the theme of this article. Of more significance are the writings of individuals connected with the Company’s work in India. A number of books and pamphlets published between 1770 and 1820 supply accounts of battles and negotiations between the East India Company and Indian rulers, as well as the conditions of ordinary people. Some of these writings influenced generations of British administrators in India. Examples include James Macpherson, The History and Management of the East-India Company, from its Origin in 1600 to the Present Time; Charles William Rouse Boughton, Dissertation concerning the Landed Property of Bengal; “Observations by C. Grant on State of Society among Asiatic Subjects of Great Britain, 1792,” originally authored by Charles Grant; and James Mill, The History of British India.26 Macpherson was an officer of an Indian state, Boughton an officer of the fiscal administration in Bengal in the 1760s, and later a politician. Grant was a director of the Company, a senior officer in Bengal, and in later life an evangelical reformer. Mill was a liberal intellectual, and after the book, an employee of the Company.

Indian-language sources are comparatively rare, but important exceptions exist. Perhaps the most important resource is formed of the papers of the Peshwa court, preserved in Pune, India. Other frequently consulted documents include Persian-language histories. A particularly well known example was the book authored by a political commentator, Ghulam Husain Khan Tabatabai, called Siyar-ul-mutaakhirin, which describes the fall of the Nawabi regime in Bengal. The book has useful descriptions of battles and disputes between indigenous states and warlords, including the dispute between the Afghans and Marathas that culminated in the momentous Third Battle of Panipat (1761). Unlike British sources, these descriptions use indigenous information. An English translation of the book can be found in Henry Miers Elliot and John Dowson, The History of India as Told by Its Historians.27

Historians of the Indian Mutiny have unearthed resources that can potentially shed light on the origins of British India as seen through Indian eyes, including folklore, newspapers, private accounts, pamphlets, and proclamations issued by the princely states. A systematic exploration of these sources is awaited.

Further Reading

  • Bayly, C. A. The Birth of the Modern World, 1780–1914: Global Connections and Comparisons. London: Blackwell, 2000.
  • Klein, I. “Utilitarianism and Agrarian Progress in Western India.” Economic History Review 18.3 (1965): 576–597.
  • Marshall, P. J. Bengal—The British Bridgehead: Eastern India 1740–1828. Cambridge, U.K.: Cambridge University Press, 1988.
  • Marshall, P. J. The Making and Unmaking of Empires: Britain, India, and America, c. 1750–1783. Oxford: Oxford University Press, 2005.
  • Roy, T. An Economic History of Early Modern India. London: Routledge, 2013.
  • Stern, P. J. The Company-State: Corporate Sovereignty and the Early Modern Foundations of the British Empire in India. Oxford: Oxford University Press, 2011.
  • Travers, R. Ideology and Empire in Eighteenth-Century India: The British in Bengal. Cambridge, U.K.: Cambridge University Press, 2007.


  • 1. The act of grant of dewanny and the subsequent process of transfer of power are described in Henry Yule and A. C. Burnell, Hobson-Jobson: The Anglo-Indian Dictionary (Ware: Wordsworth Reference, 1996), 5. This book was first published in 1886.

  • 2. Aurangzeb (1618–1707), the last of the so-called great Moghals, reigned between 1658 and his death in 1707. His reign was distinguished by two things to which the rapid collapse of the empire after his death is sometimes attributed: rebellions on the fringes of the empire, and a long and debilitating campaign to bring the Deccan uplands within the empire. The latter ended with the emergence of the Marathas as a military force, and as one of the post-Mughal successor states. On this transition and the related historiography, see Seema Alavi, ed., The Eighteenth Century in India (New Delhi: Oxford University Press, 2002), 1–56.

  • 3. P. J. Marshall, The Making and Unmaking of Empires: Britain, India, and America, c. 1750–1783 (Oxford: Oxford University Press, 2005); and Om Prakash, European Commercial Enterprise in Pre-colonial India (Cambridge, U.K.: Cambridge University Press, 2008).

  • 4. On the role of European warfare in changing the political economy of the world, see C. A. Bayly, The Birth of the Modern World, 1780–1914: Global Connections and Comparisons (London: Blackwell, 2000).

  • 5. On Doab, the tract between two confluent rivers, see Yule and Burnell, Hobson-Jobson, 331. In the Indo-Gangetic Basin, Doab would often refer to the highly fertile and densely cultivate tract between the Ganges and the Jumna Rivers. In the Deccan Plateau, the rivers were smaller in the volume of water carried compared with the Himalayan snow-melt ones like the Ganges and Jumna. In the Deccan, doab carried the meaning of a fertile cultivated tract, but tended to be narrower in extent.

  • 6. On this process, see Tirthankar Roy, An Economic History of Early Modern India (London: Routledge, 2013).

  • 7. The standing army originated in the troops raised and maintained in Bengal, Bombay, and Madras, and known as the Presidency Armies. From the mid-18th century, British regiments were sent to fight in India. Until 1784, the expense of British regiments in India was paid from British revenues; thereafter, the Board of Control (body appointed by Parliament to manage the governance of India) could hire British regiments and pay the cost with Indian revenue. Limits were set on the numbers to be hired from Britain. From the early 19th century, the cost of the army was paid mainly from the Indian revenue. For more details on the emergence of the British Indian army, see T. A. Heathcote, The Military in British India: The Development of British Land Forces in South Asia, 1600–1947 (Manchester, U.K.: Manchester University Press, 1995).

  • 8. On the simultaneous expansion of fiscal and military capacity, see Roy, Economic History of Early Modern India.

  • 9. Tirthankar Roy and Anand V. Swamy, Law and the Economy in Colonial India (Chicago: University of Chicago Press, 2016).

  • 10. On the evolution of the zamindari right in the 19th century, see B. B. Chaudhuri, “Agrarian Relations: Eastern India,” in The Cambridge Economic History of India, vol. 2 (Cambridge, U.K.: Cambridge University Press, 1983). Volume 2 covers the years 1757–1970.

  • 11. Burton Stein, ed., The Making of Agrarian Policy in British India, 1770–1900 (New Delhi: Oxford University Press, 1992); and I. Klein, “Utilitarianism and Agrarian Progress in Western India,” Economic History Review 18.3 (1965): 576–597.

  • 12. For a discussion of these debates and controversies, see Tirthankar Roy, The World’s Most Powerful Corporation: East India Company (New Delhi: Allen Lane, 2012).

  • 13. On indigo, opium, and cotton trades of the early 19th century, see Tirthankar Roy, India in the World Economy from Antiquity to the Present (Cambridge, U.K.: Cambridge University Press, 2012). On contractual disputes in these trades, see R. E. Kranton and A. V. Swamy, “Contracts, Hold-up, and Exports: Textiles and Opium in Colonial India,” American Economic Review 98.5 (2008): 967–989; and Roy and Swamy, Law and the Economy in Colonial India.

  • 14. On the historiography, and merchant actions, see Tirthankar Roy, “The Mutiny and the Merchant,” Historical Journal 59.2 (2016): 393–416.

  • 15. I. Klein, “Materialism, Mutiny and Modernization in British India,” Modern Asian Studies 34.3 (2000): 545–580.

  • 16. Philip Stern, The Company-State: Corporate Sovereignty and the Early Modern Foundations of the British Empire in India (Oxford: Oxford University Press).

  • 17. Ann Carlos and S. Nicholas, “‘Giants of an Earlier Capitalism’: The Chartered Trading Companies as Modern Multinationals,” Business History Review 62.3 (1988): 398–419.

  • 18. Holden Furber, “Review of A. Mervyn Davies, Clive of Plassey: A Biography, New York: Charles Scribner’s Sons, I939,” American Historical Review 45.3 (1940): 635–637.

  • 19. Sudipta Sen, Empire of Free Trade: The East India Company and the Making of the Colonial Marketplace (Philadelphia: University of Pennsylvania Press, 1998).

  • 20. Roy and Swamy, Law and the Economy in Colonial India.

  • 21. Robert Travers, Ideology and Empire in Eighteenth-Century India: The British in Bengal (Cambridge, U.K.: Cambridge University Press, 2007).

  • 22. Jon E. Wilson, The Domination of Strangers: Modern Governance in Eastern India, 1780–1835 (New York: Palgrave Macmillan, 2008).

  • 23. Roy, Economic History of Early Modern India.

  • 24. M. Oak and A. V. Swamy, “Myopia or Strategic Behavior? Indian Regimes and the East India Company in Late Eighteenth Century India,” Explorations in Economic History 49.3 (2012): 352–366.

  • 25. C. Lloyd, J. Metzer, and R. Sutch, eds., Settler Economies in World History (Leiden, The Netherlands: Brill, 2013).

  • 26. James Macpherson, The History and Management of the East-India Company, from its Origin in 1600 to the Present Time, 2 vols. (London: T. Cadell, 1783); Charles William Rouse Boughton, Dissertation concerning the Landed Property of Bengal (London: John Stockdale, 1791); Charles Grant, “Observations by C. Grant on State of Society among Asiatic Subjects of Great Britain, 1792,” published as a Parliamentary Paper in 1813; and James Mill, The History of British India (London: Baldwin, Cradock and Joy, 1817).

  • 27. Henry Miers Elliot and John Dowson, The History of India as Told by Its Historians, vol. 8 (Lahore, 1976).