First Phase of British Colonialism

The ‘First Phase’ is generally dated from 1757, when the British East India Company acquired the rights to collect revenue from its territories in the eastern and southern parts of the subcontinent, to 1813, when the Company’s monopoly over trade with India came to an end.

The British had come to India in the seventeenth century, purely as a trading company, backed by an exclusive royal charter to trade with India, from their queen, Elizabeth I. They set up their first ‘factory’ on the banks of the Hughli River in Bengal. The Company had managed to acquire permits or a ‘dastak’ from the Mughal emperor that exempted it from having to pay duties on its trade.

This led to a great deal of corruption among the employees of the Company, as the ‘farman’ was widely misused by them for their private trade. It also meant heavy losses in revenue for the Bengal governors (later nawabs) in way of customs duties. This became a contentious issue and one of the chief factors, which led to the Battle of Plassey, fought in 1757.

The primary function of the British East India Company in this period was to buy spices, cotton and silk from India and sell them at huge profits to the large market these goods enjoyed in Britain. This meant that large quantities of bullion would flow out of Britain into India to pay for these commodities. Despite efforts, it seemed difficult to find British goods that could be sold in India in exchange, to stem this outflow of bullion.

Besides the expenditure on buying commodities, the Company also spent very large amounts on the wars that it had to fight with other European powers, all in search of the same goods to trade in. These included the Portuguese, the Dutch and the French.

Thus, the acquisition of ‘diwani’ (right to collect revenue) in Bengal, after the Battle of Buxar, which followed the Battle of Plassey, opened the way for the Company to raise money for its expenditure in India.