India’s trade relations with Europe go back to the ancient days of the Greeks. During the Middle Ages trade between Europe and India and South-East Asia was carried on along several routes.

The Asian part of the trade was carried on mostly by Arab merchants and sailors, while the Mediterranean and European part was the virtual monopoly of the Italians. Goods from Asia to Europe passed through many states and many hands. Yet, trade remained highly profitable.

The old trading routes between the East and the West came under Turkish control after the Ottoman conquest of Asia Minor and the capture of Constantinople in 1453. Moreover, the merchants of Venice and Genoa monopolized the trade between Europe and Asia and refused to let the new nation states of Western Europe, particularly Spain and Portugal, have any share in the trade through these old routes.

The West European states and merchants therefore began to search for new and safer sea routes to India and the Spice Islands in Indonesia, then known as the East Indies. They wanted to break the Arab and Venetian trade monopolies, bypass Turkish hostility, and open direct trade relations with the East.


They were well-equipped to do so, as great advances in ship-building and the science of navigation had taken place during the fifteenth century. Moreover, the Renaissance had generated a great spirit of adventure among the people of Western Europe.

The first steps were taken by Portugal and Spain whose seamen, sponsored and controlled by their governments, began a great era of geographical discoveries. In 1492, Columbus of Spain set out to reach India and discovered America instead. In 1498, Vasco da Gama of Portugal discovered a new and all-sea route from Europe to India.

He sailed round Africa via the Cape of Good Hope and reached Calicut. He returned with a cargo which sold for 60 times the cost of his voyage. These and other navigational discoveries opened a new chapter in the history of the world.

The seventeenth and eighteenth centuries were to witness an enormous increase in world trade. The vast new continent of America was opened to Europe and relations between Europe and Asia were completely transformed.


Another major source of early capital accumulation or enrichment for European countries was their penetration of Africa in the middle of the fifteenth century. In the beginning, the gold and ivory of Africa had attracted the foreigner. Very soon, however, trade with Africa centred around the slave trade. In the sixteenth century this trade was a monopoly of Spain and Portugal.

Later it was dominated by Dutch, French and British merchants. Year after year, particularly after 1650, thousands of Africans were sold as slaves in the West Indies and in North and South America.

The slave ships carried manufactured goods from Europe to Africa, exchanged them on the coast of Africa for African slaves, took these slaves across the Atlantic and exchanged them for the colonial produce of plantations or mines, and finally brought back and sold this produce in Europe.

It was on the immense profits of this triangular trade that the commercial supremacy of England and France was to be based. A great deal of West European and North American prosperity was based on the slave trade and the plantations worked by slave labour.


Moreover, profits of slave trade and the slave-worked plantations provided some of the capital which financed the Industrial Revolution in the eighteenth and nineteenth centuries. A similar role was later played by the wealth extracted from India.

In the sixteenth century, European merchants and soldiers also began the long process of first penetrating and then subjecting Asian lands to their control. Portugal had a monopoly of the highly profitable Eastern trade for nearly a century. In India, Portugal established its trading settlements at Cochin, Goa, Diu and Daman.

From the beginning, the Portuguese combined the use of force with trade. In this they were helped by the superiority of their armed ships which enabled them to dominate the seas.

A handful of Portuguese soldiers and sailors could maintain their position on the seas against the much more powerful land powers of India and Asia. By threatening Mughal shipping, they also succeeded in securing many trading concessions from the Mughal Emperors.

Under the viceroyalty of Alfonso D’Albuquerque, who captured Goa in 1510, the Portuguese established their domination over the entire Asian coast from Hormuz in the Persian Gulf to Malacca in Malaya and the Spice Islands in Indonesia.

They seized Indian territories on the coast and waged constant war to expand their trade and dominions and safeguard their trade monopoly from their European rivals. Nor did they shy away from piracy and plunder.

They also indulged in inhuman cruelties and lawlessness. In spite of their barbaric behaviour, their possessions in India survived for a century because they enjoyed control over the high seas, their soldiers and administrators maintained strict discipline, and they did not have to face the might of the Mughal Empire as South India was outside Mughal influence.

In the latter half of the sixteenth century, England and Holland, and later France, all growing commercial and naval powers, waged a fierce struggle against the Spanish and Portuguese monopoly of world trade. In this struggle the latter had to go under.

The English and the Dutch merchants were now able to use the Cape of Good Hope route to India and so join in the race for empire in the East. In the end, the Dutch gained control over Indonesia and the British over India, Sri Lanka, and Malaya.

In 1602, the Dutch East India Company was formed and the Dutch States General—the Dutch parliament—gave it a charter empowering it to make war, conclude treaties, acquire territories and build fortresses. The main interest of the Dutch lay not in India but in the Indonesian Islands of Java, Sumatra, and the Spice Islands where spices were produced.

They soon turned out the Portuguese from the Malay Straits and the Indonesian Islands and, in 1623, defeated English attempts to establish themselves there.

They also established trading depots at Surat, Broach, Cambay and Ahmedabad in Gujarat in west India, Cochin in Kerala, Nagapatam in Madras, Masulipatam in Andhra, Chinsura in Bengal, Patna in Bihar and Agra in Uttar Pradesh. In 1658 they also conquered Sri Lanka from the Portuguese.

The English merchants looked greedily at the Asian trade. The success of the Portuguese the rich cargoes of slices, calicoes, silk, gold, pearls, drugs, porcelain, and ebony they carried and the high profits they made inflamed the imagination of the merchants of England and made them impatient to participate in such profitable commerce.

An English association or company to trade with the East was formed in 1599 under the auspices of a group of merchants known as the Merchant Adventurers. The company, popularly known as the East India Company, was granted a royal charter and the exclusive privilege to trade in the East by Queen Elizabeth on 31 December 1600.

In 1608 it decided to open a ‘factory’, the name given at the time to a trading depot, at Surat on the west coast of India and sent Captain Hawkins to Jahangir’s court to obtain royal favours. Consequently, the English Company was given permission by a royal Farman to open factories at several places on the west coast.

The English were not satisfied with this concession. In 1615 their ambassador Sir Thomas Roe reached the Mughal court. Roe succeeded in getting an imperial Farman to trade and establish factories in all parts of the Mughal empire.

In 1662 the Portuguese gave the island of Bombay to King Charles II of England as dowry for marrying a Portuguese princess. Eventually, the Portuguese lost all their possessions in India except Goa, Diu and Daman.

The English Company fell out with the Dutch Company over the division of the spice trade of the Indonesian Islands. The intermittent war in India between the two powers, which had begun in 1654, ended in 1667, when the English gave up all claims to Indonesia while the Dutch agreed to leave alone the English settlements in India.