Overseas Trade and the Role of European Trading Companies
Medieval History › Medieval Economy & Trade · Topic 8.2
India was the manufactory of the Asian world: its textiles clothed people from Aden to Achin and it earned a favourable balance paid in gold and silver. In the seventeenth century the Dutch, English and later French entered the trade, setting up factories at Masulipatam, Surat, Pulicat and Hooghly, but Indian traders were never ousted and the Europeans remained a fraction of India's foreign trade.
6 min read · UPSC Prelims · History · Medieval Economy & Trade
At a Glance
- Main export Textiles
- Imports Metals, spices, horses, ivory, luxury goods
- Paid in Gold and silver
- Companies Portuguese, Dutch, English, later French
- Effect Prices almost doubled in the first half of the 17th century
- Exam link UPSC Prelims, Medieval History: Medieval Economy & Trade
Where Does It Fit?
This is the second topic of the category on medieval economy and trade. The previous topic described inland trade, and this one covers overseas trade. The next topic covers the merchants in overland trade. Previous topic: Banjaras, boats, camels, carts Finance Hundis and sarrafs Nodes Burhanpur and Agra Helped…">Inland Trade in Medieval India. The company histories are in The English East India Company: Charter of 1600 and the Early Factories.
What Did India Trade With Asia?
In short: India supplied foodgrains and above all textiles to Asia and imported few items, so gold and silver flowed in.
India supplied foodstuffs such as sugar and rice to many countries of Southeast and West Asia, and Indian textiles played a very important role in the region’s trade. An English agent wrote that from Aden to Achin, from head to foot, everyone was clothed in Indian textiles, a little exaggerated since Egypt and Turkey also made cotton cloth, but essentially true, making India the manufactory of the Asian world excluding China. The only articles India needed to import were certain metals such as tin and copper, some spices, war horses and luxuries like ivory. The favourable balance was met by imports of gold and silver, which increased in the seventeenth century. Bernier called India the sink of gold and silver, which was exaggerated since every country tried to hold on to them, though India and China succeeded better because of their size and self-sufficiency. In the Sultanate period too, fine Indian textiles had reached China, India imported high-grade textiles, glassware and horses from West Asia, raw silk and porcelain from China and ivory from Africa, and spices from Southeast Asia.
How Did the European Companies Arrive?
| Company | Activity |
|---|---|
| Portuguese | Arrived at the end of the fifteenth century; their power declined from the second half of the sixteenth century; remained at Goa, Daman and Diu with a falling share of trade |
| Dutch | Established themselves at Masulipatam by a farman from Golconda in 1606; predominated in the spice trade by 1610; found spices were obtained most easily for Indian textiles, so spread to Coromandel and took Pulicat; later set up a factory at Surat |
| English | Came for spices but forced by Dutch hostility to concentrate on India; set up a factory at Surat in 1612 after defeating a Portuguese fleet, confirmed by Jahangir’s farman in 1618 obtained with Sir Thomas Roe; captured Ormuz in 1622 with Persian help; by 1650 had factories at Hooghly and Balasore |
By the first quarter of the seventeenth century both the Dutch and English were well set in the Indian trade, and Portuguese control of the sea was broken for ever.
What Did Europe Buy From India?
At first the prime trade, apart from pepper, was indigo for colouring woollens, best from Sarkhej in Gujarat and Bayana near Agra. The English soon developed export of cotton cloth (calicoes), first from Gujarat, then from Agra and its neighbourhood, and then from Coromandel. By 1640 Coromandel’s cloth exports equalled Gujarat’s and by 1660 were three times as much, from Masulipatam and Fort St George, which developed into Madras. The Dutch joined in exporting calico and indigo from Coromandel. The English tried Lahri Bandar on the Indus, but it stayed subsidiary to Gujarat. In Bengal and Orissa, by 1650 they exported raw silk, sugar and textiles from Hooghly and Balasore, and saltpetre, best from Bihar, used for gunpowder and as ballast. Eastern exports equalled Coromandel’s by the end of the century. Indian textiles became a rage in England by the last quarter of the seventeenth century, and an observer wrote that almost everything once made of wood or silk for women’s dress or house furniture was supplied by the Indian trade. A ban of 1701 on painted, dyed or printed calicoes had little effect: exports of white calicoes rose from 9½ lakh pieces in 1701 to 20 lakh in 1719.
Why Were the Europeans Not Dominant?
Despite domination of the seas, Europeans never ousted Indian traders from Asian trade, and their share from Gujarat, Coromandel or Bengal remained a fraction of India’s foreign trade. Indian traders knew domestic and foreign textile markets better and worked on profits of 10 to 15 per cent, while the Dutch needed 40 to 50 per cent to cover factories and warships. The Dutch and English could not trade or even feed their factories without the cooperation of the Mughal government and Indian traders, and they began freighting Indian merchants’ goods on their ships, which the Indians accepted because it made their operations safer. Indian shipping grew: at Surat the number of ships rose from about 50 in the mid-seventeenth century to at least 112 by its end. Intra-Asian trade stayed more lucrative than trade with Europe; only 14 per cent of spices went to Europe.
| Consequence | Detail |
|---|---|
| Prices | With the influx of silver and gold, prices almost doubled in the first half of the seventeenth century; this probably weakened old village ties and made the nobility more money-minded and demanding |
| Empire-seeking | Since Europeans had few goods to offer except American silver and gold, they sought territory whose revenues could pay for Indian goods; they could not succeed while India stayed strong and united |
As an analytical point, European companies entered an Asian system as junior partners in the seventeenth century; their dominance came only when the Mughal empire weakened, as in Sayyid brothers dominate Nadir Shah Sacked…">Decline of the Mughal Empire After Aurangzeb.
Why Is This Topic Important?
- Cross-subject link Leads from medieval to modern history
- Facts Factory dates, farmans, commodities
- Interpretation Why Indian traders survived
What Came Next?
The next topic describes the Qandahar, Lahore, Multan Colonies Iran, Baku, Astrakhan,…">position of Indian merchants in overland trade. Next topic: Position of Indian Merchants in Overland Trade.
Key People and Terms
- Factory Trading post of a company
- Calico Cotton cloth
- Farman Royal order
- Saltpetre Ingredient of gunpowder
- Masulipatam Coromandel port
- Ormuz Portuguese base at the head of the Gulf
Exam Corner
Points to Remember
- Dutch at Masulipatam: 1606.
- English factory at Surat: 1612; farman 1618.
- Ormuz captured: 1622.
- Profit: 10 to 15% (Indians) against 40 to 50% (Dutch).
- Calico exports: 9½ lakh (1701) to 20 lakh (1719).
Do Not Confuse With
- Dutch and English centres Pulicat and Masulipatam versus Surat and Hooghly
- Indigo of Sarkhej and Bayana Gujarat versus near Agra
- Gold and silver inflow and price rise Cause versus effect
Memory Hook
Cloth out, silver in; Dutch at the coast, English at Surat; the Indian trader stays in the game.
Mains Angle
Questions on overseas trade ask about goods, companies and effects. These points add depth.
- Pattern Textile exports and bullion imports
- Companies Dutch and English factories
- Limits Indian traders and low margins
A Question You May Face
An original practice question, not a past paper question.
“Discuss India’s overseas trade and the role of European companies in the seventeenth century.”
How to Answer
- Base Asian trade in textiles.
- Entry Dutch and English factories.
- Goods Indigo, calicoes, saltpetre.
- Limits Indian traders and Mughal power.
GS Relevance
Frequently Asked Questions
What did India export in medieval overseas trade?
India exported textiles above all, along with foodstuffs such as sugar and rice. Its cloth was worn from Aden to Achin, which made India the manufactory of the Asian world excluding China, and the trade brought in gold and silver.
When did the Dutch and English establish themselves in India?
The Dutch obtained a farman from Golconda in 1606 and settled at Masulipatam. The English set up a factory at Surat in 1612, confirmed by a farman from Jahangir in 1618, obtained with the help of Sir Thomas Roe.
What did the European companies buy from India?
At first they bought pepper and indigo, then cotton calicoes from Gujarat, Agra and especially Coromandel, and later raw silk, sugar and saltpetre from Bengal, Orissa and Bihar. Indian textiles became a rage in England.
Why could Europeans not oust Indian traders?
Indian traders knew the markets better and worked on profits of 10 to 15 per cent, whereas the Dutch needed 40 to 50 per cent. Europeans also depended on Mughal officials and Indian traders to trade and to feed their factories.
How did the inflow of silver affect India?
Prices almost doubled in the first half of the seventeenth century because gold and silver flowed in faster than the economy grew. This probably weakened old village ties and made the nobility more money-minded, greedy and demanding.
PYQ Practice — Statement Analysis
1 The English set up a factory at Surat in 1612.
A Jahangir farman confirmed it in 1618.
2 The Dutch obtained a farman from Golconda in 1606.
They settled at Masulipatam.
3 European companies ousted Indian traders from Asian trade in the seventeenth century.
Their share remained a fraction.
4 Coromandel cloth exports were three times those of Gujarat by 1660.
They had equalled Gujarat's by 1640.
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