March 10: Merchants and the East India Company in Bengal

The Nawabi of Bengal in the mid-eighteenth Century:

• Bengal remained economically strong and well-governed all through the transition from the Mughals to
the Nawabs to the EIC (due to expanding trade and agriculture)
• Indigenous groups such as Marwaris re-located to Bengal in the late 1600s, where they already had
contacts
• Strong commodity markets in Rice, Opium, Sugar, Saltpeter, Cloth (most imp.)
• Additional transactions in providing credit to merchants trading in these commodities
• As Nawabs come to power, traders also become involved in revenue farming and in moving tribute to
Delhi. Ex. Bankers from the family of Jagat Seth:
Bid on 2/3rd of Revenue at 10% 1,060,000
Int. loans from Zamindars 1,350,000
Re-coining 5m. At 7% 350,000
37.5% Int. of 4m. Loaned (misc)1,500,000
Int. on currency exchanges 700,000
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Total 4,960,000
• Trade in specific commodities became very competitive, ex. Saltpeter
• Traders sought exclusive contracts with producers to ensure supplies, also attempted to cut out the
competition
• Became highly dependent on credit provided by Financiers to close on deals quickly—make advances to
ensure delivery

Problems facing the East India Company

• French appeared to be becoming more friendly with the Nawabs after 1750
• Due to the Seven Years War in Europe tensions b/w French and EIC high
• EIC aware of extensive corruption in its own company, abuse of dastaks (seals granting duty-free trade)
cutting in on both the company’s profits and the revenues due to the nawab
• Most English traders in Bengal for a little while to make their fortune before returning to England
• Disgruntled with terms of service, they quickly engage in ‘private trade’
• To do this successfully form alliances with Indigenous traders, agents, and financiers
Beginning of Begal conflict of the 1750s:
• Fear of Maratha raids and Ahmad Shah Abdali’s invasion in the early 50s leads Nawab to post armies in
the west
• Meanwhile the English committee at Calcutta, contrary to treaty agreements begins to fortify their area,
in anticipation of French attacks.
• Nawab Siraj-ud Daulah, recently come to the throne, protests, but is ignored. Looking at EIC
involvement in succession disputes in the Deccan he suspects the company of conspiring against him
• After the ignored warning, Siraj-ud Daulah sends army to raid Calcutta and destroy the fortifications
• Most officers flee in boats, those left behind are put in the Company’s prison, where due to
overcrowding some die of heat exaustion—the legend of the Black Hole of Calcutta is born
• The Company’s governors in Madras order Robert Clive to negotiate another treaty with the Nawab and
bargain for the restoration of Calcutta.

The Plassey Conspiracy:

• Unknown to the Directors of the Company and Siraj-ud Daulah Clive enters into an agreement with the
Nawab’s uncle, Mir Jafar to enact a coup.
• Lacking funds they negotiate with the family of Jagat Seth a leading financier offering him a payout
from the treasury and exclusive trading monopolies
• Clive himself secures the promise of a Jagir from Mir Jafar—in a second secret treaty these two agree to
cut out the merchants
• The funds from the merchants make it possible for large parts of the Bengal army under Mir Jafar to be
bribed to not fight during the English-led coup
 • When negotiations with the Nawab fail, Clive and the Bengal army clash at the Battle of Plassey in
1757
• After much of the army does not fight, Siraj ud Daulah is unable to win and flees. Later he is captured
and killed.
Aftermath of Plassey:
• Once on the throne Mir Jafar had to make good on his promises:
– Rs. 10,000,000 to EIC for Calcutta (comp)
– Rs. 4 million to Navy (costs of war0
– Rs. 1.2 million to select comm. (inc. clive)
– Rs.1.6 million to Clive for ‘service’ plus a jagir of Rs. 300,000 a year
• No money or agreements were provided either to Jagat Seth or Omichand
• Mir Jaffar was left with an impoverished treasury and could no longer make annual payments either to
mansabdars or as indemnities to the company
• Clive retired to England to begin a political career as one of the richest ‘nabobs’
• In 1763-65 Mir Jaffar is replaced by Mir Kasim, his son in law, when he objects to the arrangement with
revenues
• The EIC emerges as the real power behind the throne
• Mir Jaffar escapes to Awadh and seeks the help of the Nawab of Awadh and Mughal Emperor Shah
Alam to recover Bengal
• Their combined forces are defeated at Battle of Buxar by the Bengal and EIC army in 1765
• Shah Alam gives the Diwani of Bengal to the EIC—which becomes the formal basis for colonial rule.
Also agrees to an English resident at the Mughal and Awadh courts

Impact of Buxar:
• Revenues of Bengal used to substitute bullion for trade leads to unexpected problems
• Other indigenous and foreign competitors squeezed out of the market as well and a bullion shortage
adds to decline of trade
• Unused to administration the EIC would resort even more to revenue farming—excessive taxation and
famine lead to the deaths of 1/3 of the population
• Bengal moves to a colonial-style economy, revenues used for further expansion, officials continue in
private trade leading to scandal
• Clive sent back to India to “clean up” corruption

Questions:
1. According to Karen Leonard what are the problematic ways in which merchant groups during the
Mughal period have been labeled by historians? Why does she distinguish between “bankers” and
“moneylenders?”
2. What kinds of services did bankers provide to Mughal mansabdars and later to the state? How did this
benefit these firms as Mughal political power weakened early in the 18 th century?
3. What happened to the relationship between Indian merchants and the East India Company during the
course of the 18th century?
4. What is the nature of Leonard’s disagreement with Richards about the role of bankers in the Mughal
economy? Whose argument do you find more convincing (think carefully of the types of sources each
uses, the dates relevant to their research).