European colonies in India were set up by several European nations beginning at the beginning of the 16th century. Rivalry between reigning European powers saw the entry of the Portuguese, Dutch, British and French among others. The fractured debilitated kingdoms of India were gradually taken over by the Europeans and indirectly controlled by puppet rulers. By the 19th century, the British had assumed direct and indirect control over most of India.
The Portuguese were the first Europeans to arrive in India in 1498. The closing of traditional trade routes in western Asia by the Ottomans and rivalry with the Italian states set Portugal in search of an alternate sea route to India. The first successful voyage to India was by Vasco da Gama in 1498, when he arrived in Calicut, Kerala. He proceeded to Goa. The Portuguese established a chain of outposts along India's west coast and on the island of Sri Lanka in the early 16th century. Goa was their prized possession and, the seat of Portugal's viceroy who governed Portugal's empire in Asia. Portugal's northern province included settlements at Daman, Diu, Chaul, Baçaim, Salsette, and Mumbai. Mumbai was given to the British crown in 1661 as part of the dowry of Catherine of Braganza. The rest of the northern province, with the exception of Daman and Diu, was lost to the Marathas in the early 18th century. Dadra and Nagar Haveli was occupied in 1779. Dadra and Nagar Haveli was occupied by India in 1954, and Goa, Daman, and Diu were annexed to India in 1961.
Economic competition among the European nations led to the founding of commercial companies whose primary aim was to capture the spice trade by breaking the Portuguese monopoly in Asia. In England the East India Company, founded in 1600, in the Netherlands the United East India Company, founded in 1602 and in France the East India Company founded in 1664. Both companies managed to establish trading warehouses along the Indian coast. Indian rulers enthusiastically accommodated the newcomers in hopes of pitting them against the Portuguese.
English company agents became familiar with Indian customs and languages. In many ways, the English agents of that period lived like Indians, intermarried willingly, and a large number of them never returned to their home country. The knowledge of India thus acquired and the mutual ties forged with Indian trading groups gave the English a competitive edge over other Europeans. In 1619 Jahangir (Mghal ruler at the time) granted them permission to trade in his territories at Surat (in Gujarat) on the west coast and Hughli (in West Bengal) in the east. These and other locations on the peninsula became centers of international trade in spices, cotton, sugar, raw silk, saltpeter, calico, and indigo. In 1717 the Mughal emperor, Farrukh-siyar, gave the British--who by then had already established themselves in the south and the west--a grant of thirty-eight villages near Calcutta, acknowledging their importance to the continuity of international trade in the Bengal economy.
The British brought silver bullion and copper to pay for transactions, helping the smooth functioning of the Mughal revenue system and increasing the benefits to local artisans and traders. The fortified warehouses of the British brought extraterritorial status, which enabled them to administer their own civil and criminal laws and offered numerous employment opportunities as well as asylum to foreigners and Indians. The British factories successfully competed with their rivals as their size and population grew. The original clusters of fishing villages (Madras and Calcutta) or series of islands (Bombay) became headquarters of the British administrative zones. The British company employed sepoys (European-trained and European-led Indian soldiers) to protect its trade, but local rulers sought their services to settle scores in regional power struggles.
South India witnessed the first open confrontation between the British and the French, whose forces were led by Robert Clive and François Dupleix, respectively. Both companies desired to place their own candidate as the ruler of Arcot, the area around Madras. At the end of a protracted struggle between 1744 and 1763, when the Peace of Paris was signed, the British gained an upper hand over the French and installed their man in power, supporting him further with arms and lending large sums as well. The French and the British also backed different factions in the succession struggle for Mughal in Bengal, but Clive intervened successfully and defeated Nawab Siraj-ud-daula in the Battle of Plassey (Palashi, about 150 kilometers north of Calcutta) in 1757. Clive found help from a combination of vested interests that opposed the existing nawab: disgruntled soldiers, landholders, and influential merchants whose commercial profits were closely linked to British fortunes.
Later, Clive defeated the Mughal forces at Buxar (Baksar, west of Patna in Bihar) in 1765, and the Mughal emperor (Shah Alam, r. 1759-1806) conferred on the company administrative rights over Bengal, Bihar, and Orissa, a region of roughly 25 million people with annual revenue of 40 million rupees. The imperial grant virtually established the company as a sovereign power, and Clive became the first British governor of Bengal.
Denmark was the last of the colonial powers to set foot in India. They established trading outposts in Tranquebar, Tamil Nadu (1620), Serampore, West Bengal (1755) and the Nicobar Islands (1750's). At one time, the main Danish and Swedish East Asia companies together imported more tea to Europe than the British did. Their outposts lost economic and strategic importance, and Tranquebar, the last Danish outpost, was sold to the British in 1845. Austrian enterprises were set up in the 1720s on the vicinity of Surat in modern-day southeastern Gujarat. As with the other non-British enterprises, the Danish and Austrian enclaves were taken over by the British between 1765 and 1815.