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The second half of the eighteenth century witnessed a fundamental alteration in the nature of the Indo-European encounter. The takeover of Bengal by the English East India Company following the battle of Plassey in 1757 marked the inauguration of the colonial phase in this encounter. The nawab’s army, though ten times the size of Clive’s 2,000 sepoys and 900 Europeans, was routed providing the English Company its first foothold in the subcontinent. The formal acquisition of diwani rights in 1765 provided it with access to the province’s revenues. These were used in part to strengthen further the Company’s military strength. By 1782, the Company was able to maintain 115,000 men in India (90 percent of them sepoys) enabling it to intervene effectively in other parts of the subcontinent such as the Deccan.
The availability of political power to the English East India Company altered the basic relationship between the Company on the one hand and the Indian intermediary merchant and artisan on the other. The earlier relationship based on the absence of coercion and the working of the market forces of demand and supply was now replaced by one of the availability to the Company of wide powers of coercion over the Indian trading and artisanal groups. Not only were these groups no longer entitled to a market-determined return to their endeavours, they were often no longer free even to decide whether to enter into a business relationship with the Company at all. The position of these groups was further worsened by the use of its political authority by the English East India Company to increasingly marginalize the rival European trading companies engaged in the trade from the region such as the Dutch and the French East India companies. These companies were no longer allowed to operate in the market as an equal, substantially cutting into their role as major alternative buyers of the goods manufactured in the province.
full: http://www.tcd.ie/Economics/staff/orourkek/Istanbul/Great%20Divergence.doc
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