• The Portuguese who established a control over Pulicat since 1502 were overthrown by the Dutch.
• In Pulicat, located 60 kilometers north of Chennai, the Dutch built the Castle Geldria. The remains of this 400 year old fort can be seen even now. This fort was once the seat of Dutch power.
• The Dutch established control of Masulipatnam in 1605 and they established their settlement at Pulicat in 1610. The other Dutch colonial forts and possessions include Nagapattinam, Punnakayal, Porto Novo, Cuddalore (Tiruppathiripuliyur) and Devanampatinam.
• Pulicat served as the Coromandel headquarters of the Dutch East India Company. Diamonds were exported from Pulicat to the western countries. Nutmeg, cloves, and mace too were sent from here to Europe.
• A gun powder factory was also set up by the Dutch to augment their military power.
• One less known fact about the Dutch is they were involved in slave trade. People from Bengal and from settlements such as Tengapattinam and Karaikal were brought to Pulicat.
• The Dutch employed brokers at Madras for catching and shipping slaves. Famines, droughts and war that resulted in food shortage led to the flourishing of the slave trade.

• The expansion of demand from Europe for Indian textiles also had an impact on the indigenous economy.
• Initially, this increased demand was beneficial to the local economy. The productive resources (labour, raw materials and capital) could respond positively.
• However, as the demand from Europe continued to grow, the pressure to increase production exponentially began to strain the productive resources.
• The frequent famines in the south and the shortage of food grains and raw materials, for instance, were additional burdens which the weaver had to bear.
• Thus, though the increased trade opportunities were beneficial in the short run, the long-term effects were not necessarily positive.

• The arrival of the Europeans, beginning with the Portuguese, was the first major external shock to this well established and regulated system of trade.
• The primary interest of the Europeans was in securing spices for Europe directly. In the olden days, the spices were carried to the Persian Gulf ports and then overland to the Mediterranean.
• They soon learned that a simple bilateral exchange was not workable in the Asian markets. This was mainly because there was no demand in the local economies for the products of Europe, other than gold or silver.
• On the other hand, because of the universal demand in south-east Asian markets for Indian textiles, clothes from India served as a substitute medium of exchange.
• The demand for the painted fabrics of the Coromandel coast in the Indonesian islands, in particular, made the Dutch and the English set up their establishments on the east coast to procure the cloth that could be profitably exchanged for spices.

The various kinds of markets functioned at different scales, merchants were also not a homogeneous group.
• There were traders and retailers who serviced markets in smaller centres.
• If mercantile activity can be deemed to be a pyramid, this class of merchants would be at the base of the pyramid.
• At its top were the great merchants, who were the prime movers in overseas trade with great reserves of capital, who controlled the producers in the hinterland of the ports.
• They generally employed the services of a network of brokers and sub-brokers to acquire goods from the interior regions or hinterland of the port towns.
• These agents could be said to form the middle tier of the merchant pyramid

• Under Vijayanagar rule, three Nayak kingdoms had been set up in the Tamil region; in Madurai, Thanjavur and Senji. The objective was to provide financial and manpower resources to the empire.
• After the defeat of Vijayanagar in 1565 in the Battle ofTalikota by the combined forces of the rulers of Ahmednagar, Bijapur and Golkonda, the central authority of the once dominant kingdom became very weak.
• The Nayak kingdoms became virtually autonomous, though they made a ritualistic acknowledgment of the authority of the Vijayanagar emperor .
• In addition to the larger Nayak kingdoms, several local chiefs also controlled some parts of the region. The most notable of them was probably the Setupati of Ramanathapuram, who was also keen to assert his independence.