By the middle of the eighteenth century, with the Portuguese and Dutch in decline, the British had emerged as the strongest naval power in the Indian Ocean. However, the directors of the EIC would have still baulked at the idea of a land empire beyond a few fortified bases along the coast. It was the French, their main rivals, who first attempted to control inland territory. The key person behind this new strategy was Joseph Francois Dupleix, the Governor of Pondicherry. Note that at this time, the British and the French were at war in Europe but their companies in India had initially refrained from attacking each other.

his changed when a British fleet plundered French ships in the Straits of Malacca in 1745. Dupleix immediately requested support from the French naval base in Mauritius. When reinforcements arrived the following year, the French marched on Madras and captured it without much difficulty.

The EIC now complained to the Nawab of Arcot who was the Mughal governor of the area (although by this time the Mughal empire was rapidly dissolving). The Nawab arrived in Madras with a large force but was decimated by French cannon. It was a clear demonstration of the sharp improvements in military technology that were taking place in Europe as it approached the Industrial Revolution. With the largest British settlement under his control and the Indians in awe of his firepower, it would have seemed that Dupleix was in a position to dramatically expand the French territory. However, he was repeatedly undermined by his colleagues and superiors. In 1749, he was forced to hand back Madras to the British as part of a peace deal in Europe.

Dupleix was not yet done, however. Within a year he had managed to place his own candidates as rulers of Hyderabad and the Carnatic coast. Just when the Maratha navy was being tamed on the west coast, the French seemed to have taken control of the east coast. The two European companies began to prepare for war and both recruited a large number of Indian soldiers and drilled them in modern warfare. What followed was a series of engagements known as the Carnatic Wars. The mounting cost of these wars would eventually force the French to recall Dupleix. Meanwhile, the British hand would be strengthened by a decisive victory over the ruler of Bengal in 1757. The British would occupy the French settlement of Chandannagar in Bengal and a few years later would also take over Pondicherry. Both of them were later returned to French rule as part of a peace deal but they would never regain their former importance.