The French East India company was founded in 1664 to compete with the British and the Dutch East India Company. It was a business enterprise and the brainchild of Jean Baptiste Colbert. The first director of the company was Francois Caron who had the experience of working for the Dutch East India Company for thirty years. The Company established its ports in the nearby islands of Bourbon and Ile-de-France. It had established itself in India by 1719 but was near bankruptcy and was at the verge of closure. However it was in the same year the company merged with other French trading companies under John Law to form the Compagnie Perpetuelle des Indes. It became an independent enterprise in 1723.

The French took advantage of the decline of the Mughal rule in India. They began to interfere in the political affairs in order to strengthen their rule. From 1741 onwards they pursued an aggressive policy under Joseph Francois Dupleix against both the Indians and the English. Their reign came to an end when they were defeated by Robert Clive. Financial instability prevented the company from continuing their rule and it was abolished in 1769, twenty years before the French revolution. However several trading ports like Pondicherry and Chandernagore remained under French rule in 1949.