Indian rulers encouraged foreign companies to trade in their kingdoms because of the following reasons:
1. Trading brought into India a variety of goods that were not locally available. For example, Arab traders used to supply high-quality horses that were not available in India.
2. Indian rulers could obtain revenue by imposing taxes on foreign traders. This way, they could increase the wealth available in their treasuries.
3. They also hoped to use the soldiers and armies that accompanied the foreign traders to settle local disputes with other neighboring kingdoms.
4. By trading, even the Indian goods became of great importance in the world (example, spices of India) and thus the Indian market became prosperous.
The system of Dual Government was introduced in Bengal by Robert Clive of British East India Company. It lasted from 1765 to 1772. Under this system, the administration of Bengal was divided into Nizamat and Diwani. The Diwani was carried out by the company and the Nizamat by the Nizam. The system was abolished by Warren Hastings in 1772 and Bengal was brought under the direct control of the British and the Nawabs remained as the mere pensioners of the East India Company.