The various Indian states were already making profitable trade with the greater Islamic world on both land and sea. Hindus didn't do much sailing on their own though - one limiting factor discouraging some Hindus from crossing the seas in the Early modern period was the Hindu taboo of "kalapani" or "black waters". It was considered spiritually unclean and socially abhorrent for Hindus to sail to non-Indian foreign lands; in doing so, one would risk losing their caste rank. Instead, they left cross-ocean trade to the independent Muslim merchants (many Arab) who would act as the middle-men between India and foreign markets.

At this time, India was a part of the vast and well-established Indian Ocean trade network which connected China, Southeast Asia, India, East Africa, Persia, and Western Asia. It is important to understand that trade in the Indian Ocean trade network was conducted by regional traders and guilds - no single state was dominant over this entire trade network before the heyday of European imperialism. When the Portuguese arrived in India, they saw the sheer volume of trade passing through India and wanted in on the action. With their shrewd business practices, diplomatic dealings with local rulers, and the best naval guns, the Portuguese were able to wrest significant control over the Indian Ocean trade. Practically, this meant that any merchant looking to conduct trade in Portuguese controlled waters would need to pay for a cartaz (essentially a trading license) from Portuguese authorities. Additionally, with their naval supremacy, the Portuguese were capable of diverting the flow of trade to their own ports, such as Goa, where they could levy tariffs on traded goods. Later, the Dutch would arrive and knock the Portuguese from their position of prominence, who would themselves eventually lose out to the British.

So it wasn't like the Europeans were coming in with this brand-new idea of maritime exchange; neither did they have to rely on domestically produced European goods for trade in India. Rather, Europeans inserted themselves into an already existing system of trade and through a combination of force of arms and wheeling and dealing dominated and/or supplanted local traders.