When Indian cotton exports to Britain declined after 1865, what did e…

The correct answer is Option (3) → Restrict advances to peasants and demand repayment of debts

Option (1) Shift their advances from cotton to food crops — Incorrect. They cut advances to peasants altogether, whatever the crop.

Option (2) Move their capital into the new cotton mills of Bombay — Incorrect. Instead of investing elsewhere, these lenders pulled back credit from the villages.

Option (3) Restrict advances to peasants and demand repayment of debts — Correct. As cotton prices slid, lenders lost interest in long-term credit. They closed operations, restricted advances and demanded repayment, so credit dried up.

Option (4) Buy cotton from ryots at prices fixed by the government — Incorrect. No price was fixed by the government; prices slid downwards with falling demand.