The government and Indian merchants of which city declared "Urbs Prima in Indis", a Latin phrase meaning, 'the most important city of India'?

Bombay

The correct answer is Option (1) → Bombay

When the American Civil War started in 1861 cotton from the American South stopped coming into the international market. This led to an upsurge in demand for Indian cotton, grown primarily in the Deccan. Once again Indian merchants and middlemen found an opportunity for earning huge profits. In 1869 the Suez Canal was opened and this further strengthened Bombay's links with the world economy.
The Bombay government and Indian merchants used this opportunity to declare Bombay- Urbs Prima in Indis, a Latin phrase meaning the most important city of India. By the late nineteenth century Indian merchants in Bombay were investing their wealth in new ventures such as cotton mills. They also patronised building activities in the city.