The history of trade and manufacture in colonial India is dominated by counter-factual questions about the process of industrialisation. The structure and performance of firms and markets for trade and manufacture in colonial India after 1860 were heavily influenced by institutional developments that occurred in the first century of British rule. In the eighteenth century Indian merchant and service-gentry groups played a crucial role as intermediaries between the agricultural economy and the state. By the last quarter of the nineteenth century the colonial state in South Asia had largely created its own institutional mechanisms for sustaining itself through revenue collection, expenditure and transfer. By 1913 the cotton textile industry, centred in Bombay and Ahmedabad, was well established as the most important manufacturing industry in India. The colonial administration of South Asia was conditional on the smooth working of a domestic and international economy that could supply adequate tax revenues from production, and a foreign exchange surplus on private account.