Explanation:

• Before the 1860s, three-fourths of raw cotton imports into Britain came from America. When the American Civil War broke out in 1861, a wave of panic spread through cotton circles in Britain. Raw cotton imports from America fell to less than three per cent of the normal. Messages were sent to India  and elsewhere to increase cotton exports to Britain. As cotton prices soared export merchants in Bombay were keen to secure as much cotton as possible to meet the British demand. So they gave advances to urban sahukars who in turn extended credit to those rural moneylenders who promised to secure the produce.
• These developments had a profound impact on the Deccan countryside. The ryots in the Deccan villages suddenly found access to seemingly limitless credit. While the American crisis continued, cotton production in the Bombay Deccan expanded. Between 1860 and 1864 cotton acreage doubled. By 1862 over 90 per cent of cotton imports into Britain were coming from India.
• But these boom years did not bring prosperity to all cotton producers. Some rich peasants did gain, but for the large majority, cotton expansion meant heavier debt. Hence, Statement 1 is correct.
• As the Civil War ended, cotton production in America revived and Indian cotton exports to Britain steadily declined. Export merchants and sahukars in Maharashtra were no longer keen on extending long- term credit. They could see the demand for Indian cotton fall and cotton prices slide downwards. So they decided to close down their operations, restrict their advances to peasants, and demand repayment of outstanding debts.
• While credit dried up, the revenue demand increased. In the new settlement, the demand was increased dramatically: from 50 to 100 per cent. Ryots were unable to pay this inflated demand at a time when  prices were falling and cotton fields disappearing. So again they had to turn to the moneylender. But the moneylenders now refused loans, as they no longer had confidence in the ryots’ capacity to repay.
• The refusal of moneylenders to extend loans enraged the ryots. What infuriated them was not simply that they had got deeper and deeper into debt, or that they were utterly dependent on the moneylender for survival, but that moneylenders were being insensitive to their plight. The moneylenders were violating the customary norms . The ryots came to see the moneylender as devious and deceitful. They complained of moneylenders manipulating laws and forging accounts. So, the peasants rose in revolt against moneylenders(and not against the Britishers). Hence, Statement 2 is not correct.
• Initially, the Government of Bombay was unwilling to see it as anything serious. But the Government of India, worried by the memory of 1857, pressurised the Government of Bombay to set up a commission of enquiry to investigate into the causes of the riots.The commission produced a report that was presented to the British Parliament in 1878. Now, the peasants could not be arrested and sent to jail if they failed  to pay their debt. Hence, the Deccan rebellion was one of the successful revolts of the Indian  history. Hence statement 3 is not correct.