Explanation:

• The most important challenge to the decaying Mughal power came from the Maratha Kingdom which was the most powerful of the succession states. Shahu, the grandson of Shivaji, had been a prisoner in the hands of Aurangzeb since 1689. Shahu was released in 1707 after Aurangzeb’s death. Very soon a civil war broke out between Shahu at Satara and his aunt Tara Bai at Kolhapur who had carried out an antiMughal struggle since 1700 in the name of her son Shivaji II after the death of her husband Raja Ram.

• Arising from the conflict between Shahu and his rival at Kolhapur, a new system of Maratha government was evolved under the leadership of Balaji Vishwanath, the Peshwa of King Shahu. With this change began the second period—the period of Peshwa domination—in Maratha history in which the Maratha state was transformed into an empire.

• Balaji Vishwanath gradually consolidated Shahu’s hold and his own over Maratha sardars and over most of Maharashtra except for the region south of Kolhapur where Raja Ram’s descendants ruled. Already the system of watans and saranjams (jagirs) had made the Maratha sardars strong, autonomous, and jealous of central power. They now began to establish their control in the distant lands of the Mughal empire where they gradually settled down as more or less autonomous chiefs. Thus the conquests of the Marathas outside their original kingdom were not made by a central army directly controlled by the Maratha king or the Peshwa but by sardars with their own private armies.

• The Maratha rulers failed to encourage science and technology or to take much interest in trade and industry. Their revenue system was similar to that of the Mughals as also was their administration. Like the Mughals, the Maratha rulers were also mainly interested in raising revenue from the helpless peasantry. For example, they too collected nearly half of the agricultural produce as tax. Unlike the Mughals, they failed even to give sound administration to the people outside Maharashtra. The only way the Marathas could have stood up to the rising British power was to have transformed their state into a modern state. This they failed to do.

• Hence, only statements 1 and 2 are correct.