Discussion

Explanation:

The answer (option 3) has been outlined in the fourth paragraph: “An additional factor deterring loot was the 1857 Sepoy Mutiny. Though crushed, it reminded the British vividly that they were a tiny ethnic group who could not rule a gigantic subcontinent without the support of important locals.”
Option 1 is an outcome of this realisation and not a cause.
Option 2 is not the main reason.
Option 4 can be deduced by taking into account lots of other factors and not just the Sepoy mutiny.

Hence, the correct answer is option 3.

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