The transformation into an all-India confederacy was driven by the Peshwas’ strategic decision to decentralize political and military authority. Starting with Bajirao I, the state encouraged talented generals to carve out spheres of influence in North and Central India. This created a network of powerful hereditary states—the Scindias, Holkars and Gaekwads—who operated under the umbrella of the Peshwa’s leadership. ANSWER: (C) The rise of the Peshwas and decentralization of authority