The correct answer is option 'A': The Lottery committee (1817) was set up to raise funds for town development.

Explanation:
The Lottery committee was established in 1817 by the British East India Company. It was created with the objective of raising funds for the development of towns in India. The establishment of this committee was a part of the British colonial government's efforts to modernize and develop urban areas in India.

Below are the key points explaining the answer:

1. Background:
- During the colonial period, the British East India Company was the governing authority in India.
- The company aimed to establish its control over various aspects of Indian society, including urban development.

2. Purpose of the Lottery committee:
- The Lottery committee was created as a means to generate funds for the development of towns.
- The funds raised through the lottery system were used for building infrastructure, such as roads, bridges, schools, and hospitals.
- The committee played a crucial role in financing the expansion and modernization of urban areas in India.

3. Functioning of the Lottery committee:
- The committee organized lotteries, which were essentially games of chance where people purchased tickets for a chance to win cash prizes.
- The revenue generated from the sale of lottery tickets was then used for town development projects.
- The lottery system provided a source of income for the colonial government, enabling them to fund various urban development initiatives.

4. Impact of the Lottery committee:
- The establishment of the Lottery committee contributed significantly to the development of towns in India during the colonial period.
- The funds raised through the lottery system played a crucial role in improving infrastructure, which in turn facilitated economic growth and improved the quality of life for the residents of these towns.

In conclusion, the Lottery committee (1817) was set up with the primary objective of raising funds for town development in India. It organized lotteries to generate revenue, which was then utilized for building infrastructure and modernizing urban areas. This initiative had a significant impact on the development of towns during the colonial period.