The correct answer is option C - Export of Indian manufacturers was increasing.

During the 17th and 18th centuries, the East India Company established its factories in various parts of India. The Indian rulers, particularly the Mughal emperors, tolerated and even encouraged the establishment of these factories due to several reasons.

1. Economic benefits: The establishment of the Company's factories brought economic benefits to the Indian rulers. The Company engaged in trade, exporting Indian goods to other parts of the world. This export-oriented trade helped to stimulate the Indian economy and increase revenue for the Indian rulers through the collection of taxes and duties on these goods. The Company also provided employment opportunities to the local population, contributing to economic growth and stability.

2. Technological advancements: The East India Company brought with it advanced technology and expertise in manufacturing and trade. Indian rulers realized the potential benefits of these technological advancements and saw an opportunity to improve their own manufacturing capabilities. The Company's factories introduced new techniques, machinery, and skills that Indian craftsmen and artisans could learn and adopt. This helped to modernize Indian industries and enhance the quality and productivity of Indian goods, making them more competitive in the international market.

3. Access to European markets: The Company's factories acted as a gateway for Indian goods to reach European markets. With the establishment of these factories, Indian rulers could tap into the lucrative European demand for luxury goods such as textiles, spices, and indigo. This export trade not only brought substantial revenue to the Indian rulers but also enhanced the reputation and prestige of Indian craftsmanship and products in the international market.

4. Political alliances: The Indian rulers formed political alliances with the East India Company as a means to protect their own interests. They saw the Company as a powerful ally that could help them maintain their authority and safeguard their territories from rival powers. By allowing the Company to establish its factories, the Indian rulers gained the support and protection of the Company's military forces, which acted as a deterrent against potential threats from other European powers.

In conclusion, the Indian rulers tolerated and encouraged the establishment of the East India Company's factories in India primarily because it brought economic benefits, technological advancements, access to European markets, and political alliances. The increasing export of Indian manufacturers played a vital role in driving these advantages, making it the correct answer to the question.