The question of what constitutes "colonial knowledge" has been at the heart of recent debates about empire. To what extent did colonial powers "know" the subjects and societies over which they ruled? Did they invent or impose their own understanding of alien peoples and places? Or was colonial knowledge the product of a mutual exchange of ideas and impressions rather than the one-sided product of imperial imagining?

C. A. Bayly addresses the question in two ways, first by asking what kind of knowledge about India the British were able to draw on as they extended their rule over the sub-continent, and second by examining the networks of communication and information exchange that flourished in India after its conquest. The importance of India's existing systems of communication is clearly established by examining its role in political and military intelligence in the years of conquest between the 1780s and 1850s. Without substantial numbers of European planters and settlers to turn to, without the networks of faith and family that fed information to India's pre-colonial rulers, the British were forced to draw their knowledge of people and country from Indian agents - scribes, spies, message runners and various "native informants".

Despite the gaps in their knowledge, and a failure at times to interpret accurately incoming intelligence, the success of the British in gaining control of a large part of the subcontinent by the early 19th century, can be attributed, Bayly argues, to their ability to draw upon existing, sophisticated networks of communication. Effective intelligence was as important to the success of the East India Company as any military or economic asset. Bayly substantiates this claim by contrasting British expansion in northern India with its faltering progress on the fringes of empire, in Nepal, Burma and Punjab, where diplomatic and military ventures proved less effective - precisely because the British were unable to penetrate local intelligence networks. By arguing that the colonial "information order" retained "distinctly Indian features, even while absorbing and responding to the profound influences set in motion by the European rulers, Bayly challenges the assumption that British rule was built upon new forms of technological control and colonial knowledge.

Having established as his baseline the role of India's information systems in British expansion, Bayly moves on to a wider discussion of "social communication" in 19th-century north India, and the part played by literate groups - government servants, astrologers, physicians, and others - in maintaining and re-articulating indigenous systems of knowledge. In what amounts to an extended critique of Michel Foucault and Edward Said's influence on recent South Asian historiography, Bayly argues against any simplistic assumption that colonial power was based on a monolithic, uninformed and intolerant representation of Indian society and culture.

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European representations of India were, he suggests, most extreme and prejudiced precisely where knowledge was weakest. European rule over India, as over other parts of Asia and Africa, could not have been sustained, he reasons, without a fairly close and effective engagement with indigenous society, even if colonial officials and missionaries despised and distorted the knowledge they gleaned from "native informants".

He identifies a series of "neo-orientalists" who, long after the old Orientalist-Anglicist debate appeared to have been resolved in the 1830s, continued to engage, in depth and possibly appreciatively, with Indian medicine, language, geography and religion. Above all, Bayly stresses the need to recognise the pervasiveness of Indian agency in the fashioning of colonial discourse. India's literate elites declined to accept the paramountcy of western learning without a struggle and constantly found ways to challenge it or absorb it on their own terms.

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The dynamic adaptability of Indian modes of social communication is illustrated by the ready reception of printing and the rapid spread of the printed book in the early and middle decades of the 19th century. It is further shown by the mutiny and rebellion of 1857, a revolt once cast as a backward-looking, "feudal reaction" to modernising British rule, but now shown to have drawn upon a new postal service and printing presses, as well as such traditional forms of communication as placards and proclamations. If the rising hastened the decline of the old order, it also signalled a new phase in the struggle over opinion, so much so that by the 1860s the government was already losing the battle for control of the Indian press.

What emerges from this finely nuanced and deeply researched study is an impressive balancing of the imperial and indigenous contributions to colonial knowledge. The study recognises the force of change and vigorously rebuts any suggestion that India can be typecast as "traditional" and "unchanging" in the face of the 19th century's information revolution. As in Bayly's earlier work, recognition that British rule brought certain far-reaching innovations is set alongside the resilience and adaptability of Indian society, in ways which seem to eclipse the grandiose claims and vaunted achievements of the imperial era. Far from being cut off by the advent of colonial modernity, India's pre-colonial past provides vital links to the rise of nationalism in the country, which through a series of cultural countermoves and emerging "national icons", was implicitly in evidence long before the founding of the Indian National Congress in 1885.

Discussion on issues of such complexity will not lead easily to consensus. Historians of India and of empire will long debate the extent to which British rule over the subcontinent represented coercion rather than communication, disjuncture more powerfully than continuity, contestation more emphatically than coexistence.

There is something reassuringly civilised about Bayly's version of the colonial encounter that is not always easy to square with reported episodes of searing hatred, collective bewilderment and crude repression on the subcontinent. But Bayly has not just presented a rigorous and comprehensive case for India's cultural continuity and adaptability under colonial rule. By giving priority to the sociology of knowledge, rather than to the sociology of institutions, he has also breathed fresh life into the often rather arid intellectual history of India.

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These are no mean achievements, and a work so rich in historical observation and so full of critical insight deserves to be read and reflected upon well beyond the community of South Asia scholars and imperial historians.

David Arnold is professor of South Asian history, School of Oriental and African Studies, University of London.