OK here's my standard post about 17th-18th C India:
Indian political theory revolved around, not direct control of territory but around the concept of vassalhood. An expanding empire (like, say, the Mughals) would basically issue declarations of supremacy to every king who stood in their path. Those who submitted were given vassalhood, those who resisted were fought and conquered. However, even conquered kings tended to be replaced with other kings or viceroys who ran their territories pretty much as they had before with the exception of sending tribute back to the capital. There tended to be a minimum of direct administration of conquered territory, sort of a feudal system writ large. This provided a rather unstable foundation for nation- and institution-building because as soon as power lapsed at the centre Indian empires tended to fall apart back into their earlier constituent kingdoms or analogues of the same. This is why a lot of Indian 18th C monarch had titles like Nizam or Nawab which literally mean deputies- in times of more strength in Delhi they would have been viceroys for the Mughal Padishah. Such an inherently unstable political landscape isn't the best foundation for nation building.
The exception to this tended to be South India where in the 17th and 18th C you did see more stable state structures beginning to form such as Travancore, Mysore and Hyderabad. The problem here was that with the loss of Mughal control from the centre Northern India and the Deccan were massively destabilised. The Mahrattas were overrunning North India and in Mysore, former Mughal adventurers were destabilising the government. This basically gave the Europeans a perfect situation to play different factions off against each other (as the British and the French did). The potential of properly oranised and relatively centralised Indian states to ward off colonisation was definitely present- in the Travancore-Dutch War, Travancore actually managed to fight the Dutch to a draw and made them cede their dominance of the state of Cochin with it's spice crops and rich trading port to Travancore itself. However Travancore itself was destabilised by invasions from the ex-Mughal warlord regime in Mysore and was thus forced to become a British client.
In short, thus, the collapse of Mughal central control in the 17th C completely destabilised India for two centuries creating a series of knock on effects that precluded stable state formation, allowed outsiders the leeway to play political games of patronage and paved the path for European domination of the subcontinent. The Europeans (specifically the British) had extremely lucky timing. It's noteworthy that the two most successfully centralised states, Hyderabad and Travancore retained their integrity and identity, accepting positions as British vassals but remaining essentially intact, as compared to the other more destabilised Indian states like Bengal, Mysore, and the Mahratta principalities.
It's notable that even after effective independence from Mughal rule that the Nizams of Hyderabad still maintained the legal fiction that they ruled in the name of the Padishah. Coins were minted with the Emperor's seal and Friday prayers in the mosques were conducted in the name of the Padishah not the Nizam. Besides that however the Nizams basically did whatever they wanted within their own territory.
South India in the 17th and 18th centuries is actually an extremely fascinating place which is often overlooked. On the one hand you have Hyderabad, a classic Indian "vassal" kingdom, then you have Mysore, a Hindu vassal kingdom and Travancore, a relatively new kingdom rapidly engaging in a process of state-building (by expanding aggressively against all the other statelets in Kerala) and even managing to take back trade rights from an European power. If the Europeans hadn't turned up when they did South India might well have been a veritable laboratory of nations.