The first passenger railway in India was constructed in 1853, 7 years after the Railway Regulation Act of 1846 which mandated that Great Britain use standard gauge.
I would have thought, at this point, it would have been much more practical to simply import standard gauge equipment from the UK, rather than having to build new equipment (and the tooling for said equipment) from scratch.
The common explanation is that standard gauge did not have enough stability to handle powerful cyclones. Yet, by the time of independence, India actually had more meter (metre) and narrow gauge railways than broad.
Let me venture to answer this in part, until someone more expert in the history of the indian railways is able to more fully flesh things out. As askhistorians tends to be short/deficient on experts related to indian topics, I request the mods forbearance until then.
The first contracts in British India with the East Indian Railway Company and Great Indian Peninsula Company in 1849 stipulated that railways in India would be built on a four feet, eight and half inches (standard) gauge.. However the real impetus for railways in British India came from Governor General Lord Dalhousie, the guarantee scheme he recommended and his 1853 minute, which resulted in trunk lines in all 3 presidencies. (instead of bits and pieces railway development).
Lord Dalhousie favoring a six feet gauge and Mr. Simms, the consulting engineer favoring five feet and six inches gauge.
Others also argued similarly to the Great Western Company - that in event of floods,storms, etc, the subsidence of embankments would have less of an effect on a broad gauge than the narrower standard gauge.
[Note that despite the passing of the guage act in the UK, there would continue to be incomplete standardisation of gauge even in the UK, and elsewhere]
[Also note that in addition to being the Governor General, Dalhousie was also regarded as an expert in railway matters]
However, in the 17 years between 1853 and 1869, only 4287 miles were laid out. The trunk lines created were extremely expensive; by one estimate £75 million or half of all British investments in India.
As a result the government of India dissolved the guarantee scheme and undertook direct state construction of railways in India under Lord Mayo.
This included the usage of lower cost meter gauge lines. The indian government built 3500 km in 10 years at a cost of less than half the guarantee scheme (per km).
Nevertheless, due to military reasons,some of this was converted over in the NW Frontier province and meter gauge was restricted to non-strategic areas in the south and northeast.
By 1879, the strain on government coffers and pushback from private companies, meant that Lord Northbrook re-opened the new guarantee scheme for most of the british raj with private companies laying lines, split between broad gauge and meter guage, and leading to significant progress in laying track.
In addition, to this, the private kingdoms also had started creating their own princely railways, starting with the Nizam of Hyderabad. Other princely states would also follow. [Adding to the mix of railways and gauges]
By 1922, the railways would again be re-organized as the demands of the first world war and dissatisfaction showed up inadequacies, and state management again resorted to ; the railway budget separated from the regular budget...
At independence, 42 separate railway systems, (including 32 owned by princely states) were amalgamated as Indian railways
Edit : /u/wotan_weevil has laid out the basic pros and cons of broader vs narrower gauges, which I had omitted. You should probably go through those first. You should keep in mind that some of the arguments above were made over and above those general dynamics. eg Brunel (Great Western railway) argued for many elements of safety with regard to his 7 1/4" broad gauge and conditions in the Indian sub-continent were definitely a factor in the minds of the Directors while deciding (based on Simms/Dalhousie's recommendations).
Also worth pointing out that the actual expense of track laying was not merely a technical choice or issue.
eg in the 1860s, the guarantee scheme created incentives to not be careful of expense - with returns guaranteed, british engineers,materials, ( from locomotives to wooden sleepers/ties etc) would all be imported at great expense, expensive methods used and (especially after 1858), the government engineers could only approve the results. Two fifths of all the capital was spent in Britain.
William Massie (finance minister of India from 1863 to 1868) said :
"All the money came from the English capitalist, and so long as he was guaranteed 5% on the revenues of India, it was immaterial to him whether the funds that he lent were thrown into the Hooghly or converted into bricks and mortar"
The viceroy, John Lawrence (who initiated the changed program that his successor Lord Mayo put into effect), wrote that
" the whole profits go to the Companies and the whole loss to the Government"
This might help address your question of why cost efficiency of importing standard gauge equipment vs broad gauge was not really a factor initially.
Both broad and narrow gauges have their advantages and disadvantages. The advantages of broad gauges are:
Higher axle loads are possible. This allows heavier loads.
Higher speeds are possible, due to improved stability.
Steam locomotives could use larger cylinders and be more powerful.
Their disadvantages are:
Lines are more expensive: track is more expensive for a given length, bridges must be wider, tunnels wider.
Curves must be more gradual.
The advantages of narrow gauge are the opposite of these two disadvantages: cheaper lines, and tighter curves are possible. The advantages of broad gauge relate to heavier loads and higher speeds. Thus, where lines will carry a lot of traffic, and tight curves aren't required, broad gauge is a technically better choice. The higher traffic justifies the higher construction cost of the lines.
Where traffic will be light, the advantages of broad gauge bring little benefit (high speed can still be useful). Where long lines are necessary, but the traffic will be light, narrow gauges become attractive - they can be the economically better choice. In mountainous areas, tight curves are important, and since rail traffic in mountainous areas is often light, lines are often narrow gauge.
It's useful - very useful - to have a single-gauge rail network. This is especially important for the part of the rail network that carries the most traffic. This is basically why the 1846 Act prescribed a single gauge for passenger rail in Great Britain. Standard gauge (4'8.5") was chosen because about 80% of existing major lines were standard gauge. While broader gauges were technically better, standard gauge was adequate, and better established. For Ireland, the Act specified 5'3" as the standard - nothing special about 4'8.5" except that enough had been laid in Great Britain to make it attractive as the standard.
Without lots of existing tracks, India was free to choose a gauge. 4'8.5" had become the British standard, but was not even close to being an international standard (not just Ireland with its 5'3", but the rest of the world with a diversity of gauges). So why not choose a broad gauge, and get the technical advantages? So India did. But the expense! And the mountainous areas! So narrow gauges lines were built aplenty. This is why, as you observe,
by the time of independence, India actually had more meter (metre) and narrow gauge railways than broad.
If India and the rest of the sub-continent were to make the choice today, if there was magically no rail in the sub-continent, what would be chosen? With the majority of track in the world being 4'8.5" standard gauge, and neighbours of the sub-continent such as Iran and China using it, 4'8.5" would be a good choice. The other good choice - also in the interests of standardisation - would be the Russian 5' gauge, which is used in former Soviet Central Asia. It's likely that 4'8.5" would be chosen (assuming simple rationality rules the choice-makers). Afghanistan recently made their choice, being without significant rail, and bordered by 3 major gauges (standard in Iran, Russian 5' in Central Asia, and 5'6" in Pakistan), and chose 4'8.5". Standard gauge is broad enough to allow high axle loads and high speeds; choosing a broader gauge offers some benefit, but not enough to make it a good choice compared to the advantages of standardisation.
(I see that u/barath_s has posted the details of the Indian choice, so I'll stop here.)
Reference:
The Act: http://www.railwaysarchive.co.uk/documents/HMG_Act_Reg1846.pdf
On standardisation of gauges: Douglas J. Puffert,"Path Dependence in Spatial Networks: The Standardization of Railway Track Gauge", Explorations in Economic History, Volume 39, Issue 3, 2002, Pages 282-314, https://doi.org/10.1006/exeh.2002.0786.
There are two excellent answers here already.
Just to add that even within the United Kingdom standard gauge only applied to Britain, with Ireland adopting 5’3” ( even though the very first line was built to standard gauge).
At the time of the india gauge decision the UK colonies in Australia were developing main lines on three different gauges which was already seen as a muddle.
So there was no assumption that standard gauge was best, but there was an understanding that having a common gauge was important when lines would connect.
On the other point of producing standardised equipment. Manufacturers were already exporting engines and rolling stock to Iberia 5’6” and Russia 5’ , as well as domestic stock at 5’ 3” and 7’ so were well able to adjust easily to alternate gauges.
Indeed rather later they would develop standard products that could be delivered in a variety of gauges to suit.