The term "Indian" was used by the
British to refer to "wogs", "black fellas"
or "natives". That's all it meant to
them. They used it all over the world
throughout their colonies.
To say that the British used the term
"Indian" due to their being awestruck by
the great remains of the Indus Valley
civilisation (which was a largely illiterate
civilisation anyway, not like the Vedic
civilisation which was something
completely different) is really to show
that one is wearing rose-coloured
glasses.
The diary of Captain Cook (who worked
for the British East India Company and
who in official history was supposedly
the "discoverer" of Australia) refers to
the Australian native on his approach to
Australia as "Indians".
In his logbook he wrote:
=================================
==
Wednesday, August 22nd, 1770
Remarks, &c.
Mod. and clear wea'r; saw a number of
smoaks along shore. At 1 lay too for the
yawl; pinnace and longboat sounding.
½-p't 2, made sail and steer'd for a
passage between some islands and the
main. At 3 fired a gun, and made the
signell for the boats to sound the next
passage to the no'ward of the
abovemention'd. ¾-p't 3, was in the
passage; dist'ce from the east shore, ¾
of a mile; saw several Indians, who
follow'd us shouting.