Modi secretly tried to massively cut state funds. New Delhi, India – Immediately after becoming the prime minister in 2014, Narendra Modi held backdoor negotiations with the Finance Commission of India to significantly cut funds allocated to the country’s states.

However, the head of the commission, an independent constitutional body deciding states’ shares from central taxes, resisted, and Modi had to back off, new revelations show.

The Finance Commission’s firm stance forced the Modi government to hastily redo its maiden full budget in 48 hours and slash funding across welfare programmes since its assumption of retaining a greater portion of the central taxes did not pan out.

Modi’s Claim

At the same time, Modi falsely claimed in Parliament that he welcomed the Finance Commission’s recommendations on the tax portions to be allocated to the states.

These revelations of financial haggling and behind-the-scenes manoeuvring in the making of the federal budget came from BVR Subrahmanyam, the CEO of the government think-tank NITI Aayog. As a joint secretary in the prime minister’s office, he was the liaison in the backdoor negotiations between Modi and the chairman of the Finance Commission, YV Reddy.

This is arguably the first time a top government official in the current Indian government has admitted publicly that the prime minister and his team had tried from the start to squeeze the states’ finances, a concern now repeatedly raised by the states.

Subrahmanyam shared the information while speaking as a panelist at a seminar on financial reporting in India, which had been organised last year by the non-governmental think-tank the Centre for Social and Economic Progress (CSEP).

In his remarks – another first by a government official – he revealed how the federal budgets are “covered in layers and layers of attempt to cover the truth”. He added that he was “sure you will have a Hindenburg who will open up the [Indian government’s] accounts if they are transparent”.

He meant, if the accounts were transparent, the truth of the government’s fiscal condition would become evident, similar to how the Adani Group’s questionable accounting practices were highlighted by US-based short seller Hindenburg Research last year.

Those allegations of accounting fraud and other issues by one of India’s largest business conglomerates led to a $132bn market rout in the group’s valuation and became a political hot potato as the airports-to-cooking oil conglomerate is perceived as being close to the Modi government.

The Reporters’ Collective independently verified Subrahmanyam’s claims against budget and other documents going back a decade.

At one point, Subrahmanyam even divulged details of financial embezzlement and fraud in a government-funded infrastructure project, referring to it as a “funny case”.

Despite his headline-grabbing revelations, the seminar’s YouTube livestream has garnered little more than 500 views. Hours after The Reporters’ Collective sent detailed queries to the Prime Minister’s Office (PMO), public access to the video of the seminar was cut off on the CSEP YouTube channel.

Subrahmanyam, the Ministry of Finance and the PMO did not respond to The Reporters’ Collective’s detailed queries.