As PM, India’s Modi secretly tried to massively cut state funds

Modi tried to force the Finance Commission to cut back on the amount of tax revenue meant for India’s states.

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.

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