Before I get into his revelations, I have a request.

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In a few weeks, the current government will present its final budget before polls. You'll read a lot of commentary on India's finances. But none will match what this official revealed.

"The budget is covered in layers and layers of attempt to cover the truth," he said at one point.

Who is he?

Meet BVR Subrahmanyam, CEO, Niti Aayog. He's a retired bureaucrat with a 4-decade long career that included stints at the PMO under Manmohan Singh and Modi. As you can guess, his words carry weight.

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In July 2023, he was a speaker at a seminar by Centre for Social and Economic Progress on fiscal transparency.

The seminar was live-streamed to CSEP's YouTube channel.

When it was his turn to speak, Subrahmanyam dropped quite a few bombshells.

He began by saying states' fiscal reporting is abysmal. But there's a reason they might be resorting to opacity: they don't have much funds to begin with.

To get what he's saying, we'll first have to understand how funds are shared between the central govt and state govts.

The Constitution mandates a Finance Commission. Constituted once in 5 years, this Commission recommends the share of Central tax revenue that are shared with and distributed between states.

The 13th such Commission recommended 32% of Central gov't taxes be shared with states.

In 2013, the fourteenth one was constituted. Modi was then Gujarat CM. He  targetted the then UPA govt and famously demanded that states get 50% of the country's taxes.

A year later, he became PM.

In December 2014, the 14th Finance Commission submitted its report to President. It recommended, a 10% increase in states' share - 42% of all Centre collects.

It should have made PM Modi happy given his demand as CM. But by now, not known to citizens, he had changed his mind.

Subrahmanyam revealed that the PM got into a direct conversation with YV Reddy, head of the Finance Commission, to lower the recommended share.

Subrahmanyam was the only other person in the conversation, he claims. He revealed that the conversation took place over two hours. Reddy, however, was unrelenting. He told Subrahmanyam, "Go and tell your boss he has no choice".

Why is this a big deal? Because the cabinet can only accept or reject a recommendation. It cannot lobby for change. The PM's attempt to negotiate with the Commission was a breach of constitution.

This is the first time such a negotiation has come out in the open.

Eventually, the government had to accept the 42% figure. "It was accepted so late, so late that...four of us recast the entire budget in 2 days," Subrahmanyam said! The govt halved funds to welfare schemes for women, children and others in this rushed rewrite.

In Parliament, however, Modi boasted about how pro-states his govt was for agreeing to give away 42% of tax revenues. "It's our commitment that states should be strengthened."

"Some states will not have treasuries big enough to keep all this money," he added to laughter from MPs.

Now the Union government resorted to another trick to slash states' funds. In a first the Union government top honcho admits: The Centre ramped up cesses and surcharges, a class of taxes that the Centre gets to keep for itself away from the states. We confirmed this with data.

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Subrahmanyam further lamented the fact that states are being "increasingly choked for revenue" and post GST states' "avenues for raising funds independent of some third party is also not there".

Opposition-ruled states have been saying this for years. Subrahmanyam confirmed it.

But that's not all.

According to Subrahmanyam union budgets are "covered in layers and layers of attempt to cover the truth"

"We always wait for the Citibank or the JP Morgan analysis of the Indian budget. Because that actually unveils the truth in what the real situation is."

At one point he even said that if budgets are made transparent he was "sure" that "you will have a Hindenburg who will open up the (government) accounts".

His "Hindenburg" remark came six months after the short-seller leveled allegations of accounting fraud against Adani Group.

He was hinting at the possibility of something similar happening with govt accounts if they were transparent.

An example: off-budget borrowings. These are loans raised by govt-owned bodies that are not reflected in govt budgets. But government resources are used to repay them.

While the Modi government in a welcome move disclosed such borrowings, Subrahmanyam says it's still far from painting a complete picture.

"What is the time of the borrowing, amount of borrowing, timeline of the borrowing, interest rate? Nothing is known," he said.

This fact was highlighted by the CAG, the country's auditor, as well. In its 2022 report, the CAG red flagged the off-budget borrowing disclosure statement for not appropriately revealing Rs 1.69 trillion.

This means, India's debt and therefore its fiscal deficit (the difference between revenue earned and expenditure) may be worse than what we previously believed. This could be bad news for anyone looking to invest in India

Subrahmanyam was once again echoing economists' concerns.

His speech sadly (for us citizens) got no attention.

That's why @reporters_co decided to report on it. But two hours after we sent queries to the PMO, the video was made private.

You can read the whole report, published by @AJEnglish here.

You can access the transcript by scrolling to the bottom of this page.

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