The Ford Foundation — which has worked in India since 1952 on programs ranging from the "green revolution" in agriculture to urban planning and good governance — was previously under the purview of the finance ministry, but can now disburse funds only after clearance from the home affairs ministry.

A letter on Thursday from the home affairs ministry to the Reserve Bank of India, published by Indian news media, asks the central bank to place the Ford Foundation on a watchlist to ensure that the funds it distributes are used "for bona fide welfare activities without compromising on concerns for national interest and security".

The news was greeted with alarm by Indian and foreign non-government organisations and western donors, but hailed by many nationalist Indians on Twitter as an overdue crackdown on foreign meddlers.

India has placed the Ford Foundation, the U.S. philanthropy group, on a national security watchlist following complaints about its links to an activist seeking the conviction of Prime Minister Narendra Modi for human rights abuses.

The curbs apparently arise from a complaint by the government of Gujarat — where the Hindu nationalist Mr Modi was chief minister for more than a decade — about an NGO called Sabrang and led by activist Teesta Setalvad that previously received funds from the Ford Foundation. Ms Setalvad herself has demanded that Mr Modi be tried for his alleged role in the massacre of Muslims in Gujarat in 2002, though Mr Modi denies involvement.

A week ago, Rajnikant Patel, a Gujarat minister, said Ms Setalvad's NGO had misused funds from Ford to create "communal disharmony" and carry out "antinational propaganda against India in foreign countries". A week before that, Mr Modi had pointedly asked in a speech to judges whether the judiciary was driven by "five-star activists", a comment widely assumed to refer to Ms Setalvad.

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The Ford Foundation confirmed it had learnt officially that "the Ministry of Home Affairs is reviewing information related to their ongoing investigation of Sabrang Communications and Publishing".

The foundation said it was confident it was complying with the law and was transparent about its grants. "Over many decades, the foundation has built strong relationships with the people, institutions, and governments of India, and has contributed to the remarkable growth and development of the nation," it said.

According to the foundation's website, it last made a grant to the Sabrang Trust of $250,000 in 2009, "to strengthen its conflict resolution and peace building activities in Gujarat and Maharashtra".

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The Ford Foundation is not the first donor or NGO to fall foul of Indian governments. Last year, New Delhi blocked incoming foreign contributions to Greenpeace India, just after a leaked intelligence bureau report accused it and other NGOs of stalling India's growth by fomenting opposition to large industrial projects.

In January this year, however, Greenpeace won a case in the Delhi High Court, which ordered the Modi government to release Rs18m in foreign contributions to the India branch and rejected the blocking of the funds as arbitrary, illegal and unconstitutional.

Foreign investors have also sometimes complained of unfair treatment at the hands of Indian governments, with the latest criticism focusing on large and unexpected tax demands directed at multinationals such as Vodafone.