India's 2 million nongovernmental organizations are prominent advocates on issues from women's rights to educational equality.

But over the past few weeks, the atmosphere for advocacy NGOs, and in particular those funded by foreign donors, has become decidedly chilly.

The home ministry is running a national investigation into the funding of all NGOs after the leak of a classified report last month which blamed a handful of foreign-funded NGOs for stalling development projects in India. The report, by an internal security agency, claimed that these group's activism resulted in a 2-3 percent decrease in India's economy.

Any NGO found violating current registration rules will have their bank accounts seized, registration canceled, and will be banned from receiving foreign funds, a senior home ministry official says. And in the July 10 federal budget proposal, the government included a series of amendments that would expand its power to withdraw tax benefits or cancel registration of NGOs.

Activists accuse the new government of Prime Minister Narendra Modi of looking for ways to stifle opposition, especially to infrastructure and power projects that may carry heavy environmental costs. Mr. Modi's Bharatiya Janata Party came to power in May on a pro-business platform.

“The government wants to ensure that nobody raises voices against any government projects,” says Achin Vanaik, a member of the anti-nuclear Coalition for Nuclear Disarmament and Peace, a network of over 200 Indian NGOs and advocacy groups.

Classified report

The controversial leaked report on NGOs was prepared for the new government by the Intelligence Bureau, an internal security agency.

It called out several international organizations, including Amnesty International, Action Aid, and the Netherlands' CORDAID for harming developmental projects relating to coal plants, oil exploration, nuclear plants, steel, and mining.

The report singled out Greenpeace India, which was mentioned 15 times. It alleges that Greenpeace India is using foreign funds to hurt economic progress by campaigning against power projects, mining, and genetically modified food. The home ministry has asked India's central bank to stop processing foreign contributions to Greenpeace.

Greenpeace, in a statement, has said that the organization has raised 61 percent of its budget in the last financial year from Indian supporters.

"Just because contributions are from foreign sources does not mean that they come with an agenda," says Bharati Sinha, a spokeswoman at Greenpeace India. "We believe that this report is designed to muzzle and silence civil society who raise their voices against injustices to people and the environment by asking uncomfortable questions about the current model of growth."

There are no official government figures on how many NGOs in India receive foreign funding. Public and private donors from the United States, the United Kingdom, Britain, and Germany are the top foreign funders to Indian NGOs, according to figures compiled by the Indian government.

In the year ending in March 2011, the most recent period for which data is available, about 22,000 Indian NGOs received a total of more than $2 billion from abroad, of which $650 million came from the US.

Past pressure

This is not the first time NGOs working on environmental or land rights issues have faced official ire. Modi's predecessor, Manmohan Singh, complained in 2012 that foreign-funded NGOs were blocking the expansion of Koodankulam, India’s biggest nuclear power plant. Demonstrations led by the People's Movement Against Nuclear Energy delayed construction on the project, which only started supplying power in 2013, six years after schedule.

The Indian government complains that only 2 percent of Indian NGOs file annual returns with the government. Government officials say this shows a lack of accountability and transparency and prevents them from knowing which NGOs are active and where.

This led the government to tighten the rules on NGOs over the past two years: In 2012, the government empowered senior income tax officials to cancel registrations of those NGOs who fail to file income tax returns. Last year, the government banned Indian Social Action Forum, a network of more than 700 NGOs across India, from receiving foreign funds. The conglomerate of NGOs mostly campaigns for indigenous peoples' land rights and against nuclear energy; nearly 90 percent of its funding comes from overseas.

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Now, the new government may also review visa applications of foreign academics and researchers who work with Indian NGOs, according to local media reports.

Targeting civil society and NGOs will ultimately be counterproductive, says Parth J. Shah, who heads the New Delhi-based Centre for Civil Society. “It will create unwanted fraction between civil society and the government. Nobody is against prosperity and growth,” he says. “But for the benefit of few you cannot harm interests of a large section of your population.”