Hello, Niraj.
To clarify, Wikimedia India, and indeed any other group or individual Wikimedian in India, _is_ eligible for funding from the Wikimedia Foundation, via 3 different grant programs, described here:
There exists a fourth funding model which offers less restricted funds to affiliated entities that meet other, more stringent, eligibility standards, called the Funds Dissemination Committee (FDC) process. You can read all about it at the FDC portal[1], and specifically about the eligibility criteria for the FDC[2]. At the moment, Wikimedia India does not meet all of the criteria. It is likely that it _will_ by the next round of funding (not the one currently underway), later this year.
So no one has "withdrawn financial support" from India at all.
Indeed, Wikimedia India has lately been discussing with the Foundation its intent to submit two new grant proposals to the Wikimedia Grants Program (that I manage), and I personally encouraged them to do so.
I encourage you (and anyone reading this) to read the information pages on WMF's various funding models, starting with the link above.
Cheers,
Asaf Bartov
Wikimedia Foundation