Dorsey, who quit as Twitter CEO in 2021, said on Monday that India also threatened the company with raids on employees if it did not comply with government requests to take down certain posts.
"It manifested in ways such as: 'We will shut Twitter down in India', which is a very large market for us; 'we will raid the homes of your employees', which they did; And this is India, a democratic country," Dorsey said in an interview with YouTube news show Breaking Points.
Deputy Minister for Information Technology Rajeev Chandrasekhar, a top ranking official in Modi's government, lashed out against Dorsey in response, calling his assertions an "outright lie".
"No one went to jail nor was Twitter 'shut down'. Dorsey's Twitter regime had a problem accepting the sovereignty of Indian law," he said in a post on Twitter.
Dorsey's comments again put the spotlight on the struggles faced by foreign technology giants operating under Modi's rule. His government has often criticised Google, Facebook and Twitter for not doing enough to tackle fake or "anti-India" content on their platforms, or for not complying with rules.
The former Twitter CEO's comments drew widespread attention as it is unusual for global companies operating in India to publicly criticise the government. Last year, Xiaomi in a court filing said India's financial crime agency threatened its executives with "physical violence" and coercion, an allegation which the agency denied.
Dorsey also mentioned similar pressure from governments in Turkey and Nigeria, which had restricted the platform in their nations at different points over the years before lifting those bans.
Twitter was bought by Elon Musk in a $44 billion deal last year.
Chandrasekhar said Twitter under Dorsey and his team had repeatedly violated Indian law. He didn't name Musk, but added Twitter had been in compliance since June 2022.
Modi and his ministers are prolific users of Twitter, but free speech activists say his administration resorts to excessive censorship of content it thinks is critical of its working. India maintains its content removal orders are aimed at protecting users and sovereignty of the state.
The public spat with Twitter during 2021 saw Modi's government seeking an "emergency blocking" of the "provocative" Twitter hashtag "#ModiPlanningFarmerGenocide" and dozens of accounts. Farmers' groups had been protesting against new agriculture laws at the time, one of the biggest challenges faced by the Modi government.
The government later gave in to the farmers' demands.
Twitter initially complied with the government requests but later restored most of the accounts, citing "insufficient justification", leading to officials threatening legal consequences.
In subsequent weeks, police visited a Twitter office as part of another probe linked to tagging of some ruling party posts as manipulated. Twitter at the time said it was worried about staff safety.
Dorsey in his interview said many India content take down requests during the farmer protests were "around particular journalists that were critical of the government."
Since Modi took office in 2014, India has slid from 140th in World Press Freedom Index to 161 this year, out of 180 countries, its lowest ranking ever.
