Here are the latest developments:
"Today I will announce the package for Bihar. 50,000 crore, 60,000, 70,000, 75,000, 80,000?" the PM asked as his audience cheered, and then said, "Today I promise Rs 1.25 lakh crore."
The PM said with other funding already earmarked for Bihar, the state now has Rs 1.65 lakh crore pledged to it in central funds. He had earlier promised the state, at an election rally, more than Rs 50,000 crore.
PM Modi's nearly hour-long speech at the government function to inaugurate roads was more like an election rally with crowds chanting his name through the speech.
He also made a blistering attack on Bihar Chief Minister Nitish Kumar. "Our chief minister said with authority that Bihar is no longer a BIMARU (underdeveloped) state... If it is true, then I will be the happiest person... Tell me, if somebody is healthy, will he go to a doctor... I am surprised that on the one hand, he says Bihar is not BIMARU, and on the other, he keeps asking for something or the other."
Nitish Kumar tweeted, "While I will wait to hear details of the so called package announced by Modiji, I emphasize, special assistance is OUR RIGHT & not a favor."
Mr Kumar has repeatedly demanded that Bihar be assigned special category status by the Centre to help develop the poor state. The Prime Minister's announcement will deny him credit for getting central funds for the state.
At a rally in Saharsa later in the day, PM Modi made another attack on Mr Kumar, accusing him of "arrogance" for having refused aid for floods from Gujarat of which he was then chief minister.
Nitish Kumar hit back saying, "The PM has called me both arrogant and a beggar. How can I be both?" He said calling Bihar a Bimaru state was "offensive."
In the Bihar elections, the BJP takes on a coalition led by Mr Kumar that includes Lalu Prasad's Rashtriya Janata Dal, the Congress and other smaller parties.
Nitish Kumar ended a long partnership with the BJP two years ago. In the national election that followed months later, the BJP had almost swept Bihar, winning 31 of 40 seats.