What the fall of the Adani group reveals about India 1%

In January, Gautam Adani appeared in a rare television interview on Hindi-language news channel, India TV, to answer a host of questions from a flattering talk show host about how he became the man richest in Asia. Asked about his strong relationship with Indian Prime Minister Narendra Modi and whether the government had played a role in helping to create his wealth, Adani responded, “I don’t chase numbers. For me, the biggest question is, “What can I do for the nation?

Adani’s comments appeared to be a nod to “India Inc,” a term for the country’s booming business and information technology sectors, which are key drivers of its economic growth on the continent. World Scene. But a recent report by Hindenburg Research finally pops that balloon.

The New York-based short-selling firm accused the Adani Group of “carrying out the biggest scam in company history”, alleging stock manipulation, accounting fraud and other wrongdoing. Hindenburg said the report followed a two-year investigation and was based on interviews with former leaders, site visits and the review of thousands of documents.

The fallout from the allegations is already rippling through global equity markets. As of Wednesday, the news sent Adani’s business value plummeting by more than $90 billion, as stock prices plummeted and Adani lost his status as the richest man in Asia and India.

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In response to Hindenburg’s allegations, Adani Group issued a 413-page response that called the short seller’s claims “outdated, baseless and discredited allegations.” Notably, the company also called the report a “calculated attack on India, the independence, integrity and quality of Indian institutions, and India’s history of growth and ambition” .

In a video appearanceAdani’s embattled chief financial officer, Jugeshinder Singh, stood before a giant Indian flag, mobilizing nationalist support that seemed to signal a message that any foreign scrutiny of Adani was an attack on India’s own success.

Supporters of Adani and the Indian government repeated similar claims on Twitter. After the Adani Group published its rebuttal last Thursday, hundreds of pro-Adani tweets with the hashtag “#IndiaINCSupportsAdani” flooded the Twitter timeline.

The saga has shed light on the relationship between India’s business and political elite, questioning whether India, facing accusations of crony capitalism, can become a global economic juggernaut like its biggest Asian competitor. nearby, China.

“Adani’s struggles only underscore the limited progress India has made in taming the excessive power of its growing gang of super-rich ‘Bollygarch’ tycoons and how they use political connections to their advantage,” James Crabtree, author Billionaire Rajsaid TIME.

What are Adani’s ties to the Indian government?

Both Adani and Modi hail from the western state of Gujarat, where Modi served as chief minister before being elected as the country’s leader in 2014. Under his leadership, Gujarat’s economy experienced its highest GDP growth. faster, eclipsing other Indian states – a feat which has been dubbed the “model of Gujarat” and which many Indian voters hoped Modi would emulate across the country. As Modi rises through the political ranks, he also openly displays a close friendship with Adani: he flew in Adani’s private jets during his election campaign, and again when he traveled from Gujarat to New Delhi to take office. of Prime Minister.

During this period, Adani’s wealth increased nearly 230%, from $1.9 billion in 2014 to over $26 billion this year. Much of this increase is attributed to the Indian government’s massive privatization drive and pro-business policies, which has seen Adani win several government tenders and infrastructure projects in ports, airports , roads, railroads, fossil fuels and green energy across the country. Modi called this approach “nation building”.

Farmers shout slogans before burning effigies of Narendra Modi, Mukesh Ambani, Gautam Adani to protest against companies following the recent passage of farm bills in parliament.

Narinder NanuAFP/Getty Images

In 2018, a controversial decision by the Indian government allowed Adani to bid and win tenders for six airports. Although Adani has no previous experience in operating airports, the decision transformed his group into one of the largest private airport operators in the country overnight. The move was lucrative for the Adani Group, but it also sparked outrage. In the southern state of Kerala, where Adani won a 50-year lease to operate Trivandrum International Airport, the state finance minister called the decision a “shameless act of cronyism”.

Adani addressed his relationship with the government head-on during the India TV interview, denying that Modi had bestowed personal favors on him or his businesses. “You can talk to him about politics, discuss the interest of the country, but the politics worked out is for everyone, not for the Adani Group alone.”

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It’s a sentiment shared by other big companies and investors. “You can ask the government for favorable policies, but you can no longer ask for individual favors,” said an executive at a major international investment firm in Mumbai. Told them FinancialTimes. “You need sensible execution. It is not enough to have political connections.

What does this mean more broadly for the Indian economy?

India’s recent economic growth has been built on a model that champions nationalist industrialists like Adani, who reiterated this in his India TV interview saying, “What I see now is that this country is making great strides”.

In India, family conglomerates like Adani’s have often been built from the rapid consolidation of state assets, market monopolization and stifled competition – which in 2021 has driven the 1 % of richest Indians to own more than 40% of the country’s total wealth. , according to a report by Oxfam. (The figure rises to 32% in the United States.)

While Adani may not rely heavily on the Indian government to bolster his empire, many Indians have reason to fear that large-scale government investments in his business will harm the country’s infrastructure. “Can they build the roads they promised, improve the ports they received, maintain the airports they won in a bid? So far no one else has been able to do that,” Bloomberg columnist Mihir Sharma said. wrote.

Hindenburg’s allegations also raised critical questions about the regulatory effectiveness and accountability of Indian institutions, which typically attract foreign investment to India rather than its neighbor China. Most notably, the report claims that the Securities and Exchange Board of India, or SEBI, has so far failed to deliver an effective outcome to an investigation into Adani’s offshore accounts “over a year and a half after concerns were initially raised by the media.” and members of parliament.

And with scrutiny of the Hindenburg report, bets placed on Adani and other Indian businessmen could backfire. Year-to-date net worth of other Indian billionaires Mukesh Ambani, Radhakishan Damaniand Savitri Jindal have all fallen – collectively, the four richest Indians have lost an estimated $45 billion so far thanks to falling stock prices. This is a huge test of Adani’s assertion that “no one can stop India’s position in the world today, or in the next 20 to 30 years.”

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