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February 27, 2023

Man and Country

India

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Indian billionaire Gautam Adani used to claim that the success of his energy and port facilities conglomerate, the Adani Group, reflected the rising power of his massive country’s economy.

Then, in January, the New York-based Hindenburg Research investment firm accused Adani of fraud and stock manipulation, and announced they were short-selling the company’s stock by employing complicated financial machinations as detailed by this Financial Times story. The Adani Group has since lost more than $135 billion in value, unseating Adani as Asia’s richest person and raising troubling questions about the foundations of the Indian economy.

Adani has denied Hindenburg’s allegations, saying that the firm is making “a calculated attack on India” and “the independence, integrity and quality of Indian institutions,” as well as on the regulators who should have detected the alleged wrongdoings that Hindenburg Research has claimed to have identified, reported the New York Times.

Indian regulators are now investigating Hindenburg’s claims, noted CNN, adding that the Adani Group is reportedly postponing spending and is cutting its revenue growth estimates by 50 percent.

Importantly, the scandal has cast doubt on the economic policies of Prime Minister Narendra Modi, a pro-business conservative who has increased the influence of the majority religion of Hinduism in the technically secular country.

As CNBC reported, billionaire investor George Soros, saying that Modi was “no democrat” hoped Adani’s fall would trigger a “democratic revival” in India. Modi’s defenders, in turn, quickly blasted those sentiments, saying they reflected a “Euro-Atlantic” (read: Western-centric, imperialistic) perspective.

But others reiterated Soros’ point. Comparing the scandal to failed companies in the US like Enron and Lehman Brothers, Japan’s Yamaichi Securities, and the Evergrande Group in China, Forbes argued that the scandal could actually exert a positive effect on the Indian economy – if Modi uses the crisis as an opportunity to weed out corruption and reform poor business practices in his country.

Modi and Adani’s close ties might make it hard for the prime minister to distance himself from the tycoon’s alleged misdeeds, however.

As Indian novelist and activist Arundhati Roy explained in the Guardian, Adani came to Modi’s defense in 2002 after Hindus massacred Muslims in Gujurat when Modi was governor of the Indian state. The episode has long dogged Modi and undermined his image.

It’s also the center of a battle by Indian authorities against the BBC, which aired a documentary on Modi and focused on the massacre, and which was banned by the government of India. Afterward, Indian tax regulators raided the offices of the broadcaster, which cried foul, noted CNN.

Adani, meanwhile, established a business association that attacked Modi’s enemies and helped him launch his bid for the premiership as “Hindu Hriday Samrat, the Emperor of Hindu Hearts, or, more accurately, the consolidator of the Hindu vote-bank,” wrote Roy.

If the Indian economy under Modi is built on sand, Adani is just the first of many casualties.

This story originally appeared in the February 27, 2023 newsletter, Man and Country.