Adani Scam Tests the Credibility of India’s Institutions

Most people would never see wealth to the tune of $60 billion in their entire lives. Yet that is precisely how much India’s influential billionaire baron Gautam Adani has lost in recent days as a net worth. half reduced from a high of $120 billion.

That chaos was caused by shocking accusations of stock manipulation and money laundering by the US short-selling firm, Hindenburg Research, which accused Adani and his businesses to pull “the biggest scam in corporate history.” The allegations made Indian markets nervous when Adani’s group of companies lost over $110 billion in value and its new stock offering was spoiled.

Stock markets normally recover from shocks as the passage of time forces a reckoning and balances out speculation. But for India, the problem runs much deeper and raises several long-term credibility tests.

Perhaps much more dangerous than the possible fraud committed by Adani is the fact that no one can ask questions about it.

In its official response Faced with the allegations, the Adani Group said the report was a “calculated attack on India, the independence, integrity and quality of Indian institutions, and India’s history of growth and ambition.” Later, its CFO compared the stock market crash to the 1919 massacre of unarmed Indians at Jallianwala Bagh in Amritsar by a British Army officer.

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then various influential public personalities in India he unleashed a barrage of jingoism, claiming there was a coordinated Western attack on India and its booming economy.

Much of this rhetoric seems to have been taken directly from the emotive narrative of victimhood that is now a staple of Hindu nationalist politics in India. Not coincidentally, Adani’s statement echoed the Indian government’s own response to a controversial BBC documentary about Prime Minister Narendra Modi. Asked about that film, the spokesman for the Indian Ministry of External Affairs, Arindam Bagchi, saying that “a persistent colonial mentality is blatantly visible”.

However, as far as foreign investors are concerned, it is beside the point whether there really is a neo-colonial Western attack on a proud and rising India. The very fact that both the government and India’s largest industrialist believe this is a credible defense raises questions about whether India’s state institutions will objectively investigate Hindenburg’s claims, or even other allegations against similarly influential corporations in India. the future.

As columnist Andy Mukherjee summarized In Bloomberg, “Casting yourself as the standard-bearer for a proud and self-sufficient India is increasingly seen as a ticket to avoid scrutiny from the media, regulators or environmental groups, all of whom can be denounced for not agreeing. I agree with chauvinism. blows to the chest.”

Adani also raises other credibility tests, especially in terms of the role he has played in India’s foreign policy. In early December of last year, even before the Hindenburg allegations, a Washington Post report revealed that Adani was construction of a coal power plant sell electricity to Bangladesh at several times the market price in that country. That agreement was signed years ago during Modi’s visit to Bangladesh, but in the wake of that report and the most recent riots, the Bangladeshi authorities asked for a review of those prices. more reports He suggested that the Adani plant was favored by a much cheaper deal with Bhutan.

Meanwhile, in Australia, political influence was reported greenlighting a controversial coal mine in Adani’s name.

For years, analysts and observers have sounded the alarm about Adani’s potential ability to subdue and co-opt India’s state institutions by leveraging his close ties to Modi. In 2014, during his first election campaign for prime minister, Modi flew around on a plane bearing the name of Adani. Later, the billionaire accompanied the prime minister on several of his trips abroad. Since then, Modi has further cemented his grip on Indian politics, making concerns about that influence that much more pressing.

None of this is to say that India’s state economic institutions are now discredited and compromised. But the more Adani and others use nationalism as a way to deflect and shut down questions, the more such doubts will grow and persist among foreign investors.

If it is serious about its aspirations for long-term economic growth, India cannot afford to market itself abroad as little more than a leap of blind faith, as an inevitable alternative to China, with the promise of youth, in an environment where you can Don’t ask uncomfortable questions or get answers.

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