What does the fall of the Adani group reveal about India 1%

IIn January, Gautam Adani appeared in a rare television interview on Indian news channel, India TV, answering a series of questions from the host of a stellar show about how he became the richest man in Asia. When asked about his strong relationship with Indian Prime Minister Narendra Modi and whether the government played a role in helping build his wealth, Adani replied answered“I don’t chase numbers. For me, the bigger question is, ‘What can I do for the nation? ‘” His answer was met with thunderous applause from the audience, and he later added, “This balloon will keep flying as long as India progresses.”

Adani’s comments seemed to be a reference to “India Inc” – a term that captures the country’s thriving businesses and information technology sectors that are key tools for its economic growth on the global stage. But a recent report from Hindenburg Research has finally caused that balloon to burst.

The New York-based short-selling firm accused the Adani Group of “Pulling the biggest hoax in company historyHindenburg said the report followed a two-year investigation and was based on interviews with former executives, site visits and a review of thousands of documents.

The ramifications of these allegations are already reverberating in global stock markets. By Wednesday, the news had devalued Adani’s companies by more than $90 billion, as share prices plummeted and Adani signed on. He lost his status As the richest man in Asia and India.

Read more: Gautam Adani started last week as the richest man in Asia. Now, it’s not even India

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

in video appearanceAdani’s chief financial officer Jugeshinder Singh stood in front of a giant Indian flag, mustering nationalist support that seemed to signal that any external scrutiny of Adani was an attack on the success of India itself.

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

The epic sheds light on the relationship between India’s businessmen and political elite, raising questions about whether India, faced with accusations of crony capitalism, can become a global economic powerhouse like its closest Asian rival, China.

Adani’s difficulties only underscore the limited progress India has made in taming the excessive power of its growing band of wealthy ‘Bollygarch’ tycoons and the way they use political connections to their advantage. Billionaire Rajtell TIME.

What are Adani’s relations with the Indian government?

Both Adani and Modi hail from the western state of Gujarat, where Modi was prime minister before his election as the country’s leader in 2014. Under his leadership, Gujarat’s economy experienced the fastest growth in GDP, outpacing other Indian states—a feat that has been called the “Gujarat model”. , which many Indian voters had hoped Modi would follow suit across the country. With Modi’s rise in political office, he has also publicly displayed a close friendship with Adani: he has flown in Adani’s private jets during his election campaign, and again when he traveled from Gujarat to New Delhi to take over as prime minister.

During this period, Al-Adani’s wealth more By about 230%, from $1.9 billion in 2014 to more than $26 billion this year. Much of this increase has been attributed to the Indian government’s mass privatization drive and business-friendly policies, which has seen Adani win numerous government tenders and infrastructure projects in ports, airports, roads, railways, fossil fuels and green energy across the country. Modi called this approach “state building”.

Farmers chant slogans before burning statues of Narendra Modi, Mukesh Ambani and Gautam Adani, in protest against business firms after the recent passage of farming bills in Parliament.  (Narinder Nano - AFP/Getty Images)

Farmers chant slogans before burning statues of Narendra Modi, Mukesh Ambani and Gautam Adani, in protest against business firms after the recent passage of farming bills in Parliament.

Narinder Nano-AFP/Getty Images

In 2018, a controversial decision by the Indian government allowed Adani to bid and win bids for six airports. Although El-Adani had no previous experience operating airports, the decision transformed his group into one of the largest private airport operators in the country overnight. The move was profitable for Adani’s group but also met with anger. State Finance Minister in the southern state of Kerala, where Adani won a 50-year lease to operate Trivandrum International Airport. named The decision is “an act of shameless nepotism.”

Adani spoke about his relationship with the government directly during the India TV interview, denying that Modi had given him any personal favors to him or his companies. “You can talk to him about politics, discuss the interest of the country, but the policy is for everyone, not for the Adani group alone.”

Read more: How the population of India will break the record in shaping the world

It’s a sentiment echoed by other major companies and investors. “You can ask the government for favorable policies but you can no longer ask for individual services,” says an executive from a major international investment firm in Mumbai. Tell the financial times. “You need reasonable implementation. It is not enough just to have political ties.”

What does this mean more broadly for India’s economy?

India’s economic growth has recently been based on a model defending nationalist industrialists such as Adani, who echoed this sentiment during his interview on India Television when he said, “What I see now is this country is forging ahead.”

In India, family-run conglomerates like Adani have often been built from the rapid consolidation of state assets, market monopoly, and stifling competition — which in 2021 results in the richest 1% of Indians owning more than 40% of the country’s total wealth. , according to Report From Oxfam. (It’s 32% in the US).

Even if Adani did not rely heavily on the Indian government to further his empire, many Indians have reason to fear that the large-scale investments the government is making in his company could harm the country’s infrastructure. Can they build the roads they promised, improve the ports they’ve been given, and maintain the airfields they’ve won in a bid? So far, no one else has been able to do it,” Mihir Sharma, a columnist for Bloomberg, said. books.

Hindenburg’s allegations also raised crucial questions about the regulatory effectiveness and accountability of Indian institutions, which usually attract foreign investment in India at the expense of neighboring China. In particular, the report claims that the Securities and Exchange Board of India, or SEBI, has so far failed to deliver an effective outcome on an investigation into Adani’s offshore accounts “after more than a year and a half of concerns being initially raised by the media and members of Parliament.”

And with scrutiny of the Hindenburg Report, bets placed on Adani and other Indian businessmen may backfire. Since the beginning of the year, the net worth of fellow Indian billionaires Mukesh AmbaniAnd Radhakishan DamaniAnd Savitri Jindal They’ve all fallen this year — the four richest Indians have lost about $45 billion so far, thanks to plummeting share prices. It is a major test of Adani’s claim that “no one will be able to stop India’s position in the world today, or in the next twenty to thirty years.”

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