What Adani’s Downfall Tells Us About India’s Crony Capitalism

In January, Gautam Adani appeared in a rare televised interview on a Hindi news channel, India TV, to answer a host of questions from a fawning show anchor about how he became Asia’s richest man. When asked about his strong rapport with Indian Prime Minister Narendra Modi and if the government had played a role in helping build his wealth, Adani responded, “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 crowd, and later, he added, “This balloon will keep flying as long as India is progressing.”

Adani’s comments appeared to be a nod to “India Inc”—a term that captures the country’s booming corporate and IT sectors that are major vehicles of its economic growth on the global stage. But a recent report issued by Hindenburg Research is finally bursting that balloon.

The New York-based short-selling firm has accused the Adani Group of “pulling the largest con in corporate history,” alleging stock manipulation, accounting fraud, and other malfeasance. Hindenburg said the report followed a two-year investigation and was based on interviews with former executives, site visits, and the review of thousands of documents.

The fallout of the allegations is already reverberating through global stock markets. By Wednesday, the news had knocked more than $90 billion off the value of Adani’s companies, as share prices tumbled and Adani lost his status as both Asia and India’s richest man.

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In response to Hindenburg’s allegations, Adani Group issued a 413-page reply that called the short-seller’s claims “stale, 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 the growth story and ambition of India.”

In a video appearance, Adani’s embattled Chief Financial Officer Jugeshinder Singh stood in front of a giant Indian flag, drumming up nationalist support that appeared to signal a message that any foreign scrutiny of Adani was an assault on the success of India itself.

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

The saga has shone a light on the relationship between India’s business and political elite, bringing into question whether India, faced with accusations of crony capitalism, can become a global economic juggernaut like its nearest Asian competitor, China.

“Adani’s difficulties only underscore the limited progress India has made in taming the excessive power of its growing band of super-rich ‘Bollygarch’ tycoons and the way in which they use political connections to their advantage,” James Crabtree, who authored The Billionaire Raj, told TIME.

What are Adani’s ties with the Indian government?

Adani and Modi both hail from the western state of Gujarat, where Modi was Chief Minister before he was elected as the country’s leader in 2014. Under his leadership, Gujarat’s economy experienced its fastest GDP growth, eclipsing other Indian states—a feat that was dubbed the “Gujarat model,” and which many Indian voters hoped Modi would emulate across the country. As Modi climbed through the political ranks, he also openly displayed 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 as Prime Minister.

During this period, Adani’s wealth increased by nearly 230% from $1.9 billion in 2014 to more than $26 billion this year. Much of this increase is credited to the Indian government’s mass privatization drive and business-friendly policies, which saw Adani winning several government tenders and infrastructure projects in ports, airports, roads, rail, fossil fuels, and green energy across the country. Modi has called this approach “nation-building.”

In 2018, a controversial decision by the Indian government allowed Adani to bid—and win—tenders for six airports. Although Adani had no prior experience operating airports, the decision turned his group into one of the country’s biggest private airport operators overnight. The move was lucrative for Adani Group but it was also met with outrage. In the southern state of Kerala, where Adani won a 50-year lease to operate the Trivandrum International Airport, the state’s finance minister called the decision an “act of brazen cronyism.”

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

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It’s a sentiment echoed by other major businesses and investors. “You can ask the government for favorable policies but you can no longer ask for individual favors,” an executive from a major international investment firm in Mumbai told the Financial Times. “You need sensible execution. It isn’t enough to just have political connections.”

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

India’s recent economic growth has rested on a model that champions nationalist industrialists like Adani, who reiterated this during his interview on India TV by saying, “what I’m seeing now is that this country is charging ahead in progress.”

In India, family-run conglomerates like Adani’s have often been built out of the rapid consolidation of state assets, market monopolization, and stifled competition—which in 2021 led to the richest 1% of Indians owning more than 40% of the country’s total wealth, according to a report by Oxfam. (The figure stands at 32% in the United States.)

Even if Adani may not rely heavily on the Indian government to boost his empire, many Indians have reason to fear that the wide-scale investments made by the government into his company could hurt the country’s infrastructure. “Can they build the roads they have promised, improve the ports they have been given, maintain the airports they won in a bid? Until now, nobody else has been able to do so,” Mihir Sharma, a Bloomberg columnist, wrote.

Hindenburg’s allegations have also crucially raised questions about the regulatory effectiveness and accountability of Indian institutions, which usually attract foreign investment in India over 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 on an investigation into Adani’s offshore accounts “more than a year and a half after concerns were initially raised by the media and members of Parliament.”

And with the Hindenburg report’s scrutiny, the bets placed on Adani and other Indian businessmen may be backfiring. Since the start of the year, the net worths of fellow Indian billionaires Mukesh Ambani, Radhakishan Damani, and Savitri Jindal have all declined – collectively, the four richest Indians have lost about $45 billion so far thanks to falling share prices. It’s a huge test of Adani’s claim that “no one will be able to stop India’s position in the world today, or in the next 20 to 30 years.”