Adani: The Infallible?

If India’s rise in decades after independence was shaped by the Tatas and Birlas, then Adani became synonymous with India’s growth in the 21st century. He is the one who began the year 2023 as one of the richest men, who had surged his value 2500% in 5 years. As he portrays, his rise wasn’t his alone, it was inseparable from the growth of India. He often says that his company’s goals are in lockstep with the country’s needs. In 2022, he overtook Reliance Industries’ Chairman Mukesh Ambani and China’s Jack Ma to become one of the world’s top three billionaires. 

The journey of Adani’s growth and now his speculated fall is indeed very interesting. It almost seems like a fictional story of a magician in a utopian world. The journey makes us realize some of the harshest realities of India’s business and political scenario. The story of Adani gives us a taste of Daron Acemoglue and James A Robinson’s 2012 book, Why Nations Fail : The Origin of Power, Prosperity and Poverty. The book suggests that extractive institutions often function to safeguard the interests of those in power. Adani’s rapid growth has coincided with favorable government policies and infrastructure projects, particularly under India’s current leadership. Some analysts believe that Adani’s success is partly due to these political connections, allowing for advantageous policies, swift land acquisition, and access to resources. This scenario illustrates the book’s idea that privileged access to state resources can propel corporate growth, potentially undermining fair market competition.

The strengthening of the link between business and politics could push India closer to an extractive pairing between economic and political institutions, both working for a few. To understand the scenario and link between the economic and political world in India, we need to look at the past. At the time of independence, India’s private sector was dominated by the clutches of business families and it continued till the License Raj came to an end in 1991 due to the LPG (liberalization, privatization, and globalization) reforms by the then Congress government. After the 1990s, new companies were formed. These all were firms in new sectors like IT, healthcare, telecom, etc. But the firms in heavy sectors like infrastructure, stayed hand in hand with the political economy and these firms supported political parties by making donations to them, and some enterprises were even owned by politicians themselves. Political patronage remained beneficial for firms in Captive Coal Block allocation popularly known as the Coalgate Scam (2012) and the Arunachal Pradesh Hydel Scam. Companies with political links got everything they wanted. All that mattered was their willingness to pay. When Adani came to the economic world, India started seeing something new. The government had chosen this particular group as a national champion by encouraging its expansion. 

Adani’s companies are not just interested in a wide swathe of India’s infrastructure. They have become the first choice as partners in multiple sectors as well. Multi sectors have always been considered as the priority of growth for India. So, giving the first priority to the Adani group only implies that the government wants India to grow only with the help and aid of some particular business giants. Now, the question that remains is how was this particular group chosen as the national champion? Is it the right strategy for India? Elections in India have become very expensive for political parties and capital plays a very vital role in it. Given the financial pressure to win elections, political parties in India are turning kleptocratic. And winning is possible only with the help of connections with business giants. In return, business giants take advantage of these connections with political parties and get involved in the abuse of their situation and position. 

In Gujarat, under the Modi government, Adani saw a meteoric growth. It allowed the creation of a world-class port complex at Mundra. The company received government largesse e.g. SEZ (Special Economic Zone) without environmental clearance and in some instances, the Mundra port got more preference than the Kandala port. When Narendra Modi came to power at the center, Adani went national, as remarked by Lok Sabha MP, and opposition leader Rahul Gandhi, in his vote of thanks to the President of India in Lok Sabha. In 2018, Adani announced a future expenditure of 167000 crore despite a net profit of 3455.34 crore. 

The group benefited greatly from the government’s decisions. It got a 1600 MW coal-based power project at Godda, despite the fact that the company was charging a higher rate than normal. Also, a renewable project was given by the Prime Minister of Sri Lanka, Gotabaya Rajapaksha, to Adani under Modi’s pressure. And the third most important instance — the airport rules were changed to get Adani to operate 6 airports. It seems if the government would want companies to set up factories for solar panels, Adani will readily oblige. If the Prime Minister were to set a stiff renewable energy target, somehow Adani would meet the mark. If the government was worried about self-reliant weaponry, Adani would create an indigenous defense ecosystem under “Make in India”. A report from The Morning Context said that a handful of investment funds invest almost solely in Adani’s companies. 

What would you call it when foreign funds invest their assets in a corporate group company? NSDL (National Security Depository Ltd.) froze the accounts of 3 such funds, Albula Investment Fund, Cresta Fund, and APMS Investment Fund which together own 43,500 crore rupees worth of shares in 4 Adani Group companies. These funds were frozen because of insufficient disclosure of misinformation regarding beneficial ownership as per The Prevention of Money Laundering Act (PMLA). The Hindenburg Report, on 25th January 2023 revealed the findings of their two-year-long investigation, presenting that INR 17.8 billion (US $218 billion) Indian Conglomerate Adani group had allegedly “engaged in brazen stock manipulation and accounting fraud over the course of decades”. 

The report also focused on the funds mentioned above. The report was released just ahead of the ₹20000 FPO (Follow on Public Offer) by Adani Group’s flagship firm Adani Enterprises which was later called off. In a 413-page response, Adani Group commented, “It’s not an unwarranted attack on any specific company, but a calculated attack on India, the independence, the integrity and the quality of the institutions and growth story and ambitions of India”. Hindenburg, however, in its rebuttal said that Adani did not address any of the substantive points that the report raised, rather Adani just stocked a national narrative. 

The initial impact was the loss of US$100 billion. After that, Adani called off the whole FPO and refunded the money. S&P and Dow Jones Indices said that it will remove Adani Enterprises from widely used sustainability indices on February 7, 2023, making shares less appealing to environment-conscious investors. RBI also sought details from banks about market exposure. However, after the issue came to the limelight, a probe was initiated by SEBI’s side. According to SEBI, it conducted investigations on 23 out of 24 issues. 6 companies also disclosed their stock exchange and received show cause notice, but with the intention that disciplinary action will only be taken after proof of any discrepancies. The Supreme Court’s January 3, 2024 ruling on the Adani Group case wasn’t explicitly “in favor” of Adani but rather upheld the regulatory authority of SEBI (Securities and Exchange Board of India) to continue its investigation. The Court rejected the petitioners’ requests to transfer the probe to a Special Investigation Team (SIT), emphasizing that SEBI was already handling the matter and had completed most of the investigation. In effect, the decision allowed SEBI to continue its investigation without external interference, signaling confidence in the regulator’s competence rather than a judgment in Adani’s favor. The Court directed SEBI to finalize its probe on the remaining issues within three months, ensuring further scrutiny while avoiding unnecessary disruptions to the ongoing process. 

Adani’s journey—from extraordinary success to intense scrutiny—captures the often hidden dynamics of power and influence in India’s economics. His rise isn’t just about one man’s achievements but reflects the vast potential of a nation on the move and the sometimes blurry line between corporate success and political favoritism. As India’s story unfolds, the real challenge will be ensuring that its growth is as fair as it is ambitious, that its institutions stay strong, and that progress is something all can share.

Faizan Hussain Wani is a student pursuing Law from Jamia Millia Islamia.

Edited By: Mukaram Shakeel.

Disclaimer :This is a guest entry. The opinions expressed in this publication are those of the author. They do not purport to reflect the opinions or views of The Jamia Review or its members.