It is not yet clear what will happen once financial markets stabilise after the Hindenburg Research’s revelations. India could follow South Korea whose economy is dominated by family-owned economic conglomerates, or see greater erosion of the rule of law. Many Indians are concerned that promised new infrastructure projects will be built.

Milan (AsiaNews) – The Adani Group lost US$ 110 billion in market capitalisation after Hindenburg Research published a report two weeks ago that contained fraud allegations and raised questions about the group’s debts. Since then, Gautam Adani, the conglomerate’s founder and chairman and hitherto Asia’s wealthiest man, saw his personal wealth halved to US$ 61 billion.

For days now, India’s main opposition parties, led by the Congress, have called for an investigation, given the close ties between Adani and Indian Prime Minister Narendra Modi and the role Adani companies play in the Indian economy.

Adani was born in 1962 into a family of merchants. He started out in the diamond trade, an important sector in the Indian state of Gujarat, which is also Prime Minister Modi’s home state.  In the 1990s, Adani turned to infrastructure projects, a classic story of crony capitalism, accumulation of capital through political connections, according to some observers.

The ties between the businessman and Modi, when he was chief minister in Gujarat, was cemented after anti-Muslim pogroms broke out in 2002, which a recent BBC documentary blames on the prime minister. Officially for copyright issues, the latter is almost impossible to find online.

Unlike the rest of the Indian business world, Adani sided with Modi at the time and began building his business empire in the 2000s.

As Gujarat's GDP exploded, eclipsing that of other Indian states, leading experts began to cite a “Gujarat model”, creating the expectation that Modi, who came to power in 2014 at the federal level, would extend the new model to the whole country.

Since 2014, Adani's wealth rose by 230 per cent thanks to the privatisations and company-friendly government policies, which helped Adani bag many tenders for what Modi called “nation building”.

What joins the two men is not only a close friendship (Modi has often flown on Adani’s planes while in office) but also a shared vision: both want to build a nation that can compete with the great global powers (especially China). It is no coincidence that Adani described the Hindenburg Research report as an attack against the whole country.

Suffice to say that India's highly decentralised economy has increasingly veered towards crony capitalism, which is now showing its darker sides.

Adani’s firms have become the leading businesses in key sectors of the economy, like energy, foreign trade (port infrastructure) and internal transport (airports). The Adani name is all pervasive in Indian life.

“Coal extracted from mines Adani owns is shipped via his ports and railroads, then hauled to the furnaces in his power plants,” Bloomberg reports.

“The electricity produced runs on his transmission lines into homes built with cement his group produces, where people prepare dinner on stoves fuelled by Adani gas with Adani cooking oil, grains and apples.

“No other individual in India’s modern history has built such a presence in so many parts of the economy in such a short time."

Now Hindenburg Research accuses Adani of inflating the value of its shares, thanks to a series of holding companies linked to his family located in tax havens.

Not only did this boost the family’s wealth, but it also allowed the company to obtain loans and financing necessary to invest directly in the country's economy and carry out the projects that were supposed to reshape the nation.

Adani’s dominance was driven by a distortion that linked market valuations to cronyism, which gave the conglomerate the means to dominate the country’s economy.

Even if investors get their money, it is unclear what impact the group’s financial losses will have on the Indian economy and especially society.

India could follow South Korea, where the main economic players are large family-owned business conglomerates (like Samsung), or see crony capitalism erode the rule of law and make India an even less democratic country.

It is perhaps no coincidence that one of the Adani Group's most recent acquisitions, New Delhi TV, has raised concerns among press freedom advocates and human rights defenders.

But several analysts note that now what worries many Indians (who will be called to the polls in 2024) is whether the promises made so far on road and airport construction will be kept.

• india
• adani group
• crony capitalism
• hindenburg research
• fraud
• allegations