The Fall of India’s Rockefeller
Gautam Adani’s troubles began on January 2023, when Hindenburg Research, a Wall Street short seller, accused him of manipulating financial data to inflate his companies’ value. He was then the world’s third-richest man and led colossal investments, all endorsed by none other than India’s Prime Minister, Narendra Modi. He was dubbed “India’s Rockefeller”.
According to Hindenburg, Adani had created bogus companies that engaged in substantial internal trading, artificially driving up his companies’ market capitalisation. Rapidly, markets reacted. His investments were long-term, showed no immediate profits, and were heavily reliant on debt. Why were they booming?
In a matter of weeks, his firms toppled. Adani Enterprises, his flagship firm, lost two-thirds of its value, and Adani’s own wealth fell by $50 billion. As India’s largest private investor, his fall likewise hit the country’s stock markets out of fear of contagion.
The case turned critical in November 2024, when U.S. federal prosecutors accused Mr. Adani of bribery to secure India’s state contracts. Until then, the tycoon had managed to capitalise his group’s debt, report increasing profits, and engage with institutional investors, all of which had slightly improved his credibility. Now, however, his top executives were being accused of bribing Indian officials with $250 million, making his companies unable to raise money in debt markets.
Adani’s close ties to Modi increased the suspicion of obscure operations within India’s growing financial system, damaging India’s institutional reputation. The country’s regulators had found no wrongdoing in January 2024 but Deloitte resigned as Adani’s auditor following his refusal to allow an independent examination. How did his scheme go unnoticed?
The case appeared to stem from Modi's cronyism. While his popularity underpins political stability, his government strongly interferes with big corporations’ decisions, and has firm control over the country’s regulatory bodies. His failure to prosecute attacks on religious minorities and journalists, coupled with a nationalist stance limiting international oversight, only exacerbates these concerns. Large companies appear complicit –the state’s colossal contracts serve as major incentive.
Crony capitalism comes at a high cost, and the Adani case offers a grim warning for India’s development. Countries with poor government controls are more prone to drastic changes in their economic policy, making investors wary of its stability. Furthermore, poor rule of law undermines public confidence and the reliability of official information. As a result, financial risks increase, driving up the cost of capital and limiting access to credit for companies and the public sector.
The Adani case is still at the U.S. courts, but Modi would do well to look at his neighbouring countries for reference. China’s failure to boost domestic demand highlights that, in financial markets, expectations are critical, and opaque institutions deter investors from following state decisions. India could face a similar fate if decisive action aren’t taken soon. After all, sound institutions lend compelling credibility—one without which countries struggle to thrive. History keeps reminding us of this.
