The Adani question

Rajesh Ramachandran

For a supposedly strong leader who outweighs the entire Opposition, PM Narendra Modi’s response to allegations of crony capitalism was weak in Parliament these past days. The least one had expected was an assurance to Parliament, and thereby to the country, of an inquiry into specific allegations of misconduct, if any, by investigating agencies. It would have pushed the Adani stocks further down, but at the same time it would have, at one stroke, allayed doubts of the PM getting bogged down in allegations of nepotism. Instead of MPs and ministers asking Adani to open his books for scrutiny, chants of ‘Modi-Modi-Modi’ rose from the treasury benches, and desks were thumped in a spectacle of sycophancy. The leader of the largest democracy in the world should not have allowed such a show of strength.

These questions that the government ought to answer may not reveal much but the answers would at least stop the overreach of the over-leveraged oligarch.

After Indira Gandhi, no Indian leader has had such complete control of his or her own party, has held sway over public opinion and has dictated one’s own destiny so decisively as Modi has. Unlike Indira, Modi comes from modest means and has worked his way up the party hierarchy, and hence should have taken greater care in keeping the organisation supreme. The public display of devotion by the BJP parliamentarians was a throwback to Dev Kant Barooah, the discredited former Congress president, who coined the slogan ‘India is Indira and Indira is India’. It would have lent greater credit to a smart leader to have taken up the allegations one by one and shredded them, which is not really difficult. In defending the indefensible, standing the ground and winning the day lies the charm of the art of parliamentary debate or even court craft.

That Adani has over-leveraged is a verity. That the Adani group’s debt-to-equity ratio is scary is an undisputed fact of accounting. But the group has not gone belly up yet. It has not defaulted on any of its loans. It has not failed to deliver any of its projects. If it has shored up its own stocks, manipulated them, the question is: Isn’t that what many big players aspire to do in stock markets? How many big Indian or global companies can plead not guilty to similar charges of market manipulation? It is obviously opportunistic or purely partisan to zero in on just one entrepreneur and expect him or her to maintain lily-white credentials when the entire capital class does paint the financial street black. But if the mud is still sticking on to the BJP-led government or the Prime Minister, it is because of Adani’s supposed relationship with him.

And the allegation of such a relationship — real or imaginary — makes it imperative for the government to answer some real questions. Did the BJP government create a context wherein Adani could cherry-pick projects in India or abroad? Did the investigating agencies hound the operators of Mumbai airport and Gangavaram port into handing them over to Adani? According to Financial Times’s sister publication Nikkei Asia, ‘Debts owned by Adani Group are equivalent to at least 1% of the Indian economy.’ Were Indian banks and financial institutions forced to lend to Adani projects or buy Adani’s stocks? If so, how much of all this involves criminal intent and criminal conduct? And it is not just the BJP governments, even the CPM had held hands with the BJP in Thiruvananthapuram to save Adani’s port there.

These questions that the government ought to answer may not reveal much but the government’s answers would at least stop the overreach of the over-leveraged oligarch. Democracy fails when an individual or a few individuals have disproportionate access to the country’s banking system. For a banker, one entrepreneur cannot be more equal than other entrepreneurs. Unfortunately, among all emerging economies, one would presume India, with its civilisational caste checkpoints, has the most difficult barriers to access capital. No wonder most of the bank defaulters come from one varna. Allegations against Adani only reinforce the stereotypes of the traditional Indian capitalist class that bends rules to dip its hands into public savings. For one Adani, there could be lakhs of entrepreneurs starved of capital. Democratisation of capital is the only means to unleash India’s entrepreneurial energies. So long as the likes of Adani hold monopoly over Indian capital, we would not have innovator-billionaires like Steve Jobs or Mark Zuckerberg with garage-to-global stage stories.

Beyond our systemic drawbacks, caste barriers and political patronage, which can all be labelled as the great Indian crony capital syndrome, the Hindenburg report against Adani does not say anything new, anything that anybody did not know. Yet, it was successful in shorting the Adani stocks at the time of the company’s Follow-on Public Offer and, more damagingly, shorting the Indian market on the eve of a very good election-year Budget, which would otherwise have generated immense feel-good atmospherics. Whether or not there is a conspiracy linking Hindenburg and the BBC regurgitating the 21-year-old Gujarat riots story, the short-seller’s report reminded one of the Enron collapse and its aftershocks.

The then finance minister had been Enron’s lawyer in India, so he recused himself from a meeting that seriously considered the Finance Ministry dipping into the LIC and the Employees’ Provident Fund to repay Enron India’s (Dabhol project) foreign debts. When I broke the story of this outrageous attempt, the India representative of one of the world’s biggest business dailies wanted a copy of the documents. The Editor was happy with the story being picked up by a global giant and so it was handed over. Lo and behold, his story turned out to be not about poor Indian workers or investors getting cheated but about a glimmer of hope for Enron’s American lenders. So, between the desi and videshi godi media, it will always be difficult to understand the motives and outcomes of certain exposes. But all one can say is that such due diligence and transparency could have averted the 2008 US financial crisis.

Join Whatsapp Channel of The Tribune for latest updates.