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India
This Week in AsiaEconomics

As Adani Group saga casts a shadow over Modi and India’s economy, will both emerge unscathed?

  • Questions have been raised about India’s regulatory standards and levels of corporate governance following the Adani Group’s stock wipeout
  • Modi’s opponents will seek to use the episode to hurt his electoral chances, analysts say – but the implications reach far beyond politics

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The Adani affair raises broader questions about regulatory standards in India’s markets and could hurt Prime Minister Narendra Modi electorally. Photo: Reuters
Biman Mukherji
Gautam Adani’s fall from grace as Asia’s richest man was swift and sharp. Since short-seller Hindenburg’s price-rigging allegations in late January, shares of the billionaire’s conglomerate have halved in price and seven of the group’s listed firms have lost US$140 billion in market value.
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The Adani Group’s stock wipeout hit some of India’s biggest ports, airports and power stations, raising broader questions about regulatory standards in Indian markets and casting a shadow over Prime Minister Narendra Modi’s reign ahead of crucial state elections.
Rahul Gandhi, a leading figure in the main opposition Congress party, has accused Modi’s government of advancing the Adani Group’s business interests – a charge the ruling Bharatiya Janata Party (BJP) denies.

While the accusation has not as yet triggered a public backlash against the government, India’s Supreme Court on Thursday set up a six-member panel to investigate allegations against the Adani Group, including the exposure of and risk to public money through public-sector undertakings. Opposition leaders have demanded a parliamentary probe as well.

Activists from the youth wing of India’s Congress party hold placards and shout slogans as they protest outside the regional headquarters of the Life Insurance Corporation of India in New Delhi last month. Photo: AFP
Activists from the youth wing of India’s Congress party hold placards and shout slogans as they protest outside the regional headquarters of the Life Insurance Corporation of India in New Delhi last month. Photo: AFP

The stock wipeout hurt the middle class, too. Shares in the country’s largest insurer – the state-run Life Insurance Corporation of India (LIC), which holds around 4 per cent of flagship company Adani Enterprises – took a beating in the aftermath. About one-quarter of India’s population have investments and policies with LIC.

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Analysts say the BJP is likely to be hard-pressed over the issue in state elections this year, three of which were held this week. Defeat could mar the ruling party’s prospects in next year’s general election, where it seeks a historic third mandate.

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