People’s eyes glaze over when they hear the word ‘infrastructure’, but there is nothing boring about the collapse of India’s king of infrastructure, Gautam Adani. A US-based short seller, Hindenburg Research, released a 106-page report forensic report accusing Adani and his companies of a vast scheme of stock market manipulation and fraud, using a complex system of front companies. And poof: in a few days, and despite Adani’s denial, more than $110 billion of companies’ market capitalization disappeared, leaving Adani himself $58 billion poorer in paper wealth. Can the plot thicken further? It is certainly possible. The Adani affair could become India’s so-called Lehman moment – leading to the collapse not only of one of India’s largest and best-connected business empires, but of the ambitions of an entire nation to harness what will soon be the world’s largest population in an effort to realize the country’s vast economic potential.
But ironically, the Adani crisis is exactly what India needs right now to accelerate its journey. There is a lot of complacency among the Indian elite and around the world. The country’s size, booming market, young demographics and politically strong government make India’s rise inevitable. fix its physical infrastructure, and the world will knock on India’s door to invest and do business with it, or so the mantra goes. Poor corporate governance, crony capitalism, scruffy regulators and uncritical media are only part of the price to pay for India’s rise. After Adani’s shake-up, there will inevitably be a re-examination of India’s narrative, with renewed attention given to fixing India’s system of economic and corporate governance.
In the meantime, it’s not hard to imagine the many ways Adani’s crisis can cause lasting damage. Its sprawling conglomerate has played a key role in solving India’s infrastructure problems, ranging from an inadequate transport and logistics system to an unreliable energy supply. Adani Group controls India’s largest airport companythe largest private port operatorand the second largest cement worker. Adani’s warehouses store almost a third of The grain of IndiaAdani Enterprises is the largest coal merchant in the country and controls 20% of India’s power transmission lines. He is also leading the charge on a project $50 billion hydrogen ecosystem, factory Photovoltaic cells and wind turbines, and distributes wind energy. If Adani stagnates, so do many, so will India’s progress.
People’s eyes glaze over when they hear the word ‘infrastructure’, but there is nothing boring about the collapse of India’s king of infrastructure, Gautam Adani. A US-based short seller, Hindenburg Research, released a 106-page report forensic report accusing Adani and his companies of a vast scheme of stock market manipulation and fraud, using a complex system of front companies. And poof: in a few days, and despite Adani’s denial, more than $110 billion of companies’ market capitalization disappeared, leaving Adani himself $58 billion poorer in paper wealth. Can the plot thicken further? It is certainly possible. The Adani affair could become India’s so-called Lehman moment – leading to the collapse not only of one of India’s largest and best-connected business empires, but of the ambitions of an entire nation to harness what will soon be the world’s largest population in an effort to realize the country’s vast economic potential.
But ironically, the Adani crisis is exactly what India needs right now to accelerate its journey. There is a lot of complacency among the Indian elite and around the world. The country’s size, booming market, young demographics and politically strong government make India’s rise inevitable. fix its physical infrastructure, and the world will knock on India’s door to invest and do business with it, or so the mantra goes. Poor corporate governance, crony capitalism, scruffy regulators and uncritical media are only part of the price to pay for India’s rise. After Adani’s shake-up, there will inevitably be a re-examination of India’s narrative, with renewed attention given to fixing India’s system of economic and corporate governance.
In the meantime, it’s not hard to imagine the many ways Adani’s crisis can cause lasting damage. Its sprawling conglomerate has played a key role in solving India’s infrastructure problems, ranging from an inadequate transport and logistics system to an unreliable energy supply. Adani Group controls India’s largest airport companythe largest private port operatorand the second largest cement worker. Adani’s warehouses store almost a third of The grain of IndiaAdani Enterprises is the largest coal merchant in the country and controls 20% of India’s power transmission lines. He is also leading the charge on a project $50 billion hydrogen ecosystem, factory Photovoltaic cells and wind turbines, and distributes wind energy. If Adani stagnates, so do many, so will India’s progress.
Adani’s difficulties have implications beyond these specific sectors. India needs deep investment and financial markets; here too the crisis pinches. At one time, the Adani companies represented 6 percent shares traded on India’s two major stock exchanges and were responsible for 7 percent of the total capital investment of India’s 500 largest non-financial corporations. Now, foreign investors might see Hindenburg’s accusations as a sign of deeper rot in Indian business, and they might fear the country is too risky an investment. Indeed, many foreign investors already believe that the Indian stock market is overvalued and have therefore reduced their exposure to the country’s assets. Since the Hindenburg report, S&P Global Ratings cut off one’s prospects on two of Adani’s dollar bonds to negative, and there was a big withdrawal of Adani’s holdings by the Norwegian sovereign wealth fund, the world’s largest equity investor. Other investors are bound to get finicky.
Meanwhile, the crisis also revealed that India’s financial markets regulator, the Securities and Exchange Board of India, had fallen asleep at the wheel. Indian media also chose to look the other way. Prior to the Hindenburg Report, media outlets asking about Adani faced trial and arrest warrants, and the others self-censored. After the publication of the Hindenburg report, major television news stations managed to ignore the story during their primetime broadcasts for two whole days, according to All news, a leading fact-checking site. In fact, one of last strongholds independent journalism among major Indian media, NDTV, was acquired by Adani in December 2022. The government has been silent on the crisis. THE personal link between Adani and Indian Prime Minister Narendra Modi is common knowledge.
The Adani crisis also threatens India’s international geopolitical position. India has built its influence in its neighborhood as a springboard to its global aspirations. Unlike China’s far more ambitious, state-led Belt and Road Initiative, India’s incursions have been channeled through the private sector. Adani has been at the forefront of power supply in Bangladesh, port construction in Sri Lanka and coal mining in Indonesia and Australia. Blocking Adani, especially given his close ties to the government, could raise questions about the Modi administration’s foreign economic policy and affect India’s credibility abroad.
There is no doubt that India’s progress will see a near-term slowdown as Adani strives to stay focused, retain the confidence of key partners and raise capital. That said, Adani businesses sell tangible products; it is not a cryptocurrency exchange. They are backed by durable assets and generate cash. Adani’s power projects, for example, depend on the government as a reliable customer and source of revenue; no matter what happens to Adani personally, fast-growing India has endless demand for its products. His businesses generate floods of cash that can service debt or, in the event of a sale, attract buyers. Either Adani will continue to operate the businesses or someone else will.
What about the possibility of financial market contagion? The risk of a default on Adani’s debt could ease debt specialists and hedge funds see opportunities in the crisis and seek to buy Adani bonds at a bargain price. There were reassuring words from various analysts to boost confidence in Indian markets. Goldman Sachs analysts noted that the crisis is “unlikely to have a wider contagion impact”. Indian central bank governor declared that “the strength, size and resilience of the Indian banking system is now much stronger and bigger to be affected by a case like this”. At the same time, major public companies in the financial sector, such as the Life Insurance Corporation and the State Bank of India, have only limited exposure to Adani companies. More importantly, India has a well-capitalized stock market, with a turnover of over $3 trillion per year; India’s Nifty 50 index remains close 2.5 percent above what it was at the same time last year.
In addition: feeling matters. The world needs India’s story to work. It’s a remarkable nation in a post-pandemic global economy beset by problems: slowdowns in the West, war in Europe, jitters in China and a growing rift between Beijing and major players in the global economy. India’s key role in shaping the global digital and environmental agenda is undeniable. In its role as G-20 chair this year, New Delhi will work hard to make the case that the world can only progress if India does.
Despite all the concerns about the crisis, the risk seems manageable for now. But no matter how the plot unfolds, one thing is clear: Adani’s crisis has brought an unexpected upside in a stark reminder that India’s biggest hurdle isn’t its still rickety physical infrastructure. Above all, India needs to fix the broken state of its systems of governance, transparency and checks and balances – in other words, the software infrastructure within corporate boards, at the crossroads of business and government, and among the watchdogs, including the media. The Hindenburg Report’s greatest gift is that it may shake India’s business, government and media elite enough that this process of reform can finally begin.