Top Highlights
> Economist Nouriel Roubini said the recent saga surrounding the Adani Group is a symptom of a trend that will eventually hurt India’s growth.
> Roubini said that the Modi administration should focus on ways that India does not go down its path of growth.
> Last week, billionaire investor George Soros said that the current Adani turmoil will weaken PM Narendra Modi’s grip on power and lead to a “democratic revival” in the country
Economist Nouriel Roubini, who has been bullish about India’s growth in the medium term despite a global slowdown, has said that the recent row surrounding the Adani group could have larger implications and eventually hurt India’s growth momentum.
In an article in Guardian, Roubini, who goes by the nickname 'Doctor Doom' by Wall Street, said that the recent scandal doesn’t seem to extend beyond the ports-to-power conglomerate, adding that the latest accusations against the Adani Group and the stock rout can have macro implications on India’s institutional robustness and also affect the global investors’ perception of India.
“The recent saga surrounding the Adani group is a symptom of a trend that will eventually hurt India’s growth,” Roubini wrote in the article.
Gautam Adani and his controlled companies have been under attack since US-based short seller Hindenburg Research released a report accusing the group of a “brazen stock manipulation and accounting fraud scheme". It cited 2 years of research, including talks with former senior executives of the company and reviews of several documents.
Adani Group stocks have seen the erasure of over Rs 11 lakh crore in combined market capitalisation (m-cap). The combined group m-cap has fallen below the $100 billion level from $232 billion as on January 24. Three of Adani Group shares, namely Adani Total Gas, Adani Green, Adani Transmission are in fact top losers on BSE since January 24, the day Hindenburg Research alleged fraud and accounts manipulations by Adani Group companies.
Roubini, who is known for having spotted the 2008 US housing market collapse and predicting the Great Financial Crisis, said that it is possible that Adani’s exponential growth was supported by the Narendra Modi-led government, but the whole optics of the Adani story is concerning for investors and the economy.
“It is possible that Adani’s rapid growth was enabled by a system in which the Indian government tends to favour certain large conglomerates and the latter benefit from such closeness while supporting policy goals. Again, Modi’s policies have deservedly made him one of the most popular political leaders at home and in the world today. He and his advisors do not appear to be corrupt, and their BJP will likely win re-election in 2024 regardless of this scandal. But the optics of the Adani story is concerning,” Roubini said.
He added: “There is a perception that the Adani Group may be helping support the state political machinery and finance state and local projects that would otherwise go unfunded, given local fiscal and technocratic constraints. In this sense, the system may be akin to ‘pork barrel’ politics in the US, where certain local projects get earmarked in a legal congressional vote-buying process.”
He said that the Modi administration should focus on ways that India does not go down its path of growth. “While the scandal surrounding the Adani empire doesn’t seem to extend beyond the conglomerate itself, the case does have macro implications for India’s institutional robustness and global investors’ perceptions of India. The Asian financial crisis of the 1990s demonstrated that, over time, the partial capture of economic policy by crony capitalist conglomerates will hurt productivity growth by hampering competition,” he said.
Last week, billionaire investor George Soros said that the current Adani turmoil will weaken PM Narendra Modi’s grip on power and lead to a “democratic revival” in the country.
Soros, while delivering a speech at the 2023 Munich Security Conference, said PM Modi would "have to answer questions" from foreign investors and parliament on allegations of fraud and stock manipulation at Adani's industrial empire. He noted that PM Modi had been "silent" on the topic.
"Modi and business tycoon Adani are close allies; their fate is intertwined," Soros said, adding, "Adani Enterprises tried to raise funds in the stock market, but he failed. Adani is accused of stock manipulation and his stock collapsed like a house of cards. Modi is silent on the subject, but he will have to answer questions from foreign investors and in parliament."
Soros was criticised by the ruling party. Union Minister Smriti Irani said Soros's remark were a 'declaration to destroy India's democratic processes'. She said Indians should unite and defeat such 'foreign powers' who tried to meddle with India's internal affairs.
A day later, External Affairs Minister Dr S Jaishankar said Soros’s comments were typical of a “Euro-Atlantic view” and rejected his accusations.
“There are still people in the world who believe that their definition, their preferences, their views must override everything else,” Jaishankar said.
Jaishankar added there was “a debate and conversation that we must have on democracy,” including whose values defined democracy as the world rebalanced and became less Euro-Atlantic.
“He is old, rich, opinionated and dangerous, because what happens is when such people and such views and such organizations — they actually invest resources in shaping narratives,” Jaishankar told a media gathering in Sydney.
Also read: Adani Total Gas, Adani Green, Adani Transmission: Meet the worst BSE performers since January 24
Also read: Hindenburg report may be blessing in disguise for Gautam Adani, says economist Swaminathan Aiyar