Bangkok India is fighting the global downturn with record investments – but the scandal surrounding allegations of fraud against Gautam Adani, until recently the richest man in Asia, is overshadowing the presentation of the government’s ambitious plans. Prime Minister Narendra Modi plans to invest around 122 billion US dollars in investment projects in the next fiscal year. That is a third more than in the previous year and more than ever before in the history of the emerging country.
Finance Minister Nirmala Sitharaman promised in her budget speech to parliament on Wednesday that the plans would lead to a “virtual cycle of investment and jobs”.
Investing big bucks in upgrading roads, airports and housing is usually a popular topic in India. Sitharaman emphasized that the government is now increasing the budget for this for the third time in a row. Among other things, she announced new airports and heliports.
But there are growing reservations about the investment offensive with which Prime Minister Modi hopes to make his homeland the third largest economy in the world by the end of the decade. The main reason for the skepticism is the man who recently benefited particularly strongly from the infrastructure projects: multi-billionaire Adani.
The entrepreneur has stood by Modi’s side over the past few decades and implemented his infrastructure visions: his conglomerate operates ports, airports, motorways and power plants, among other things, and is also building large-scale apartments in the country with 1.4 billion inhabitants.
Financial activists from the USA accuse his company of extensive fraud.
(Photo: Reuters)
However, financial activists from the USA accused the group last week of having committed extensive fraud. Short seller Hindenburg Research, which specializes in exposing alleged corporate wrongdoing, claimed the Adani group had “systematically plundered” India. The company rejected the allegations and spoke of a “calculated attack” on India.
Adani shares are in free fall
During the finance minister’s budget speech, which has traditionally attracted much attention, the opposition insisted on linking the affair with government policy. “Adani, Adani,” chanted members of parliament while the minister presented the government’s infrastructure plans. After the budget speech, Kodikunnil Suresh, an MP for the opposition Congress party, accused the government of working in the interests of Adani and ignoring ordinary people.
However, the government’s infrastructure announcements on the Mumbai stock exchange did not help the conglomerate: Shares in several Adani companies fell again. The main company, Adani Enterprises, temporarily lost 30 percent of its value. Just the day before, she had been able to place new shares worth 2.5 billion dollars – primarily with institutional investors.
But the uncertainty remained: the recent slide in prices was apparently triggered by a report according to which the Swiss bank Credit Suisse apparently no longer accepts Adani bonds as collateral for securities loans in view of the increased risks.
The accusations of a short seller put the company under pressure.
(Photo: Reuters)
The crisis of confidence caused by accusations by short sellers, who, among other things, raised suspicions of balance sheet manipulation, has caused the value of Adani’s company empire to collapse by more than 90 billion dollars since last week.
With the continued price slide, Adani now also lost the title of the richest man in Asia: According to Forbes magazine, his personal fortune fell to $75 billion – $50 billion less than a week ago. Adani’s compatriot Mukesh Ambani is now well ahead of him with $84 billion.
India recorded seven percent economic growth
The conglomerate’s unprecedented fall in value shows just how quickly India’s rise to become an economic powerhouse can falter. The collapse of the Adani empire knocked India out of the top five stock markets in the world on Monday. Should the allegations against the group be substantiated, this should also undermine confidence in the abilities of the Indian authorities, who have entrusted important parts of the infrastructure to Adani.
So far, the government has not commented on the Adani affair. Finance Minister Sitharaman also ignored the heckling during her appearance in Parliament. Instead of addressing the crisis, she praised India as the “bright star” of the global economy. She put the economic growth for the current fiscal year, which lasts until the end of March, at seven percent: “It is remarkable that this is the highest value among all major economies.”
Her ministry expects growth of 6.5 percent for the coming fiscal year. “The Indian economy is on the right track and is heading for a bright future despite a challenging time,” said the Minister.
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The government in New Delhi is trying to promote India as an alternative production location for foreign companies. She achieved success with the US electronics group Apple, which relocated parts of its iPhone production from China to India. According to Sitharaman, the value of mobile phones produced in India has increased fourteen-fold in the past eight years. With lower tariffs on smartphone components, she wants to continue to support the industry in the future. Her tax policy is aimed at “increasing exports, promoting domestic production and increasing domestic value creation,” she said.
International attention for India is particularly great this year: According to forecasts by the United Nations, the country will overtake China as the most populous country in the world in 2023.
In addition, India is chairing the G20 group of states for the first time. The summit of the largest developed and emerging countries is planned for September in New Delhi. According to reports in the Indian media, Federal Chancellor Olaf Scholz (SPD) wants to travel to India this February for the first time since taking office and apparently also wants to promote closer economic relations.
More: Short seller Hindenburg Research reiterates fraud allegations against Adani Group