The US-based market watchdog, Hindenburg, published a report on 25 January accusing the Indian mega-conglomerate Adani Group of a litany of dirty financial dealings, triggering mass sell-offs that have so far wiped at least $100 billion off its value. This is a bombshell detonating right in the heart of Indian capitalism, which could have big implications for the Modi regime.

The Adani Group is absolutely dominant in the Indian economy, with tentacles wrapped around infrastructure, ports, airports, power and many other sectors, assisted by the brutal privatisation policies of Prime Minister Narendra Modi. By leeching the country dry, its stock soared by over 1,000 percent in the past year alone.

But Hindenburg’s investigation exposed a tangled web of stock manipulation, fraud, hidden debts and corruption running throughout the Adani Group, which it summarised as “the largest con in financial history.”

Litany of crimes

Foremost among a lost list of irregularities is a network of shell companies, which were used to conceal how much of the Group is owned by members of the Adani family, thus dodging rules to limit how much stock can be held by insiders.

The state insurance company (LIC) has a stake in Adani Enterprises / Image: PL Tandon

Hindenburg accused Chairman Gautam’s older brother Vinod Adani of using a “labyrinth” of companies in the UAE, the Caribbean, Mauritius and elsewhere to pump billions of dollars worth of cash flows into the Adani Group to artificially inflate its share price.

Moreover, these linked offshore entities made the Adani Group’s listed companies appear more creditworthy, allowing them to borrow more.

These are just the headline findings of a very long and damning report, which came just as Adani was about to close a $2.4 billion public offer to broaden its investor base.

The revelations prompted an avalanche of short selling. Just weeks ago, Gautam Adani was the third-richest man in the world, behind Elon Musk and Bernard Arnault. He has now been knocked back to 17th (our hearts bleed!)

But while Adani will have to be content with a mere top-20 spot amongst the world’s superrich, the consequences for ordinary Indians could be much more serious. For one thing, the state insurance company (LIC) has a stake in Adani Enterprises (flagship company of the Adani group), and has already lost Rs. 2,300,000,000,000 in value.

Given Adani Group’s vast quantities of debt, as uncovered by the Hindenburg report, the fallout also exposed much of India’s banking sector, including the state bank (SBI), which had invested Rs.7,800,000,000,000 of public money into the conglomerate.

In December, the Indian business website Quartz argued that any Adani company defaulting could damage not only the stock market, but also the wider economy:

“The taxpayer will be hit, additionally, by… indirect exposure to the group, through LIC and the state-owned banks. A bailout would limit the damage. That too would be funded by the public exchequer, but it would be unavoidable if the government decides that the Adani Group has indeed grown too big to be allowed to fail.”

In other words, if necessary, the government will throw public money into the black hole Adani has created, and make ordinary people pick up the tab in the form of austerity. The spillover from India’s biggest crook having his crimes exposed could result in financial turmoil for the country’s workers, middle classes and the poor.

Modi and Adani’s sordid partnership

So far, India’s financial authorities have projected an image of calm. The Securities and Exchange Board of India (SEBI) euphemistically talked about “unusual price movement in the stocks of a business conglomerate” and said it would examine and take “appropriate” action “if any information comes to SEBI’s notice”.

Adani's close personal relationship with Modi allowed him to rapidly grow his empire / Image: Prime Ministers Office

The Finance Minister Nirmala Sitharaman said that “the regulators will do their job. Our macroeconomic fundamentals, our economy’s image – none of [it] has been affected.”

The full economic implications of the Adani Group scandal remain to be seen. So too does the impact on the image of Modi’s government, which is bound very closely to Adani.

Adani started as an insignificant trader in Gujarat. His close personal relationship with Modi, while the latter was Chief Minister of Gujarat, gave Adani political connections and preferential treatment that allowed him to rapidly grow his empire, in tandem with Modi’s political ascendency.

From exempting Adani enterprises from tariffs and taxes; to negotiating lucrative projects abroad; to granting contracts over privatised seaports, airports, and power infrastructure; Modi has directly assisted Adani time and again, all the way back to 2007.

Modi was instrumental in convincing the governments of Australia, Bangladesh and Sri Lanka to strike deals in the coal, power and shipping sectors in favour of Adani enterprises in these countries.

In turn, Adani became one of Modi’s most high-profile champions. Following the Gujarat riots in 2002, an orgy of rape and murder by Hindu nationalist mobs that Modi was accused of inflaming with reactionary anti-Muslim rhetoric, even a section of Modi’s big business allies in the Confederation of Indian Industry criticised him publicly.

To help counter this, a small group of Gujarati industrialists organised around Adani set up the so-called ‘Resurgent Group of Gujarat’, denouncing Modi’s critics and supporting his Hindu nationalist platform politically. As the Guardian comments:

“In 2003, they held an investors’ summit called Vibrant Gujarat. So was born what is known as the Gujarat model of ‘development’: violent Hindu nationalism underwritten by serious corporate money.”

This Gujarat model of symbiosis between Hindu nationalism and naked capitalist interests was paraded as a template for India’s national economic growth under the Modi-led central BJP regime. Subsequently, Adani’s investments have been orchestrated along with Modi’s economic agenda, sinking billions into areas the government deems priorities (particularly coal mining and, more recently, renewable energies).

And these old brothers-in-arms are now closing ranks in the face of this latest crisis. Modi hasn’t replied to opposition parties’ questions regarding the Hindenburg report. Adani himself has dismissed it, and even attempted to whip up nationalist sentiments in his defence, arguing that an attack on his mega-corporation is “an attack on India.”

Similarly, Modi has banned a BBC documentary, which explores his role in the Gujarat Riots, from being shown in India, painting it together with the Hindenburg report as a two-pronged attack on India by hostile foreign powers.

Ironically, the imperialists mostly ignored the bad press about the BBC documentary and the Hindenburg report. Earlier this month, US President Joe Biden and French President Emmanuel Macron were engaged in “warm and productive meetings” with Modi about the purchase of 470 Boeing and Airbus aircraft. Biden said the deal would support more than a million American jobs.

Meanwhile, British Prime Minister Rishi Suank was touting the benefits for his country’s aerospace sector, given that the airbuses will be powered by Rolls-Royce engines.

Expropriate all the capitalist criminals!

Opposition parties in parliament during the budget session have now demanded a joint parliamentary probe into the Hindenburg report. Opposition leaders like Rahul Gandhi (Congress) have criticised Modi’s “crony capitalism”, while debating an austerity budget.

The working class, peasantry and poor cannot rely on the likes of Congress and other capitalist parties for solutions to their problems / Image: DSAWHU Facebook

But we would point out that Adani has benefited from the privatisation policies of successive central governments, led both by Congress and the BJP. Despite Congress calling a nationwide protest in response to this new scandal, there has been no serious opposition to capitalists like Adani growing fat by looting the state and manipulating the system for years.

The reactionary policies of successive governments have fed corporate fraud and manipulation, of which the Adani Group’s crimes are merely the most egregious example. Privatisation and liberalisation have led to huge income inequality, which continues to squeeze the masses, even as the rich grow richer.

Unemployment and inflation under Modi and BJP have seriously worsened the conditions of the masses, while criminals like Adani can lose $100 billion, benefit from state bailouts, and still emerge grossly wealthy.

The working class, peasantry and poor cannot rely on the likes of Congress and other capitalist parties for solutions to their problems. Nor can they expect anything from the legal system, which is nothing but an instrument to protect capitalist interests.

None of the so-called left parties have any solutions either. They merely trail the bourgeois parties, participating in class collaboration, and calling meekly for ‘reform’. Only an independent mobilisation of workers along the lines of the farmers’ movement against Modi’s reactionary agricultural bill can put a stop to the BJP regime, which works hand in glove with capitalist criminals like Adani to pillage the wealth created by working people.

As a starting point, the labour movement should organise to demand all contracts awarded to the Adani Group be rescinded at once. The company should have all its assets expropriated and placed under the democratic control of the working class.

This latest affair demonstrates that Indian capitalism is totally rotten, and bound by a thousand threads to the state, which exists merely to manage its affairs. Therefore, all the private owners of banks, insurance companies, heavy industry, airports, railways and essential infrastructure should be expropriated. These resources should be put at the service of the majority, rather than serving as cash cows for the rich!

Naturally, the reactionary Modi regime would never permit this, so it must be brought down – which can only be achieved with an escalating strategy of strikes, up to an indefinite general strike. Let us pose the question of who really rules in India: Modi and his capitalist cronies, or the masses of working people?