The first alarm bell was sounded in Colombo in 2022. A Sri Lankan official alleged that the government of India had exerted pressure on the government in Colombo to secure a contract for a renewable energy project for a Gautam Adani firm. The usual denials were issued. An India-friendly government then entered office and it was business as usual. By late 2023 all was forgotten and the United States even partnered with the Adani Group offering $533 billion financing for an Adani port in Sri Lanka. Keeping China out was the geopolitical rationale for the deal.
Responding to the news of a US grand jury indictment, the Sri Lankans are taking a second look at an Adani power project. In Kenya the government has said it would terminate a contract awarded to the Adani Group for the expansion of the Jomo Kenyatta International Airport. Recently, the Bangladesh High Court ordered a probe into the power purchase agreement entered into with Adani Power. It remains to be seen which other governments around the world would want to take a second look at Adani projects.
The Adani Group’s global footprint has stretched from Australia to Greece, Bangladesh to Kenya, China to the United Arab Emirates and beyond. The global forays of the Adani Group have been overtly supported by the Government of India in the name of geopolitics and as geo-economic statecraft.
The Russian newsmagazine, Sputnik, recently quoted an Indian diplomat defending the globalisation of India’s crony capitalism as serving New Delhi’s “geo-strategic objectives”. Economic diplomacy, he was quoted as saying, aims to promote India’s comprehensive national power. “In this quest big Indian companies with a much stronger economic heft can help serve the foreign policy interests while becoming global players in their own right.”
The problem with this view is that Adani was investing overseas with funds borrowed overseas. It is this external financial exposure that has now come to bite him. The US judicial system has entered the picture because Adani Green, an Adani Group firm, raised funds in the US and is a firm registered in the US, inviting the attention of the anti-bribery clause in US laws pertaining to overseas investments.
As in the case pertaining to the attempted assassination of a US citizen, Gurpatwant Singh Pannun, so too in this instance, it is the breaking of a US law that has exposed an Indian citizen to criminal liability in the US.
Much has been written over the past couple of years in captive sections of India’s media about how the present Indian government was copying the South Korean model of state-supported globalisation of domestic business — the chaebols. From port and power projects around South Asia, through West Asia and across to Europe, India was extending its geo-economic influence by supporting the extension of the global footprint of Indian business. Few were willing to ask or question the cronyism inherent in this globalisation of a politically well-connected business group.
The Adani indictment also points to another key vulnerability in India’s geo-economics strategy. While China has been able to extend its economic footprint using its own financial resources, many Indian firms have been drawing on western finance to fund their global business. This has made the globalisation of Indian business dependent on western support, as in the case of the US funding of an Adani project in Sri Lanka. However, this dependence on funding from the US exposes the Indian firm to the disciplines of the US legal system.
In other words, India’s larger strategy of extending its global influence and projecting its external power drawing on western support has inherent limitations. To imagine that India’s global standing is powered entirely by Indian capabilities while in fact drawing sustenance from external support is a flawed strategy. There is no point in blaming George Soros or some shadowy forces behind the curtains for the ignominy brought upon ourselves by our own misdemeanours in broad daylight.
Much effort has gone into building the global equity of Indian brands over the past quarter century. Business groups like the Tatas and companies like Infosys have been able to establish themselves as global brands after years of working at it. In one fell go, Gautam Adani has considerably weakened Brand India.
Political corruption and the nexus between business and politics is not new. From the days when Seth Ghanshyam Das Birla funded the Indian National Congress to the present when business persons are forced to buy electoral bonds in fear of investigating agencies, politics and business have been intimately connected at home. The licence-permit-control raj laid the foundations of crony capitalism. After that system was demolished, new instruments like public private partnerships and the regulatory raj introduced new forms of cronyism.
As long as this nexus between business and politics remained a domestic phenomenon, few feared the long arm of the law. Indeed, the legal system itself got corrupted. Firms that have gone global did not encounter problems as long as they were able to buy political protection in the home and host country, when such protection was required. After all, corruption is a global phenomenon.
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It is one thing to let Indian firms do what they can and please globally and face the consequences of their actions in their host countries. It is altogether a different thing for a government to underwrite the dubious practices of a private entity. This is precisely what has happened with the Modi government’s overt global support to the Adani Group.
I am personally aware of many instances when Indian businesspersons have sought the support of the government of the day for their business ventures outside India. Some politicians are willing to step in while some are not willing to do so. If the support involves waving the flag on behalf of the firm there is no harm. Every head of government waves the flag to promote national business interests. However, to take such support beyond the “lakshman rekha” that separates cronyism and corruption does not serve the national interest.
The Adani expose has damaged the global credibility of Indian business. The sooner exemplary action is taken the better. At any rate, there is no case for defending the wrong practices of a business group in the name of national interest.
