How US fraud charges against him impact India’s economy and politics | Global News Avenue

Just a few weeks ago, one of the world’s richest men, Gautam Adani Celebrating Donald Trump’s election victory and announced plans to invest $10bn (£7.9bn) in US energy and infrastructure projects.

Now the 62-year-old Indian billionaire and close ally of Prime Minister Narendra Modi faces U.S. fraud charges that could jeopardize his ambitions at home and abroad. Modi’s empire is vast, worth $169 billion, spanning ports and renewable energy.

Federal prosecutors accuse him of orchestrating a $250 million bribery scheme and concealing it to raise funds in the United States. They accuse Adani and its executives of bribing Indian officials to secure contracts worth $2 billion in profits over 20 years. Adani Group denied the accusations, calling them “baseless”.

But it has hurt the group and the Indian economy.

Adani Group Inc. lost $34 billion in market capitalization on Thursday, bringing the total market capitalization of its 10 companies to $147 billion. Adani Green Energy, the company at the center of the accusations, also said it would not proceed with the $600 million bond issuance.

There are also questions about the impact of the allegations on Indian business and politics.

India’s economy is closely linked to Mr Adani, the country’s leading infrastructure tycoon. It operates 13 ports (30% market share), 7 airports (23% of passenger traffic) and India’s second largest cement company (20% market share).

Mr. Adani owns six coal-fired power plants and is India’s largest private power company. At the same time, he pledged to invest $50 billion in green hydrogen and operate an 8,000-kilometer (4,970-mile) natural gas pipeline. He also built India’s longest highway and redeveloped India’s largest slum. He has more than 45,000 employees, but his businesses impact millions of people across the country.

Mr Adani’s global ambitions span coal mines in Indonesia and Australia, airports and energy projects in Kenya and Morocco. The group is considering infrastructure projects worth more than $1 billion in Tanzania and Kenya.

Mr. Adani’s portfolio closely reflects Mr. Modi’s policy priorities, starting with infrastructure and recently expanding to clean energy. He has thrived despite critics labeling his business empire crony capitalism and noting his close relationship with Modi, both as chief minister of Gujarat (they are both from the state) and as prime minister of India. (Like any successful businessman, Mr Adani has developed ties with many opposition leaders to invest in their states.)

“This (bribery allegation) is serious. Mr. Adani and Modi have been inseparable for a long time. This will affect India’s political economy,” said Paranjoy Guha Thakurta, an Indian journalist. has written extensively about the business group.

The crisis also follows the release of a 2023 report by US short-seller Hindenburg Research, which has seen Mr Adani spend nearly two years trying to rebuild his image. Report Accuses his group of decades of stock manipulation and fraud. Although Mr Adani denied the claims, the accusations triggered a market sell-off and ongoing investigation Regulated by the Indian market regulator SEBI.

“Mr Adani has been working hard to rehabilitate his image and try to show that those fraud claims made earlier by the Hindenburg Group were not true and that his company and his businesses have actually been performing very well over the past year. There have been a lot of new deals and investments made in about a year, so this is just a hard blow for the billionaire, who has done a good job of shaking off the potential damage of these early accusations,” said the author of the Wilson Center, a US think tank. Michael Kugelman told the BBC.

For now, raising funds domestically for Adani’s costly projects could be a challenge.

“The market reaction shows how serious the situation is,” independent market analyst Ambareesh Baliga told the BBC. “Adanis will still secure funding for its major projects, but with some delays.”

The latest accusations could also hamper Adani’s global expansion plans. He has already been challenged in Kenya and Bangladesh over a planned Take over international airport and a Controversial energy deal. Nirmalya Kumar, Lee Kong Chian Professor at Singapore Management University, told the BBC: “This (bribery allegation) blocks US-related international expansion plans.”

What to do next? Politically, opposition leader Rahul Gandhi unsurprisingly called for Mr Adani’s arrest and promised to incite Parliament. “Bringing government officials in India is not news, but the amounts mentioned are shocking. I suspect the United States has the names of some of the intended recipients. This has potential implications for Indian politics. There will be more to come.” Mr. Kumar believes it.

Mr. Adani’s team will undoubtedly assemble a top-notch legal defense. “Right now, we only have the indictment and a lot remains to be revealed,” Mr. Kugelman said.

Kugelman said that while the U.S.-India commercial relationship may face scrutiny, it is unlikely to be significantly affected, especially given the recent $500 million U.S. deal with Adani for a port project in Sri Lanka. Despite the serious accusations, broader commercial ties between the United States and India remain strong.

“The U.S.-India commercial relationship is a very large, multi-faceted relationship. Even with these very serious allegations against such an important figure in the Indian economy, I don’t think we should exaggerate the impact that this could have on the relationship,” Mr. Kugelman said.

In addition, it is unclear whether Adani will be targeted despite the extradition treaty between the United States and India, as it depends on whether the new administration allows the case to proceed. Mr Baliga believes it is not all doom and gloom for the Adani family. “I still think foreign investors and banks will support them as they did after Hindenburg because they are part of a very important, well-performing sector of the Indian economy,” he said.

“The market also believes that this matter may be calmed down and resolved once the (Donald) Trump administration takes office.”