By Shivaji Sarkar
The ongoing situation surrounding Gautam Adani highlights the pressing need for a balance between corporate aspirations and public accountability. Neglecting this balance risks further deterioration of India’s international economic reputation and investor trust. It’s crucial to promote ethical corporate governance, ensuring transparency and adherence to global standards to regain confidence. Members of Parliament should prioritize corporate accountability as a means to foster economic progress.
Corporate entities such as FICCI, Assocham, and the PHD Chamber of Commerce must advocate for legislative reforms that reinstate safeguards against monopolistic behaviors similar to the Monopolies and Restrictive Trade Practices (MRTP) laws. Additionally, there should be initiatives to prevent a recurrence of fraudulent practices akin to the Satyam scandal.
Gautam Adani is not just another billionaire; he has emerged as an influential figure closely associated with the Indian government. His conglomerate, the Adani Group, has expanded significantly over the past decade, playing a pivotal role in various sectors such as ports, factories, and power plants—often through government contracts. Since Narendra Modi’s ascent to the Prime Ministership in 2014, Adani’s business empire has reportedly multiplied tenfold since the onset of the COVID-19 pandemic.
On November 21, the U.S. government brought charges against Adani for “multiple counts of fraud.” Federal prosecutors alleged that he and his associates attempted to bribe Indian officials with $265 million and misled Wall Street investors regarding a significant renewable energy project—actions that constitute serious criminal violations under U.S. law.
The ramifications of these allegations extend to India’s trade and investment standing, particularly in emerging markets like Africa and Southeast Asia. Indian firms could face intensified scrutiny, stricter compliance demands, and diminished trust from global partners. This decline in confidence threatens future foreign direct investment (FDI), a vital component of India’s economic trajectory.
While the Adani Group contends it has not breached Indian law and has actively refuted the allegations posed by Hindenburg regarding stock market manipulations, the repercussions are palpable. The Securities and Exchanges Board of India (SEBI) has been embroiled in controversies with its leadership’s connections to the group, compounding the situation. This led to significant disruptions during parliamentary sessions in 2023.
Since late January, the stock market has experienced a steep decline, with the market capitalization of all 11 Adani Group entities plummeting by Rs 38,000 crore to Rs 11.68 lakh crore following the recent U.S. indictment. Moreover, S&P Global downgraded its outlook on three of these companies to ‘negative.’ The recent cancellation of a $2.6 billion deal by Kenya, amid political unrest, also calls into question the feasibility of Adani’s international ventures, reflecting a pattern of concern reminiscent of issues faced in Bangladesh and Sri Lanka.
In just the second week of November, BSE investors suffered losses exceeding Rs 13 lakh crore. Assessing the cumulative losses since January is challenging, but the impact on the credibility of Indian corporations is evident. The current climate severely restricts these companies’ ability to secure international funding, echoing the past scandal of Satyam Computer Services, which involved a well-known global auditing firm, PricewaterhouseCoopers (PwC), as its auditor during its accounting scandal in 2009.
The origins of India’s current corporate challenges can be traced back to the early 2000s, marked by Pramod Mahajan’s declaration about the MRTPC being an impediment to corporate growth. This shift signaled a turn in how Indian corporations engaged with governance.
Historically, Pt. Jawaharlal Nehru had resisted the influence of the Bombay Club, which represented corporate interests. His government established an anti-monopolistic legal framework to prevent corporate abuse, later reinforced by the MRTP Act of 1969 under Indira Gandhi’s administration, aimed at curbing economic power concentration.
However, by 1991, under the PV Narasimha Rao government, these regulations were weakened to accommodate corporate demands, leading to significant corporate scandals like the Harshad Mehta stock scam in 1992. Subsequent administrations, including Vajpayee’s, enacted the Competition Act, effectively dismantling the MRTP Act in 2009, allowing corporations greater latitude but at the cost of necessary checks and balances.
The unfolding situation with the Adani Group draws stark parallels to the Satyam scandal, which was a cornerstone of corporate malpractice in India, exposing systemic vulnerabilities. From 2012 to 2014, numerous corporate fraud cases emerged, yet many lawmakers now seem reticent to address these critical issues. Recently, only one MP voiced concerns regarding gifts received by members of the Parliamentary Standing Committee.
It is imperative for Members of Parliament, irrespective of their political affiliations, to confront blatant corporate misconduct not merely as a punitive measure, but to safeguard the entities that contribute to national growth and well-being. The reintroduction of MRTP-like regulations is essential. Since 1991, the country has inadvertently nurtured an environment that allows corporate excesses to flourish—with Parliament now facing a choice: will it defend public interest or yield to corporate pressures that have already severely eroded its credibility?
