Defective Campaign Against Adani Risks India's Global Credibility & Public Money

The Hindenburg report is a chance for the campaign to bring about reform, but it does not seem ready for the same.

4 min read

Market Manipulation through pump and dump or short selling is not new to anyone in the world. However, the campaign surrounding the Hindenburg report alleging stock manipulation and accounting fraud against the Adani Group of Companies (AGC) is unique and unheard of.

It is driven by two major presumptions:

  • The proximity of Prime Minister Modi with Gautam Adani, the chairman of the AGC

  • The perceived loss of public money invested in AGC by the State Bank of India (SBI) and Life Insurance Corporation of India (LIC), two major public sector undertakings

The campaign led the frontline attack against Modi and the BJP in a way as if the fallout from the Adani controversy is ammunition for the 2024 parliamentary elections and it should be dealt with an all-round political strategy to dislodge the former from the power. There are, however, very few supporters of this campaign within the opposition parties' political spectrum.

By treating the Hindenburg report as the gospel truth by relying upon its two major allegations, the campaign doesn’t question the veracity and intentions of the report or the short-selling tactics. 

Although the campaign doesn’t take into account the impact of Hindenburg’s report on India’s economy, financial stability, and credit of India, it also doesn’t press for regulatory reform to improve the integrity, transparency, and fairness of the securities market and protection of investors’ interest.


Hindenburg Report Should Catalyse Regulatory Reform

While the Hindenburg report is an excellent opportunity for the campaign to bring institutional reform, it does not appear to be ready for it. The earliest Securities Exchange Act of the United States (1934) was enacted in response to the stock market crash of 1929. India’s Securities and Exchange Board of India Act (1992) was enacted following the securities scams that took place during the 1980s. Therefore, the campaign’s inaction to come out with a bill or any paper to reform the existing regulatory framework raises serious questions about its intention to hype the fallout from the Adani-Hindenburg row.

Despite India having a comprehensive mechanism to regulate the market and prohibit fraudulent and unfair practices, market manipulation continues to occur due to various factors including the complexity of the market, inadequacy and inefficiency of regulations, the greed to secure windfall profit, technological advancement, or the lack of global coordination. The campaign is required to take note of all this to push for regulatory reform which, unfortunately, is not happening in this case and therefore, despite having the better outreach, the present campaign will not be able to bring any new and meaningful change.

In the aftermath of the Hindenburg report, the fallout has not only affected the AGC but also several state-owned Institutions that have invested in it, including the State Bank of India (SBI) and the Life Insurance Corporation (LIC). As a result, these institutions have lost billions of dollars in market capitalization, which ultimately belong to the public.

This raises important questions about the responsibility of public officials like those involved in the campaign in protecting the interests of the people of India. After all, institutions like the SBI and the LIC usually invest in large companies such as the AGC for strategic and financial reasons.

While it is the duty of opposition leaders and parliamentarians to speak out against Prime Minister, the ruling party, the government, and its policies, it is also necessary to ensure that their actions do not jeopardize the interests of the country. In this case, it appears that the campaign against Modi and Adani may have done more harm than good, not only to the Adani Group of companies but also to India's economic and financial regulators and its potential for foreign investment.

How the Campaign Threatens India's Progress

The campaign has set a dangerous precedent towards public accountability, where unverified allegations can lead to significant losses of public money and yet justified. This undermines the credibility of India's institutions and regulators, and could deter foreign investors from investing in Indian businesses. Furthermore, it threatens to undo the progress India has made in the last 30 years in building a conducive and friendly environment for globalization, foreign direct investment, and foreign institutional investment.

The success of India's economic growth in recent years has been closely tied to its openness to the global market. The country's willingness to embrace globalization and foreign investment has been a key driver of its economic success, and any campaign that undermines this progress risks derailing India's economic growth.

It is imperative that while public officials take steps to ensure that any investigation into potential wrongdoing is fair and impartial to hold businesses accountable for any misdeeds, it is equally important to ensure that the investigation process does not result in the loss of public money or harm India's reputation in the global market.

This could be achieved by proposing varied measures but it appears that the campaign doesn’t have faith in the regulatory mechanism that India has established through the parliamentary legislation. Making the fallout a driver of the political campaign would not only harm India’s global credibility but also the institutional integrity built over a long period of time. The campaign will jeopardize global faith in India's businesses, and economic, financial, and security regulators, which will be difficult for India to reverse for many years.

(Nitin Meshram is an advocate who practices in the Supreme Court and various High Courts of India. This is an opinion article and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)

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