It has happened before. A business grows, builds connections, grabs political patronage and thinks it can get away with anything. The game works for a while. The swell of false pride, projected numbers and publicity bring with it the feeling of invincibility. Bolder gambles follow. And the world appears to cheer the one who is said to rewrite rules, reframe the very idea of success. Then cometh the fall.

We have had our long list of business scams. Over time, they get bigger, and violations get normalised. This is the downside of poor governance made worse by poor regulatory systems. The results are everywhere, seen as much in non-performing assets that at one time crossed Rs.10 lakh crore, as in the weak delivery of public services, delayed projects and a bureaucracy that works less for ordinary people and more for the powerful.  The surprise here is not that scams happen, that business breeds greed and worse in some but that the State is unable or unwilling to act even in the eye-popping cases to make an example out of the most spectacular of the fraudsters.

The question therefore today in the Adani case is not how much the political establishment and the State are involved, the answer to which becomes a political ping-pong, but how fast the State can turn from accommodation to action. This is a time to send the signal that whatever the connections, allegations of humongous violations, at least when they come out in the open, will be probed and met with radical surgery.

That stage has been reached in the Adani case. The government has a choice – it can sit back and do nothing, or it can choose swift regulatory action and full-fledged investigations into what has been alleged to be, in the words of Hindenburg Research, “the world’s 3rd richest man … pulling the largest con in corporate history.” It would be a mistake to think that the sudden fall in market cap by as much as USD 100 billion since the Hindenburg allegations brought the Adani stocks tumbling, can be managed with government backing, or the perception that he remains in the good books of the political leadership.

Credibility crisis 

For a group facing a crisis of credibility and with liabilities (according to Nikkei Asia) from ten of its listed companies adding up to 3.39 trillion rupees ($41.1 billion),” or 1.2 per cent of the Indian economy, the magnitude and significance of the Adani quake and what it might mean for the nation cannot be overstated.

The point to note is that the Adani saga is not of Adani failing but of India failing, even if the stock market holds out in the near term. This is the story of a liberalisation programme that has gone haywire, of a post-1991 era that has hit its limits because the road is hijacked by those who redefine entrepreneurship from risk-taking and gut instinct to safe bets under the patronage of fail-safe deals for the chosen few, marking the crony capitalists of our times.

This is not the India that can sustain economic reforms. Businesses that bring reforms a bad name and further reduce the already weak trust that Indians have in the private sector cannot be the future of a resurgent India. It bears repetition that a good deal of the agitation against farm laws was the inherent lack of faith in the policy-making institutions and private sector to which the business was being handed. An illustration of this was the way in which the BJP leader and former Governor Satya Pal Malik spoke against the farm laws and raised questions on how Adani came to acquire land for warehouses just when the farm laws arrived.

Cleaning up the mess

As it is, India at this stage of development does not appear to believe in the private sector. The Economic Survey of India for 2016-17 pointed out: “The ambivalence in India (about the private sector and property rights) seems to be greater than elsewhere It appears that India has distinct anti-market beliefs.”

In short, whatever Adani has done for the powers that be, the powers that be will have to take the call that this is the time to clean up the mess and dump some of the rogue players. There will be too much of a national price to pay if such passengers are carried for long.

It is true that India is not alone in having its share of scams. The US economy is known for bigger ones – Theranos, Madoff, Enron are few from a long list. And just as the Indian media handled Adani, the US media treated Enron first a red carpet, and then the kitchen sink.

 In the Adani case, the would-be media baron is now under attack from a media that steered clear of him and even went out of its way to heap praise (“Self-made billionaire Gautam Adani had an exceptional 2022 even by his own standards,” according to one cover story) while those who did raise questions paid the price. He obliquely made light of Rahul Gandhi in a friendly TV interview, had a book on himself published and arranged a book tour, the unveiling at no less space than the venerable IIM-Ahmedabad. Now, the entire national media is engaged in disrobing the man who could do no wrong until very recently. To put it mildly, Adani has many problems, and a bad press, and an explosive Opposition are just two of the many thorns giving him sleepless nights.

The Enron case 

Take the US. In the case of Enron, the biggest bankruptcy of its kind in 2001, the US media before the bankruptcy was among the cheerleaders for a business that was essentially a fraud. Media giants epitomised the cheering with awards, endorsements and this classic, much-studied, quote from Fortune magazine of April 2000: “Imagine a country-club dinner dance, with a bunch of old fogies and their wives shuffling around half-heartedly … Suddenly young Elvis comes crashing through the skylight, complete with gold-lamé suit, shiny guitar, and gyrating hips … In the staid world of regulated utilities and energy companies, Enron Corp. is that gate-crashing Elvis.”

But when the fraud came to be known, the Enron biggies were convicted and jailed, never mind that Chairman Ken Lay was known to be very close to and funded the campaign of US President George Bush, and CEO Jeff Skilling was well-connected and a part of the powerful Harvard Business School network. The US regulators acted. Justice was swift. It has been so almost every time businesses have turned scandalous. 

In India, this has typically not happened and the damage to the system is deep – much more than the damage one Adani family can ever do.

 (The writer is a journalist and a faculty member at SPJIMR, Mumbai. Views are personal. By special arrangement with The Billion Press/editor@thebillionpress.org)