US Indictment Of Adani: Many Lessons To Be Learnt By Modi Government And Big Business

The United States' (US) indictment of top officials of the Adani Group, including Gautam Adani himself, for allegedly paying bribes to Indian state officials is a wake-up call for both the Modi government and the ambitious Indian businessmen who want to play on the global stage. The indictment includes a warrant for the arrest of Adani and some of his top officials.

The charges against Adani and his officials are simple: The US Department of Justice (DoJ) says Adani Green bribed officials in several Indian states (Andhra, Chhattisgarh, Odisha, Tamil Nadu, and Jammu and Kashmir, among them) to obtain lucrative prices for supplying renewable energy to their grids.

The US Securities and Exchange Commission is after the Adanis because he and his top officials knew they were being investigated by the DoJ but failed to disclose this to investors in a bond issue in which US investors were involved. Non-disclosure of material facts is the problem here.

The US has given itself jurisdiction over an Indian company operating in India by virtue of its Foreign Corrupt Practices Act (FCPA). So even if no direct US interests are involved, it can meddle with Indian companies if bribery or corruption is suspected.

There are lessons to be learnt by both India's government and its top business groups that operate globally from this crisis.

First, the Modi government must be clear that in geopolitics there are no friendly countries. Even friends seek vulnerabilities in you so that they can leverage them to their advantage. Faced with the prospect of a rising India, which will inevitably help ambitious businesses rise along with it, both the US and China have common interests in slowing this rise and limiting the reach of Indian business in global projects.

It is significant that Kenyan President William Ruto, who has cancelled Adani’s airport and power deals in his country, said that this was done based on “new information provided by our investigative agencies and partner nations.” One can speculate on whether these “partner nations” included China, the US, or both. One can expect similar pressure on the Sri Lankan government to cancel Adani contracts in the island nation. 

Action point: The Modi government must develop long-term institutional capabilities and more nuanced diplomatic, business, and security strategies that do not automatically presume someone is a friend or foe. We have to deal with every major country or partner as a frenemy. A friend in one case may well be an enemy or a rival in another.

We need a nimble policy guided by a nuanced understanding of the world. For example, we now presume that both Japan and Israel are our friends, but both these countries also kowtow to the US for national security reasons. So, they can well work against our interests in some cases.

Also, Japan feels seriously threatened by the prospect that in a few years’ time India’s economy will overtake its own. That will bring Japan a new sense of insecurity about India.

Second, our internal (and external) security doctrines need to be aligned and strengthened. The US could not have gotten details of Adani’s chats without infiltrating his communications, possibly breaching Indian sovereignty and privacy laws.

In this, Uncle Sam can easily be aided by US Big Tech, which includes Meta, Apple, Google, and Microsoft. While Apple makes devices that may offer more privacy, the other three may be giving backdoor entry to US security and law enforcement agencies in return for lower scrutiny of their monopolistic practices.

Even though US regulators are seeking to break up Google, the breakup may be on Google's terms, with little damage to its power. Our tech vulnerabilities are huge.

Action point: India must double down on its policies to localise data storage in India, no matter what the cost to these global companies. They must simultaneously be put under a legal obligation to not share data with agencies outside India without our courts agreeing to it. We must build extraterritorial capabilities into our security laws. There are no friendly shores for data storage whose jurisdiction should be acceptable to us.

At another level, an aggressive government-private partnership must be built to create our own search, mail, social media, and other platforms. We cannot be so dependent on Google, Meta, and X by giving them ownership of data on millions of Indian users.

When an Uber can do a deal with the Indian Air Force, which involves Uber owning some location and profile details of our top officers, we must ask ourselves how much we are compromising our security interests by giving Big Tech platforms a free ride in India.

Third, and this is directly related to the Adani case. It is not a good idea for a Prime Minister to be perceived as being close to one businessman, even though it is not likely that he favours only one of them. Modi’s close ties to Ratan Tata and general support for Indian businesses are evidence to the contrary. Nevertheless, the perception of being tied at the hip to Adani must be broken convincingly to carry credibility — both for his own government and for Adani himself.

The lessons for businessmen seeking to grow globally are even more vital.

One, like the government, they too must be careful in how they conduct themselves, both in India and abroad. A stronger security consciousness is needed to protect their interests, and they must be extremely diligent in observing the laws in the US and Europe.

Two, groups like Adani face two additional pressures. They operate in heavy investment areas like infrastructure, where usually governments are involved, and there is a great need for leveraged funding. Where industries need government support and regulatory clearances, the chances of bribery rise. It may be true that bribery is unavoidable in some cases — US companies do the same thing in the third world — but they have to cover their tracks better.

While the Adanis are reducing dependence on debt funds, it is still large enough to upend some parts of the business when there is a general loss of confidence in their ability to manage the growth. So, at the very least, the Adanis, and others in the same boat, should be using more equity and less debt. 

Three, just as it is not good for a politician to be seen as too close to a businessman, it is equally important for a business to not put themselves in such politically exposed situations. They must maintain an arm’s length distance from political parties and politicians, just like the Tatas and Birlas do. Sophistication is the key to this game.

In the short run, though, the interests of Adani and India are closely linked. We cannot let a big business icon go down in flames. As Franklin Delano Roosevelt is reported to have said about an unsavoury Latin American dictator, “He may be an SOB, but he is our SOB.” Adani may be in trouble, but he is our guy fighting global rivals in difficult terrain.

In the long term, both Adani and the Modi government must learn from their mistake of being perceived to be too close to each other.