Why the Adani scandal is a problem for India's foreign policy

UPDATED: Nov 26, 2024 19:34 IST

The Adani Group, one of India’s largest and most influential conglomerates, has become a cornerstone of India’s global economic ambitions. With interests spanning from power projects in Sri Lanka to mines in Australia and a port in Israel, Adani’s global reach is undeniable. But this expanding empire, closely linked to India’s ruling Bharatiya Janata Party (BJP), is raising concerns about its impact on India’s foreign policy and reputation on the global stage.

Founded in 1988 by Gautam Adani in Ahmedabad, the company initially focused on commodity trading before diversifying into infrastructure, energy, and logistics. Over the years, Adani’s rise has coincided with the political ascent of Prime Minister Narendra Modi, whose government has supported the conglomerate through lucrative infrastructure and energy contracts. In return, Adani has become a key instrument of India’s foreign policy, helping to boost India's economic presence in regions like South Asia.

Adani’s reach has played a significant role in strengthening India’s economic ties with countries like Bangladesh and Sri Lanka. In Sri Lanka, the group has been involved in developing critical port infrastructure and energy projects, while in Bangladesh, it has secured agreements for power supply. These projects align with India’s broader strategy of using economic diplomacy to pull neighbouring countries closer into India’s orbit, particularly as it competes with China for influence in South Asia.

However, this close relationship between Adani and the Indian government is becoming increasingly controversial. Allegations of corruption, political manipulation, and lack of transparency have dogged the group’s international dealings. For instance, in Sri Lanka, the awarding of renewable energy contracts to Adani has sparked protests and accusations that the Sri Lankan government was pressured by India to favour Adani, despite local opposition. Critics argue that the contracts are part of Sri Lanka’s efforts to repay its debts to India, further fuelling suspicions of political favouritism.

In Bangladesh, similar concerns have emerged surrounding the Adani Group’s $1.7 billion power project in Godda, Jharkhand, which supplies electricity to Bangladesh. The project’s pricing, which is significantly higher than that of domestic providers, has drawn ire from the Bangladeshi government and public. Many question why Adani was chosen for such a high-profile project, with some suggesting it was a political decision to benefit Modi’s close associate.

The controversy extends beyond South Asia. In Kenya, the Adani Group faced backlash over its bid for a $1.8 billion contract to expand Nairobi’s Jomo Kenyatta Airport. Kenyan civil society groups and opposition leaders claimed the deal lacked transparency and violated the country’s laws on public-private investments. As the “Stop Adani” movement gains traction, Kenyan President William Ruto recently announced the cancellation of these contracts, further tarnishing Adani’s image.

These scandals, coupled with charges by U.S. authorities accusing Adani of bribery and defrauding American investors, are beginning to overshadow the group’s global ambitions. The U.S. allegations, particularly under the Foreign Corrupt Practices Act, further reinforce the perception that Adani’s rise is tied to corrupt practices and undue political influence.

India’s foreign policy is now facing a dilemma. On one hand, Adani’s expansion abroad contributes to India’s economic clout and geopolitical strategy, especially in South Asia where India seeks to counter China’s growing influence. On the other hand, the increasing association between the Indian government and the Adani Group’s controversial dealings abroad could undermine India’s global standing. If foreign governments and citizens begin to associate Indian economic expansion with corruption and political manipulation, it could hinder future investments and damage India’s reputation as a reliable and transparent partner in global trade.

As Adani’s empire continues to grow, India must navigate the delicate balance between leveraging the conglomerate’s global reach and managing the political and reputational risks associated with its increasingly controversial rise.