By K Raveendran
Industrialist Anil Ambani has been barred from the securities market for a period of five years for perpetrating what SEBI describes as a ‘fraudulent scheme’ that led to diversion of funds from a group company. SEBI’s move, ostensibly a robust response to alleged fraudulent practices involving the diversion of funds from Reliance Home Finance, stands in stark contrast to the regulatory leniency observed in cases involving other influential business conglomerates. This discrepancy has triggered perceptions of selective enforcement, particularly given the broader context of crony capitalism and the intricate ties between major business figures and the government.
The tale of crony capitalism in India is intricately tied to the rise of conglomerates like the Ambanis and the Adanis. Since the Modi government came to power, there has been a noticeable shift in the economic landscape, characterized by a significant concentration of wealth and influence within a small group of favoured corporations. The Adani Group, under the stewardship of Gautam Adani, has become emblematic of this trend. The Modi administration’s close relationship with the Adani Group, coupled with favourable policies and concessions, has led to the rapid expansion and increased profitability of Adani enterprises.
The Modi era has seen a striking concentration of economic power among approximately 20 percent of India’s most profitable companies. These companies, including those linked with the Adanis and the Ambanis, have managed to increase their share of total profits substantially. By 2019, these favoured conglomerates collectively generated 70 percent of the country’s total profits. This remarkable concentration of wealth is not attributed to groundbreaking product innovations or operational efficiencies but rather to the strategic advantages and concessions they have been able to secure through their connections with the government.
The relationship between the Modi administration and these business groups can be described as symbiotic, where the benefits are mutual. For the businesses, government connections translate into preferential access to resources, regulatory relaxations, and lucrative contracts. For the government, these business groups provide significant financial backing and political support, creating a cycle where both parties benefit. This nexus is particularly pronounced in the case of the Adani Group, which has been a prominent beneficiary of various policy decisions that have bolstered its market position.
The favouritism shown to these companies is evident in numerous ways. Regulatory bodies, such as SEBI, have been criticized for their inconsistent application of rules, often seemingly overlooking infractions by favoured groups while targeting less influential entities. The barring of Anil Ambani, despite his connection with a leading crony capital player, can be seen as a move to project an image of regulatory action , yet without hurting the group itself because Anil is an outcast from the favoured Ambani group. As such it can only be seen as regulatory grandstanding without offending the favoured groups.
The Adani Group’s meteoric rise is a testament to the effective leveraging of political connections. From acquiring key infrastructure projects to benefiting from favourable policy changes, the Adanis have capitalized on their relationship with the government to expand their business empire rapidly. The Modi administration’s policies have provided a conducive environment for these conglomerates to thrive, often at the expense of fair competition and market integrity.
Similarly, the Ambanis have historically enjoyed substantial benefits from their close ties with the ruling establishment. The shifting dynamics in the business environment have often shielded them from the full brunt of regulatory actions that might befall less connected entities. The apparent arbitrariness of SEBI’s decision against Anil Ambani might be seen as a response to mounting pressures or a tactical move to deflect criticism while allowing the status quo to persist.
As Anil Ambani prepares to challenge SEBI’s order, it is likely that the appellate tribunal will grant a stay, as such outcomes are often influenced by the high-profile nature of the individuals involved. This potential development could further underscore the perception of selective enforcement and the entrenched nature of crony capitalism. The broader implications of these dynamics are significant, casting a long shadow over the integrity of regulatory institutions and the fairness of the economic playing field in India.
The SEBI order also suffers from lack of credibility for the organisation, in which its chief has been accused of going out of her way to shield the Adani group, highlighting a paradox within the country’s financial regulatory framework. It reveals a troubling pattern, in which despite the gravity of the allegations raised by the Hindenburg reports, SEBI has responded with questionable intents. SEBI’s actions so far have been more about protecting influential interests rather than enforcing stringent regulatory standards. This perceived failure to adequately address the concerns has destroyed SEBI’s reputation as a credible regulatory authority. (IPA
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