Amidst the tumult of controversial cabinet nominations, recriminations in the Democratic Party about why it was clobbered on Nov. 5, the Israeli–Hezbollah ceasefire, and Russia’s grinding advances in Ukraine, it is understandable why a major scandal that recently erupted in India was slow to be picked up by U.S. mainstream media, although it has potential implications for U.S.–India relations. Once again, the Adani Group, one of India’s leading enterprises is the focus. In January of last year, New York-based Hindenburg Research alleged stock price manipulation and accounting fraud over decades by this conglomerate engaged in energy and infrastructure development. Initially, Adani lost more than $60 billion in market capitalization following the release of the Hindenburg report. (It was also a Hindenburg Research publication in August that alleged accounting irregularities of server manufacturer, Super Micro Compute of Silicon Valley – the company’s auditors, Ernst & Young, resigned last month.) The Latest Scandal On Nov. 20 in New York, the U.S. Department of Justice indicted the founder and chairman, Gautam Adani, and seven executives, for an over $250 million bribery scheme to secure electricity distribution contracts from Indian officials and for providing false and misleading statements to secure loans and a bond offering that was then sold to U.S. investors and other international parties. This time, the fallout immediately cost Adani almost $55 billion in market capitalization. The company has vigorously denied these charges and has said it will pursue legal action. In addition to the falling bond prices of Adani, other immediate ramifications included a Moody’s and Fitch outlook downgrade from “stable” to “negative” and hesitation by some foreign banks to contemplate fresh funding. The French energy firm, TotalEnergies, paused new investment in the company. Adani also pulled a planned $600 million bond offering. The company’s airport and power project in Kenya was canceled and an investigation was started in Sri Lanka on all Adani projects. Longer-term consequences are difficult to assess. Long-Term Impact During the previous Indian National Congress-controlled coalition government, India had corporate scandals in the outsourcing, mining, telecom, and defense sectors. More recently, however, the Bharatiya Janata Party government of Prime Minister Narendra Modi has been intensely committed to improved governance and has been generally quite successful — except for a 2018 fraud case that involved Punjab National Bank. Naturally, the Indian National Congress (INC) opposition has seized this opportunity to discredit Modi and his Bharatiya Janata Party, which has distanced itself from Adani and advises that it has no reason to defend the beleaguered company. Further, the leader of the INC opposition has called for the resignation of the chair of the Securities Exchange Board of India for inadequate supervision. It is possible that Adani’s travails will soon disappear from headline news in India, given the vibrancy of the Indian press and the rapid pace of the modern news cycle. Whether Justice Department allegations are proven or not though, there will likely be damage to India’s reputation and governance among offshore constituencies. Risk management committees and corporate boards will also assess and stress test their exposure to Adani. They will also want to review their exposure to other hotshot Indian companies. Foreign direct investment (FDI) in India, necessary for job creation in the manufacturing sector, may be affected. FDI has increased dramatically due to India’s deregulated economy. The India Brand Equity Foundation reports FDI over $70 billion per year from 2022-2024, also noting that it has increased by 20 percent since 2000. Since 2014, business in India has been quite successful under the Modi government, and it is well known that Morgan Stanley has predicted that the country will rank as the third-largest GDP in the world by 2027. Whether these recent developments will slow economic momentum and aspirations remains to be seen. For some companies, India has been seen as an attractive alternative to China, where there has been a general crackdown on foreign firms, but now there is a severe threat of additional tariffs from the new Trump administration. (Late last year, Apple announced that it would move a quarter of its iPhone production to India). Also, India has an aggressive target of 500 GW from renewable energy sources by 2030 and now its state-run Solar Energy Corp is embroiled in the Adani scandal. Momentum may be slowed as contracts for solar energy are further scrutinized. Foreign Policy Implications The White House has understandably expressed confidence in U.S.–India relations, advising that it is aware of the charges against Gautam Adani and colleagues. The U.S. does not need another contentious issue with India, viewed as a major diplomatic player in BRICS and the Global South with access to Russian President Vladimir Putin. It is also a U.S. ally interested in containing China. Nevertheless, this scandal comes on the heels of a mid-October announcement by the Department of Justice of charges against an Indian government employee for his role in an assassination plot on U.S. soil. A co-conspirator was also previously charged. India watchers and the world of international finance will note that, in the coming days, Gautam Adani will also need to address a summons by the U.S. Securities Exchange Commission to appear in court for civil charges. The Adani Group is a strategic asset to India and a major contractor for the India–Middle East–Europe Economic Corridor (IMEC), intended to compete with China’s vaunted Belt and Road Initiative with shipping and rail infrastructure. Gautam Adani is also reported to be well-known to Modi. A question is whether President-elect Trump will intervene, capitalizing on his rapport with Modi and the successful 2020 visit to New Delhi (branded as “Namaste Trump”). As I wrote then in The American Spectator, Trump received a hero’s welcome in India and staged a visit to important Hindu and Muslim sites that helped strengthen U.S.–Indian emotional bonds. Frank Schell is a business strategy consultant and former senior vice president of the First National Bank of Chicago. He was a lecturer at the Harris School of Public Policy, University of Chicago, and is a contributor of opinion pieces to various journals. READ MORE from Frank Schell: Separating Fact From Hype About BRICS What’s Wrong With Canada? India’s Modi Wins a Third Term — But No Majority The post Justice Department Indicts Top Indian Company for Bribery appeared first on The American Spectator | USA News and Politics.