Adani, the Indian Budget and the Laffer Curve
The top big stories of the week were the new Indian budget and the Adani vs Hindenburg showdown.
Dear Member,
We look forward to welcoming many of you to the reception and Awards in Parliament tonight. We have several Cabinet and Shadow Cabinet Ministers confirmed as well as other parliamentarians, members of the armed forces, Ambassadors and representatives from several embassies from around the world, and business and community leaders.
The big corporate story of the week has been the Adani vs Hindenburg battle. Hinderburg have shorted Adani and have probably already made a huge return, given how the Adani shares have tanked (although it's unclear just how large the short positions are, and who's behind them). But what’s been under-reported in the India media is that taxpayers have invested circuitously in the Adani Group, through the Life Insurance Corporation of India, State Bank of India and other public sector banks. A whopping 8% of LIC's equity assets under management is in Adani companies.
So ironically Adani is kind of right by saying an attack on Adani is an attack on India – if Adani loses, so do Indian taxpayers. Credit Suisse has assigned a zero lending value for bonds issued by the Adani Group’s listed subsidiaries in the last few days. But isn’t the company, whose success is so intertwined with Modi, too big to fail?
But the other big story of the week is the Budget. There is plenty of Budget analysis readily available, so we’ve cherry-picked points you might not have seen elsewhere, as well as the overall political economy context.
As Shekhar Gupta pointed out in ThePrint, for Modi and Shah, every Budget is an election budget. And this one is no different. The government’s budgets have gotten increasingly confident over the years, this time showing its comfort with running high and perennial deficits, spending big on capex, getting inspiration from the US Inflation Reduction Act on promoting Net Zero industries, placing a massive focus on digitisation and more or less conceding that massive government spending is needed to try and crowd-in private sector investment.
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