The recent accounting fraud and stock manipulation allegations against multi-billionaire Gautam Adani made by Hindenburg Research, a New York-based short-selling firm, has startled the financial world. The episode is a necessary reality check for those who are expecting India's star to burn brighter in the global economic firmament as China's dims.
The allegations have highlighted some of the systemic issues that plague the Indian economy and often go ignored, particularly its extreme inequality and corporate concentration. A small slice of the economy produces capital- and skill-intensive goods to meet the demands of the wealthy, whereas most other sectors, by and large, suffer from insufficient demand and weak productivity, resulting in low aggregate investment and high unemployment.
