Trump targets Modi’s tycoons

The world’s largest corporations now rival most governments – not only in terms of revenue and assets, but also in their ability to shape political outcomes. Their power is reinforced by the immense personal fortunes of billionaires, which enable them to wield disproportionate influence over public policies, laws, and regulations.

Crucially, extreme concentrations of wealth and power could not have developed without the active support of policymakers, whether tacit or explicit. Consequently, being an oligarch is inherently precarious.

Crony capitalism may grant enormous advantages, but it also carries built-in risks. Chief among them is political change: new leadership, whether elected or imposed, may not extend the same protections or privileges to elites favored by the previous government.

That danger is especially acute in authoritarian or personality-driven regimes, where leaders’ whims often override institutional checks. The on-again, off-again bromance between US President Donald Trump and Elon Musk is an obvious example.

As geopolitical tensions escalate, however, oligarchs are no longer contending solely with domestic challenges. Increasingly caught in global power struggles, they have become convenient targets for hostile foreign powers seeking to pressure or undermine the leaders they support.

The sanctions imposed by the United States and the European Union on oligarchs linked to Russian President Vladimir Putin following the 2022 invasion of Ukraine are a case in point. While these measures have done little to change the course of the war, they have profoundly disrupted the lives and businesses of those affected.

Indian billionaires Gautam Adani and Mukesh Ambani have also found themselves in America’s crosshairs. Both have profited enormously from their ties to Prime Minister Narendra Modi – a fellow Gujarati – with their fortunes growing in tandem with his political ascent. This has made them useful bargaining chips in the ongoing trade negotiations between the US and India.

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To be sure, Ambani’s Reliance Group had already mastered the art of leveraging political influence to advance its business interests well before Modi rose to power. But Ambani’s alliance with Modi has pushed Reliance’s dominance to new heights. Adani’s rise, by contrast, is inextricably tied to Modi, dating back to the latter’s tenure as chief minister of Gujarat.

Both oligarchs, particularly Adani, have relied on their proximity to Modi to expand their business empires, benefiting from regulatory reforms tailored to their interests and acquiring state assets through lucrative privatization deals, often without a public tender. They have also moved into new sectors by purchasing successful firms targeted by Modi’s administration, effectively neutralizing potential competitors.

Moreover, Ambani and Adani have enjoyed privileged access to publicly owned banks, receiving favourable loan terms that allowed them to restructure their debts with minimal scrutiny. Their political connections, evidenced by frequent appearances alongside Modi during his international trips, have helped them secure major contracts abroad.

These political alliances have translated into lenient regulatory treatment. In Adani’s case, allegations that he has engaged in stock manipulation through opaque shell companies in offshore tax havens – exposed by US-based short-seller Hindenburg Research – were met with a muted response. Regulatory bodies like the Securities and Exchange Board of India declined to pursue a serious investigation.

Officially, Ambani has come under scrutiny for profiting from the resale of Russian oil, effectively circumventing US sanctions, while Adani is being investigated for alleged bribery. But Trump’s actions appear to be a calculated attempt to pressure Modi through his inner circle. Adding insult to injury, they come from a US president whom Modi has long described as a “true friend”.

Modi has claimed that his sole concern is protecting Indian farmers – a statement that would surely come as a surprise to the farmer protest movement, which his government has long vilified and suppressed.

Trump, for his part, insists that his priority is securing a better deal for American producers and workers. In reality, many of his key demands are aimed at advancing the interests of US-based multinationals and those of his own companies.

But given Trump’s track record, it’s hard to imagine that personal grievances did not play a role. Relations between the two leaders have noticeably cooled since Modi refused to endorse Trump’s dubious claim that he helped broker the recent India-Pakistan cease-fire – a narrative Trump had hoped would strengthen his bid for a Nobel Peace Prize. Modi’s refusal to play along effectively derailed that effort.

Trump and Modi are both shrewd and self-interested enough to recognise each other’s true priorities. By attacking Modi’s tycoons, Trump may have found the most effective pressure point to extract significant concessions from the Indian government.

If Modi yields, it won’t just be a costly political blunder but also a tragedy with far-reaching consequences for India and the world economy. © Project Syndicate

Jayati Ghosh, Professor of Economics at the University of Massachusetts Amherst, is a member of the Club of Rome’s Transformational Economics Commission.