A recent report published in the American daily The Washington Post has once again brought the pervasive issue of crony capitalism and rent-seeking in India into focus. According to the report, Life Insurance Corporation of India (LIC), at the behest of the government of India, made huge investments in Adani Group’s securities after they took a big beating in the stock markets.
Government officials “drafted and pushed through a proposal in May to steer roughly $3.9 billion in investments to Adani’s businesses from the Life Insurance Corporation, or LIC,” The Washington Post reported on 25 October 2025. In its response, the insurance behemoth issued a firm denial, stating that the allegations are “false, baseless, and far from truth.” According to the report, two officials familiar with the situation revealed that “The investment plan was crafted by officials at DFS (Department of Financial Services) in coordination with LIC and India’s main government-funded think tank, Niti Aayog, the documents show, and approved by the Finance Ministry.” The article further stated that documents and interviews suggest the plan was part of a broader strategy by Indian authorities to direct taxpayer money into the Adani Group, a conglomerate led by one of India’s most politically well-connected billionaires.
The report kicked up a political storm in India with the principal Opposition party, the Congress, demanding an investigation by the Parliament’s Public Accounts Committee into the matter.
Allegations that LIC, one of the world’s largest institutional investors, was coerced by the government to make huge investments in a particular conglomerate, raises critical questions about state influence in the country’s financial markets. Also, for many Indian policyholders, who entrust LIC with their life’s savings, it is a question of their financial security. Despite publicly stating that its investments were guided by “prudent financial strategies” and “due diligence,” LIC’s holdings in the Adani companies have ballooned over the years, making the insurer one of the largest institutional investors in the group. In 2022 alone, LIC’s exposure to Adani companies crossed Rs 30,000 crore, a whopping sum for a public institution managing policyholders’ money.
The Adani Group, with interests in infrastructure, energy, and mining, saw its stock prices soar during the pandemic era, attracting global attention. However, the group’s rapid rise has been shadowed by concerns regarding its corporate governance, financial transparency, and its close ties with the government at Centre. The group’s fortunes took a dramatic turn in early 2023 after a report by US-based short-seller Hindenburg Research alleged that the group had inflated its financials and engaged in stock manipulation. The report sent shockwaves through Indian financial markets, causing Adani shares to plummet and triggered massive erosion in shareholder value. LIC, already heavily invested in Adani’s publicly traded companies, similarly saw a sharp decline in the value of its holdings. India’s markets regulator, Securities and Exchange Board of India (SEBI), however, cleared the Adani Group’s name from allegations of stock manipulation made by Hindenburg, concluding that fund transfers between group companies did not violate any regulations.
Crony capitalism and rent-seeking are all too common in India, no matter whichever party is in power, as here political connections and favouritism often shape economic outcomes. In this system, businesses with ties to influential politicians secure lucrative deals, bypassing market competition. This not only undermines fair competition, but also discourages innovation. Likewise, rent-seeking behaviours, such as seeking monopolistic advantages from government, greatly contribute to wealth inequality and concentration of wealth. Adding to this, the clear lack of transparency and accountability in our system further exacerbates the problem, reinforcing a cycle of corruption, even as the broader population remains deprived of opportunities for growth.