NDIA – JANUARY 18: Prime Minister Narendra Modi with Gautam Adani, chairman and founder of Adani Group, and other delegates at the Vibrant Gujarat Global Summit, at the Mahatma Mandir Exhibition cum Convention Centre, on January 18, 2019 in Gandhinagar, India.

Hindustan Times | | Getty Images

India slammed billionaire investor George Soros after he claimed the Adani turmoil will weaken Prime Minister Narendra Modi’s grip on power and lead to a “democratic revival” in the country.

The latest dispute highlights renewed scrutiny of the relationship between India’s leader and business tycoon Gautam Adani, who has lost billions in net worth since a short-seller report accused his company of fraud. The Adani Group has denied these allegationscalling the report a “calculated attack on India.”

Last week, Soros criticized the prime minister said India was a democracy but Modi “is not a democrat.” Over the weekend, India’s foreign minister, Subrahmanyam Jaishankar, told a conference in Sydney that Soros’ comments were typical of a “Euro-Atlantic view” and rejected his allegations.

“There are still people in the world who believe that their definition, their preferences, their views must override everything else,” Jaishankar said.

He added that there was “a debate and conversation that we need to have about democracy”, including whose values ​​defined a democracy as the world rebalanced and became less Euro-Atlantic.

“He is old, rich, opinionated and dangerous, because what happens is when such people and such views and such organizations – they actually invest resources in shaping narratives,” Jaishankar said in response to a question about the billionaire’s comments.

India’s voters will decide “how the country should be (governed),” the foreign minister said.

“It worries us. We are a country that went through colonialism. We know the dangers of what happens when there is outside interference,” Jaishankar added.

Modi-Adani ‘close allies’

Soros’ criticism focused on the cozy relationship between Modi and Adani.

“Modi and business tycoon Adani are close allies; their fates are intertwined. Adani company tried to raise money in the stock market, but he failed, says Soros.

Both men come from India’s western state of Gujarat. Adani was an early supporter of Modi’s political ambitions and defended Indian Leader’s Growth Vision for the country. Modi flew in an Adani jet after he was elected to national office in 2014.

Adani's market losses have now exceeded $100 billion in the week since a short seller targeted

But Adani lost his crown as Asia’s richest man in a ask about days by short seller companies Hindenburg Research alleged fraud. The Adani Group has denied wrongdoing and fired back at the company in an over 400-page rebuttal.

“Adani is accused of stock manipulation and its stock collapsed like a house of cards. Modi is silent on the subject, but he will have to answer questions from foreign investors and in Parliament,” Soros said.

The billionaire predicted that Adani’s troubles will “significantly weaken Modi’s stranglehold on India’s federal government” and “open the door to push for much-needed institutional reforms.”

“I may be naive, but I expect a democratic revival in India,” Soros said.

The Hungarian-born investor is the founder of The Open Society Foundation’s advocacy network, through which he has donated more than $32 billion, according to its website. The network said it makes “thousands of grants every year to build inclusive and vibrant democracies,” with active projects in more than 120 countries.

Adani’s case draws fire

Opposition critics have also seized on the Hindenburg report to attack Modi and his party ahead of national elections due next year. India’s largest opposition Congress party has staged protests and demanded an investigation into Hindenburg’s accusations.

However, the opposition party quickly distanced itself from Soros’ comments.

“Whether the PM-linked Adani scam sparks a democratic revival in India depends entirely on the Congress, opposition parties and our electoral process,” Jairam Ramesh, Congress general secretary, tweeted. “It has NOTHING to do with George Soros.”

Politically, it is difficult to predict what effect, if any, the Adani review will have on the popularity of Modi and his ruling Bharatiya Janata Party, observers said.

Still, the relationship between Modi and Adani is “so long and strong” that it will be tough for the prime minister and his party to emerge from the crisis unscathed, says Ashok Swain, head of the peace and conflict research department at Uppsala University. Sweden told CNBC recently.