U.S. Tech Leaders Back Indian Prime Minister Modi Prior to Elections

• The relationship between Indian Prime Minister Narendra Modi and U.S. tech company CEOs has contributed to increasing the country's and his own popularity prior to the upcoming national elections on Friday.
• Elon Musk, CEO of Tesla, will visit India next week, after discussions between Modi and Jensen Huang of Nvidia, Tim Cook of Apple, and Sundar Pichai of Alphabet, were held last year.
• India faces a range of hurdles to ensure future investments.

Narendra Modi's strong bond with U.S. tech company CEOs has provided India with the foreign backing it has long sought for over a decade.

The former Indian government official stated that the ties between Modi and the business community have helped elevate his profile before crucial elections starting on Friday.

The slowing of China's economy has prompted many American CEOs to back Modi's economic policies in India.

To avoid disruptions from any potential conflict between Washington and Beijing, U.S. conglomerates have diversified their manufacturing bases to countries including India.

According to Manjari Chatterjee Miller, senior fellow for India, Pakistan, and South Asia at the Council on Foreign Relations, India's importance as a linchpin increases when supply chains are shifted away from rivals.

The backing of significant American corporations aids in safeguarding Modi from accusations of India's ongoing acquisition of Russian and Iranian oil, as most major economies impose sanctions on these countries.

Experts informed CNBC that Apple's expansion in India has boosted Modi's political power and attracted more U.S. investment interest prior to the election.

The success of Apple has benefited both the economy and Modi's political image, according to Pravin Krishna, a distinguished professor of international economics and business at Johns Hopkins University.

As India's national election begins, Modi maintains an ongoing dialogue with influential Silicon Valley CEOs.

The upcoming election, scheduled for early June, is predicted to have over 960 million voters participate. According to polls, Modi's Bharatiya Janata Party is likely to secure a victory.

Elon Musk, CEO of Tesla, plans to visit New Delhi next week. In anticipation of Musk's visit, the Indian government reduced import taxes on electric vehicles for manufacturers who invest $500 million in establishing production centers in India. This move has attracted Tesla's attention.

In June, the last meeting between Musk and Modi took place in New York. During this meeting, Musk raised the issue of India's high import tax, according to sources. Following this one-on-one meeting, Musk stated that Tesla was planning to establish a factory in India soon.

Tesla's interest in India extends beyond selling electric vehicles. The company is also interested in exploring India's lithium reserves, which were discovered in 2023, according to two sources. The global demand for lithium, a key component of electric vehicles, has increased due to their growing popularity, leading to a competition among manufacturers.

India has become a more attractive business partner for corporate America due to Modi's growing rapport and the increasing tensions between the US and China.

In September, Jensen Huang, the CEO, traveled to India to meet the prime minister and discuss potential collaborations on artificial intelligence projects. While there, Huang disclosed plans to partner with Tata Partners and Reliance to develop India's AI infrastructure.

During Modi's visit to the White House in June, several CEOs, including Sundar Pichai, Tim Cook, and Lisa Su, participated in a roundtable to explore potential collaborations with India on artificial intelligence.

Modi faces challenges to more investment

To ensure continued investment from U.S. companies in India, Modi must overcome significant obstacles.

CNBC reported that Frank Wisner, former U.S. ambassador to India, listed land and labor laws as his top priorities.

The difficulty in hiring and firing workers and purchasing land in India may present challenges for U.S. businesses looking to expand.

If Modi's government is reelected, it will also be responsible for reducing India's high youth unemployment rate of 44% and implementing training programs to strengthen the country's manufacturing base, according to Miller. If the root causes of India's growth issues are not addressed, it could hinder U.S. companies from continuing to expand there, experts warned CNBC.

Dinyar Devitre, an advisory board member of General Atlantic and a public board member of multiple companies including Altria, Kraft Foods, SAB Miller, and IHS Markit, advised CNBC that India's reputation as a business-friendly country can be enhanced if bureaucratic red tape, regulatory complexities, and poor corporate governance are gradually eliminated or minimized.

Foreign direct investment into India has increased from $36 billion in 2014 to over $70 billion in 2023, while investment in China has decreased.

According to Dave Mazza of Roundhill Investments, ETF data indicates that investors are still allocating capital into India, with $2.5 billion in inflows so far this year, just behind Japan's $3.5 billion. Meanwhile, China has experienced nearly $1 billion in outflows.

"Jitania Kandhari, Managing Director at Morgan Stanley Investment Management, stated to CNBC that India is still a highly attractive growth and investment opportunity for this decade, despite high valuations. Kandhari emphasized that earnings have remained strong."