Wall Street is in disarray following the election shortfall of Indian Prime Minister Narendra Modi.

• Narendra Modi's failure to secure a supermajority for his party has caused investors to race to comprehend the impact on India's economic landscape.
• On Monday, the Indian stock market experienced its largest decline since 2021 after the unexpected election results.
• India has attracted high-profile deals from GE Aerospace, Apple, Starbucks, and Nvidia for expanding, manufacturing, or selling their products.

The failure of Indian Prime Minister Narendra Modi to secure a supermajority for his party has left business executives in the country scrambling to comprehend the consequences on India's economy and investment environment.

Venugopal Garre, managing director at AB Bernstein, wrote to clients that Indian voters are great teachers who have certainly surprised politicians, exit pollsters, and market watchers.

Over the past several years, some of the biggest companies in the United States have invested time and money into relationships with Modi, with the Indian market in their sights.

Several companies, including Aerospace, , and , have recently made high-profile deals to expand, manufacture, and sell their products within the country.

According to Pramit Chaudhuri, head of Eurasia's South Asia practice, CNBC, India has become the preferred destination for U.S. tech companies as China slows down.

On Monday, the Indian stock market experienced its largest decline since 2021 after the unexpected election results.

An emerging markets portfolio manager at an investment firm with $6 billion in assets under management, Rahul Sharma, stated that the outcome is "a clear negative that is likely to create an overhang on the market over the near term."

Despite being a long-term bull on India, Sharma emphasizes the country's robust demographic profile as a key factor in its future growth potential.

Sharma emphasized the significant potential of the country, despite its low per capita income and the presence of a large, young, and relatively educated workforce.

Modi's economic agenda

The failure of Modi's party to secure a supermajority also raises new questions about the broader economic agenda of the Modi government.

Will Modi's promised reforms be passed quickly, as he promised during his campaign?

When devising economic plans, coalition governments often encounter difficulties, as noted by Asia Society's India team in a client note.

Economic reforms in India will likely necessitate the Indian leader to convince, negotiate, and collaborate with parties on the opposite side of the aisle, potentially extending the timeframe for achieving progress, according to a former government official who spoke to CNBC on the condition of anonymity.

Can Modi shift from ruling as the head of a majority government to functioning as a consensus builder?

By 2027, Modi aims to transform India into the world's third largest economy, with a growth rate of 8.2% in the fiscal year ending in March, making it the fifth largest economy currently.

Despite India's impressive GDP growth last year, a high unemployment rate is severely impacting the career prospects of young workers and causing mass migration from cities to rural areas.

Eurasia's Chaudhuri stated that the jobless situation in the country definitely impacted the election outcome.

According to TS Lombard analysts, the biggest concern for voters is the "lack of jobs" as the labor market recovery is not yet "broad-based."

The implementation of one of the labor laws that Modi's government intended to reform may be hindered because the BJP no longer holds an outright majority in Parliament.

Modi's proposed reforms would have streamlined employment laws and eliminated obstacles to a more adaptable job market.

Other analysts predict that key reforms related to agriculture and land acquisition may require more time to implement than initially anticipated. Similarly, infrastructure projects should proceed, but at a slower pace, like other sectors.

American investment

A coalition government in India's Parliament may necessitate a reset of corporate expectations in the United States, as some reforms may require more time to implement.

According to experts, U.S. companies view India as a crucial element in their long-term plans to diversify their manufacturing and supply chains beyond solely relying on China.

Raghuram Rajan, the former governor of the Reserve Bank of India, stated that the U.S. corporate expansion into India should not be impacted by the election results.

Rajan, currently a professor of finance at the University of Chicago's Booth School of Business, stated that American investment had never been "coming in because of reforms, that would affect that investment."

Easing social tensions

According to Sharma of Shafer Cullen, the "aggressive Hindu nationalist" rhetoric of BJP will become less intense after the election, resulting in less divisiveness and tension in the country.

The Indian leader has been criticized for his treatment of minorities, such as Sikhs and Muslims, and his government's efforts to suppress political opposition.

According to Tom Miller, an analyst at Gavekal Research, the election results could lead to a more secure social position for India if the BJP abandons its hardline Hindu nationalist policies.

The annual budget will be released on July 1 after the new government is formed, according to Jitania Kandhari, head of macroeconomic research on Morgan Stanley's emerging market equity team.

Kandhari wrote in an email to CNBC that this will establish the spending priorities of the new government and influence its tone and reaction.