Google CEO Sundar Pichai and Apple CEO Tim Cook listen as Indian Prime Minister Narendra Modi speaks during a meeting with senior officials and CEOs of US and Indian companies at the White House in Washington, DC. DC, on June 23, 2023.
Brendan Smialowski | AFP | Getty Images
The ironclad relationship Indian Prime Minister Narendra Modi has developed with the CEOs of the biggest US technology companies is giving his nation the foreign support India has craved for more than a decade.
Those ties have also boosted Modi’s own profile ahead of key elections starting Friday, a former Indian government official told CNBC on condition of anonymity.
The promise of further economic growth in India as China’s economy slows has led many American CEOs to support Modi’s policies.
Tensions between Washington and Beijing have also prompted US conglomerates to diversify their industrial bases in countries including India to avoid disruption from any potential conflict.
“Shifting supply chains away from competitors makes India a very important pivot,” Manjari Chatterjee Miller, senior fellow for India, Pakistan and South Asia at the Council on Foreign Relations, told CNBC.
Support from major US companies also helps shield Modi from criticism over India’s continued purchase of oil from Russia, as most major economies impose sanctions on the two nations.
In the run-up to the election, Apple’s expansion into India in particular has given Modi political influence and generated more investment interest among American companies, experts told CNBC.
“The story of Apple, such a marquee name, worked in Modi’s favor — it not only helped the economy but also gave him political leverage,” said Pravin Krishna, the Chung Ju Yung Distinguished Professor of International Economics and Business at Johns Hopkins University.
Modi has established an ongoing dialogue with a number of powerful Silicon Valley CEOs as India’s national elections begin.
More than 960 million citizens are expected to vote in the elections, which will be completed in early June. Polls show that Modi’s Bharatiya Janata Party is expected to win.
Indian Prime Minister Narendra Modi (R) meets with Elon Musk (L) in New York, United States on June 20, 2023. (Photo by Indian Press Information Bureau (PIB) / Handout/Anadolu Agency via Getty Images)
Press Information Bureau of India | Anadolu Agency | Getty Images
Tesla CEO Elon Musk plans to fly to New Delhi next week. Ahead of Musk’s visit, the Modi government cut import taxes on electric vehicles for manufacturers investing $500 million in setting up manufacturing centers in India. The move clearly piqued Tesla’s interest.
The last meeting between the two leaders was in June in New York, where Musk addressed India’s high import tax, sources said. After Musk’s one-on-one meeting with Modi, he said Tesla hoped to build a factory in India soon.
However, Tesla’s desire to expand in India goes beyond manufacturing and selling electric vehicles. Tesla is also interested in learning more about India’s lithium reserves, which were discovered in 2023, two sources told CNBC. A shortage of lithium — a key EV component — as electric cars gain popularity has created an arms race among global manufacturers.
Modi’s relationship with corporate America has grown exponentially over the past 18 months as US tensions with China push the West to look for opportunities in India.
Nvidia CEO Jensen Huang flew to India in September to meet the prime minister and discuss ways to work on AI projects. During his trip, Huang revealed plans to partner with India’s Tata Partners and Reliance to build the country’s artificial intelligence infrastructure.
When Modi paid a state visit to the White House in June, Alphabet CEO Sundar Pichai, apple CEO Tim Cook, AMD CEO Lisa Su, among others, attended a roundtable to discuss cooperation opportunities with India on artificial intelligence.
Modi faces challenges for more investment
In order to ensure that American companies continue to invest in India, Modi has some huge hurdles to overcome.
“Land and labor laws are at the top of the list,” Frank Wisner, a former US ambassador to India, told CNBC.
Current Indian laws make it difficult to hire and fire workers, as well as to buy land, which could create problems for American businesses trying to expand.
If Modi’s government is re-elected, it will also be tasked with reducing India’s high youth unemployment rate of 44 percent and implementing training programs that will strengthen the country’s manufacturing base, Miller adds. If the underlying issues holding back India’s growth are not fixed, it could discourage American companies from continuing to expand there, experts told CNBC.
“India’s reputation as a place to do business can be further accelerated if red tape, regulatory complexities and mediocre corporate governance are gradually eliminated or minimized,” said Dinyar Devitre, an advisory board member at General Atlantic who has served on several public boards, including Altria, Kraft Foods, SAB Miller and IHS Markit, told CNBC.
For now, the money is flowing in. Foreign direct investment in India is growing steadily from $36 billion in 2014 to over $70 billion in 2023, according to Visual Capitalist. During the same period, investment in China declined.
ETF data shows investors continue to allocate funds to India, according to Dave Mazza of Roundhill Investments. So far this year, India’s inflows stand at $2.5 billion, just behind Japan’s $3.5 billion. At the same time, China has seen outflows of nearly $1 billion.
“India remains one of the most compelling growth and investment stories for this decade,” Jitania Kandhari, CEO of Morgan Stanley Investment Management, tells CNBC. Kandhari acknowledges that valuations are high, but adds that “earnings have been held high.”