A Indian Bharatiya Janata Party supporter displays her decorated palms outside party headquarters in New Delhi. / Sajjad Hussain, AFP/Getty Images
The sweeping victory of India's opposition party and its pro-business leader will likely create a more stable, tax-friendly investment climate for U.S. companies, analysts say.
On Friday, the Bharatiya Janata Party (BJP) and its allies won more than the 272 seats needed for a majority in Parliament, pushing the long-dominant Congress party from power and setting the stage for Hindu nationalist Narendra Modi to become the next prime minster of the world's largest democracy.
"This is really historic," says Milan Vaishnav, an India expert at the Carnegie Endowment for International Peace, noting it's the first time since 1984 that India will have a single-party majority government. "It's going to create a certain sense of stability ... U.S. companies are very excited," he says, adding Modi will govern as a "pragmatist who wants to show India is 'open to business'."
"It's a very good thing for U.S. companies," agrees Gunjan Bagla, founder of Amritt Ventures, a California-based consulting firm that advises clients on investing in India. He says India had regressed the past five years with new regulatory and bureaucratic rules.
Modi, 63, the son of a tea seller who rose to become chief minister of the western state of Gujarat, campaigned on a platform that focused on economic development -- not religion. For example, the BJP said it would end "tax terrorism" partly by getting rid of controversial 2012 legislation that allowed for retroactive corporate taxes.
"That's a huge investment issue in the corporate world," says Alyssa Ayres, a scholar on India at the Council on Foreign Relations, a Washington-based think tank. She says the BJP's platform also called for cutting red tape and making it easier to create businesses as well as allowing more foreign direct investment.
Bagla says he's often skeptical of such platforms, but "in this case, it's based on Modi's 10-year track record" in Gujarat, where he attracted many U.S. investors, including Ford. He says India has such huge infrastructure and energy needs that with a more pro-business climate, it could go from being the 11th-largest U.S. trading partner to among the top seven within the next five or six years.
"I will develop this country. I will take it to new heights," Modi said to cheers in a victory speech Friday night. The Indian stock market rallied on news of his party's landslide, and the White House said that President Obama called Modi to congratulate him and invite him to Washington.
Yet Modi is not without controversy. He was partly blamed for sectarian riots in Gujarat in 2002, when more than 1,000 people -- mostly Muslims -- were killed. As a result, he's been denied entry into the United States since 2005. In February, though, Washington signaled a change when the U.S. ambassador to India met with Modi. "Look forward to working w/you," Secretary of State John F. Kerry tweeted to Modi Friday.
Last July, Vice President Joe Biden told the Bombay Stock Exchange in Mumbai that bilateral trade has increased five-fold -- to nearly $100 billion in 2012 -- the past 13 years and could increase another five-fold to $500 billion.
Ayres says many U.S. companies have been doing big business in India for at least a decade, noting IBM has at least 100,000 employees there. In recent years, she says India's tax and other policies created a lot of friction with U.S. investors who are expressing relief with Modi's ascension. She adds: "This is a real opportunity for India's growth."
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