Apple, Tesla investments boost Modi

The rock-solid relationships that Indian Prime Minister Narendra Modi has developed with the CEOs of America’s biggest tech companies give his country the foreign support India has needed for more than a decade.

Those ties have also boosted Modi’s profile ahead of key elections that begin Friday, a former Indian government official told CNBC on condition of anonymity.

The promise of new economic growth in India as China’s economy slows has led many U.S. CEOs to support Modi’s policies.

Tensions between Washington and Beijing have also pushed U.S. conglomerates to diversify their industrial bases to countries like India to avoid disruption from any potential conflict.

“The distance of supply chains from competitors makes India a very important pillar,” Manjari Chatterjee Miller, senior fellow for India, Pakistan and South Asia at the Council on Foreign Relations, told CNBC .

Support from major U.S. companies also helps shield Modi from criticism over India’s continued purchases of Russian and Iranian oil, while most major economies sanction both countries.

Ahead of the election, Apple’s expansion in India in particular gave Modi political clout and sparked more interest among U.S. companies, experts told CNBC.

“The story of Apple, such a famous name, worked in Modi’s favor – not only did it help the economy, but it also gave him some political arrogance,” said Pravin Krishna, distinguished professor of economics and international trade in Chung Ju Yung. Johns Hopkins University.

Modi has established an ongoing dialogue with a number of powerful Silicon Valley CEOs as India’s national elections begin.

The elections, which will end in early June, are expected to see more than 960 million citizens vote. Polls suggest Modi’s Bharatiya Janata Party is likely to win.

You’re here CEO Elon Musk plans to visit New Delhi next week. Ahead of Musk’s visit, Modi’s government reduced import taxes on electric vehicles for automakers that invest $500 million in setting up production centers in India. This move clearly piqued Tesla’s interest.

The last meeting between the two leaders took place in June in New York, where Musk discussed high taxes on Indian imports, according to sources. After Musk and Modi’s one-on-one meeting, he said Tesla hopes to build a factory in India soon.

However, Tesla’s desire to expand in India goes beyond building and selling electric vehicles. Tesla also wants to know more about India’s lithium reserves, which were discovered in 2023, two sources told CNBC. The shortage of lithium – a key component of electric vehicles – as electric cars gain popularity, has created an arms race among global manufacturers.

Modi’s relationship with American businesses has grown exponentially over the past 18 months, as tensions between the United States and China push the West to look to India for opportunities.

Nvidia CEO Jensen Huang visited India in September to meet the prime minister and discuss ways to work on artificial intelligence projects. During his trip, Huang revealed plans to partner with Indian companies Tata Partners and Reliance to develop the country’s AI infrastructure.

When Modi made 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 panel discussion to discuss collaboration opportunities with India on artificial intelligence.

To ensure that American companies continue to invest in India, Modi must overcome enormous obstacles.

“Land and labor laws are at the top of the list,” Frank Wisner, former US ambassador to India, told CNBC.

India’s current laws make it difficult to hire and fire workers, as well as purchase land, which could pose problems for U.S. companies trying to expand.

If Modi’s government is re-elected, it will also be tasked with bringing down India’s high youth unemployment rate (44%) and implementing training programs that would strengthen the country’s manufacturing base, Miller adds. If the underlying issues hampering India’s growth are not addressed, it could prevent U.S. companies from continuing to expand there, experts told CNBC.

“India’s reputation as a place to do business can further improve if red tape, regulatory complexities and poor corporate governance are gradually eradicated or minimized,” Dinyar Devitre, advisory board member of General Atlantic, which has served on several public boards, including Altria, Kraft Foods, SAB Miller and IHS Markit, told CNBC.

For now, the money is flowing. Foreign direct investment in India has increased steadily from $36 billion in 2014 to more than $70 billion in 2023, according to Visual Capitalist. During the same period, investments in China fell.

ETF data shows investors continue to allocate capital to India, according to Dave Mazza of Roundhill Investments. So far this year, inflows to India stand at $2.5 billion, second only to Japan’s $3.5 billion. At the same time, China saw capital outflows of almost $1 billion.

“India remains one of the most attractive growth and investment countries of this decade,” Jitania Kandhari, managing director at Morgan Stanley Investment Management, tells CNBC. Kandhari acknowledges that valuations are high but adds that “profits have held up.”