THE BLOG
05/23/2014 07:30 pm ET Updated Jul 23, 2014

Opportunities Abound for American Companies in India Election Aftermath

Starting from zero in 2001, the USA is now India's largest defense supplier and India is the largest importer of weapons and equipment in the world. American companies such as IBM and Hewlett Packard now employ over 100,000 Indians each.

As the world's largest democracy, India is also the third largest economy in the world by purchasing power parity, next only to the United States and China. The news of India passing Japan last month got buried amidst reporting on the election campaigns.

There are four thrusts that American companies can expect from a Modi government, as promised in the platform ("manifesto") of the Bharatiya Janata Party (BJP), released on March 26, 2014:

  • Acceleration of infrastructure upgrades will create opportunity for American products and services. The party promises to build 100 new cities, to create world class ports and to build a "diamond quadrilateral" of bullet trains connecting Delhi, Mumbai, Chennai and Kolkata.
  • Technology companies could find large new prospects as the BJP promises broadband in every village, Wi-Fi in public places, MOOCs (massive open online courses) to promote vocational educational for the working class and for homemakers, increasing public R&D spend and incentives for private R&D investment. The manifesto includes a commitment to develop centers of excellence in nano technology, material science, brain research and thorium power; these are all areas where America is stronger than China and bode well for U.S.-India co-operation.
  • American companies already doing business in India can look to the example of streamlining accomplished by Narendra Modi in the state of Gujarat. At the federal level, the BJP promises tax simplification streamlined processes and procedures, special courts to deal with intellectual property rights and a commitment to promote Foreign Direct Investment (FDI), including FDI in defense. Quoted in India's Economic Times, Ketan Dalal of accounting and consulting firm PwC, says to "expect some quick steps to address concerns on this front, particularly for international investors."
  • While the Prime Minister Manmohan Singh declared the intent to create 100 million new manufacturing jobs through policy initiatives, there was little follow through. The BJP promised to make India a center for labor intensive assembly of electronics, footwear, textiles and more by encouraging global hubs of manufacturing skills. These assurances are held in high regard by India's manufacturing moguls. Interviewed by Business Today, Adi Godrej, billionaire Chairman of the Godrej Group, rejoiced "[Modi] will work on restoring investor confidence and addressing manufacturing issues." If BJP policies succeed, American companies will increasingly find India to be a credible sourcing alternative to China.

According to some analysts, China potentially stands to lose the most from the outcome of this election. Forbes magazine's China Expert, Gordon Chang, cites "intensification of [Beijing's] discriminatory investigations of multinationals" as a major deterrent for foreign investment in the country. Furthermore, he credits Modi's previous success in Gujarat as well as majority control in the parliamentary lower house by the business-friendly BJP as reasons why India will steal the allure away from China.

Even if 25 percent of these promises find their way into reality, my colleagues and I estimate that it could increase U.S.-India bilateral trade from $100 billion to $500 billion or more by 2020. This growth will be created not by the Indian government but by the hard working employees, executives and entrepreneurs of both the United States and India. India, where business is conducted in English, has more in common with the United States than any other major economy in Asia. The potential for mutual benefit for these two free market democracies is unprecedented.