Ambassador (ret.) Atul Keshap Ambassador (ret.) Atul Keshap
President, U.S.-India Business Council, President, U.S.-Bangladesh Business Council, & Senior Vice President, South Asia, U.S. Chamber of Commerce

Patrick Pitts Patrick Pitts
Director, South Asia, U.S. Chamber of Commerce
Jay Sapsford Jay Sapsford
Senior Vice President, Global Risk Analysis, U.S. Chamber of Commerce


June 07, 2024


After the vote counting was over, the Indian electorate had narrowed its endorsement of Prime Minister Narendra Modi even though he had engineered a ten-year growth streak that saw the country’s economy double in size.

One possible outcome: Even stronger growth in the years ahead.

Modi will now become only the second leader in India’s modern history to win a third term as Prime Minister. He will preside over a coalition government that will have significant incentives to address perhaps the biggest reason the Bharatiya Janata Party lost 63 seats in the recent election: The benefits of the rapid growth reached too few Indians, especially those in rural areas.

India, which overtook China as the world’s most populous nation two years ago, is growing at an eye-popping 8.2%, buttressed by strong demographics, ample skilled talent, and recent economic reforms. This is happening all while significant investments in infrastructure have eased bottlenecks.

Unemployment, however, is also hovering around 8%, up from 6% before the pandemic, according to the Center for Monitoring Indian Economy, a think tank. In less developed areas, joblessness among young workers is well into the double digits.

Growth, in short, is too concentrated. In the coming weeks, the new government, formed by the National Democratic Alliance of parties close to the BJP, will allocate ministerial portfolios, set the policy agenda, and then roll up its sleeves to draft an all-inclusive budget by a July deadline.

The early June election results underscored economic concerns, and addressing the disparities in employment will be a priority. That, in turn, will require broader job creation, enhanced manufacturing, and more foreign investment—all while keeping inflation under control, says Vasudevan Rangarajan, a veteran policy analyst with Edelman Global Advisory.

“The path forward for the Prime Minister and the new Government is perhaps clear,” he said in a post-election analysis. “The unfinished economic agenda of previous years needs to be accelerated.”

Exerting Influence

Over six weeks and seven regional phases, roughly 642 million Indian voters braved intense heat waves to cast their votes in 1.2 million polling stations. It was, simply put, the largest exercise of the democratic franchise the world has ever seen. 

For the past two election cycles, the BJP has won an absolute majority of seats in India’s parliament, allowing the party to form a government without the complications of sharing power.

This time, the BJP won only 240 of the 272 seats required to form a government, an opening for members of the allied parties to join the government and influence policy. These allies have already endorsed the economic policies of the BJP, but the question is what concessions they will require for their support.

The Prime Minister and his party will need to compromise, not always on policies specifically, but on how the impact of those policies is distributed across the diverse interests of the nation. That will test the flexibility of a BJP leadership used to running the government by itself.

Regional coalition partners, especially from underperforming states including Andhra Pradesh and Bihar, will be able to exert more influence than what was previously possible, including on economic reforms, investment policy, taxes, and regulation.  

Implications for Business

How successful the Prime Minister is at convincing rivals to continue embracing his agenda over the five-year term will have implications for business and for anybody investing in India, which remains one of the world’s biggest growth stories.

Foreign investors will want to monitor the policy signals as they emerge as the new government takes shape. Debates will ensue over tax reform, infrastructure investments, funding for local governments, power distribution, and the revamp of India’s all-important railway system.

Of particular interest to foreign investors will be foreign direct investment. Before the election, BJP representatives had targeted FDI growth to levels as high as $100 billion, up from current levels of roughly $70 billion.

India has had some success in positioning itself as an alternative target for supply chain investment. One example: Bloomberg reported in April that Apple now makes 14% of its iPhones in India, or about one in seven of the devices.

Privatization will be another theme, as the Indian government seeks to divest from public sector companies. The government in 2021 allowed the sale to foreign investors of up to 20% of Life Insurance Corporation of India, a major government insurer, and more such opportunities are expected to follow sales in sectors from materials to energy, aeronautics, transportation, and tourism, according to law firm White & Case.

Meanwhile, India’s ties to the U.S. are set to deepen, and the two countries are drawn closer together through increasing people-to-people ties, shared values and norms, a common view of the Indo-Pacific, and shared apprehensions about China’s strategic intentions.

Those ties will include areas both strategic and economic: intelligence, maritime domain awareness, cybersecurity, counterterrorism, science, defense, supply chains, semiconductors, AI, life sciences, space, and regional coordination in the Middle East and Indo-Pacific.

About the authors

Ambassador (ret.) Atul Keshap

Ambassador (ret.) Atul Keshap

Ambassador (ret.) Atul Keshap serves at the U.S. Chamber of Commerce as President of the United States India Business Council, whose members are dedicated to the growth of commercial ties between the world's two largest democracies.

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Patrick Pitts

Patrick Pitts

Patrick Pitts is Director for South Asia at the U.S. Chamber of Commerce. He primarily works with the Chamber's U.S.-India Business Council (USIBC), U.S.-Bangladesh Business Council (USBBC), and regional programs, including Nepal, Sri Lanka, Bhutan, and the Maldives, helping companies navigate policy landscapes and serving as a trusted facilitator to improve trade and commercial ties.

Jay Sapsford

Jay Sapsford

Jay Sapsford is Senior Vice President for Global Risk Analysis and helps lead the Chamber’s efforts in assessing geopolitical and economic risks that impact the business community. He plays a key role in identifying global trends, risks, and opportunities on behalf of the Chamber’s membership.

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