* Highest profile meeting between Modi and U.S. officials since visa ban
* Boycott stems back to deadly riots in Gujarat
* European countries have already held talks with man who could be next Indian prime minister
By Frank Jack Daniel
NEW DELHI, Feb 11 (Reuters) - U.S. ambassador to India Nancy Powell is to meet the politician who could become India's next prime minister, Narendra Modi, signalling a softening of the U.S. position since the Hindu nationalist was denied a visa over religious riots.
Modi's Bharatiya Janata Party (BJP) is considered the favourite to form a government after a general election due by May. He is also the chief minister of Gujarat state, where in 2002, Hindu mobs killed at least 1,000 people, most of them Muslims.
"We can confirm the appointment," a U.S. embassy spokesman said. "This is part of our concentrated outreach to senior political and business leaders which began in November to highlight the U.S.-India relationship."
The meeting, which could happen as soon as this week, will be the highest profile encounter between U.S. officials and Modi since the U.S. State Department revoked his visa in 2005 over the riots, which erupted after some Hindus were killed in a fire on a train.
The United States and India have developed a close commercial and strategic relationship over recent years and they share almost $100 billion worth of annual trade. The United States sees India as a regional counterweight to China.
Underscoring growing economic ties, the U.S. automaker Ford is due to open a plant in Gujarat this year. General Motors already has a production facility there.
But the India-U.S. friendship is often problematic, with disputes over market access and a recent row over the behaviour of an Indian diplomat in the United States damaging sentiment in both countries.
The change in the U.S. position on Modi is likely to anger rights groups and members of the Muslim community who say Modi allowed or even actively encouraged attacks on Muslims in the 2002 riots.
Modi has always denied the accusations, and a Supreme Court inquiry found no evidence to prosecute him.
Britain became the first European country to end an informal boycott on meeting Modi, which had been in place since the riots. Other European countries followed suit last year.
The U.S. consul general met Modi two years ago, and Republican lawmakers recently visited Gujarat and invited him to the United States. However, as of last year the U.S. State Department said it had not moved to reconsider its stance on the visa.
In January, the U.S. Commission on International Religious Freedom, a government agency which recommended that a visa be denied to Modi in 2005, told Reuters it had not changed its position.
Powell will travel to Gujarat's capital, Gandhinagar, to meet Modi in his office, an aide of the candidate told Reuters. It was not clear what would be discussed, but the meeting could happen on Thursday or Friday, a Gujarat official said.
The Hindustan Times newspaper cited a BJP leader as saying the talks would focus on bilateral ties and not Modi's U.S. visa, which is a sensitive subject among his supporters.
Senior BJP leader Yashwant Sinha, who is seen a possible candidate for finance minister in a Modi government, was last year quoted by media as saying India should cancel U.S. President Barack Obama's visa to India if he did not come to Delhi to hand over a visa to Modi.
India and the United States are working to repair the damage done to ties by the recent row over the arrest and strip search of an Indian diplomat in New York, which led to the cancellation of high-level visits and the downgrading of privileges for U.S. envoys in India.
Adding another irritant to the relationship, on Monday, the United States said it would take India to the World Trade Organization to gain a bigger foothold for U.S. manufacturers in its fast-growing solar products market.
Opinion polls show Modi's BJP has the edge in the election race but is unlikely to get a majority and may struggle to win enough seats to form a stable coalition government.