* Highest-level US meeting with Modi in years
* Question of visa remains
* Comes at delicate time in relationship (Adds comment from source, poll details)
By Frank Jack Daniel
GANDHINAGAR, India, Feb 13 (Reuters) - With flowers, smiles and handshakes, the United States and the man tipped to be India's next prime minister ended on Thursday a long estrangement stemming from a spasm of Hindu-Muslim violence more than a decade ago.
The U.S. Ambassador to India, Nancy Powell, met opposition leader Narendra Modi on Thursday at his residence in Gandhinagar, the capital of Gujarat state, where he is chief minister.
It was the highest-profile encounter between U.S. officials and Modi since the State Department revoked his visa in 2005 over bloodshed in Gujarat three years previously.
The visit marked the end of a boycott of Modi, although there was no specific mention of his visa status. Officials and analysts said that if he was to become prime minister, the United States was unlikely to uphold its ban.
The U.S. embassy characterised the meeting as part of its "outreach" to leaders of India's main political parties before elections, which are due by May.
Powell's talks with Modi and others in Gujarat focused on the importance of the U.S.-India relationship, regional security, human rights, and U.S. trade and investment, it said in a statement.
But its chief significance was clear. Television footage showed Powell shaking Modi's hand and smiling, while he gave her a bunch of red and yellow flowers.
The meeting took place at a delicate time.
The two countries are developing closer commercial and strategic ties and bilateral trade is worth almost $100 billion. But their often volatile relationship has been strained by a trade dispute and a row over the arrest of an Indian diplomat in New York after she was accused of visa fraud and underpaying her maid.
Modi's Bharatiya Janata Party, or BJP, is considered the favourite to form a government after the general election. A new opinion poll released on Thursday showed the party widening the gap over its rivals, but still short of a majority.
"The guy would be prime minister and that's different from being chief minister. You can't shut out the prime minister of one of our largest allies and someone who frankly is very pro-American," a congressional source in Washington told Reuters.
Modi's record as chief minister of Gujarat has been overshadowed by the riots 12 years ago in which Hindu mobs killed at least 1,000 people, most of them Muslims. Rights groups and political rivals have long alleged he allowed or actively encouraged the attacks.
The violence erupted after 59 people, mostly Hindu pilgrims, were killed in a fire on a train.
Modi, a Hindu nationalist, has always denied accusations he allowed or encouraged the attacks on Muslims. A Supreme Court inquiry found no evidence to prosecute him.
VISA ON MERIT
BJP senior leader Arun Jaitley said the U.S. boycott of Modi had not been based on any evidence or court verdict but on "excessive propaganda".
"For us in the BJP, the meeting is a part of the diplomatic routine," he said in a statement.
The Congress party, who leads the ruling coalition, also appeared to play down a meeting which some interpreted as a sign that the United States expected Modi to win the election .
"Did we celebrate that he did not get visa? Are we going to be depressed that he got the visa?" Foreign Minister Salman Khurshid said.
The U.S. State Department said any application for a visa would be treated on its merits.
But the U.S. Commission on International Religious Freedom, a government agency which recommended that visas be denied to Modi in 2005, said it had not changed its position.
"Neither the passage of time nor any change in Mr. Modi's position in government absolves him and his government of their alleged involvement, negligence, and complicity in the 2002 violence," its chairman, Robert George, told Reuters.
Govinda Acharya of rights group Amnesty International said other foreign leaders accused of human rights violations often went to the United States.
"I would speculate that Modi, if he became prime minister, would be able to visit the United States with diplomatic immunity, but not for a private visit. He would certainly be able to come, I would imagine, to the United Nations."
Such a solution would be unacceptable to Modi, a source close to the leader said.
"He won't take a visa unless it's on his own terms," the source said. "He cannot be seen to be taking anything less than any other Indian leader took - his image is about making India strong."
Britain became the first European country to end the boycott on meeting Modi, which had been in place since the riots. Other European countries followed suit last year.
Republican lawmakers recently visited Gujarat and invited him to the United States.
U.S. automaker Ford is due to open a plant this year in Gujarat, where Modi has been praised by businessmen for cutting red tape. General Motors already has a production facility there.
Zahir Janmohamed, a rights activist who took part in the original campaign against Modi's visa in 2005, said he saw the rapprochement as pragmatic politics.
"I don't see this as a policy shift, because if you look at last year's State Department rights report, the U.S. still has some strong concerns about Modi. I think it's just a very practical thing the U.S. has to do." (Additional reporting by David Brunnstrom in Washington; Writing by Angus MacSwan; Editing by Raju Gopalakrishnan and Robert Birsel)