State by State: India and Minnesota Trade

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Known as the “Land of 10,000 Lakes”, Minnesota is the second northernmost state in the U.S. In 2013, the state’s real GDP reached US$312 billion, up 2.8 percent from the previous year and significantly outpacing the 1.9 percent national increase. Major industries in Minnesota include medical devices, biomedical technology, renewable energy, environmental technologies, agribusiness as well as financial and insurance services.

Trade and Exports

Exports from Minnesota to India have boomed since 2005, almost tripling from US $86.9 million to $321.9 million in 2014. This means that India is Minnesota’s second biggest export partner of all BRICS countries (Brazil, Russia, India, China and South Africa), following only China. Last year alone saw a 70 percent increase in exports from Minnesota to India. If this trend continues, India could be well on its way to becoming Minnesota’s next big Asian trade partner.

The biggest contributor to Minnesota-India trade relations is paper exports, which account for 47 percent of the state’s exports to India. Minnesota’s forestry industry could have a bright future if growing economies like India continue to provide demand. After paper, non-electrical machinery, computer and electrical products are the next biggest exports to India. Overall, however, Minnesota is a leading exporter of a number of products that are experiencing increased demand in the Indian marketplace. In particular, Minnesota has established itself as a prominent exporter of civilian aircraft and vehicle parts as well as healthcare products, primarily medical devices.

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Investment Opportunities

Prime Minister Narendra Modi’s Make in India campaign, which is designed to encourage manufacturing in India, presents a number of opportunities for Minnesotan companies. Meanwhile, some Indian companies have begun to invest in Minnesota to support economic development back home. For example, the Essar Group, an Indian multinational conglomerate, recently invested over $1.6 billion to acquire Minnesota Steel LLC, forming a wholly owned subsidiary called Essar Steel Minnesota LLC (ESML). ESML has created a taconite mine and pellet plant in Minnesota; a study by University of Minnesota- Duluth projects this project to boost Minnesota’s economy with $350 million in annual spending. The size of this investment illustrates the level of demand for raw resources in India.

The Indian government has also focused on improving the ease of doing business to allow foreign investors to access India’s rapidly growing market. For example, the government recently opened its medical devices industry to 100 percent foreign direct investment (FDI). The medical devices market in India is valued at $6.3 billion; multinational firms supply an estimated 80 percent of India’s medical devices. Optimistic experts expect this industry to be worth $50 billion by 2025. To achieve this, India will require significant investment, technical guidance and strategic partners from abroad – all of which represent opportunities for Minnesotan healthcare companies.

Separately, India remains a global leader in business process outsourcing (BPO). Minnesota-based Target Corporation has maintained a back office in India for a number of years, but small and medium sized enterprises (SMEs) are increasingly taking advantage of the low operating costs for back office support from India. Another area where Minnesota is primed to take advantage of Indian economic growth is in agricultural exports. Major Minnesota-based multinationals like General Mills and Cargill already have divisions in India, but smaller food companies expect to find more opportunities to serve India’s growing middle class in the near term.

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Tax Treaty – U.S. Trade with India

The U.S. has signed a Double Tax Treaty with India. This can reduce tax burdens under certain circumstances in both trade and any India legal establishment. Please seek professional advice for specific India investment requirements.

Further Support from Dezan Shira & Associates

Dezan Shira & Associates can service Minnesota-based companies that are looking to develop their Asia operations. The firm can help companies establish a direct office in the region and can guide them through the affiliated tax, legal and HR issues that come with doing so. To arrange a free consultation, please contact our U.S. office at usa@dezshira.com.

For further Minnesota-Asia trade data, please see our articles on trade with ASEAN, China and Vietnam.

 

About Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email india@dezshira.com or visit www.dezshira.com.

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