State by State: India and Minnesota Trade
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.
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.
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 firstname.lastname@example.org.
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 email@example.com or visit www.dezshira.com.
Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.
An Introduction to Doing Business in India 2015 (Second Edition)
Doing Business in India 2015 is designed to introduce the fundamentals of investing in India. As such, this comprehensive guide is ideal not only for businesses looking to enter the Indian market, but also for companies who already have a presence here and want to keep up-to-date with the most recent and relevant policy changes. We discuss a range of pertinent issues for foreign businesses, including India’s most recent FDI caps and restrictions, the key taxes applicable to foreign companies, how to conduct a successful audit, and the procedures for obtaining an employment visa.
Using India’s Free Trade & Double Tax Agreements
In this issue of India Briefing magazine, we take a look at the bilateral and multilateral trade agreements that India currently has in place and highlight the deals that are still in negotiation. We analyze the country’s double tax agreements, and conclude by discussing how foreign businesses can establish a presence in Singapore to access both the Indian and ASEAN markets.
Passage to India: Selling to India’s Consumer Market In this issue of India Briefing magazine, we outline the fundamentals of India’s import policies and procedures, as well as provide an introduction to engaging in direct and indirect export, acquiring an Indian company, selling to the government and establishing a local presence in the form of a liaison office, branch office, or wholly owned subsidiary. We conclude by taking a closer look at the strategic potential of joint ventures and the advantages they can provide companies at all stages of market entry and expansion.
- Previous Article Where Are Indian States Putting Their Money?
- Next Article India Regulatory Brief: 9,000 NGO Licenses Revoked, Maharashtra to Make Starting a Business Easier