India-Mexico Bilateral Trade and Investment

The strategic partnership between India and Mexico facilitates robust bilateral trade and investment, with key collaboration in IT, pharmaceuticals, and automotive sectors, leveraging Mexico’s access to North American markets and India’s growing industrial base.

India and Mexico share strong historical and strategic relations, underpinned by mutual interests and similar geo-climatic conditions, biodiversity, and cultural values. Diplomatic relations between the two countries were formally established in 1950, and 2020 marked the 70th anniversary of this diplomatic partnership. Over the years, both nations have expanded collaboration across trade, science, technology, and cultural exchange.

During Prime Minister Narendra Modi’s 2016 visit to Mexico, the countries agreed to elevate their diplomatic ties from a “Privileged Partnership” to a “Strategic Partnership,” reflecting a stronger commitment to enhanced cooperation.

Bilateral mechanisms such as the Joint Commission and the High-Level Group (HLG) on Trade, Investment, and Economic Cooperation facilitate structured collaboration across sectors. The HLG, established in 2007, emphasizes trade, investment, services, customs, and tourism, with six working groups focusing on key areas, including information technology, textiles, and biofuels. The 8th Joint Commission Meeting held in 2020 provided a platform to further explore trade opportunities and address ongoing market access challenges, underscoring both nations’ interest in deepening economic ties.

India-Mexico bilateral trade

Trade between India and Mexico has grown significantly, with both nations benefiting from diversified exports and imports. Per OEC data, in July 2024, India reported a positive trade balance with Mexico, exporting US$554 million in goods and importing US$274 million, leading to a trade surplus of US$280 million. India’s exports to Mexico increased by 25.9 percent from US$440 million in July 2023, while imports from Mexico rose by 64.3 percent from US$167 million, showcasing a robust bilateral trade momentum.

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In 2022, India exported US$5.3 billion worth of goods to Mexico, achieving an average annual growth rate of 5.06 percent from 2017 to 2022. On the other hand, Mexico’s exports to India were valued at US$4.26 billion in 2022, with a growth rate of 1.73 percent annually from 2017 to 2022.

Key export and import commodities

The following items were among the top products traded between India and Mexico:

India’s exports to Mexico

India’s imports from Mexico

Source: Trading Economics

Investment landscape

Mexico holds a significant position as an investment destination for India, primarily due to its strategic access to the United States-Mexico-Canada Agreement (USMCA) and broader Latin American markets. This access makes Mexico an attractive hub for Indian businesses, particularly as more countries apply pressure onto multinational firms to consider nearshoring.

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Indian companies have invested over US$4 billion in Mexico, with notable concentrations in information technology, pharmaceuticals, and automotive manufacturing. Major Indian IT and ICT companies such as TCS, HCL, Infosys, and Tech Mahindra have expanded their operations to Mexico, establishing regional hubs that cater to North and South American markets. Additionally, Indian pharmaceutical companies, including Lupin, Dr. Reddy’s Laboratories, and Zydus, have leveraged Mexico’s regulatory environment to gain a foothold in Latin America’s healthcare sector.

On the other hand, Mexican investment in India is estimated at around US$1 billion, with sectors like entertainment, automotive, IT services, and manufacturing being key areas of focus. Prominent Mexican companies operating in India include Cinépolis, Tremec, and Nemak, which have successfully established a market presence and continue to contribute to the Indian economy.

Prominent Mexican companies in India:

• Cinépolis (Entertainment, cinema chains)
• Tremec (Automotive)
• Nemak (Automotive parts, part of ALFA Group)
• Softtek (IT services)
• Metalsa/Orbia (Automotive)
• Ruhrpumpen (Manufacturing)
• KidZania (Entertainment, theme parks)
• Bimbo (Food and bakery)
• Great Foods & Beverages (Food)

Indian companies in Mexico:

• TCS, HCL, Infosys, Tech Mahindra, NIIT, Aptech, Hexaware, Cognizant, Wipro, BirlaSoft, Zoho (IT services)
• Lupin, Dr. Reddy’s Laboratories, Zydus, Hetero Drugs, Sun Pharma (Pharmaceuticals)
• Parle-G (Food processing), Olam Group (Food and agriculture)
• Sakthi Group, Motherson Technical Precision Mexico (Automotive parts)
• Hero MotoCorp (Automotive), Oyo Rooms (Hospitality)
• Flex Americas (UFLEX Ltd.), UPL Ltd. (Packaging and manufacturing)

Double Taxation Avoidance Agreement (DTAA)

India and Mexico signed a Double Taxation Avoidance Agreement (DTAA) to prevent double taxation and promote fiscal cooperation with respect to income taxes. This agreement enhances economic relations by establishing fair tax policies that reduce barriers to trade and investment. Key provisions include:

• Dividends, interest, and royalties: Taxation of dividends, interest, royalties, and technical fees in both the country of residence and the country of source, with a 10 percent tax cap in the source country if the beneficial owner resides in the other contracting state.
• Capital gains: Capital gains from share sales are taxable in the country of the company’s residence.
• Tax credits: To avoid double taxation, tax credits are provided for residents of one country on income earned in the other.
• Exchange of information: Information exchange provisions support investigations and revenue collection.
• Limitation of benefits: Anti-abuse provisions prevent misuse of DTAA benefits.

Methods for avoiding double taxation:

1. In India: Indian residents earning income taxable in Mexico can claim a tax deduction equal to the tax paid in Mexico, limited to the portion of Indian tax attributed to that income.
2. In Mexico: Mexican residents can claim tax credits for Indian taxes on income earned in India. If a Mexican company owns at least 10 percent of an Indian company, dividends from the Indian company include credits for taxes paid on the distributing company’s profits.
3. Exempt income provisions: In cases where income is exempt in one country, the income can still be accounted for when determining the tax on remaining income in that country.

Business outlook

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India and Mexico’s trade and investment relationship offers ample opportunities in sectors such as IT services, pharmaceuticals, automotive manufacturing, and food processing. Indian companies can leverage Mexico’s proximity to the U.S. and Latin American markets as a springboard for regional expansion under the USMCA framework. The ongoing trend of nearshoring and Mexico’s established trade network with the U.S. make it an ideal destination for Indian companies seeking to access North American markets cost-effectively.

Mexico’s commitment to foreign investment, coupled with a favorable regulatory environment and skilled labor force, aligns well with India’s growing industrial and services sectors. The enhanced strategic partnership between the two countries sets the stage for deeper economic collaboration and sustained investment, with benefits for both economies.

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