State by State: India and California Trade

June 26, 2015 Posted by India Briefing Reading Time: 5 minutes

California is the most populous U.S. state and the third largest state by area. The ‘Golden State’ owns three of the largest seaports in the world, making it the Pacific Rim’s global gateway and the number one state in the U.S. for attracting foreign direct investment.

California has the world’s eighth-largest economy, overtaking Italy with a GDP of US$ 2.31 trillion in 2014. The state is considered the nation’s leader in industries such as agriculture, pharmaceutical, finance, computer technology, aerospace technology, film and entertainment industry as well as tourism.

Trade and Exports

California is the largest U.S. state exporter to India. In 2014, California exports were approximately US $ 5.28 billion, an increase of 0.23 percent from 2013. However, over the span of the past decade (2005-2014), exports from California to India have risen by 393 percent. Of the total US $21.63 billion worth of U.S. exports to India, 24.4 percent come from California alone.

California is home to a large variety of industries. Some of the most noted companies headquartered in California are Google, Apple, Facebook, Chevron , Walt Disney Company, McKesson, and Hewlett-Packard. The state’s top exports include computers processors, civilian aircraft parts, and almonds while its top imports include crude oil, passenger vehicles and mobile phones.

California also has three of the largest ports in the U.S. as well as two of the busiest airports in the nation – Los Angeles International and San Francisco International. In regards to India, California’s location on the Pacific Coast makes it ideal to receive many trans-Pacific imports, including those originating in India. Additionally, according to the 2010 census, there are approximately 528,000 members of the Indian diaspora in California, more than any other state in the US.

Investment Opportunities

Electronics Manufacturing

Some of the most notable electronics firms are based in California. Apple Computers and Intel, two large electronics producers, are headquartered in California, along with numerous other companies. Recently, Foxconn Technology Group, an electronics manufacturer for Hewlett-Packard and Apple, announced that it would be opening more factories in India. It is possible that other companies may follow: Taiwan-based Quanta are also looking to commence operations in India.

India offers comparatively low labor costs and a business-friendly government that is determined to move manufacturing to the country. The vast majority of India’s demand for electronics is met by imports; however, the government has crafted incentive schemes and infrastructural projects to boost the country’s electronics manufacturing capacity. With labor and production costs continuing to rise in China, it is likely that more electronics companies may move production to India.

RELATED: Pre-Investment and Entry Strategy Advisory

Information Technology

California is known world-wide for its innovative and important technology firms. Numerous start-ups – along with Yahoo, Apple, Oracle and Google – are headquartered within the Silicon Valley region. However, many of these firms outsource work to India or open back office locations in India. India currently has a large number of skilled computer engineers and administrative support specialists that can perform jobs for a fraction of U.S. costs.

California-based Cisco, Oracle and Intel have large-scale operations in India. The cities of Bangalore and Hyderabad continue to offer opportunity for investors with many tech firms, and industrial parks present. However, many foreign companies are also examining opportunities to outsource business process outsourcing (BPO) services to rural India to save further on labor and infrastructural costs.

Agriculture

California is one of the largest Agriculture-producing regions in the world. California produces a significant amount of U.S. agriculture, and also continues to be a primary exporter of dried fruits, nuts and wines. With a growing consumer market – particularly for dried fruit and nuts, and increasingly wine – India can be a viable trade partner for California. Meanwhile, the increased cost of agricultural production in California positions India as less expensive source of production for Asian markets.

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 California-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 California-Asia trade data, please see our related 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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