India-South Korea Trade Relations
The recent visit of the South Korean President to India resulted in multiple agreements across various sectors like trade, energy, technology, digital security, and more, aiming to enhance bilateral trade significantly.
- Target: Double bilateral trade from $27 billion to $54 billion by 2030.
- Agreements need to be backed by firm-level decisions and domestic regulatory alignment to be effective.
Economic Context of South Korea and Japan
Both South Korea and Japan are developed economies with significant outward orientation in trade and investments, contributing hugely to their GDP.
- South Korea's per capita GDP: $36,000.
- Japan's per capita GDP: $34,000.
- Trade accounts for 70-75% of South Korea’s GDP and 45-47% of Japan’s GDP.
- Both countries exhibit high R&D intensity and expertise in strategic technology domains.
Trade Agreements with India
India has trade agreements with both South Korea (since 2009) and Japan (since 2011), which have liberalized tariffs significantly.
- India reduced tariffs on over 85% of tariff lines.
- South Korea and Japan eliminated duties on 90-95% of goods over time.
- India faces trade deficits of $12-13 billion with Japan and $14-15 billion with South Korea.
Challenges and Opportunities
Despite improved market access, India faces internal challenges that hinder taking full advantage of trade agreements.
- Challenges: Uneven product quality, logistics inefficiency, and lack of integration into global value chains.
- Japan and South Korea benefit due to strong manufacturing ecosystems and advanced technology.
- Developed economies are attracted by India's growing market but possess stronger firms and better technology.
Conclusion
Trade agreements are necessary but not sufficient for economic gains. India must enhance domestic capabilities in manufacturing, export orientation, and regulatory efficiency to benefit from such agreements.
