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The new decade could belong to Indo-Korean partnership as the two nations look to more than double bilateral trade to $ 50 billion by 2030.
In this new decade which is sure to herald structural realignment of relationships between global powers, India’s bilateral ties with South Korea offers the best potential for growth.
It is no secret that India is looking to dial down its dependence on China–its biggest trading partner with bilateral trade at $ 82 billion, it also has a steep deficit of almost $ 50 billion. Its massive Atmanirbhar programme promoting self reliance and local manufacturing is also aimed towards that objective. But not all of what it imports from China can be localised in a jiffy and South Korea and Japan to a relatively lesser extent are the two primary candidates that can fill that void.
It is with this in mind that Riva Ganguly Das, Secretary (East) at India’s Ministry of External Affairs and Choi Jung-kun the first Vice Foreign Minister of South Korea held virtual consultations on December 23 that covered issues related to bilateral cooperation. The interaction happened two months after India’s Prime Minister Narendra Modi made a telephone call to Korean President Moon Jae-In where the two leaders had discussed diversification of international value chains and ways to enhance bilateral trade.
In 2011 trade between the two countries had crossed $ 17 billion registering a 40 percent growth over a two-year period but declined the following year to $16.68 billion and could tally only $18.13 billion by fiscal 2015. Thereafter it declined again to $16.56 billion in 2015-16 and only inched upwards to $16.82 billion in 2016-17. It has grown again since then and in 2019-20, it stood at over $ 20 billion. It is positioned well to take off this decade and the target of $ 50 billion for 2030 may be achieved before that deadline.
The optimism stems from the fact that in the last few years, big Korean firms like Samsung, LG, Hyundai and Kia have increased their presence in the Indian market. In 2018, Samsung started world’s largest mobile manufacturing facility in Noida with an investment of Rs 5000 crore and a capacity of 120 million units per annum.
“Today is an important day in making India a manufacturing hub. The investment of Rs 5,000 crore [$735mn] by Samsung will strengthen India-South Korea relations,” Prime Minister Modi had then said. “Make in India initiative is getting support from all across the world. India has become number 2 in mobile phone manufacturing.”
The next year, Kia–a subsidiary company of Hyundai, opened its 300,000 unit per annum car factory in Andhra Pradesh built with an investment of $ 1.1 billion. Hyundai already has two mega factories in Chennai that churn out over 700,000 cars every year not only for the domestic market but also for exports to over 100 countries across the world.
These are only the big ones. There are 600 other large and small Korean firms, which have offices in India. The prospect of Korean firms shifting their base from China and heading towards India has only increased due to the need for companies to de-risk their strategies in the post pandemic era. Samsung has recently followed its 2018 factory with another mega Rs 4,825 crore investment towards relocation of its mobile and IT display production unit from China to Uttar Pradesh. Scores of other companies are also looking to do the same.
“We see a lot of technology tie-ups and collaboration happening between Indian firms and companies from Japan, South Korea and Taiwan, because right now India does not have technology, which is the biggest challenge it faces in import substitution. A few months back, we had signed an MoU with the Korean Small & Medium Enterprises Association to work together,” said Animesh Saxena, President, FISME. “Korean MSMEs see a golden opportunity in collaborating with Indian firms.
It isn’t that the relationship has no creases. The FTA between the two countries that was signed between 2010 is currently under review by India along with other similar agreements with Japan and ASEAN as they are believed to have benefited the other party more. South Korea enjoys a trade surplus of $ 10 billion with India.
In the pandemic scarred worldview though, the focus is more on reducing dependence on China. It is a relationship of equals where Korea brings in the technology and capital while India provides the market.