{"id":2201785,"date":"2023-07-25T17:30:42","date_gmt":"2023-07-25T08:30:42","guid":{"rendered":"https:\/\/koreapro.org\/?p=2201785"},"modified":"2023-07-26T19:19:34","modified_gmt":"2023-07-26T10:19:34","slug":"how-indias-economic-rise-portends-a-new-era-of-indo-korean-relations","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2023\/07\/how-indias-economic-rise-portends-a-new-era-of-indo-korean-relations\/","title":{"rendered":"How India\u2019s economic rise portends a new era of Indo-Korean relations"},"content":{"rendered":"

India is projected to become the third-largest economy globally by the end of the decade, surpassing Germany and Japan, according to <\/span>Morgan Stanley<\/span><\/a>, and it is <\/span>expected to overtake<\/span><\/a> the U.S. by 2075. This global economic shift brings to the fore a significant potential for strengthening strategic partnerships, particularly with South Korea.<\/span><\/p>\n

However, this prospective partnership is contingent upon a mutual understanding and practical realization of each other\u2019s potential, coupled with strategic actions from both governments.<\/span><\/p>\n

India\u2019s rapid growth, the fastest among emerging markets and developing economies, is anticipated to continue in the foreseeable future. This pace was corroborated by the World Bank in its <\/span>Global Economic Prospects 2023 report<\/span><\/a>. The international financial institution forecasts India\u2019s economic growth at 6.3% in the fiscal year 2023-24, followed by slightly faster growth of 6.4% in 2024-25.<\/span><\/p>\n

These projections gain added significance against the backdrop of the U.S.-China trade friction, which is starting to constrict the global economic environment. The ripple effects of this geopolitical strain are being felt in economies closely linked to these powers, such as South Korea. In particular, South Korean <\/span>exports<\/span><\/a> to China in sectors such as electric vehicles (EVs) and semiconductors have been negatively impacted.<\/span><\/p>\n

Caught in the crossfire of escalating U.S.-China trade tensions, South Korea is actively seeking partners in the Indo-Pacific region. In this regard, India, given its rapidly ascending economy, emerges as an appealing candidate.<\/span><\/p>\n

FULL POTENTIAL<\/b><\/p>\n

South Korea\u2019s automotive success in India offers a compelling case study. This year, India surpassed Japan, becoming the <\/span>third-largest auto market<\/span><\/a> globally, with 4.25 million cars sold. Hyundai and Kia, two South Korean automakers, have carved out a significant share in this challenging market. Both companies rank in the <\/span>top five<\/span><\/a>, commanding 14.54% and 5.98% of India\u2019s auto market share, respectively.<\/span><\/p>\n

Entering India in 2019, Kia marked a significant milestone by reaching <\/span>one million car productions<\/span><\/a>, a testament to its adaptability to Indian consumers and market requirements. Following its success in the internal combustion engine segment, its strategy aligns with the Indian government\u2019s <\/span>target<\/span><\/a> of achieving 70% EV sales for commercial vehicles and 30% for privately-owned cars.<\/span><\/p>\n

This year, Hyundai pledged to <\/span>invest<\/span><\/a> $2.45 billion in the EV ecosystem, with Kia <\/span>announcing<\/span><\/a> a $2 billion commitment to R&D, manufacturing and infrastructure development. As per a Bain & Co <\/span>report<\/span><\/a>, by 2030, EVs will comprise 15 to 20% of the passenger vehicle market share.<\/span><\/p>\n

South Korea elevated its relations with India to a special strategic partnership during the Park Geun-hye administration. The objective was to diversify ties, emphasizing the defense, technology and energy sectors.<\/span><\/p>\n

The following Moon Jae-in administration further bolstered this bond by expanding diplomatic and economic ties under his New Southern Policy. In 2018, both nations <\/span>agreed<\/span><\/a> to increase trade levels to $50 billion by 2030, underlining the importance of solid economic ties.<\/span><\/p>\n

\"\"

Domestic KIA automobile on display at the 2011 Seoul Motor Sho, Mar. 31, 2011 | Image: Republic of Korea via Flickr<\/a><\/em><\/p><\/div>\n

STAGNATION<\/b><\/p>\n

However, recent years have seen economic ties stagnate, with a trend of <\/span>increasing trade imbalance<\/span><\/a> \u2014 $7.5 billion in 2021 and $10 billion in 2022 \u2014 favoring the ROK. Additionally, the Comprehensive Economic Partnership Agreement (CEPA) negotiations have stagnated largely due to the pandemic.<\/span><\/p>\n

This <\/span>stagnation<\/span><\/a> was apparent during the ninth CEPA round of negotiations when issues pertaining to market access, tariffs and non-tariff barriers were raised. This has created what could be seen as a \u201c<\/span>strategic gap<\/span><\/a>.\u201d This gap, however, could be bridged with technology partnerships focusing on emerging sectors, specifically EVs, semiconductors and clean energy technology.<\/span><\/p>\n

In May, <\/span>discussions<\/span><\/a> were held between India\u2019s finance minister and her South Korean counterpart to deepen economic ties through increased infrastructure projects in India via the Economic Development Cooperation Fund (EDCF) framework agreement. The aim is to broaden the agreement’s scope to include new projects in the green, digital and health sectors with a proposed budget of $4 billion.<\/span><\/p>\n

The <\/span>first project<\/span><\/a> under the EDCF, a $191 million (245 billion won) loan-funded traffic management project, was initiated after India <\/span>designated<\/span><\/a> Korea as its Official Development Assistance Partner in 2016.<\/span><\/p>\n

In Nov. 2022, Korean deputy trade minister Jeong Dae-jin, addressing the Korea International Trade Association-Confederation of Indian Industries forum, <\/span>stated<\/span><\/a> that the combination of the ROK\u2019s robust manufacturing foundations and India\u2019s information and communications technology capabilities could drive the growth of future industries.<\/span><\/p>\n

DEEPENING ECONOMIC RELATIONS<\/b><\/p>\n

The future of Indo-Korean relations holds significant potential, with experts projecting it to be among the most impactful partnerships in the Indo-Pacific region, contingent upon strategic actions. This relationship extends beyond most other Asian connections India maintains, except for its ties with Japan.<\/span><\/p>\n

However, the success of this relationship hinges on the political leadership of both countries, which bear the responsibility of providing clear policy direction to their respective industries.<\/span><\/p>\n

India has made strides in leveraging the China Plus One strategy through the Production Linked Incentive scheme. This initiative has attracted global giants such as <\/span>Apple<\/span><\/a> and <\/span>First Solar<\/span><\/a> and has <\/span>sparked discussions<\/span><\/a> with Tesla regarding the establishment of an EV factory in the country.<\/span><\/p>\n

Yet the trajectory of these partnerships will broadly be defined by businesses. To ensure their success, these businesses require well-articulated policies and strategic signals from their governments \u2014 an element currently lacking in the Indo-Korean relationship.<\/span><\/p>\n

A holistic approach involving both nations\u2019 governments and industries is crucial to strengthen economic ties. This collaborative model has been successfully implemented by the U.S. and Japan, where businesses have taken full advantage of initiatives launched by their governments, thereby deepening connections on both governmental and industrial fronts.<\/span><\/p>\n

The Indian Ministry of Commerce and Industry has <\/span>identified<\/span><\/a> 12 priority countries, including South Korea, to promote trade and investments. Further, individual Indian states are vying for Korean investments. For instance, delegations from the Indian states of <\/span>Andhra Pradesh<\/span><\/a> and <\/span>Uttar Pradesh<\/span><\/a> recently traveled to the ROK to meet officials and top executives from businesses such as Samsung and Daesang.<\/span><\/p>\n

If the <\/span>goal<\/span><\/a> is to bolster economic relations, the onus lies on the governments. India must take steps to attract Korean businesses and <\/span>address<\/span><\/a> the challenges Korean companies operating in the country face. Conversely, South Korea must commit to enhancing its strategic partnership, recognizing the potential of bilateral economic cooperation in promoting a resilient supply chain.<\/span><\/p>\n

Considering past precedents, it is unclear whether Seoul or New Delhi has the political capital required to reach out to each other.<\/span><\/p>\n

Edited by John Lee<\/span><\/i><\/p>\n

Business & Economy<\/span><\/a>Inter-Korean & Foreign Relations<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"

India is projected to become the third-largest economy globally by the end of the decade, surpassing Germany and Japan, according to Morgan Stanley, and it is expected to overtake the U.S. by 2075. This global economic shift brings to the fore a significant potential for strengthening strategic partnerships, particularly with South Korea. However, this prospective […]<\/p>\n","protected":false},"author":10207,"featured_media":2201790,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[21],"tags":[24,28],"yoast_head":"\nHow India\u2019s economic rise portends a new era of Indo-Korean relations - KOREA PRO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2023\/07\/how-indias-economic-rise-portends-a-new-era-of-indo-korean-relations\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How India\u2019s economic rise portends a new era of Indo-Korean relations - KOREA PRO\" \/>\n<meta property=\"og:description\" content=\"India is projected to become the third-largest economy globally by the end of the decade, surpassing Germany and Japan, according to Morgan Stanley, and it is expected to overtake the U.S. by 2075. 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