Ties with Korea of cen­tral im­por­tance in In­dia's 'Act East' pol­icy

FICCI Business Digest - - Contents -

In­dia-Korea trade is just about US$17 bil­lion, much smaller than the com­bined size of our two economies. It also does not ad­e­quately re­flect the strong eco­nomic ties that we have through CEPA and now Re­gional Com­pre­hen­sive Eco­nomic Part­ner­ship (RCEP). The vol­ume of trade can be scaled up sev­eral fold, tak­ing ad­van­tage of the com­ple­men­tar­i­ties in the two economies. In­dia of­fers a large do­mes­tic mar­ket, which is among the fastest grow­ing in the world. It has a young de­mog­ra­phy. Its next phase of growth will be driven by huge in­vest­ment in in­fras­truc­ture. It is also go­ing to be a global hub for manufacturing, thus of­fer­ing Korean busi­nesses, a base to ser­vice other mar­kets of the re­gion and the world. To give a fil­lip to In­dia-Korea trade and in­vest­ment ties, FICCI mounted an 11-mem­ber In­dia's CEOs del­e­ga­tion, led by Ku­mar Man­galam Birla, Chair­man, Aditya Birla Group, to Korea from May 18-20, 2015.

While ad­dress­ing the VIP ses­sion of the In­dia-Korea CEOs Fo­rum in the pres­ence of the Pres­i­dent of the Re­pub­lic of Korea, Park Geun-hye and Prime Min­is­ter of In­dia, Naren­dra Modi, Birla said, Korea is one of the very few coun­tries with whom In­dia has signed a Com­pre­hen­sive Eco­nomic Part­ner­ship Agree­ment, which was signed in 2009. “I be­lieve the in­creased eco­nomic, trade and in­vest­ment en­gage­ment will prove to be im­mensely ben­e­fi­cial to both coun­tries, in the years to come. This will also com­ple­ment our strong cul­tural and so­cial ties, given our com­mon Asian her­itage. Un­der Prime Min­is­ter Modi,

In­dia's erst­while 'Look East' pol­icy of the 1990s has been trans­formed and en­hanced to 'Act East' pol­icy, and the Korean re­la­tion­ship is of cen­tral im­por­tance in that con­text,” he added.

He said that in the com­ing years In­dia is poised to be one of the fastest grow­ing economies, with growth driven by its young de­mog­ra­phy and eco­nomic re­forms. The size of the con­sumer mar­ket as well as in­vest­ment op­por­tu­ni­ties will grow ex­po­nen­tially in the com­ing decades. He high­lighted the fol­low­ing five ar­eas, where In­dia and Korea have much to gain through a mu­tu­ally ben­e­fi­cial part­ner­ship. The first area is In­dia's in­fras­truc­ture po­ten­tial. The next phase of high growth in In­dia will be driven by in­vest­ment in in­fras­truc­ture. The es­ti­mated de­mand is about US$1 tril­lion in five years, split be­tween elec­tric­ity, high­ways, bridges, ports, air­ports, rail­ways, avi­a­tion, telecom and en­ergy. The in­vest­ment in in­fras­truc­ture has to rise from about 6% at present to 9% of GDP. With In­dia's rapid ur­ban­i­sa­tion, the de­mand for ur­ban in­fras­truc­ture, in­clud­ing high speed trans­porta­tion, hous­ing, san­i­ta­tion and waste man­age­ment, will also rise sub­stan­tially. In­fras­truc­ture is one of Korea's forte.

In­dia's manufacturing pol­icy aims to in­crease the share of manufacturing in GDP from around 15% to 25% in the next 10 years. This process will be aided by our young de­mog­ra­phy, fo­cus on skill for­ma­tion, eco­nomic re­forms to im­prove the ease of do­ing busi­ness, and im­prove­ment in in­fras­truc­ture. “I be­lieve this is a win-win propo­si­tion es­pe­cially for Korean ma­jors who can use their base in In­dia, to serve the large do­mes­tic mar­ket as well as their global cus­tomers. Al­ready com­pa­nies like Hyundai, Sam­sung and LG have sig­nif­i­cant in­vest­ment in In­dia, and have be­come housh­old pop­u­lar brands. Hyundai also ex­ports ve­hi­cles out of In­dia. Manufacturing can be ex­po­nen­tially in­creased not just in con­ven­tional sec­tors like tex­tiles, but also in elec­tron­ics, telecom, au­to­mo­biles and ship-build­ing. There are huge op­por­tu­ni­ties in the defence and aero­space sec­tor,

and the re­cent visit to Seoul, of our Defence Min­is­ter Mr. Manohar Par­rikar il­lus­trates its im­por­tance,” said Birla.

The third area is financial com­ple­men­tar­ity. Korean in­vestible funds, in­clud­ing its large stock of for­eign ex­change and pen­sion funds need long term growth in­vest­ment des­ti­na­tions. In­dia's cap­i­tal mar­kets and also its in­fras­truc­ture projects need fi­nance. The to­tal in­vest­ment needed in In­dia's in­fras­truc­ture is US$1 tril­lion, of which 750 bil­lion is in long term debt. This af­fords a prof­itable op­por­tu­nity for long term funds like pen­sion funds to be de­ployed from Korea.

The fourth is bi­lat­eral trade. Com­pared to the com­bined size of the two economies, which is nearly US$ 3.5 tril­lion, the size of Indo-Korean trade is minis­cule at just about US$17 bil­lion. With the sign­ing of a com­pre­hen­sive eco­nomic part­ner­ship agree­ment, surely we can see dou­bling if not tripling of trade be­tween the two coun­tries. In­dia can surely in­crease its ex­port of IT ser­vices and pharmaceuticals. Korean stu­dents go to English speak­ing coun­tries for higher ed­u­ca­tion. They are wel­come to come to In­dia as well. The Bud­dhist cir­cuit tourism in In­dia also has great po­ten­tial. From the Korean side, I en­vis­age more ex­port po­ten­tial in cap­i­tal goods, ship build­ing, rail­ways and in­fras­truc­ture re­lated ser­vices. In­dia and Korea have a great cul­tural match, and have com­mon Asian her­itage.

He said In­dia and Korea have aligned in­ter­ests when it comes to global is­sues too. “We are both com­mit­ted to com­bat­ing cli­mate change through poli­cies to re­duce car­bon diox­ide emis­sions and to in­crease pro­duc­tion of re­new­able en­ergy. We be­lieve in the prin­ci­ple and prac­tice of sus­tain­able de­vel­op­ment. I be­lieve Korea has achieved 60% for­est cover through en­vi­ron­men­tally sound poli­cies, which In­dia too can em­u­late. Even in other global fo­rums like G20, our coun­tries have com­mon­al­ity of views, and al­ways work to­gether,” stated Birla.

“South Korea's open mar­ket poli­cies, tech­no­log­i­cal ad­vance­ment and in­no­va­tion find res­o­nance in In­dia's pur­suit of vig­or­ous eco­nomic re­forms, in­dus­tri­al­i­sa­tion, and a proac­tive 'Act East' pol­icy, which makes Korea an im­por­tant part­ner. There are...

Prime Min­is­ter Naren­dra Modi (6th from right) with In­dian CEOs in Korea.

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