Ties with Korea of central importance in India's 'Act East' policy
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.
Prime Minister Narendra Modi (6th from right) with Indian CEOs in Korea.
“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 positive vibes on both sides with Modi and President Park Geun-Hye sharing a commitment on further deepening and expanding bilateral relations.”
Dr. Jyotsna Suri, President, FICCI