<韓銀> "India Likely to Lead Global Economic Growth... South Korea Must Prepare"

Bank of Korea Overseas Economic Focus

[Image source=EPA Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] The Bank of Korea emphasized on the 16th that India’s economy is highly likely to gain long-term spillover benefits following the COVID-19 pandemic, and stressed the need to diversify South Korea’s global value chain (GVC) to India.

In its 'Overseas Economic Focus' report released that day, the Bank of Korea stated, "As the Indian government strengthens efforts to promote manufacturing, and amid the global supply chain restructuring triggered by the US-China conflict and COVID-19, there is a growing possibility that production bases will shift to India, centered around the United States."

In the short term, the Bank of Korea forecasted that India’s economic recovery would be slow after the second half of this year due to the spread of COVID-19. India implemented strict lockdown measures from March 25 to May 3 in response to the pandemic. Public transportation was suspended, and service businesses and manufacturing plants ceased operations. Recently, the daily average of new confirmed cases in India has risen to 55,000, making it one of the fastest-growing countries alongside the United States (57,000) and Brazil (43,000).

Nevertheless, the Bank of Korea still views India’s medium- to long-term growth prospects as favorable. A major advantage is the rapidly expanding domestic market driven by a continuously growing population. According to the United Nations (UN) 2019 projections, India is expected to surpass China in population by 2027.

The Indian government is pursuing a manufacturing-centered growth strategy, expanding its role as a global alternative production base.

Due to the US-China trade conflict and COVID-19, signs have emerged of diversifying production bases to countries other than China to secure the stability of global supply chains, leading to an increase in companies expanding production volumes within India. For example, Apple in the United States is promoting a plan to shift about 20% of its existing production volume from China to India, driven by the need to diversify its supply chain and incentives provided by the Indian government. Accordingly, Apple’s new contract manufacturer, Taiwan’s Pegatron, is in the process of establishing a factory in India, and Foxconn is reportedly planning to invest up to $1 billion to expand its production facilities in India.

The Bank of Korea stated, "In the medium to long term, with improvements in manufacturing competitiveness, the strengths of a huge consumer market, and strengthened cooperation with the United States, India’s role as an alternative production base will further expand," adding, "Major institutions expect India to emerge as the world’s third-largest economy within the next decade."

This content was produced with the assistance of AI translation services.