Korea's 'Post-China' India Exports Decline Since 2018... Need to Overcome Stagnation Phase

[Asia Economy Reporter Jeong Hyunjin] As India rises as a post-China economic powerhouse, concerns have been raised about the lack of economic exchange between the two countries, with South Korea's exports to India declining since 2018 despite India's growth as a major economy.

On the 10th, the Federation of Korean Industries (FKI) analyzed South Korea's exports to India and Korea's market share in India's import market. According to the analysis, India, ranked as the world's 10th largest importer in 2019 (USD 483.3 billion, approximately KRW 569 trillion), has not yet seen South Korea's export volume recover to the pre-COVID-19 pandemic level of the same period in 2019 during the first nine months of this year.

South Korea's exports to India, which were around USD 11.6 billion in 2016, grew to USD 15.06 billion in 2017 and USD 15.61 billion in 2018, but then sharply declined to USD 15.1 billion in 2019 and USD 11.94 billion in 2020. Notably, from January to September this year, exports decreased by 3.5% compared to the same period in 2019 before the pandemic, contrasting with a 16.5% increase in exports to South Korea's top 20 export destinations.

The FKI analyzed that "the sluggishness in South Korea's exports to India this year is due to the delayed economic recovery caused by India's second wave of COVID-19 and regional lockdown measures, along with India's continued import restrictions on key export items such as chemicals, steel, and plastics."

Last year, India imposed a total of 34 import restrictions on South Korea, accounting for about 15% of all global import restrictions applied to South Korea, which is a relatively high proportion. Currently, India actively utilizes trade remedy measures such as anti-dumping duties and countervailing duties. In particular, India tends to initiate investigations by accepting domestic producer complaints under the pretext of protecting its domestic industries against surges in imports.

As a result, South Korea's exports to India in three major affected sectors?steel (5 cases), chemicals (11 cases), and plastics & rubber (3 cases)?have been declining since peaking in 2018. Excluding mineral resources, South Korea's market share in India's top five import items (based on HS2 classification) has also shown a clear downward trend since 2017-2018. South Korea's market share in India's import market has stagnated at the low 3% range since 2018.

Kim Bongman, Director of International Cooperation at the FKI, stated, "The Narendra Modi government in India aims to realize the Manufacturing 2030 vision to build a global factory comparable to China by 2030 and to alleviate chronic trade deficits. Therefore, India's foreign policy will continue to take a regulatory direction." He added, "Our trade authorities must promptly conclude the revision negotiations of the Korea-India Comprehensive Economic Partnership Agreement (CEPA) to overcome the current stagnation phase." He further emphasized, "Trade authorities should strive to expand CEPA tariff concessions focusing on items where Korea is at a disadvantage compared to the Japan-India CEPA, further reduce agreement tariffs, relax strict rules of origin criteria, and work toward easing India's import restrictions on South Korea."

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