India-South Korea Trade Gap Widens To $14.7 Bn: Report
The report highlights key developments in South Korea’s economic landscape and growing trade ties with India
As trade between the two nations continues to expand, India’s exports to South Korea dipped to USD 6.41 billion in FY2024 from USD 8.1 billion in FY2022, according to a report by Rubix Data Sciences, a risk management and monitoring firm. The report titled ‘Rubix Country Insights’ stated that imports stood at USD 21.1 billion in FY2024 as against USD 17.5 billion in FY2022
Notably, India and Korea signed the Comprehensive Economic Partnership Agreement (CEPA) in 2010. With talks to upgrade the existing India-FTA, the last round of discussion was held in July 2024. India is concerned about its growing trade deficit with South Korea, which has risen from USD 9.4 billion in FY2022 to USD 14.7 billion in FY2024.
In response, while reviewing its Free Trade Agreement (FTA) with South Korea, India is seeking significant duty reductions on a wide array of exports, including agricultural products, textiles, pharmaceuticals, electronics, and petrochemicals, as well as increased market access for items such as steel, rice, and shrimp. Meanwhile, South Korea is seeking improved mobility access for its professionals in return.
India's trade dynamics with South Korea have undergone significant changes over the past three years, from FY2022 to FY2024. Notably, India's exports to South Korea have declined at a compound annual growth rate (CAGR) of 11 per cent. Conversely, imports from South Korea have risen at a 10 per cent CAGR.
Despite the decline in exports, total bilateral trade between the two nations has increased at a 4 per cent CAGR. However, this growth has been accompanied by a substantial widening of India's trade deficit with South Korea, which has surged at a 25 per cent CAGR, according to the report.
A report by the economic think tank Global Trade Research Initiative (GTRI) stated that Indian exporters are facing various non-tariff barriers in South Korea, including stringent standards, regulations, and certification requirements, and these barriers are making it difficult for Indian goods to penetrate the South Korean market. Further, according to GTRI, India is looking for greater liberalisation in the services sector, including healthcare and Information Technology (IT), and easier access for Indian professionals and service providers in the South Korean market.
More On South Korea
The report stated that South Korea is forecasted to achieve a 2.5 per cent gross domestic product (GDP) growth in 2024, driven by steady export growth and stabilised inflation rates. After facing a global overcapacity issue, South Korea’s semiconductor industry is bouncing back, marking a pivotal role in the nation’s economic revival.
While South Korea remains heavily dependent on trade with major partners like the U.S. and China, recent trends show a narrowing gap, signalling potential changes in global trade relationships. The automotive sector saw a 32% surge in exports in 2023, hitting record levels, while semiconductor exports fell by 23.7 per cent, showcasing the diverse dynamics within South Korea’s export industries.
The report identified critical challenges, including South Korea's ageing population, growing competition from Chinese manufacturers, and geopolitical risks that could impact economic stability and trade.
