Korean Investment in India Expected to Increase Significantly

South Korean President Moon Jae-in will meet with Samsung Electronics Vice Chairman Lee Jae-yong at a ceremony celebrating the completion of the company’s mobile phone and consumer electronics manufacturing plant in Noida, India on July 9. The President is currently staying in India with his economic delegation. He regards India as a center of his New Southern Policy and his visit is expected to lead to a significant increase in South Korea’s investment in India.

India posted an economic growth of no less than 7.7% in the first quarter of this year alone. According to the World Bank, India is expected to continue a high growth track for the time being, growing at least 7% a year based on an increase in investment and private consumption. At present, India is showing stable consumer prices along with a decline in fiscal deficit. In November last year, Moody’s adjusted its credit rating for India from Baa3 to Baa2, which was the first upward adjustment in 13 years. The country has a population of approximately 1.3 billion and those aged 24 or less account for 44% of the population.

The Indian labor market is very attractive as well. India’s official language is English and it has a large number of skilled IT workers. According to Bloomberg, India is likely to become a country with the largest number of working age population in the world in 2020. The number of middle class population is estimated to increase from 300 million to 550 million between this year and 2025.

India is a business-friendly country where deregulation is accelerating, too. Last year, India jumped from 130th to 100th in the Doing Business survey of the World Bank. The country’s infrastructure market is very promising given the central government’s eagerness for development. Infrastructure investment accounts for 24.4% (97 trillion won) of the government’s budget for 2018 to 2019. The market is expected to grow 6% a year from 2015 and reach 18 trillion won in 2025.

Most of the infrastructure development projects in India allow a foreign direct investment of 100% and a number of South Korean companies are joining the projects. In June last year, the South Korean government promised the Indian government to provide a financial assistance of US$10 billion for infrastructure development, including US$1 billion from the Economic Development Cooperation Fund (EDCF).

Samsung Electronics, in the meantime, initiated the expansion of its plant in Noida in June last year at a total investment of 860 billion won (US$774 million). As a result of the facility expansion, the plant’s monthly mobile phone and refrigerator manufacturing capacities have been doubled to 10 million units and 200,000 units, respectively.