No Strategies for Indian Market
As the Indian economy is receiving a lot of attention with Modinomics, famous for the slogan “Make in India,” the Chinese and Japanese governments are stepping up efforts to dominate the Indian market. In contrast, the Korean government shows a passive attitude, as witnessed by the fact that it does not even try to address unfair issues in the Korea-India Comprehensive Economic Partnership Agreement (CEPA).
In January, President Park Geun-hye visited India to hold a summit with Indian Prime Minister Manmohan Singh. At that time, they talked about Korea's entry into the Indian market. But experts are saying that the appointment of Narendra Modi as a new prime minister made Korea's penetration less meaningful due to opposing political tendencies between former and current prime ministers.
According to the Korea Trade-Investment Promotion Agency (KOTRA) and the Korea International Trade Association (KITA) on Oct. 29, India shows a clear sign of economic recovery, as India's trade deficit has narrowed and stock prices have surged since Prime Minister Modi took office. The Indian economy grew 5.7 percent in the second quarter, and the country's current account deficit stood at US$7.8 billion, merely one third of the 2013 figure.
As India's marketability was revealed, Chinese and Japanese governments suggested a summit with the new Indian prime minister, and they promised investment in India.
Japan invited Prime Minister Modi in August, promised a US$35 billion investment for five years, and decided to create industrial parks for Japanese companies in four states, including Gujarat. Japan and India also decided to cooperate in developing new renewable energy, building eco-friendly thermal power plants and making US-2 amphibious aircraft. Prime Minister Modi established Japan Plus to help Japan enter the Indian market, and promised to let the third-largest economy double the amount of its direct investments into India.
Japanese companies are moving fast as well. Japan's largest IT company SoftBank made a decision to invest US$10 billion (10.5 trillion won) in India.
Chinese President Xi Jinping also made a three-day state visit to India starting on Sept. 17 and announced that it will make a US$20 billion investment for five years. The Chinese government is also planning to build industrial complexes for Chinese firms in Gujarat and Maharashtra and to make a large-scale investment in a high-speed railway project in India.
According to a report released by the KITA, Korea represents only 2.8 percent of the Indian market, lagging far behind China in the top spot with an 11.3 percent share. Japan's direct investment in India accounts for 7.5 percent of the total, but the weight of Korea is merely 0.65 percent. India has opened its market to Japan as much as 90 percent, with Korea at 85 percent. However, the Korean government is not actively trying to address this inequality.
In January, the Korean and Indian governments promised to set up a ministerial level joint committee aimed at promoting trade investment and to discuss an improvement in the Korea-India CEPA. Nevertheless, there has been virtually no progress. Working-level talks between the two countries initially scheduled on Oct. 17 were also postponed, since the Indian government gave a notification of its decision only two days before the scheduled meetings.