KOREA finally widened its road to India, which ranks second in the world in terms of population and 12th in the world in terms of gross domestic product (GDP). A major emerging market with great growth potential, India also possesses the fourth strongest purchasing power. The National Assembly of Korea ratified the Korea-India Comprehensive Economic Partnership Agreement (CEPA) during its plenary session on November 6. As a result, the free trade agreement will take effect beginning January 1, 2010. Therefore, Korean companies are expected to preoccupy the fast growing Indian market faster than those of other countries.
India and Korea have enjoyed win-win bilateral relations. Only five years ago, trade between the two countries stood at the US$3 billion level. However, in 2008, the figure reached US$15.56 billion. Korean companies’ investment in India surpassed $1billion, ranking Korea the largest investor in India in terms of investment approvals.
Hyundai Motor has Hyundai Motor India Limited (HMIL) to build and sell its vehicles in India. Hyundai Motor made a foray into the Indian car market with the Santro model in 1998. Since then, the automaker has enjoyed steady growth, with Indian consumers responding well. In 2008, Hyundai Motor sold 489,328 vehicles in India, up 49.6% from the year before. In addition, Hyundai Motor went down in history for reaching sales of 1,000,000 units in the Indian market quicker than any other automaker.
POSCO signed a Memorandum of Understanding (MoU) with the government of Orissa in June, 2005 to set up a 12 MPTA green field steel plant near Paradip in the Jagatsinghur District, of Orissa, with an estimated investment of US$12 billion. The company will build a 4-million-ton-perannum capacity steel plant in Orissa during the first phase of the project, with final production volume expected to be 12 million tons per annum.
Samsung Electronics and LG Electronics are popular brands among Indian consumers. More and more are recognizing the high quality of the mobile handsets, refrigerators, washing machines, TVs and air conditioners produced by Samsung and LG. It is easy to find Korean electronic products in Indian homes these days.
The Indian economy grows 8% annually. Despite the global economic crisis, the International Monetary Fund (IMF) predicts that India’s economy will grow 6.5% this year and 5.4% next year. In five to ten years time, the Indian economy will be much bigger than it is today. Recognizing the huge growth potential of the Indian market, companies from Korea, Japan and the European Union are currently competing fiercely there.
Currently, Korea exports more than 5,000 different items to India. The CEPA will reduce or abolish tariffs on about 85% of Korean exports to India. Accordingly, Korean companies will enjoy an increase in their exports to India. In addition, tariffs on imported goods from India will also be reduced or eliminated altogether on 93% of the total items, or 90% of the total amount.
Thus, India will be able to sell goods such as naphtha, steel ore and other raw materials to Korea free of tariffs. Furthermore, India can export its competitive human resources, such as IT professionals, consultants and English teachers to Korea. However, tariffs will continue to be applied to items such as rice, beef and frozen fish even after the CEPA takes effect.