India and the Republic of Korea (ROK), or South Korea, had signed a Comprehensive Economic Partnership Agreement (CEPA) in Seoul on 7 August 2009, which came into effect on 1 January 2010, to reduce and eliminate tariffs on goods; in May 2015, it was converted to ‘special strategic partnership’. With respect to trade between the two countries, India has a comparative advantage in services and the ROK in merchandise goods. Hence, there is much to benefit for both countries if India offers market access to the ROK’s merchandise goods and the ROK provides access to India’s services.
 

Bilateral Market Analysis

• In 2016, both countries launched an initiative called ‘Korea Plus’ to boost Korean investments in India.
• In April 2022, ROK exported USD 1.54 B to and imported USD 897 M from India, resulting in a positive trade balance of USD 646 M.
• Between April 2021 and April 2022, ROK’s exports increased by 15% from USD 1.34 B to USD 1.54 B, while imports increased by 22.8% from USD 730 M to USD 897 M.
• In April 2022, the top exports of ROK to India were electrical machinery, equipment and parts (USD 373 M); iron and steel (USD 228 M); plastics and articles thereof (USD 191 M); nuclear reactors, boilers, machinery and mechanical (USD 137 M); and mineral fuels, mineral oils and products (USD 98 M).
• In April 2022, the top imports of South Korea from India were mineral fuels, mineral oils and products (USD 314 M), aluminum and articles thereof (USD 154 M), organic chemicals (USD 64.5 M), iron and steel (USD 43.2 M), and lead and articles thereof (USD 32.4 M).
• Major Korean companies including Samsung, Hyundai Motors and LG have made heavy investments in India in recent years.
• Indian companies like Mahindra and Mahindra, Tata Motors and banks like State Bank of India and Bank of Baroda have large investments in South Korea.

 

Major Sector Opportunities in India

Mineral Fuels, Mineral Oils & Products of their Distillation; Bituminous Substances; Minerals

The index of mineral production of the mining and quarrying sector for March 2022 at 144.6 was 4.0% higher as compared to the level in March 2021. Provisional figures available estimates that the cumulative growth for April- March 2021-22, over the corresponding period of the previous year, has increased 12.2%. The demand of minerals is increasing due to clean energy transition.   
 
The production level of important minerals in March 2022 were: Coal - 958 lakh tonnes, Lignite - 60 lakh tonnes, Natural Gas (utilized) - 2813 million cu. m., Petroleum (crude) - 25 lakh tonnes, Bauxite - 2031 thousand tonnes, Chromite - 414 thousand tonnes, Copper Concentrate - 9 thousand tonnes, Gold - 169 kg, Iron Ore - 270 lakh tonnes, Lead Concentrate - 39 thousand tonnes, Manganese Ore - 269 thousand tonnes, Zinc Concentrate - 182 thousand tonnes, Limestone - 373 lakh tonnes, Phosphorite - 158 thousand tonnes, Magnesite - 12 thousand tonnes, and Diamond - 8 carat.

Custom tariff

Description of Goods	Unit	Standard (rate of duty)	PreferentialAreas (rate of duty)
Sulphur recovered as by-product in refining of crude oil	Kg	2.5%	-
Graphite, crystalline	Kg	5%	10%
Natural aluminium calcium phosphate	Kg	2.5%	-
Ethylene, propylene, butylene and butadiene	Kg	5%	-

 

Organic Chemical

In 2019, the chemicals industry in India stood at USD 178 and is expected to reach USD 304 billion by 2025. This registers a CAGR of 9.3% and, additionally, the demand for chemicals is expected to expand by 9% per annum by 2025. The chemical industry is expected to contribute USD 300 billion to India’s GDP by 2025.

Custom tariff

Description of Goods	Unit	Standard (rate of duty)
Lithium perfluorooctane sulphonate	Kg	5%
Phenyl acetaldehyde	Kg	7.5%
Vanillin (4-hydroxy-3methoxy benzaldehyde)	Kg	7.5%
Thio sulphonic acid	Kg	7.5%

 

Iron and Steel

India's iron and steel industry is organized into ‘main producers’, ‘other major producers’ and ‘secondary producers’. The demand for steel gets a boost by higher spends on infrastructure and gradual revival of the automotive sector, which will grow at 7.5% in 2022 among top consuming nations, including China and the US.

Custom tariff

Description of Goods	Unit	Standard (rate of duty)
Waste and scrap of cast iron	Kg	5%
Waste and scrap of tinned iron or steel	Kg	5%
Waste and scrap of high carbon steel	kg	15%
Waste and scrap of Iron (Ingots)	Kg	15%

 

Major Sector opportunities in South Korea

Healthcare

South Korea’s healthcare market is ranked fourth among countries in the Asia-Pacific region and with an aging population, increased insurance coverage and government initiatives to expand the healthcare market, South Korea happens to be a prime destination for Western medical companies. The Korean medical device market size is USD 5.5 billion with a projected growth rate of 6.2%. The Korean pharmaceutical market size is USD 20 billion with a projected growth rate of 2.4%.

Custom tariff

Description of Goods	Unit	Standard (rate of duty)
Astronomical instruments	u	10%
Electron microscopes fitted with equipment	u	7.5%
Dental cements and other dental fillings; bone reconstruction cements	kg	10%
Opacifying preparations for X-ray examinations:diagnostic reagents designed to be administered to the patient	kg	10%
Sterile laminaria and sterile laminaria tents, sterileabsorbable surgical or dental haemostatics, sterile surgical or dental adhesion barriers, whether or not absorbable	kg	10%

 

Electronic

South Korea is a technologically developed country and has huge technology penetration in the country. The South Korea consumer electronics industry is set to reach USD 15.3 billion by 2024, growing at a CAGR of 7.6% over 2017-2025. The global semiconductor material market was worth USD 55.3 billion in 2021 and is expected to grow by about 6% in 2022, reaching USD 58.7 billion. South Korea alone would account for USD 10.5 billion by 2022. South Korea is the third largest in market size after Taiwan and China for semiconductors.

Custom tariff

Description of Goods	Unit	Standard (rate of duty)
Semiconductor media (solid-state non-volatile storage devices)	U	10%
Aluminium electrolytic	U	free
Thyristors	U	free
Undefused silicon wafers	Kg	free

 

Information and Communication Technology

South Korea has earned a reputation as a leading global information and communication technology hub. With its innovative ICT infrastructure boasting the world’s fastest internet speeds, the country is home to global leading electronics and IT companies such as Samsung Electronics, LG Electronics, SK Hynix, and Naver. South Korea is an ideal market for US firms seeking to assess cybersecurity solutions before deployment in other markets.

Custom tariff

Description of Goods	Unit	Standard (rate of duty)
Paper insulated, of a kind used in telecommunication	m	15%
Plastic insulated, of a kind used in telecommunication	m	15%
Rubber insulated, of a kind used in telecommunication	m	15%
Processors and controllers, whether or not combined with memories, converters, logic circuits, amplifiers,clock and timing circuits, or other circuits (ELECTRONIC INTEGRATED CIRCUITS)	u	free

 

Conclusion

Bilateral trade between India and ROK grew 40% to USD 23.7 billion in 2021; and India and ROK have agreed to strengthen their defense partnership by joint production and export of military hardware, as well as co-operation in cyber domains and enhanced intelligence sharing. With the recent increase in the sectoral cap in the defense sector from 49% to 74%, it is expected that a significant amount of ROK investment may be steered into India. Further, India has sought investments from ROK companies in sectors like semiconductors, chemical batteries for e-vehicles, green energy, hydrogen cells, and technical textiles.

India also benefits from the CEPA in terms of movement of professional workers to ROK - there are about 163 such professions in the ROK services market that includes computer programmers, software engineers, English language teachers, etc. In a recent development, India and ROK aim to achieve the trade target of USD 50 billion before 2030.