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India has called for fast-tracking the review of the India-South Korea Comprehensive Economic Partnership Agreement (CEPA) to bridge the high trade deficit with the country.
New Delhi wants the review to focus on increasing market access for Indian businesses in both goods and services, according to officials tracking the issue.
Commerce & Industry Minister Piyush Goyal, in a recent meeting with his South Korean counterpart Yeo Han-koo on the sidelines of the G20 meet in Italy, insisted that a review of the India-South Korea CEPA needed to be expedited for a more balanced trade relationship.
“India has been seeking the review for some time but it has been getting delayed. Now that the Commerce & Industry Minister has made a fresh call, officers are going to follow it up with their counterparts in South Korea,” an official told BusinessLine.
India’s exports
The India-South Korea CEPA was implemented in 2010 envisaging tariff elimination/reduction in about 80 per cent of goods such as textiles, leather goods and, pharmaceuticals and opening up of sectors such as tourism and healthcare and freer people movement.
While the pact has given a boost to exports from South Korea to India, there hasn’t been a commensurate increase in India’s exports to South Korea resulting in a widening trade deficit between the two.
“Various studies show that India’s utilisation of the FTA with South Korea is very low. As part of the review, the two sides need to find out ways to overcome this through simplification of procedures or further lowering of tariffs. The net result has to be a bridging of the trade deficit through an increase in India’s exports,” the official said.
‘Nominally upgraded’
India and South Korea nominally upgraded the CEPA in 2018 with South Korea agreeing to reduce import duties on 17 items from India and India on 11 items from South Korea over a number of years. The move, however, did not significantly affect exports from India.
South Korea’s exports to India increased from $8.57 billion in 2009-10, a year before the implementation of the CEPA, to $15.65 billion in 2019-20 (the pre-pandemic year). South Korea’s exports dropped to $12.77 billion in 2020-21 due to the pandemic related overall slowdown. India’s exports to South Korea, on the other hand, increased from $3.42 billion in 2009-10 to $ 4.84 billion in 2019-20 and $4.68 billion in 2020-21.
India’s trade deficit against South Korea, therefore, doubled to $10.8 billion in 2019-20 (pre-pandemic year) from $ 5.15 billion in 2009-10.
“Not only has India not got the advantage in the area of goods as it had hoped for, enough gains also did not materialise in the area of services,” the official said.
As mutual recognition agreements for recognising local qualifications of various professionals is taking time to materialise, New Delhi wants both countries to accept home country certification for identified professions in the mean time, the official added.