Whalesbook
India's Push for Fairer Trade
India's firm stance on trade fairness is driven by its goals to boost domestic manufacturing and reshape its international economic partnerships. The country now prioritizes deals that benefit India equitably, focusing on market access and local value addition, rather than just increasing trade volumes.
Criticism Mounts Over CEPA
India's trade minister has sharply criticized the Comprehensive Economic Partnership Agreement (CEPA) with South Korea, calling it a "poorly negotiated, imbalanced agreement tilted against India." This follows a trend where bilateral trade has grown, but India's imports from South Korea have increased disproportionately, widening the trade deficit. The current government sees the 2010 CEPA as outdated. Renegotiations began in 2015, with eleven rounds completed and an Early Harvest Package addressing key sectors, trade barriers, and origin rules. The talks are expected to conclude by mid-2027, aiming for a more balanced economic relationship.
Steel Investment Fuels Trade Demands
India is using major industrial investments to gain market access concessions. A prime example is the new 50:50 joint venture between JSW Steel and South Korea's POSCO to build a large steel plant in Odisha, with an investment of ₹35,000 crore. This joint venture is a shift from the usual foreign-owned operations, indicating a move towards shared ownership. POSCO, a global steel leader, contributes technology, while India's JSW Steel brings local scale. This large investment supports India's call for better market access and localization for Korean companies. The government notes that these efforts are leading to increased domestic production.
Barriers and Competition Concerns
Concerns about South Korea's market access policies have been raised by figures like Mohandas Pai, who described them as "predatory" and protective of Korean businesses. Despite India opening its market, barriers in sectors such as automotive parts, electronics, and agriculture continue to contribute to the trade gap. The ongoing renegotiations aim to remove these trade barriers and create more favorable 'rules of origin' for Indian products. Globally, the steel industry is dealing with overcapacity and the need to reduce emissions, making green steel projects like the JSW-POSCO plant strategically vital. India's trade policy now emphasizes reciprocal market access and fair competition, moving away from past agreements that benefited partners with large trade surpluses.
Risks to Trade Deal Success
However, achieving true market access reciprocity faces significant challenges. The CEPA renegotiations depend on South Korea agreeing to concessions in sensitive areas and lowering trade barriers, which has historically been difficult. The ₹35,000 crore JSW-POSCO investment, while positive, carries risks common to large projects, such as delays, cost increases, and regulatory hurdles. The joint venture shows shared commitment, but Indian firms compete with the strong market position and advanced technology of global giants like POSCO. If past protectionist practices by South Korea are not resolved, they could cause future trade disputes and undermine the partnership. For India's domestic production goals to succeed through these JVs, ongoing government support and the ability of Indian partners to adopt advanced manufacturing are crucial.
What's Next for India-Korea Trade
India expects the CEPA renegotiations to conclude by mid-2027 with an agreement promoting more domestic production and reducing import reliance for Korean companies. Analysts believe successful talks could set a new standard for India's trade deals, emphasizing tangible mutual benefits and strategic industrial ties over just increasing trade volume. The progress of the JSW-POSCO steel plant project will be a key measure of this evolving industrial cooperation and India's ability to use foreign investment for economic advantage.