Datanomics: India eyes South Korea agreement review as deficit widens

Prime Minister Narendra Modi and South Korean President Lee Jae-myung exchanged several MoUs, with both sides agreeing to deepen cooperation in strategic sectors, including shipbuilding

Amid heightened global uncertainty, India and South Korea are committed to increasing economic cooperation by aiming for $50 billion in bilateral trade by 2030, up from the current level of around $27 billion. PM Narendra Modi and South Korean President Lee Jae-myung exchanged several Memorandums of Understanding (MoUs), with both sides agreeing to deepen cooperation in strategic sectors, including shipbuilding.

 

Trade deficit rises as exports fall

 

India’s trade deficit with South Korea widened after the bilateral trade agreement came into force in 2010. After 2021-22 (FY22), India's exports to Korea fell, with a major decline in exports of petroleum products, aluminium and its products, and iron and steel. This assumes significance as India bats for renegotiation of the bilateral trade agreement. 

 

India’s share in shipbuilding down

 

India and South Korea have agreed to deepen cooperation in shipbuilding. India’s share in the number of ships built globally fell from 0.15 per cent in 2014 to 0.06 per cent in 2024, while South Korea's share decreased from 34.36 per cent in 2014 to 28.02 per cent in 2024. In 2024, South Korea held the second-largest share in global shipbuilding, next to China. 

 

FDI from South Korea fluctuates

 

Foreign direct investment (FDI) inflows from South Korea to India have fluctuated in the last decade. FDI from South Korea remains narrowly concentrated in certain sectors such as consumer electronics, automobiles, steel and shipbuilding.