Sunday, January 24, 2021

Why India Is Becoming South Korea’s Crucial Economic Partner?

Both India and South Korea are trying to establish a strong presence in the Asian geopolitics which is largely dominated by China. India’s Act East policy will boost trading relations with the South East Asian countries including Northeast Asia.

India’s ‘Act East Policy’ and China’s ‘One Belt One Road’ Compliment Each Other

Last year, the South Korean leader Moon Jae-in visited India. On his visit, Indian Prime Minister praised South Korea’s valuable friendship and also committed to growing special strategic ties. During PM Modi’s recent visit to Seoul, seven significant pacts were signed. The two countries have signed an agreement to continue operations of Korea Plus organisation that promotes investments by Korean companies in India. Korea Plus comprises of representatives from the Ministry of Industry, Trade, and Energy of South Korea, Korea Trade-Investment and Promotion Agency (KOTRA) and Invest India.

South Korea offers a huge opportunity for investments and India is ready to invest in its market especially in areas like infrastructure, shipbuilding, and manufacturing. After the implementation of the Comprehensive Economic Partnership Agreement in 2010, the Bilateral trade between the two countries in 2011 crossed $20.5 billion. At the end of July 2017, Indian exports to South Korea stood at $2.91 billion and imports from there stood at $8.71 billion. Indian exports to South Korea include mineral fuels, oil distillates (mainly naphtha), cereals, iron, and steel.

If we look in the past, India was never inclined towards Northeast Asia. However, India’s current PM have always tried hard to promote the Look East Policy which is now called the Act East Policy. Now, India is becoming a crucial economic partner for South Korea with frequent meetings between the two countries to boost existing bilateral relations. One of the major reason behind this shift is the rise in labour costs due to which many South Korean companies have started displacing investments.

India’s Act East policy is aimed to shift the country’s trading focus from the west towards the South East Asian countries. The policy was launched by Prime Minister P V Narasimha Rao as “look east policy “and is one of the significant parts of India’s foreign policy. South Korea’s open market policies have close affiliations with India’s ‘look east policy’. The New Southern Policy of South Korea also aims at reducing South Korea’s reliance on the United States, China, Japan, and Russia by developing ties with South-east Asian nations and India.  In order to challenge the growing presence of China in the ASEAN region, the policy seems to be a beneficial tool.

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