SEOUL: India could emerge as an alternative export market to China for South Korea amid a diplomatic row between Seoul and Beijing over the deployment of a Terminal High Altitude Area Defense battery here, analysts said.
Although Korea and India forged a bilateral trade deal, or the Comprehensive Economic Partnership Agreement in 2010, the two sides have not yet fully explored the potential of each other’s markets, they said.
India is Korea’s 8th biggest export destination with the former’s outbound shipment to the latter amounting to only about $12 billion in 2015, according to the Korea Trade-Investment Promotion Agency.
Korea’s investment in India stood at $4 billion last year. Its main export items to India are budget smartphones, electronic parts, automobiles and petrochemicals.
However, Seoul is seeking to expand its partnership as the two sides resumed negotiations to upgrade the CEPA last month. The two sides began their negotiations last year.
This comes amid positive forecasts for the Indian economy, which is expected to grow around 7% annually over the next decade. India grew 7.62% last year, according to the International Monetary Fund.
“The negotiation reflects the need for Korea to diversify its trade with and investment in India, which has the potential to grow 7%, amid growing uncertainty and protectionism,” the Korea Ministry of Trade, Industry and Energy said in a statement.
India is seeking to widen the scope of bilateral trade as it wants to reduce its deficit with Korea by increasing exports of new goods such as textiles and pharmaceuticals to Korea. India’s trade deficit with Korea increased to about $8 billion in 2014, from $5 billion after the CEPA went into effect in January 2010.
Korea’s exports to China have been falling since 2014 when outbound shipments to the world’s second-largest economy dropped 0.4%. In 2015, they declined 5.6%, and 9.3% last year. Nevertheless, Korea’s exports to China account for about 25% of the total.
The diplomatic spat over the THAAD anti-missile defense system has negatively spilled over to the Korean economy as China has been banning Chinese tourism to Korea and imports of Korean content, fashion and cosmetics goods.
“Korea will inevitably see a further drop in exports to China, which has upped the ante against Korean products,” said Kim Ji-man, an analyst at HMC Investment Securities.
