India and Korea set to finalize the FTA this year

Negotiations to enhance the existing India-Korea free trade agreement (FTA) are progressing, with senior officials from both countries discussing key issues, aiming to finalize the agreement this year. Both countries are seeking greater market access for specific products currently listed under the agreement’s negative list, which does not grant customs duty concessions.

The Department of Commerce has engaged with various ministries, including heavy industries, steel, and chemicals, to prepare the offer list. India is seeking greater market access for products from South Korea to boost exports. Concerns have been raised about Korean firms not purchasing Indian steel. The review process is significant as both countries hope that upgrading the CEPA will strengthen and deepen economic cooperation.

These review or upgrade exercises typically address implementation issues, rules of origin, verification processes, customs procedures, further trade liberalization, and the exchange of trade data. India has also expressed concerns about the growing trade deficit between the two countries. India’s exports to Korea decreased to $6.41 billion in 2023-24 from $6.65 billion in 2022-23 and $8 billion in 2021-22. Imports stood at $21.13 billion in the last fiscal year compared to $21.22 billion in 2022-23 and $17.5 billion in 2021-22.

According to the Global Trade Research Initiative (GTRI), India’s trade deficit with South Korea has increased at a higher rate compared to its trade deficit with the rest of the world. GTRI reported that Indian exporters face non-tariff barriers in South Korea, such as stringent standards, regulations, and certification requirements, making it difficult for Indian goods to enter the South Korean market.

GTRI also noted that India seeks greater liberalization in the services sector, including healthcare and information technology (IT), and easier access for Indian professionals and service providers in the South Korean market.