www.korea.net

With the CEPA in effect, the tariffs on
automobile parts will drop from 12.5
percent to 1-5 percent within eight
years. And over the next decade, tariffs
on 85 percent of the goods will fall, thus
opening up the export market for Korean
companies. With a 1.15 billion population,
India represents the world’s second
largest market for Korea. The nation’s
“economic map” has grown larger.
This agreement, called a virtual FTA,
or Free Trade Agreement, will accelerate
the pace with which Korean companies
have already been entering India. India
is the next giant of the global economy,
hotly pursued by Japan and the
European Union. As of 2008, India had
the world’s second biggest population,
and the 12 th -largest gross domestic product
at US$1.2 trillion. It’s the
fourth-largest consumer market behind
only the United States, China and Japan.
“India is a country with tremendous
growth potential, so much so that it
managed a positive growth despite the
global economic recession,” said a
researcher at the Korea Institute for
International Economic Policy. “Reaching
the CEPA with India is significant
for Korea in that it has given our
exporters the opportunity to secure the
huge emerging market with nearly 1.2
billion people.”
India has reached free trade deals
with only Singapore, Sri Lanka and
Thailand, among others. Most are small
countries and major economic powers
aren’t among them. India is negotiating
with Japan and the EU, but Korea is the
first nation with economic sway to have a
free trade deal with the country.
From this perspective, the signing of
the Korea-India CEPA has laid the foundation
for Korean exporters to beat others
to the massively growing market.
“Korea has signed the CEPA ahead of
other competing powers such as China
and Japan,” said Lee Seong-han, head
of the FTA Promotion and Policy
Adjustment Authority under the Ministry
of Strategy and Finance. “Exports are
expected to grow by four times the
amount of imports.”
The main reason why India is called a
land of opportunity is its seemingly infinite
growth potential. Since 2005, India
has maintained around a 9 percent
annual growth rate. From April 2008 to
March 2009, during the global economic
downturn, India averaged a 6.7-percent
growth per month. Last year, the
Indian economy is estimated to have
grown 6.5 percent and is expected to
grow 8 percent this year.
Its per capita income soared from
around US$400 in 2000 to US$1,000
last year. Its middle class is expanding,
making it an even more attractive emerging
power with a potentially major consumer
market. The middle class consisted
of 50 million (5 percent of the total
population) this year and could rise more
than tenfold to about 583 million (43
percent) by 2025.
India’s economy is driven more by
domestic consumption than by export,
which makes it less sensitive to global
economic shifts. The Indian government
focuses on stimulus measures through
tax breaks and supplying liquidity.
The growing middle class is a huge
strength for India, since consumption
has also increased. Compared with
China, it has just gotten on track for
economic development. With sustainable
growth, foreign investments that
left India previously are returning. The
BSE Sensex index, which nosedived to
8,000 in 2008 because of the exodus
of foreign capital, has climbed back up
to 20,000, the pre-economic downturn
level.
“The biggest appeal about India is
that its economy is growing rapidly,”
said an official at the Korea Institute for
Industrial Economics and Trade. “The
economy is about US$1 trillion today
but it should surpass US$2 trillion by
2020, when India will become the
sixth-largest economy in the world.”
Other experts say India is growing so
fast that in 20 years, it could trail only
the United States, China and Japan.
We have to keep in mind that the
CEPA with India has given Korean companies
an upper hand in the Indian market.
Prices are so important in India that
companies there will choose cheaper
options over its partners for 10 or 20
years. As tariffs on most goods are eliminated
thanks to the CEPA, our products
will have that much of an edge.
Yonhapnews Agency
India is a country with great potential; it is the
fourth largest market in the world, and also
attracts lots of foreign tourists for its beautiful
landscapes and cultural heritage, as shown by
above and opposite images of Taj Mahal.
KOREA
FEBRUARY
2010
41