India, South Korea agree to speed up trade-pact upgrade to fix widening deficit

India and South Korea have agreed to accelerate negotiations to upgrade their bilateral trade pact while acknowledging concerns over New Delhi’s widening trade deficit with Seoul, according to an official statement issued after the latest round of talks held in New Delhi.

The 12th round of negotiations for upgrading the India-Korea Comprehensive Economic Partnership Agreement (CEPA) concluded on Wednesday, with both sides reaffirming their commitment to conclude the discussions in a “time-bound manner” and build a more balanced trade partnership.

The three-day negotiations, held from 25-27 May, follow an agreement reached in April between Union commerce and industry minister Piyush Goyal and Korean trade minister Yeo Han-koo during the South Korean President’s state visit to India to fast-track the CEPA review.

India and South Korea signed the CEPA in 2009 and implemented it from January 2010 to boost bilateral trade and investments. However, Indian officials have increasingly expressed concern over the growing trade imbalance in favour of South Korea, particularly in sectors such as electronics, machinery and petrochemicals.

“Both sides acknowledged India’s bilateral trade deficit, which has risen significantly since the IK CEPA came into force in 2010, and agreed to address the issue within the overall IK CEPA framework,” the commerce ministry said.

The latest negotiations covered trade in goods, trade in services, investment, sanitary and phytosanitary standards, rules of origin and origin procedures.

Greater market access

People aware of the discussions said India is seeking greater market access for labour-intensive sectors and services exports while pushing for tighter rules of origin to prevent misuse of tariff concessions through third countries. South Korea is understood to be seeking improved investment protections and greater policy predictability for Korean firms operating in India.

The two countries also agreed to create sub-groups to expand discussions into newer areas such as digital trade, supply chain cooperation and strategic industrial cooperation, signalling efforts to widen the scope of the agreement beyond conventional tariff issues.

The move is significant as India seeks to strengthen supply chain resilience and deepen industrial partnerships amid global geopolitical uncertainties and efforts by multinational companies to diversify manufacturing bases.

South Korea remains one of India’s key economic partners in East Asia, as Korean companies have a strong presence in automobiles, electronics and mobile phone manufacturing.

The negotiations are aligned with the broader “‘Futuristic Partnership’ vision outlined by Prime Minister Narendra Modi and South Korean President Lee Jae-myung during recent bilateral engagements," the commerce ministry statement said.

Officials said more rounds of negotiations are expected in the coming months as both countries work towards finalising a modernised CEPA aimed at correcting trade imbalances while boosting investment and economic cooperation.