The deal signed in August, known as the Comprehensive Economic Partnership Agreement, hopes to unlock that potential. CEPA is India’s first free trade agreement with an OECD country – a club of wealthy nations – and goes beyond traditional trade deals by encompassing services and investment.
While India has opposed global free trade agreements out of concern for its farmers, New Delhi is aggressively pursuing these bilateral deals across Asia that sidestep the agricultural sector. India signed a similar pact in 2005 with Singapore.
The Korean deal is estimated to add up to $3.3 billion in annual trade between the two nations. Trade between India and South Korea has already jumped dramatically, rising to $15.6 billion last year, up from $2.6 billion in 2002.
In economic relations, opposites can attract.
“India is very good at software, Korea is very good at hardware. Similarly, there are complements between different sectors where trade should be much more, but we haven’t gotten to that level because of trade barriers,” says Professor Sahoo. Now the barriers “have been mostly taken care of by CEPA.”
India’s most pressing need, infrastructure, turns out to be a Korean specialty. On the eve of the visit, New Delhi gave the environmental OK to a South Korean firm to build a $12 billion steel plant in the Indian state of Orissa. The project represents the biggest foreign investment in the country.
South Korean companies won nine of the 44 contracts for India’s National Highway Development Project. And the country has manufactured trains for the darling of India’s new infrastructure projects, the Delhi metro.