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India-Korea Cooperation in Food Processing

Monday, December 2nd, 2013

In the last five years, India has inked numerous agreements with other nations, the Comprehensive Economic Partnership Agreement (CEPA) with South Korea being the latest. Though the signing of the Korea-In­dia CEPA on August 7, 2009 was delayed, it has been welcomed by policy makers and business community members from the two countries. It is expected that the agree­ment, which has stipulations for tariff and non-tariff barrier reductions, will take the relationship of India and Korea to a higher level, especially when it comes to the food processing industry.
As the economy of India has been opened up, it has improved market access to Korean products and has provided op­portunities in investment for Korean com­panies. The present flow of investment and trade between the two countries is low because of numerous tariff and non-tariff obstacles. It is expected that CEPA will ad­dress these problems while also ‘legalizing’ the Look East Policy of India. To maintain its progress in economy and trade, Korea is also looking beyond traditional partners in trading.
From 1991 to 2007, the exports of India to South Korea have been augmented by 10 times, leading to a trade deficit increase. The merchandise increase between the two nations has been attributed to the ever-changing structure in demand and com­parative benefits of the economies in cor­responding sectors.
A ‘revealed comparative advantage’ analysis shows that in both the disaggre­gated and aggregated levels, South Korea has been focusing in value-added manufac­turing commodities, while the exports of India have been more branched out. It is also indicated in the analysis that the two nations have comparative benefits in vari­ous products in the same industry, showing the chance for intra-industry trade, or IIT.
Additionally, the rising trade comple­mentarity index, or TCI, reveals that Ko­rean and Indian trade has slowly become well-matched over time, specifying that any agreement between the two nations can improve trade flows. The intensity of trade between the two nations also shows that Korea is doing better and that India may enhance its intensity in export with Korea.
On the other hand, the tariff elimination and reduction on 90 percent of Indian com­modities and 85 percent of Korean com­modities when it comes to value under the CEPA would lead to competitive exports in each others’ markets. Moreover, nego­tiation on commodities concessions and desired rates of tariff would also further the India-Korea trade, particularly the food pro­cessing aspect, according to economists.
Sensing the many opportunities in In­dia’s food processing industry, several Ko­rean companies have been penetrating the Indian market since the year 1991. In just a short period of time, Korean food pro­cessing companies have branched out in the Indian market. On the other hand, as reported by CEPA, there are 1889 items on a ‘negative list’ of India’s goods for Korea. Sectors with a huge number of tariff lines that are subject to this negative list include prepared foodstuffs and vegetable products.
In the coming years, it is expected that the India-Korea relations in food processing will continue to thrive. CEPA is also antici­pated to take bigger steps in strengthening these ties

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