When South Korean President Lee Jae-myung visited New Delhi in April 2026, one announcement stood out for both its economic and strategic significance: India and South Korea would accelerate negotiations to upgrade their Comprehensive Economic Partnership Agreement (CEPA). Signed in 2009 and operational since 2010, the agreement was envisioned as a gateway to deeper Asian economic integration. Instead, it has increasingly come to symbolise a widening imbalance. India’s exports to South Korea remain heavily concentrated in low-value commodities, while imports from South Korea have surged in high-value industrial and technology products, pushing India’s bilateral trade deficit beyond US$ 15 billion.
The ongoing review seeks to address longstanding concerns around Rules of Origin, non-tariff barriers, regulatory bottlenecks, and limited services access. But beyond correcting trade asymmetry, the negotiations may also determine whether the two countries can build a deeper industrial and supply-chain partnership for the next decade.
When South Korean President Lee Jae-myung visited New Delhi on April 20, 2026, one of the most consequential announcements was also one of the least surprising. India and South Korea agreed to resume and expedite negotiations to upgrade their Comprehensive Economic Partnership Agreement — the bilateral trade pact that has governed economic ties between the two countries since January 2010.
Ministry of External Affairs Secretary (East) P. Kumaran, in a briefing on the visit, put the issue plainly: “The bilateral trade is close to $27 billion. But it is quite unbalanced in the sense that our exports are in the range of about six and a half billion, while Korea’s is about 18 and a half billion. So there is a need to rebalance the CEPA, try and find ways to increase our exports to match that of Korean exports.”
The numbers behind that assessment have been accumulating for years. India’s exports to South Korea stood at US$ 6 billion in 2024–25, while imports from South Korea reached US$ 21.1 billion — a trade deficit of US$ 15.2 billion that has widened every year since the agreement took effect. Commerce and Industry Minister Piyush Goyal, responding to a media report on bilateral trade and investment flows, noted that while merchandise trade has grown 92.7% since CEPA came into force, India’s imports from South Korea rose faster, at 103.7%, contributing to the widening deficit. His assertion was that the deal is not balanced in favour of India.
The India–South Korea Comprehensive Economic Partnership Agreement (CEPA) was signed in Seoul on August 7, 2009, after more than three years of negotiations spanning twelve formal rounds, and came into force on January 1, 2010. The agreement committed both countries to progressively reduce or eliminate tariffs across a substantial share of bilateral trade, with South Korea agreeing to eliminate or reduce duties on around 90% of Indian tariff lines over time, while India extended concessions on roughly 85% of Korean tariff lines.
The agreement reportedly classified thousands of tariff lines into multiple staging categories that determined the pace and extent of tariff liberalisation — ranging from immediate elimination to phased reductions and exclusion lists. Beyond goods trade, the agreement was notable for its breadth. Unlike a conventional free trade agreement focused primarily on merchandise trade, the CEPA also covered services, investment, intellectual property, and economic cooperation, making it one of the most comprehensive bilateral trade agreements India had signed at the time.
India’s top exports to South Korea
Source: DGCIS; * Turbojet and refined copper exports are recent entrants with irregular prior-year data; CAGR not calculable.
The initial response to the agreement appeared encouraging. Bilateral trade crossed US$ 20 billion by 2011, rising sharply in the first two years after implementation. But beneath the headline growth figures, the structural imbalances that would increasingly define the relationship over the following decade were already beginning to emerge.
Why the preferences didn’t translate for India
India’s export basket to South Korea has remained heavily concentrated in commodities and semi-processed industrial materials — including petroleum products, unwrought aluminium, ferroalloys, refined lead, and copper products. These are categories where tariff preferences under the CEPA provide limited incremental advantage. Many already face relatively low Most Favoured Nation (MFN) tariffs globally, while others are traded in highly price-sensitive commodity markets where marginal tariff preferences do little to alter competitiveness. By contrast, the sectors where the CEPA could potentially have generated greater gains for India — pharmaceuticals, engineering goods, textiles, and processed food products — are precisely the areas where Indian exports to South Korea have remained limited.
Research published in the Journal of Indian and Asian Studies in 2023 found that utilisation of the CEPA from the Indian side remained relatively low due to a combination of complex Rules of Origin (ROO) provisions, compliance burdens, and limited awareness among Indian exporters about opportunities in the South Korean market. The study noted that these challenges were particularly significant for micro, small, and medium enterprises in sectors such as gems and jewellery and auto components.
The Rules of Origin issue is partly structural. In many cases, the administrative burden involved in claiming preferential tariff treatment — including certificates of origin, documentation on value addition, and product classification compliance — can reduce or even outweigh the benefits of tariff savings themselves. As a result, exporters often prefer to trade under standard MFN tariff rates rather than utilise the agreement. In certain gems and jewellery categories, industry observers have argued that the value-addition thresholds required under the CEPA’s Rules of Origin provisions are sufficiently stringent to discourage large-scale utilisation despite India’s strong global position in the sector.
The Indian Embassy in Seoul has also noted that one barrier India faces is South Korea’s restrictive policy on imports of primary agricultural products such as fruits and vegetables, and that there is a need for diversification of India’s export products, which remain driven by petrochemical products.
On the South Korean side, non-tariff barriers (NTBs) have, in several categories, diluted the tariff concessions that CEPA established. South Korea’s Ministry of Food and Drug Safety requires foreign pharmaceutical manufacturers to work through an in-country caretaker, with new drug applications following a standard review timeline of 12–18 months. In marine exports, South Korean regulations require offshore seafood processing facilities to be individually registered and approved.
Concerns over tariff barriers, regulatory hurdles, and non-tariff restrictions have also surfaced repeatedly in bilateral economic discussions. At the Korea–India Economic Partnership Dialogue 2026, hosted by the Korea Institute for International Economic Policy Delhi Office in New Delhi in April 2026, participants identified tariff and non-tariff barriers, regulatory constraints, and market-access issues as key impediments to expanding bilateral trade and upgrading the CEPA framework.
The investment picture adds another dimension to the imbalance. South Korea’s cumulative FDI in India stands at approximately USD 7 billion, compared to nearly USD 92 billion in Vietnam. The report that triggered Shri Piyush Goyal’s public response also noted that Hyundai and LG together repatriated around USD 4.7 billion from their Indian subsidiaries over the past year, and that Samsung’s royalty payments to its parent rose 50% year-on-year to Rs 3,322 crore.
India’s stated priorities for the CEPA upgrade, as outlined by MEA Secretary Kumaran, include finding ways to increase Indian exports, addressing non-tariff barriers, enhancing investment flows, and expanding services exports — particularly in IT, which he described as “an area of particular strength for us.”
Officials from both sides have said the review aims to make the agreement more comprehensive and mutually beneficial, particularly by improving market access and easing trade facilitation measures, and that future rounds of discussions will focus on advanced manufacturing, electronics, green energy, and digital technologies.
India’s market share in S. Korea’s top import categories
Source: DGCIS
The sectoral opportunities for India are substantial and well-documented. South Korea imports US$ 9.7 billion in pharmaceuticals annually, yet India’s exports in this category to South Korea stood at barely US$ 33 million — a 0.34% market share — despite India being the world’s largest supplier of generic medicines by volume and hosting the highest number of US FDA-approved manufacturing facilities outside the United States. In textiles, South Korea imports over US$ 12 billion in apparel and cotton annually; India’s combined share is around 1.5%. In processed food and marine products, South Korea’s import bill across fish, spices, oils, and edible preparations exceeds US$ 20 billion annually, while India’s presence remains a fraction of that figure.
The South Korea-India Economic Partnership Dialogue identified opportunities in semiconductors, electric vehicles, renewable energy, green hydrogen, shipbuilding, and critical minerals as high-growth areas for deeper bilateral integration. Participants also emphasised building resilient supply chains through joint ventures and strategic partnerships.
A renegotiated CEPA would need to address three layers simultaneously: simplifying Rules of Origin to reduce compliance costs for Indian exporters, particularly MSMEs; establishing mutual recognition frameworks for regulatory certifications in pharmaceuticals and food; and building a dedicated NTB resolution mechanism with defined timelines for addressing notified barriers. A services chapter with meaningful commitments on cross-border IT delivery and movement of professionals — an area conspicuously absent from the current CEPA — would also need to be on the table.
During the April 20 summit, India and South Korea set a target to increase bilateral trade from approximately US$ 27 billion to US$ 50 billion by 2030, and agreed to upgrade CEPA to make trade more balanced and efficient.
PM Modi described the partnership as “futuristic” during talks with President Lee, with both sides committing to deepen ties in trade, investments, artificial intelligence, semiconductors, and critical technologies.
Goyal also cited the proposed 50:50 joint venture between JSW Steel and POSCO to establish a 6 MTPA integrated steel plant in Odisha, with an estimated investment of Rs 35,000 crore, as an example of a potential shift toward deeper industrial partnership.
The dialogue also underscored the need to upgrade the CEPA into a more comprehensive and future-oriented agreement capable of fostering greater trust, improving investment flows, and supporting deeper industrial integration between the two economies. South Korea’s ongoing supply-chain diversification efforts — shaped by both economic and geopolitical considerations — and India’s expanding manufacturing ambitions under Production Linked Incentive (PLI) schemes in sectors such as electronics, pharmaceuticals, and auto components create a degree of strategic complementarity that a modernised CEPA could help institutionalise.
Further rounds of negotiations are expected in the coming months as both sides work toward updating key provisions under the CEPA framework. Officials from India and South Korea have indicated an intent to accelerate the review process, although the timeline for concluding the upgraded agreement remains uncertain. Whether the revised CEPA ultimately delivers meaningful structural rebalancing — rather than incremental adjustments — may determine whether it fulfils the ambitious economic partnership both governments are now seeking to build.
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