PM Modi welcomes Korean FDI
On 27th February, 2018, Prime Minister Narendra Modi attended the India-Korea Business Summit organised by the Confederation of Indian Industry and addressed a mega delegation of over 150 Korean companies. He noted that our bilateral trade crossed 20 billion dollars last year, for the first time in six years. South Korea’s open market policies have found resonance with India’s economic liberalization and ‘Look East Policy’. His visit to South Korea in 2015 proved fruitful as today, over 500 Korean companies are operating in India. India has opened its arms for Korean investors, thereby providing them a huge market. However, South Korea ranks only 16th in FDI Equity inflows to India.
The Prime Minister highlighted India’s increasing purchasing power and said that India is already the third largest economy by purchasing power and will soon become the world’s fifth largest economy by nominal GDP. India has the largest start-up ecosystem and takes its place among the fastest growing economies of the world.
He however also stated that the existing trade deal between India and South Korea hasn’t helped India as much as it was expected. In this regard, India’s exports have steadily declined while imports have consistently increased. Considering the trade figures from 2016-17, the import-export relationship doesn’t look balanced. In 2016-17, India exported $4.24 million merchandise while imports from Korea accounted to $12.58 billion worth of goods (Business Standard). More than 78% items from India’s list of goods and 88% items from South Korea’s list of goods currently fall in the zero-duty category (Press Information Bureau).
The Prime Minister asked the mega-conglomerates, noteworthy among which were Samsung, Hyundai and LG, to expand their existing $2.55 billion worth of investments, particularly in the automobile and engineering sectors.This may prove to be a challenge given their reservations about increasing investment, due to complications surrounding the Goods and Services Tax (GST). They have also been vocal about the difficulty in obtaining loans from banks.
Explaining about GST, Finance Minister, Arun Jaitley, said that the four rates for GST were necessitated by the vast difference in taxes earlier in place for different items. “We have worked towards creating a stable business environment, removing arbitrariness in decision making. We seek positivity in day to day transactions. We are widening areas of trust. This represents a complete change of the Government’s mindset.”
The Prime Minister emphasized on the change in the government’s approach towards increasing the scope for investments. “India is on a de-regulation and de-licensing drive. Validity period of industrial licenses has been increased from 3 years to 15 years,’’ he added. He also added that India is now ready for business with South Korea and will do whatever is required to “promote and protect” Korean investment.