Empowering Steady Synergies – India Korea Financial Dialogue 2017
The world is witnessing a new surge of protectionism, especially from the developed world. It is a period of transforming international relations for the developing ones. With a similar motive, the 5th Korea-India Financial Dialogue, a four day long meet was held on June 17, 2017, in Seoul, South Korea. Republic of Korea acquires sixth position in the list of India’s top import source countries, with a share of 3.42 per cent in its total imports, valuing USD 12214.05 million in 2016. Exports from India to South Korea are valued at USD 3465.42 million in 2016, forming 1.3 per cent of India’s exports .
History of India- Korea partnership
Openness in trade between India and South Korea was initiated with the ‘Comprehensive Economic Partnership Agreement’ which came into force on January 1, 2010, significantly impacting trade volumes between the two countries. In 2015, a special strategic partnership was shaped. Bilateral understanding in defence matters date back to 2005 when the first MoU in Defence, Industry and Logistics was signed.
Agreements this year
In this year’s meet, India and Korea have particularly zeroed down on cooperation in Defence, Infrastructure and Manufacturing. Defence partnership can mean maturation of India’s defence technologies. Further, the focus was primarily on infrastructure development, investment enhancement and bilateral trade. Agreement on USD 9 billion of concessional credit and USD 1 billion of Official Development Assistance (ODA), were signed between the two countries. These agreements are in line with Indian PM’s visit to South Korea in 2015, and show a continuity of efforts which binds any geopolitical strategy. A discussion of ODAs and concessional credit follows.
ODAs and Concessional Credit
ODAs are essentially government aid designed to promote the economic development and welfare of developing countries. Partnership with South Korea is expected to energize India’s objective of increasing spending on infrastructure. Also, such spending spans into different sectors and improves overall production and consumption capacity.
Concessional Credit is a mechanism of providing credit on generous terms, below market loan requirements. Naturally, a movement of such credit from the well off to the needy economy is witnessed. India had pledged USD 10 billion concessional credit to Africa in 2010. A series of such credit between different nations establishes a nexus of inclusive global growth.
Implications for India’s domestic policies
The funds received under ODA will be deployed for infrastructure development projects in India, furthering India’s relocated focus on infrastructure. Similarly, the depressed state of private investment in India, which is being substituted by public spending can be eased out, though minutely, by long term stable investments coming from strategic partners like Korea. The two nations have also agreed on considering ODA fund allocation towards India’s Smart Cities Mission. It would be interesting to see how India benefits from Korea’s expertise in urban development.
Altogether, there is a hope of gaining a lot from India-Korea engagement at a political and economic level.
1. Republic of Korea, South Korea and Korea have been used interchangeably
2. Data from ITC Trade Map