The 40th Anniversary of Korea-India Amity: Evaluation and Prospects for Investment Cooperation

Abstract

The Korea-India diplomatic relationship marked its 40th year in 2013. Regarding relations between the two countries, investment plays a particularly significant role, because trade barriers from India make investment an effective channel of cooperation compared to trade. Moreover, India has placed greater priority and emphasis on investment rather than trade, as the country is suffering from chronic trade deficits and a lack of investment sources. Despite the importance of investment, however, in the late 2000s, other major investing countries boosted their investments significantly in India and consequently weakened Korea’s standing. Since 2007, Singapore has become the second largest investor in India after Mauritius, a well-known tax haven. The fourth largest foreign investor in India is Japan, whose cumulative investment represents 7.4% of India’s total investment from 2000 to 2013. Meanwhile, during the same period, Korea was ranked 13th, accounting for 0.6% of foreign investment in India. This paper examines the achievements related to investment between Korea and India by analyzing associated trends, characteristics and determinants. Flaws and solutions are also identified, through a comparative analysis on the distinct features of FDI in India and on the investment patterns of major investors. The paper ultimately aims to propose policy challenges for the future and contribute to bringing the two countries closer together as investment partners.