India invited the South Korean president to attend its 61st Republic Day Tuesday, an honor that’s become a tool of Delhi’s foreign policy in much the same manner as Washington’s White House state dinner.
At first glance, these two nations have about as much in common as kimchi and curry, although both support a legend that Koreans with the surnames Kim and Huh can trace their lineage back to an Indian princess in the first century.
Today, the connections are trade.
Since the end of the cold war, India has followed a “Look East” policy that calls for building deeper trade and security ties with Asian nations rather than focusing on Europe and America. India is now diving into economic integration with Asia, beginning with a new comprehensive trade deal with South Korea.
The relationship “is quite important in the sense that it goes with India’s ‘Look East’ policy,” says Pravakar Sahoo, an associate professor at the Institute of Economic Growth in New Delhi and coauthor of a study on the bilateral trade ties. “For the third and fourth largest economies in Asia, the trade between the two countries is quite low. There is huge potential.”
The deal signed in August, known as the Comprehensive Economic Partnership Agreement, hopes to unlock that potential. CEPA is India’s first free trade agreement with an OECD country – a club of wealthy nations – and goes beyond traditional trade deals by encompassing services and investment.
While India has opposed global free trade agreements out of concern for its farmers, New Delhi is aggressively pursuing these bilateral deals across Asia that sidestep the agricultural sector. India signed a similar pact in 2005 with Singapore.
The Korean deal is estimated to add up to $3.3 billion in annual trade between the two nations. Trade between India and South Korea has already jumped dramatically, rising to $15.6 billion last year, up from $2.6 billion in 2002.
Trade partners that fit
In economic relations, opposites can attract.
“India is very good at software, Korea is very good at hardware. Similarly, there are complements between different sectors where trade should be much more, but we haven’t gotten to that level because of trade barriers,” says Professor Sahoo. Now the barriers “have been mostly taken care of by CEPA.”
India’s most pressing need, infrastructure, turns out to be a Korean specialty. On the eve of the visit, New Delhi gave the environmental OK to a South Korean firm to build a $12 billion steel plant in the Indian state of Orissa. The project represents the biggest foreign investment in the country.
South Korean companies won nine of the 44 contracts for India’s National Highway Development Project. And the country has manufactured trains for the darling of India’s new infrastructure projects, the Delhi metro.
The Indian Express newspaper interpreted the deepening economic ties as the reason for New Delhi’s invitation to South Korean President Lee Myung-bak. India traditionally invites one head of state to help it mark the anniversary of India’s adoption of a constitution and designation as a republic in 1950.
“In an innovation increasingly evident, the government has been weaving strategy with hospitality to decide its chief guest for the Republic Day,” the paper notes. Recent years have targeted countries useful for developing India’s nuclear power, including Kazakhstan, a major uranium producer, and France, a technological leader in nuclear plants.
Time for bigger-name guests?
Comments posted under the article online offer a glimpse into how Indians are increasingly seeing their country outgrowing its neighborhood.
“I am also amazed to see that in the last 20 years we didn’t find it appropriate to invite heads of Japan or Germany or Canada as chief guests,” writes S. Dutta. “Nepal, Bhutan, Maldives, Mauritius could have been accommodated by other means instead of wasting opportunities.”
Another user named “Indian” touted South Korea as an economic role model: “A perfect chief guest for the 60th year of Republic Day. Being transformed from an impoverished country to the world’s fastest-growing major economy for three straight decades …. is something to admire."
[Editor's note: The original version of this article misstated how many Republic Days India has celebrated.]