India’s stature on the international stage is strengthening. The country has recently become the world’s most populous country, and the international ranking of its economic size is expected to go from 5th to 3rd this decade. Moreover, India is becoming a major partner for many developed countries amidst the rising diplomatic conflict between the west and China. Advanced economies, including the United States, the European Union, and Japan are devising detailed strategies to strengthen relationships with India in the areas of trade, investment, development cooperation, and security. Along with these major trends, global companies in search of a huge consumer market and competitive manufacturing base are expanding investment in India. The Korean government and companies also need to strengthen their partnership with India. To support their ventures, this report takes a close look at four main areas with significant potential, namely supply chain rearrangement, digital transformation, climate change, and south-south development cooperation. The report analyses India’s position and strategy, as well as policies that Korea and India could implement to strengthen their relationship.

In India, forward- and backward-linkage global value chain trade ratios declined in the early- to mid-2010s and increased in the late-2010s. While ‘complex’ global value chain trade ratios remained stable, ‘simple’ global value chain trade ratios led an increase in these overall ratios. As these small adjustments have canceled out one another, the global value chain trade ratios in the early-2010s and the early-2020s did not show significant change.

India’s gradual global value chain participation is linked to the government’s industrialization strategy, which prioritizes domestic value addition rather than export expansion via using imported products. A key policy that matches this description is the ‘production-linked incentive’ scheme. During the 2010s, the Indian government focused on improving the business climate by streamlining investment processes and improving infrastructure under the ‘Make in India’ strategy. In the beginning of the 2020s, the government began providing subsidies to incentivize domestic manufacturing under the ‘production-linked incentive’ program. Furthermore, India has been participating in discussions on supply chain at multinational forums such as the Quadrilateral Dialogue and the Indo-Pacific Economic Framework.

As the Indian government has been actively adopting policies to stimulate domestic manufacturing and as global manufacturers are rushing to establish production bases in India, Korean companies should also strengthen their entry into India to tap into the growing consumer market. However, there are still many hurdles that Korean manufacturers face when seeking to enter India. To collaboratively solve these challenges, the governments of the two countries can establish a senior-level institutional structure. This body will find viable solutions to problems that Korean manufacturers face in India and use the outcomes of the discussion when negotiating the upgrade of Korea-India Comprehensive Economic Partnership Agreement. Moreover, as the Korean government is planning to strengthen development cooperation with India, the focus may be on ways to strengthen India’s manufacturing competitiveness. Infrastructure projects that improve connectivity and skill training projects that support local companies and workers could indirectly help Korean manufacturers in India.

India’s enormous digital market is expanding rapidly. India’s digital communication networks, equipment, contents, finance, and online marketplace are quantitatively and qualitatively upgrading. India’s digitally deliverable services trade is also growing with India recording a large trade surplus. This notable growth of India’s digital economy is supported by government-driven policies across diverse segments. The government is actively participating in establishing the foundations of digital economy as it aims to secure domestic benefits from digital transformation. For example, the government has established an electronic identification system, Aadhaar, the Unified Payments Interface (UPI), and the Open Network for Digital Commerce (ONDC). The Indian government has also emphasized the public character of digital data. In other words, the country maintains a conservative stance in terms of cross-border data flows and international agreements on data transfers. While the government has, at times, weakened its stance in order to foster the growth of the digital industry, its overall position of limiting foreign companies’ access to India’s market and data with an aim to support domestic firms is expected to be in place for the foreseeable future.

Considering that the areas for digital cooperation are diverse and because the Indian government considers digital industry a key pillar of economic development, the Korean government should establish a high-level cooperative mechanism with India. Participating officials may discuss digital public infrastructure, communication networks, artificial intelligence, finance, and standards. The relevant information may be passed on to Korean digital companies to help them adjust strategies. Moreover, the Korean government could continue monitoring the changes in India’s regulations in the digital industry and share information that could act as risks to the Korean companies. The two countries can find ways to co-invest in start-ups and research and development activities in the digital industry.

India is expected to be one of the countries that suffer to the largest extent from climate change. News on extreme weather in India has already been widely shared, and statistics highlight the seriousness of the situation. Compared to approximately nine decades ago, the recent monthly temperature patterns show that winters have become warmer and summers have become longer. The comparison of monthly precipitation during the same period shows that the level has decreased in June and increased from August-October. The frequency of natural disasters such as floods and storms is also increasing along with climate change. These trends not only threaten lives and livelihoods, but also hurt worker productivity thereby having negative consequences on India’s economy.

In response, India has adopted various climate change adaptation policies. Under the National Action Plan on Climate Change, the government has designed strategies to expand renewable energy, protect ecosystem and forests, and create sustainable urban areas. Furthermore, reflecting increasing concerns surrounding natural disasters, the Indian government has been continuously modifying the National Disaster Management Plan. There are also policies aimed at climate change mitigation. India has established and adopted policies for achieving the Nationally Determined Contribution, which demonstrates the country’s plan to cut emissions. India’s climate change policies also have an international angle. India aims to become leader of the Global South by implementing climate change policies on an international scale. For example, India has been at the forefront of establishing and operating multinational bodies such as the International Solar Alliance and the Coalition for Disaster Resilient Infrastructure. Using these multilateral platforms, India is supporting developing countries’ adoption of climate change policies and expansion of infrastructure.

As India’s climate change policies cover adaptation and mitigation and are both domestic and international, Korea should establish a multifaceted cooperative relationship with India. An important starting point would be to construct a high-level communication channel that would support the establishment of a cooperative strategy. This forum will provide a venue for information sharing on India’s demand and Korea’s strengths. Korea should also pay attention to India’s international efforts to fight climate change. Korea may contribute to finding global solutions by firstly joining the International Solar Alliance and the Coalition for Disaster Resilient Infrastructure, which already have numerous developed and developing countries as members. Moreover, the Korean government’s efforts to strengthen development cooperation with India may focus on the green sector. Furthermore, diversifying Korea’s development financing tools would expand the scope of cooperation.

India is actively seeking means of supporting developing countries’ economic and social progress. India’s south-south cooperation began in the 1950s, and its expansion began to accelerate in the 2010s. India has been mobilizing numerous tools to pursue south-south cooperation. The Indian government’s grants and concessional loans to developing countries is concentrated on its neighbors. The government is also providing lines of credit through the Export-Import Bank. While Bangladesh is the largest beneficiary, the lines of credits are provided to a large number of countries in various regions since they are designed to support Indian companies’ global venture. The Indian Technical and Economic Cooperation program invites individuals from developing countries to educational and training courses in India. Moreover, India has contributed to solving global challenges by, for example, providing vaccines to its neighbors during the COVID-19 Pandemic.

Many developed countries view India as a key facilitating partner in triangular development cooperation because the country has accumulated important information and technology in the process of solving its own problems, as well as vast experience in cooperating with certain developing countries. India may benefit from triangular development cooperation as it can strengthen global reach and leverage developed countries’ development finance. Based on these strategic opportunities, India and developed countries such as the United States, the United Kingdom, Germany, and Japan are strengthening triangular development cooperation in various forms.

Triangular development cooperation with India could also support Korea’s aim of becoming a global pivotal state. Korea may seek triangular development cooperation projects by joining multinational forums such as the International Solar Alliance and the Coalition for Disaster Resilient Infrastructure, as well as the Global Biofuel Alliance and the One Future Alliance in the digital sector, which were announced during the G20 Summit in New Delhi. Since Korea has not yet have systematically begun triangular development cooperation, it requires a special taskforce with the role of designing an overall strategy. Following this process, Korea can sign an official document indicating the aims and goals of triangular development cooperation with India and establish a dedicated team that searches for potential projects that reflect the two countries’ strengths.

This report concludes by emphasizing the importance of creating a conducive atmosphere for a smooth implementation of economic cooperation between Korea and India. Firstly, considering India’s economic size and strategic importance, Korea should view the country as a major cooperative partner that is in a different league to other developing countries. Secondly, Korea’s development agencies and government- linked financial institutions could innovate their development cooperation tools to satisfy India’s growing needs for diverse financing instruments. Thirdly, because the Indian government is aiming to foster the growth of domestic firms, Korean businesses must strengthen cooperation with local companies, and the Korean government could provide supporting measures. Fourthly, as business and people exchange between Korea and India is expected to intensify, the Korean government could prepare by adopting measures that could improve the living environment of Koreans residing in India. Finally, the Korean government needs to establish a centralized body that coordinates government institutions at the forefront of strengthening Korea-India relations. A careful coordination would enable the mobilization of various cooperation tools such as the Comprehensive Economic Partnership Agreement, grants, and concessional loans to create synergy and minimize negative side effects.