India’s state enterprises, or central public sector enterprises (CPSEs), are playing a key role in numerous industries. Although the country began its economic liberalization in the early 1990s, large-scale privatization did not gain momentum due to strong political and societal opposition, allowing CPSEs to maintain their pivotal position within the Indian economy. Starting from the mid-2010s, the number and total size of CPSEs increased as the Narendra Modi government actively mobilized these enterprises to pursue economic development. As of 2022, there were 389 CPSEs with total revenues exceeding 30 trillion rupees (approximately 350 billion dollars).

This report focuses on the agriculture-related sector, electric power sector, transport infrastructure sector, energy, minerals and metals sector, and defense sector as promising areas for Korea-India cooperation. It examines the role and key projects of India’s major CPSEs within these industries. Major CPSEs were selected based on indicators such as assets, revenues, and employment, as well as their roles in government development strategies. The report finds that major CPSEs play a crucial role in all five selected sectors. CPSEs in the agriculture-related sector are prominent players in fertilizer production, food trading, and food storage. In the electric power sector, CPSEs are leaders in thermal and nuclear power generation. CPSEs are also in charge of significant public transport infrastructure projects in the road, rail, port, and airport segments. In the energy, minerals and metals sector, CPSEs hold substantial shares in upstream and downstream businesses. Defense CPSEs lead the domestic production of military vehicles, ships, and aircraft.

While the Indian government actively employs CPSEs for development, it also recognizes the importance of the private sector. To attract private investment, the government has been improving the business environment by easing regulations and strengthening infrastructure. Moreover, it has been encouraging cooperation between CPSEs and international companies and organizations.

This report analyzes a set of case studies involving CPSEs and international companies or organizations. These cases can be divided into two areas: industrial cooperation and development cooperation. In the area of industrial cooperation, the goals of CPSEs include gaining access to advanced technologies and capital while strengthening supply chains. In comparison, external partners seek to leverage CPSEs’ local knowledge, networks, and market access. In the area of development cooperation, major advanced countries’ development agencies and global development financial institutions have been expanding funding to India with CPSEs charged with the execution of numerous development projects.

India is a pivotal partner in the Indo-Pacific era. As Korea seeks to strengthen its partnership with India, the most populous country in the world and soon to be the third-largest economy, the Korean government and businesses can consider cooperating with India’s CPSEs. Based on in-depth analyses of CPSEs, this report suggests five strategies referred to as the 5Ms (Monitoring, Meeting, Marketing, Matching, and Metamorphosis) to enhance relations with these enterprises.

First, Korea’s government institutions and industry associations need to strengthen their monitoring of India’s CPSEs. To prepare for potential disruptions in key natural resource supply chains, a monitoring team can be tasked to collect information on CPSEs with increasing influence in the global commodities market. Additionally, the team can gather critical information on India’s major development strategies and projects by monitoring CPSEs. As state enterprises play an important role in several large emerging economies, these monitoring activities should be extended to these countries.

Second, while India’s CPSEs actively cooperate with international companies and organizations, their interaction with Korea remains limited. To address this, Korea could organize “State-Enterprises Meetings” with Indian counterparts as an initial step toward collaboration. In these meetings, high-ranking officials from both countries’ state enterprises can discuss India’s development challenges and industrial trends and explore potential areas of cooperation. Korean companies could also identify solutions for some of the obstacles they face in India.

Third, the Korean government could support the marketing activities of Korean businesses aimed at CPSEs, which serve as important contractors in large projects in India. The designated organization would collect and provide information on CPSEs’ contractual relationships, purchasing intentions, and tender regulations as well as arrange seminars and exhibitions aimed at promoting Korean products to CPSEs.

Next, the Korean government could establish a unit responsible for identifying and designing potential cooperation projects by matching the needs of both India and Korea. This team, composed of industry and development experts, would plan cooperation projects aligned with the development strategies of both countries. Given that government-initiated projects involving India’s CPSEs tend to proceed relatively quickly, the team would benefit from close consultation with these enterprises in its search for potential areas of cooperation.

Finally, the report emphasizes the need for a metamorphosis in the Korean government and businesses’ approach to India. Korean businesses should seriously consider expanding local manufacturing capacities, while the Korean government needs to diversify development cooperation tools. With the Indian government advancing its industrialization strategy, Korean businesses targeting India’s vast market are advised to establish local manufacturing facilities. As CPSEs strive to increase indigenization in line with government policy stance, local production will be particularly important. Turning to the role of the Korean government, it could learn from major development finance institutions and policy finance institutions that utilize diverse tools to cooperate with India’s CPSEs. It could also expand its portfolio of policy tools by incorporating guarantees, debt and equity financing, and triangular cooperation mechanisms in addition to grants and concessional loans.