India is rapidly positioning itself as a central force in reshaping global trade architecture, and the latest developments from New Delhi underscore that ambition. The Korea Institute for International Economic Policy (KIEP) Delhi Office hosted the india korea cepa upgrade Economic Partnership Dialogue 2026 on Tuesday, bringing together policymakers, industry leaders, economists, and trade experts under one roof. The gathering signaled a shared commitment to building a deeper, more resilient economic relationship between India and South Korea at a time when global supply chains are under considerable stress.
The dialogue arrived at a particularly significant moment for India's trade diplomacy. With the BRICS Business Summit creating fresh momentum for connecting the MSME sector to international markets, India's strategic positioning within multilateral frameworks is becoming increasingly important. The convergence of these two developments reflects India's broader approach of pursuing bilateral depth while expanding multilateral reach simultaneously. Both agendas carry direct implications for thousands of small and medium enterprises seeking access to global value chains.
The scale of participation at the Korea-India dialogue reinforced how seriously both governments are treating this relationship. Discussions moved across a wide range of subjects, from bilateral trade patterns to the underutilisation of the India-Korea Comprehensive Economic Partnership Agreement (CEPA), and from digital trade to green economy cooperation. The message from the room was clear: the existing framework between the two countries needs to be modernised, expanded, and made more responsive to the economic realities of 2026.
Reviewing the India-Korea CEPA and Why Trade Utilisation Has Fallen Short
The India-Korea Comprehensive Economic Partnership Agreement has been in place for over a decade, yet participants at the dialogue acknowledged that the agreement has not delivered its full potential. Trade volumes between the two countries remain below what the size and complementarity of their economies would suggest is achievable. A careful review of bilateral trade patterns revealed that CEPA utilisation rates have been inconsistent, with many sectors failing to take full advantage of the preferential terms on offer.
In the past, the agreement was seen as a landmark achievement in South Asia-Northeast Asia trade diplomacy. It opened market access across goods, services, and investment, and created a framework for regulatory cooperation. However, structural gaps in implementation, limited awareness among smaller exporters, and the complexity of rules of origin requirements have all contributed to underperformance. Many Indian MSMEs in particular have found the compliance burden difficult to absorb, leaving potential gains on the table.
Participants at the dialogue agreed that addressing these gaps requires more than technical fixes. It demands a serious upgrade of the CEPA framework to reflect the realities of the current global economy, including the growing importance of digital trade, e-commerce, and the green economy. Aligning the agreement with these emerging sectors would not only improve utilisation but also create new categories of cooperation that did not exist when the original text was negotiated.
Tariff Barriers, Regulatory Constraints and Geopolitical Pressures on Trade
One of the most candid conversations at the dialogue revolved around tariff and non-tariff barriers that continue to limit the depth of India-Korea trade. Comparative tariff analysis presented during the discussions revealed that duties applied to Korean imports into India are higher than those extended to countries such as Vietnam, Thailand, and Chile. This disparity creates a competitive disadvantage for Korean exporters and raises legitimate concerns about whether India's trade policy is inadvertently pushing partners toward less preferential relationships.
In previous years, non-tariff barriers were often treated as secondary concerns in trade negotiations. Regulatory requirements, product standards, certification procedures, and customs processes were seen as technical matters rather than strategic ones. The Korea-India dialogue challenged that assumption directly. Participants made the case that non-tariff barriers in certain sectors are now as commercially damaging as high tariff rates, and that any meaningful upgrade of CEPA must tackle these barriers alongside traditional market access issues.
Geopolitical pressures added another layer of complexity to the discussion. Developments involving the United States, Iran, and Israel are reshaping global supply chains in ways that affect both India and South Korea simultaneously. Disruptions to energy corridors, shipping routes, and critical mineral supply networks have made supply chain resilience a priority for both governments. The dialogue treated this not as a risk to be managed defensively, but as an opportunity to build a more structured bilateral partnership that reduces vulnerability through diversification and joint planning.
High-Growth Sectors Driving the Next Chapter of India-Korea Cooperation
The most forward-looking segment of the dialogue centred on high-growth industries where India and South Korea can build genuine complementarity. Semiconductors emerged as a top priority, given India's aspirations in chip manufacturing and South Korea's world-class capabilities in that sector. Electric vehicles, battery technology, and the broader EV supply chain also drew significant attention, as both countries navigate the transition away from fossil fuel-dependent transportation systems.
Renewable energy and green hydrogen were identified as areas with exceptional bilateral potential. South Korea has invested heavily in hydrogen technology and offshore wind capacity, while India has set ambitious renewable energy targets and is building out its green hydrogen production infrastructure. Collaboration in these areas could benefit both countries commercially while contributing to global climate goals. Shipbuilding, where South Korea holds a dominant global position, also featured in discussions about how Indian ports and maritime industries could benefit from deeper technology exchange.
Critical minerals were a recurring theme throughout the sectoral discussions. Control over lithium, cobalt, nickel, and rare earth elements is increasingly shaping geopolitical alignments worldwide. India and South Korea, both of which are heavily dependent on imports of these materials, have a shared interest in developing joint sourcing strategies, processing partnerships, and stockpiling arrangements. Participants agreed that a coordinated approach to critical minerals could significantly enhance the strategic value of the bilateral relationship.
Foreign Direct Investment, PLI Schemes and Building Resilient Value Chains
Foreign direct investment was highlighted as the engine that could power the next phase of India-Korea industrial collaboration. Despite the CEPA framework and strong diplomatic ties, Korean investment in India's manufacturing sector remains limited relative to the potential. Panel discussions identified regulatory uncertainty, land acquisition challenges, and infrastructure gaps as factors that have deterred Korean companies from committing capital to Indian manufacturing projects at scale.
India's production-linked incentive schemes were discussed in detail as a mechanism with significant promise but mixed results so far in attracting Korean investment. Participants noted that PLI schemes are structured around specific sectors and output targets, but linking them effectively to global value chains requires additional work on logistics, supplier ecosystem development, and ease of doing business metrics. South Korean companies that have explored PLI-linked investments have often found the compliance and approval process more time-consuming than comparable incentive programs in competing destinations.
The dialogue's participants called for joint ventures and strategic partnerships as a practical pathway to building more resilient supply chains. Rather than waiting for comprehensive policy reforms, industry leaders recommended starting with sector-specific pilots that could demonstrate the commercial viability of deeper industrial collaboration. This bottom-up approach was seen as a way to generate evidence and momentum for broader structural reforms while delivering near-term benefits for businesses on both sides.
The Road Ahead for India-Korea Strategic Partnership and MSME Global Integration
Stakeholders at the dialogue called for a fundamental shift in how India and South Korea approach their economic relationship. The recommendation was to move beyond traditional market access negotiations and toward a more ambitious model of strategic industrial cooperation. Sectors such as space technology, defence manufacturing, hydrocarbons, and pharmaceuticals were cited as areas where cooperation has been discussed for years but has yet to translate into concrete outcomes.
A long-term Korea-India strategic industry roadmap was proposed as a practical tool for guiding that transition. Such a roadmap would identify priority sectors, set measurable targets for trade and investment growth, and create accountability mechanisms at the policy level. Improving coordination between government agencies, streamlining regulatory approvals, and addressing non-tariff barriers systematically would all be integral parts of implementing such a roadmap effectively.
One of the more innovative recommendations to emerge from the dialogue was the exploration of a currency swap agreement between India and South Korea. Reducing dependence on the US dollar in bilateral trade settlements could lower transaction costs, reduce exchange rate risk, and deepen financial integration between the two economies. In the context of India's BRICS engagement and its broader push to internationalise the rupee, this recommendation aligns well with the country's stated strategic objectives and could set a meaningful precedent for India's other key bilateral trade relationships.