India, South Korea Likely to Review CEPA In May as Trade Deficit Concerns Rise

India and South Korea are likely to hold discussions related to the review of the comprehensive economic partnership agreement (CEPA) on May 25, according to PTI.

The deliberations are important as India has suggested Korea to consider negotiating a fresh bilateral trade agreement to make it more contemporary and address concerns of the trade deficit.

"The officials of the two countries are meeting on May 25 for the FTA review," the official told the news agency.

The CEPA was implemented in January 2010. Commerce and Industry Minister Piyush Goyal suggested fresh talks for a new free trade agreement to his Korean counterpart Yeo Han-koo last month.

Goyal, on multiple occasions, flagged India's concerns over the widening trade deficit between the two countries.

India's exports to Korea declined 9.3% to $5.81bn in 2024-25 from $6.41bn in 2023-24. Imports fell marginally by 0.34% to $21bn in 2024-25, leaving a trade deficit of $15.19bn. It was $8bn in 2020-21.

The two countries aim to double their two-way commerce to $54bn by 2030 from the current $27bn while ensuring a more balanced trade relationship.

The Bonhomie

India is stepping up its efforts to attract foreign direct investment from South Korea.

South Korea is already a significant investor in India, ranking among its 13th to 15th largest sources of FDI. Between April 2000 and March 2025, Korean companies have invested over $6.69bn in India, driven largely by the CEPA.

While manufacturing has driven Korean investment in India so far, the bonhomie between two countries last month in New Delhi pointed to a more ambitious agenda.  Prime Minister Narendra Modi's meeting with visiting South Korean President Lee Jae Myung indicated that future Korean capital is expected to move into semiconductors, shipbuilding, energy systems and advanced mobility, the sectors aligned with India's industrial ambitions.

A dedicated India-Korea startup and innovation investment fund was among the key proposals discussed along side the LG Group's ongoing expansion in electronics and consumer manufacturing.

The discussions also pointed to potential expansion by other Korean manufacturers in electronics and components, with India keen to deepen value chains rather than remain a final assembly destination.