South Korea and India launched a new supply chain alliance on the occasion of their bilateral summit on the 20th. On the second day of his state visit to India, President Lee Jae-myung held bilateral talks with Prime Minister Narendra Modi and agreed to upgrade existing economic cooperation in areas such as electronics and automobiles, while expanding collaboration in strategic industries including shipbuilding, finance, artificial intelligence (AI), and defense. President Lee assessed that combining India's software capabilities with Korea's manufacturing competitiveness would generate enormous synergy. To this end, the two countries will establish a ministerial-level "Industrial Cooperation Committee" to strengthen coordination in strategic fields such as critical minerals. Prime Minister Modi also announced the launch of an economic security dialogue between the two nations. The two leaders agreed to expand bilateral trade from $25.7 billion last year to $50 billion by 2030.
To put this agreement into action, the two countries must first resolve the stalled upgrade of the Comprehensive Economic Partnership Agreement (CEPA), which has been adrift for a decade. The two sides agreed to officially begin CEPA improvement negotiations next month and conclude them by the first half of 2027. Korea signed a CEPA with India in 2009, ahead of other major economies, and the agreement took effect the following year. However, its utility has been limited due to a low level of market opening in areas such as tariff concessions and strict rules of origin. The Korean government has held 11 rounds of CEPA improvement negotiations since 2016 to address these shortcomings but has failed to reach a conclusion. Meanwhile, latecomers such as Japan (2010), the United Kingdom (2025), and the European Union (2026) have concluded high-level free trade agreements (FTAs) with India. At this rate, Korea risks falling behind rather than securing an early foothold in the Global South market. The government must leverage all available tools, including the Economic Development Cooperation Fund, to forge an agreement that raises the level of market opening between the two countries.
For this new supply chain alliance to function properly, it is crucial for Korea and India to strengthen cooperation for "freedom of navigation" to protect trade routes. If the recent blockade of the Strait of Hormuz amid the Iran war becomes entrenched as a new normal and is replicated on the world's major sea lanes, Korea, which relies on exports, and India, which depends heavily on external energy imports, would suffer fatal blows to their economies. The government should not hesitate to actively support India's naval expansion with Korea's shipbuilding and defense industry capabilities, and to expand peaceful and defensive maritime military exchanges. Furthermore, now is the time to dramatically strengthen communication with major coastal states in the Indo-Pacific and devote all efforts to solidifying maritime security cooperation.
