India tells South Korea to consider negotiating fresh free trade pact

At a ministerial-level meeting in April 2026, India proposed negotiating a fresh Free Trade Agreement with South Korea, seeking to replace or substantially r...

What Happened

At a ministerial-level meeting in April 2026, India proposed negotiating a fresh Free Trade Agreement with South Korea, seeking to replace or substantially renegotiate the existing India-Korea Comprehensive Economic Partnership Agreement (CEPA).
Commerce ministers from both sides discussed the proposal, with India characterising the existing CEPA as poorly balanced due to a persistent and growing trade deficit.
Both countries agreed to launch formal upgrade negotiations (described as CEPA 2.0), targeting a bilateral trade of $50 billion by 2030 (up from approximately $27 billion currently).
Eleven rounds of renegotiation talks have already been held; an Early Harvest Package has been agreed upon as a preliminary deliverable.
The renegotiated agreement is expected to be concluded by end-2026 or early 2027.
Key priorities in the upgrade include addressing non-tariff barriers, rebalancing trade flows, improving rules of origin, boosting services exports, and cooperation in shipbuilding, semiconductors, and critical technologies.

Static Topic Bridges

India-Korea Comprehensive Economic Partnership Agreement (CEPA)

A Comprehensive Economic Partnership Agreement (CEPA) is a broad trade and economic agreement covering goods, services, investment, intellectual property, and government procurement. India's CEPAs are among its most comprehensive bilateral trade instruments.

The India-Korea CEPA was signed in Seoul on August 7, 2009, and entered into force on January 1, 2010. It was the first CEPA India concluded with a major industrialised country. The agreement eliminated or reduced tariffs on approximately 85% of traded goods, with phased reduction schedules.

India-Korea CEPA signed: August 7, 2009; in force: January 1, 2010
Coverage: Goods, services, investment, and movement of natural persons
Tariff concessions: Covers approximately 85% of goods categories
Korea's FTA utilisation rate for India: ~67% as of 2014 — among the lowest across Korea's FTAs
India's trade deficit with South Korea: Grew from approximately $5.16 billion (2009-10) to approximately $9.39 billion (2021-22), roughly doubling in value terms
Bilateral trade volume: Approximately $27 billion (2024-25)
India's primary exports to Korea: Petroleum products, minerals, organic chemicals, iron and steel, marine products
Korea's primary exports to India: Electronics, machinery, automobiles, steel products

Connection to this news: India's push for a fresh FTA stems from the asymmetric trade outcomes under the existing CEPA — India's imports from Korea far exceed its exports, reflecting structural issues in tariff schedules, rules of origin, and non-tariff barriers.

Rules of Origin (RoO)

Rules of Origin are criteria used to determine the national source of a product. In FTAs, RoOs prevent "tariff shopping" — where goods from a third country are minimally processed in an FTA partner to claim preferential duties. Strict or poorly designed RoOs can limit FTA utilisation.

WTO Agreement on Rules of Origin (Uruguay Round, 1994) provides a multilateral framework
FTA-specific RoOs typically require a minimum "value addition" threshold (e.g., 35–40% of ex-factory price) or a "change in tariff heading" criterion
India's FTAs have been criticised for loose RoOs that allow third-country goods (especially Chinese components) to enter via FTA partners
India's Ministry of Commerce introduced stricter RoO norms for several FTA partners from 2020–2023

Connection to this news: Tightening rules of origin is a stated priority in the India-Korea CEPA renegotiation, to prevent circumvention of tariffs through Korean assembly operations using third-country (especially Chinese) intermediate inputs.

Limitations of Trade Deficit as an FTA Metric

A trade deficit in goods does not automatically indicate an FTA failure; it must be assessed alongside services trade, investment flows, technology transfers, and supply chain integration. India runs services trade surpluses with several goods-deficit partners.

However, persistent and widening deficits — particularly in manufactured goods where domestic industry has policy-priority status — raise legitimate concerns about market access asymmetry, non-tariff barriers, and the competitiveness of Indian manufacturing.

India's overall goods trade deficit (2023-24): approximately $240 billion
India's FTAs with ASEAN, Japan, and Korea have all generated or widened goods trade deficits
India conducted a comprehensive review of its FTAs (2020–2022) to identify imbalances before commencing new negotiations
The India-UAE CEPA (2022) and India-Australia ECTA (2022) incorporated revised RoO, digital trade, and safeguard provisions reflecting lessons from earlier agreements

Connection to this news: India's proposal to renegotiate rather than simply amend the Korea CEPA reflects the experience from these reviews — incremental amendments were deemed insufficient to rebalance the trade relationship.

Early Harvest Packages in Trade Negotiations

An Early Harvest Package (EHP) is a subset of trade concessions agreed upon before the comprehensive FTA is finalised, covering sectors where both parties can quickly reach consensus. EHPs allow early trade benefits without waiting for the full agreement.

EHPs have been used in India-ASEAN, India-Sri Lanka, and China-ASEAN FTA negotiations
EHPs typically cover tariff concessions on a limited product list and are later incorporated into the comprehensive agreement
The India-Korea CEPA renegotiation has agreed to an Early Harvest Package as an interim deliverable ahead of the full CEPA 2.0

Connection to this news: The agreed Early Harvest Package signals positive momentum in India-Korea talks while the comprehensive renegotiation continues through 2026–27.

Key Facts & Data

India-Korea CEPA signed: August 7, 2009; entered into force: January 1, 2010
Bilateral trade at CEPA signing: ~$14 billion; current: ~$27 billion
Bilateral trade target (CEPA 2.0): $50 billion by 2030
India's imports from South Korea (2024-25): ~$18.5 billion
Trade deficit trajectory: $5.16 billion (2009-10) → ~$9.39 billion (2021-22)
Korea's FTA utilisation rate with India: ~67% (among Korea's lowest)
Renegotiation rounds completed: 11
Early Harvest Package: Agreed at ministerial meeting
CEPA 2.0 target conclusion: End of 2026 or early 2027
Key sectors for upgraded agreement: Shipbuilding, semiconductors, critical technologies, AI, services
Other FTAs under Indian renegotiation: India has also asked Japan to renegotiate its EPA (Economic Partnership Agreement) on similar grounds