The decision to resume negotiations on upgrading the India-South Korea Comprehensive Economic Partnership Agreement reflects a timely recognition: the existing trade model has reached its limits. Bilateral trade has grown to around $27 billion, but the structure remains skewed.
India continues to run a merchandise trade deficit of $10-12 billion, driven by imports of high-value manufactured goods such as electronics and machinery, while exports remain concentrated in lower-value segments. The new target of $50 billion by 2030 is ambitious, but without a shift in composition, increased trade volume alone risks reinforcing this imbalance.
The significance of the CEPA upgrade, therefore, lies not in expanding trade per se, but in redefining what drives that trade.
India’s services strength
What makes the current moment different is that policymakers are implicitly acknowledging India’s real strength, services exports. India exported over $340 billion in services in 2023-24, accounting for nearly 40 per cent of total exports, and generated a surplus exceeding $150 billion. This surplus has consistently offset deficits in merchandise trade at the macro level.
Yet, this advantage has not translated proportionately in India’s trade with South Korea. Despite Korea’s advanced digital economy and demand for high-end services, India’s service presence in the Korean market remains limited. This is where the strategic shift becomes important. Unlike manufacturing, where India still faces scale and competitiveness constraints, the services sector has grown without heavy subsidies or incentives. Its expansion has been driven by capability, not protection.
The implication is clear: India does not need more incentives for services; it needs structured market access and strategic alignment. This is precisely what the current partnership is beginning to address.
Right strategic bet
The announcement of the India-Korea Digital Bridge is not just an add-on — it is the most forward-looking element of the partnership, and arguably the most consequential. By focusing on AI, semiconductors, and digital technologies, both countries are aligning their core economic strengths.
India brings scale, talent, and a rapidly expanding digital ecosystem — with over 850 million internet users and a digital economy projected to reach $1 trillion by 2030. South Korea contributes technological depth in semiconductors, electronics, and advanced manufacturing.
The critical point is that this collaboration is inherently services-led. Even in hardware-dominated sectors like semiconductors, the highest value segments, design, software integration, and AI optimisation, are service-intensive. Similarly, in manufacturing sectors such as shipbuilding, the integration of digital engineering and automation opens space for India’s services sector.
In this sense, the Digital Bridge is not just about technology cooperation — it is a mechanism to embed Indian services into Korean industrial ecosystems. This is exactly the kind of strategic alignment that can rebalance bilateral trade without relying on traditional tariff tools.
The CEPA upgrade must institutionalise this shift by incorporating digital trade frameworks, seamless cross-border data flows, easier mobility for skilled professionals, and mutual recognition of qualifications and standards.
Advantage India
If these elements are effectively integrated, India can significantly expand its footprint in Korea’s services market, enabling services exports to offset merchandise deficits at the bilateral level, much like they already do at the global level. The broader significance of this partnership lies in its timing.
At a moment when global trade is being reshaped by technology and supply chain realignments, India and South Korea are choosing to move beyond conventional trade logic. They are not just trying to trade more — they are choosing to trade smarter.
In doing so, they acknowledge a fundamental reality: the future of India’s export competitiveness lies in services, and strategic digital partnerships like this are the most effective way to unlock it.
The writer is an Assistant Professor at Symbiosis Institute of International Business (SIIB), Pune. Views expressed are personal
Published on April 24, 2026