The Indian Economy and Investment Suitability from a Korean Perspective

 Between War Risk and Growth Potential

The World's Largest Population, India

In 2023, India will surpass China to become the world's largest country with a population of approximately 1.4 billion.

In the past, there was a saying that "even if you sell just one toothpick to China, you will become rich," but now India is emerging as a new land of opportunity.

1. The Light and Shadow of the Indian Economy

Although its economic size is still incomparable to that of advanced countries, its growth potential and industrial expansion speed are remarkable. In particular, Prime Minister Narendra Modi is strengthening his political leadership by successfully winning a third term, and is also expanding his international presence by establishing a close relationship with former US President Donald Trump.

With an average economic growth rate of 7%, India has emerged as an alternative for global manufacturing based on cheap labor and abundant manpower. 

In particular, IT outsourcing, which takes advantage of the time difference opposite to that of the US, is competitive worldwide.

India is growing into an all-round industrial partner that encompasses not only manufacturing but also development and after-sales service.

2. Limitations due to lack of infrastructure

However, India still has problems with underdeveloped industrial infrastructure. 

The lack of basic infrastructure such as transportation, electricity, and education hinders foreign investment.

Korean companies are not actively investing in India, and major export items are concentrated in semiconductors, steel, portable devices, and automobile parts. 

As seen in the case of the Indian Mahindra Group that acquired Ssangyong Motors, there is always the possibility of conflict rather than cooperation.

3. Current status of Korean companies entering India: Cooperation and challenges

Currently, major domestic companies such as Samsung Electronics, Hyundai Motors, and LG Electronics have entered the Indian market and are actively operating.

In particular, Samsung Electronics is emphasizing the importance of the Indian market by operating the world's largest smartphone factory in Noida, near the capital city of New Delhi.

Hyundai Motors and LG Electronics are also seeking cooperation in the smartphone and electric vehicle sectors as they secure a foothold in the Indian market. 

Mahindra Group, which previously pursued the acquisition of Ssangyong Motors, is also an Indian company.

The Korea-India Comprehensive Economic Partnership Agreement (CEPA), which came into effect in January 2009, lowered tariff barriers between the two countries and laid the institutional foundation for opening the service market and expanding trade.

This is a positive signal that economic cooperation between Korea and India can be further expanded in the future.

4. Geopolitical Risk and Investment Strategy: Relations with Pakistan and Investment Direction

Recently, geopolitical risks have been highlighted due to heightened tensions between India and Pakistan.

This is an important factor that should be carefully considered when considering investment in the Indian market.

Political instability can cause short-term market volatility and have a negative impact on investment sentiment.

In the short term, it is necessary to pay attention to the raw materials market related to infrastructure construction and daily necessities in India.

Basic industrial goods such as food and cement are relatively less sensitive to political and economic volatility and can be expected to have steady demand.

Conclusion

India is clearly an attractive market. No country can ignore its population size, growth rate, and abundant human resources.

However, at the same time, there are many realistic difficulties such as outdated infrastructure, political risks, and intensifying competition.

Korean companies need to diversify risks and strengthen cooperative structures from a mid- to long-term perspective rather than viewing India as a simple production base or consumer market.

Strategic partnerships will be the key to success.