The progression of foreign investment in India has made it a quintessential place for foreign investors, made possible largely due to investor-friendly regulatory reforms, availability of low-cost skilled labour and vast expanse of opportunities in the Indian market.

South Korea has emerged as one of the largest contributors of foreign direct investment (FDI) in India, investing about USD4.8 billion between April 2000 and March 2021. Sectors such as metallurgy, automobiles and electronics have attracted maximum investment from South Korea. Reputable companies such as Samsung, LG Electronics, Hyundai Motors, Kia Motors, Lotte, SK Telecom and POSCO have established their presence in India, and also enjoy substantial market share.

This article discusses the key factors that continue to incentivise South Korean investors to explore Indian markets.

Gaurav Dani, Founding and Senior Partner,
Gaurav Dani
Founding and Senior Partner

Bilateral ties

To facilitate bilateral trade and investment, India and South Korea signed a Comprehensive Economic Partnership Agreement in 2009, which came into effect in 2010. The agreement provides for the reduction and/or elimination of tariffs, and accords national treatment to investments by the two countries.

Since then, both countries have engaged in several bilateral negotiations to bolster and strengthen their economic ties, which has created a special strategic partnership for securing mutual economic growth. South Korea has also portrayed its willingness to be a strategic partner in some of India’s flagship initiatives, such as Make in India, Skill India, Digital India, Startup India, and Smart Cities Mission.

The strengthening of bilateral relations was further enhanced by the convergence of India’s Act East Policy (AEP) and South Korea’s New Southern Policy (NSP). While the AEP aims to promote economic, strategic and cultural relations with countries in the Asia-Pacific region, the NSP focuses on elevating the economic and strategic relations of South Korea with India and other Asean countries to build a mutually prosperous community.

Further, to create a robust ecosystem for investors, Korea Plus, a nodal agency, was launched in 2016 to assist South Korean companies in terms of public relations, market research and business intelligence services. The India-Korea Technology Exchange Centre platform was set up to facilitate collaboration between the micro, small and medium-sized enterprises (MSMEs) of both nations.

Saurav Kumar, Partner,
Saurav Kumar

Startup initiatives

The India-Korea Startup Hub has been set up since 2019 to synergise the startup ecosystems of both countries and enable collaborations among various stakeholders for market entry and global expansion. Similarly, the India-Korea Startup Centre was launched to assist South Korean startups through startup-investor matchmaking, mentorship, networking opportunities, B2B connections, and organising joint open innovation programmes to support and nurture the startup ecosystems.

In addition, under the Startup India initiative, the government of India provides benefits to startups such as fast-tracked examination and rebate on applications for IP, income tax exemptions for three years, self-certification under labour and environmental laws, relaxation of public procurement norms, access to fund of funds having a corpus of approximately USD1.34 billion, and fast-tracked exit procedures.

Due to these efforts of collaboration by both governments, South Korea’s key venture capital and private equity firms – including Mirae Asset, Korean Investment Partners, KB Financial Group, KTB Network and SVIC – continue to show a keen interest in investing in India. The authors foresee that the Startup India initiative will continue to attract investment from countries such as South Korea and Japan.

Make in India

The Make in India campaign primarily aims to transform India into a manufacturing hub by encouraging domestic and foreign companies to manufacture within the country.

The government has taken several steps to boost manufacturing such as the relaxation of sectoral caps for foreign investment, the reduction of corporate taxes for manufacturing companies set up after 1 October 2019, and the easing of the liquidity problems of non-banking financial companies and banks, to encourage investor confidence.

Several measures have also been undertaken to exalt MSMEs by providing them with lower interest rate bank loans, excise exemptions, speedy dispute resolution mechanisms, and by increasing their investment thresholds. The benefits under various schemes, and measures undertaken to fulfil the objective of the Make in India campaign, are available to both domestic and foreign companies manufacturing in India.

The government has also constituted an Empowered Group of Secretaries and Project Development Cells for bringing synergies and ensuring timely clearances by government departments, providing investment support and facilitation, and identifying issues that need to be resolved in order to attract investment.

Production Linked Incentive

The Production Linked Incentive (PLI) scheme was launched in 2020 to catalyst industrial expansion through domestic manufacturing in India. The scheme has piqued relevance among both Indian and foreign entrepreneurs owing to the sizeable incentive and budget allocation of about USD26.52 billion for implementation of the scheme, pursuant to which manufacturing companies in target segments are entitled to incentives.

There are varied schemes being implemented for distinct sectors. Under the scheme, tax and other discounted incentives ranging between 3% and 10% are offered, based on eligibility criteria of the sector, incremental investments and sales, which are disbursed in the form of direct bank transfer after processing of claims by the concerned agency.

Incentives are available for four to six years subsequent to the financial year 2019-2020 (being the base year), and the relevant incentives per company are subject to certain ceilings as may be applicable to such sectors. For instance, the scheme for large-scale electronics manufacturing provides that the scheme is available for five years to companies engaged in manufacturing of target segments in India, and clarifies that applicant companies are entitled to benefit under other schemes as well. Based on the sector, nodal agencies and committees have been constituted for smoother implementation of the scheme.

Initially, the PLI scheme covered only the electronics and pharmaceutical sectors, but now it covers 13 key sectors including telecoms, automobiles and auto components, and white goods such as LEDs and air conditioners. Samsung, for instance, has been approved to take benefits under the scheme.

New labour codes

The government of India has proposed breaking down the regulatory barriers for foreign investors by consolidating the existing 29 labour laws into four labour codes. The codes emphasise simplifying and consolidating the labour laws to increase transparency and uniformity. They offer various benefits such as reduced compliance and costs associated with multiple compliances, flexible hiring and firing decisions for enterprises employing fewer than 300 employees, and easy processing to shut down operations.

Sectoral opportunities. Investments from South Korea are for the most part in the electronics and automobile sectors. However, other allied sectors, as described below, have untapped potential for investment.

Defence. India and South Korea have agreed to strengthen their defence partnership by joint production and export of military hardware, co-operation in cyber domains, and enhanced intelligence sharing. With the recent increase in the sectoral cap in the defence sector from 49% to 74%, it is expected that a significant amount of South Korean investment may be steered into India.

Healthcare. The government of India has increased the budgetary allocation for healthcare to 2.5% of GDP, which will provide more opportunities for investment. Further, a Bulk Drug Park Scheme was announced to set up three bulk drug parks – under the grant-in-aid of approximately USD134.6 million per bulk drug park – to manufacture active pharmaceutical ingredients. With increasing opportunities for investment in the healthcare sector because of the covid-19 pandemic, the possibilities for collaboration in this sector are significant.

Electric vehicles (EVs). With a view to promote electrical mobility and sustainability, the government has launched incentive programmes and policies such as the National Electric Mobility Mission Plan 2020, the Faster Adoption and Manufacturing of Electric Vehicles in India (FAME-II), and the Automotive Mission Plan 2016-2026. Increasing measures to reduce pollution and usage of non-renewable sources of energy may encourage South Korean automobile and EV giants like Hyundai, Samsung and LG, which already have a substantial presence in the Indian market, to explore the EV sector.


The relationship between India and South Korea has taken a huge leap in recent years, owing to several bilateral negotiations between the two countries for creating a special strategic partnership.

India has constantly been making efforts to incentivise foreign investors by formulating lucrative policies and schemes, as envisaged above, to encourage investment into India. The relaxation of sectoral caps, a reduction in tax rates, the easing of regulations, and offering fiscal incentives, among others, have played a pivotal role in aiding the entry of South Korean investors into India, and are bound to pique curiosity among South Korean investors to further explore Indian markets.

Gaurav Dani is a founding and senior partner at IndusLaw. You can contact him at

Saurav Kumar is a partner at IndusLaw. You can contact him at



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