South Korea's "Second Wave" of Investment in India — A Complete Setup Guide for Korean Companies (2026)

The Big Picture: Why Korean Companies Are Looking at India Now

South Korea's Ambassador to India, Lee Seong-ho, put it directly in June 2026: the two countries need a "second wave" of Korean investment, led by shipbuilding and industrial collaboration, building on the first wave of the 1990s that brought Hyundai, Samsung, LG, and Kia to Indian shores.

This isn't diplomatic rhetoric. It reflects a fundamental strategic recalibration underway in Seoul. Three forces are converging:

Global supply chain diversification.

Korean conglomerates — Samsung, Hyundai, SK, LG — are actively reducing China-concentrated manufacturing risk. India, with its 1.4 billion-person consumer market and increasingly investment-friendly policy architecture, is the natural "China-plus-one" destination for Korean capital.

Bilateral strategic alignment.

India's "Act East Policy" and South Korea's "Global Pivotal State" doctrine share a common Indo-Pacific vision. President Lee Jae Myung's state visit to India in April 2026 — the first by a Korean president in eight years — produced a Joint Strategic Vision for 2026–2030 covering semiconductors, shipbuilding, defence co-production, AI, critical minerals, and clean energy. Over a dozen MoUs were signed.

India's industrial incentive architecture.

The Production Linked Incentive (PLI) scheme across 14 sectors, the India Semiconductor Mission (backed by over INR 1.5 lakh crore in approved projects), and the USD 3 billion Maritime Development Fund are creating sector-specific entry points that directly align with Korean manufacturing strengths.

The Numbers: India–Korea Economic Relationship at a Glance

The bilateral economic corridor is substantial but still significantly below potential:

Bilateral trade reached approximately USD 27 billion in FY 2024–25, with an ambitious joint target of USD 50 billion by 2030. Trade has been range-bound at USD 25–28 billion in recent years, and both governments acknowledge that unlocking the next phase requires deeper manufacturing linkages, not just increased goods trade.

Cumulative Korean FDI in India stands at approximately USD 6.9 billion (April 2000 to September 2025), placing South Korea 13th among foreign investor countries. The ROK was the 15th largest FDI investor in India in 2024, with annual investments of USD 929 million, predominantly in manufacturing.

Korean IPOs in India have been landmark events. Hyundai Motor India raised USD 3.3 billion in October 2024 — India's largest-ever IPO at the time. LG Electronics India followed in October 2025, offloading a 15% stake for approximately INR 11,600 crore; the IPO was oversubscribed 54 times, and LG India's shares surged 50% on listing day, valuing the Indian unit higher than its Seoul-based parent. CJ Darcl Logistics has also filed for an IPO.

The Comprehensive Economic Partnership Agreement (CEPA), in force since 2010, governs trade terms. Negotiations to upgrade the CEPA — stalled for years — were formally restarted in April 2026, with a target to conclude by the first half of 2027.

What the "Second Wave" Actually Looks Like: Sector-by-Sector

Shipbuilding — The Flagship Sector

This is where the most concrete capital commitments are being made:

HD Hyundai (the world's largest shipbuilding group) has signed an MoU for a USD 4 billion greenfield shipyard at Thoothukudi, Tamil Nadu. This would be the first shipyard established in India by a foreign company, with planned annual production capacity of 3.5–4 million gross tonnes. HD Hyundai's chairman personally accompanied President Lee's delegation — a signal that this has moved beyond diplomatic optics into business execution. POSCO is in talks to set up an on-site steel supply plant within the cluster. Separately, HD Hyundai is discussing a block manufacturing joint venture with Cochin Shipyard in Kochi.

Samsung Heavy Industries signed an MoU with Swan Defence and Heavy Industries (SDHI) in Gujarat — India's largest dry dock operator — to collaborate on commercial vessels including tankers, gas carriers, container ships, and specialised vessels, along with next-generation green technologies and digital shipbuilding methods.

KOMEA (Korea Marine Equipment Association), representing over 300 specialised marine equipment manufacturers, has opened its Mumbai office to promote local manufacturing of ship components, marine machinery, and repair services.

For Korean companies in the shipbuilding supply chain — steel fabricators, marine equipment manufacturers, crane makers, engineering contractors — these anchor investments create immediate India-entry opportunities.

Defence Manufacturing — Proven Model, Expanding Scope

The K9 Vajra Howitzer programme remains the gold standard for India–Korea defence cooperation. L&T manufactured the self-propelled howitzer in India under technology transfer from Hanwha Defence, with BEL providing fire control and communication systems. Ambassador Lee confirmed that both countries are already exploring a third phase of the K9 partnership, with discussions underway to expand into air defence guns, missile systems, and other advanced defence platforms.

India's defence procurement is shifting decisively toward "Make in India" and co-production models. Korean defence companies entering India will need to establish manufacturing entities — not just sales offices — to participate in this market.

Semiconductors — From Assembly to Fabrication

The India–Korea semiconductor partnership is now a formal strategic pillar. Under the India Semiconductor Mission (ISM), the government has approved semiconductor projects worth over INR 1.5 lakh crore. The Union Budget 2026–27 allocated an additional INR 1,000 crore specifically for semiconductor equipment, materials manufacturing, and workforce training. India's semiconductor market is projected to grow from approximately USD 45–50 billion in 2025 to USD 100–110 billion by 2030.

Samsung already operates one of the world's largest mobile manufacturing facilities in Noida and is expanding deeper into India's chip fabrication ecosystem. The "India–Korea Digital Bridge" initiative launched during President Lee's visit is designed to accelerate collaboration across AI, battery technology, and critical minerals.

For Korean component makers, equipment suppliers, and ATMP (Assembly, Testing, Marking, and Packaging) specialists, India's PLI for electronics components (INR 22,919 crore outlay, targeting passive components, PCBs, display modules, and camera modules) creates a direct incentive pathway.

Electric Vehicles, Clean Energy & Advanced Batteries

Hyundai and Kia are already major players in India's automotive market. The EV transition opens a second front. India's FAME-II scheme, EV component PLI, and the Advanced Chemistry Cell (ACC) PLI (INR 18,000 crore) are directly aligned with Korean strengths in batteries, EV powertrains, and battery management systems. LG Energy Solution and Samsung SDI supply chains are natural candidates for India manufacturing expansion.

How to Set Up a Korean Company in India: Entity Structures

Korean companies entering India have four primary structuring options. The right choice depends on the nature of operations, capital commitment, revenue model, and long-term India strategy.

1. Wholly Owned Subsidiary (WOS) — Most Common for Manufacturing & Services

A private limited company incorporated under the Companies Act, 2013, with 100% foreign (Korean) shareholding. This is the preferred route for companies establishing manufacturing plants, service delivery centres, or long-term operational presence.

Key features: Separate legal entity from the Korean parent. Can undertake any permitted business activity. Can raise local debt, own property, hire employees, and invoice Indian customers. 100% FDI permitted under the automatic route in most sectors (defence manufacturing allows up to 74% automatic, 100% with government approval; shipbuilding is 100% automatic route).

Typical timeline: 15–25 business days from DIN/DSC application to Certificate of Incorporation, followed by PAN, TAN, GST registration, bank account opening, and FEMA compliance filings.

2. Branch Office (BO)

Suitable for Korean companies that want to represent the parent in India for specific permitted activities (executing contracts, export/import, research, liaising with Indian customers) without full incorporation. A Branch Office cannot undertake manufacturing directly but can engage in activities connected to the parent company's business.

RBI approval required through an AD Category-I bank. The parent must have a demonstrable track record (typically five years of profitability and net worth thresholds).

3. Liaison Office (LO)

The lightest-touch presence — used for market exploration, brand promotion, and liaison activities. Cannot earn revenue in India. Useful as a Phase 1 entry before committing to a full subsidiary.

4. Joint Venture (JV) with an Indian Partner

Increasingly relevant in sectors where Indian partnerships are structurally advantageous — defence (where Indian partner participation is often required by procurement norms), shipbuilding (where existing shipyard infrastructure matters), and sectors requiring deep local market knowledge. The HD Hyundai–Cochin Shipyard and Samsung Heavy–Swan Defence partnerships exemplify this model.

For most Korean companies making a substantive India commitment, the wholly owned subsidiary is the default and most flexible structure. It provides full operational control, clean transfer pricing documentation, and the ability to list on Indian stock exchanges in the future — as Hyundai Motor India and LG Electronics India have demonstrated.

India–Korea Double Taxation Avoidance Agreement (DTAA): Key Benefits

The revised India–Korea DTAA (signed May 2015, effective April 2017) is a critical structuring tool for Korean companies with India operations. Key provisions:

Withholding tax rates reduced from 15% to 10% on royalties, fees for technical services (FTS), and interest income. This is favourable compared to India's domestic rate of 20% on interest and dividends for non-residents.

Dividends — tax capped at 15% of gross amount (the former 20% rate and associated conditions were removed).

Capital gains — if a Korean entity sells shares representing up to 5% of paid-up capital in an Indian company, South Korea retains exclusive taxing rights. Above 5%, India levies the tax.

Permanent Establishment (PE) — the revised treaty expands dependent agent PE provisions, which Korean companies need to carefully navigate, particularly for seconded employees and service arrangements.

Shipping income — exclusively taxed in the country of residence, which is significant for Korean shipping companies operating India routes.

Mutual Agreement Procedure (MAP) and bilateral Advance Pricing Agreements (APAs) — now available for transfer pricing disputes, giving Korean companies a formal dispute resolution mechanism.

Limitation of Benefits (LOB) — anti-abuse provisions ensure benefits are available only to genuine residents, which is standard in modern Indian treaties.

Practical implication: A Korean parent licensing technology to its Indian subsidiary pays 10% withholding tax on royalties (plus applicable surcharge and cess) instead of the domestic rate. Management fees, technical service fees, and interest on inter-company loans all benefit from the 10% cap. Proper structuring at the outset — with clear inter-company agreements, benchmarked pricing, and correct TDS compliance — is essential to realise these benefits.

Government Support Infrastructure: Korea Plus & Beyond

Korean companies are not entering India without institutional support. Several bilateral mechanisms exist:

Korea Plus — a dedicated investment facilitation initiative launched in 2016 by DPIIT and KOTRA (Korea Trade-Investment Promotion Agency), housed within Invest India. It provides business advisory, location analysis, state-level facilitation, regulatory handholding, and issue resolution for Korean investors. Korea Plus facilitated Kia Motors' USD 1 billion greenfield manufacturing facility in India.

India–Korea Fast Track Mechanism — an escalation channel for resolving investment-related issues faced by Korean companies already operating in India.

India–Korea SME and Start-up Centre — launched in September 2019 to connect Korean and Indian SMEs for joint ventures, technology partnerships, and market entry support.

KOSME's 2026 Roadmap — Korea's SME promotion agency unveiled a three-point engagement programme for 2026: AI-based technology matching between Indian production needs and Korean solutions, an omni-channel marketing residency model for Korean SMEs entering India, and an India–Korea JV Incubator for supply chain diversification, including structured advisory support covering legal and accounting guidance.

India–Korea Industrial Cooperation Committee — a new ministerial-level dialogue mechanism launched in 2026 to coordinate investments and supply chains in critical minerals, semiconductors, and clean energy.

Production Linked Incentive (PLI) Schemes: What Korean Companies Should Know

The PLI architecture is one of India's most powerful tools for attracting manufacturing FDI. Korean companies are eligible across multiple sectors:

Large-Scale Electronics Manufacturing — Samsung is already a major PLI beneficiary through its Noida plant. New Korean entrants manufacturing mobile phones, tablets, or IT hardware can access incentives of 4–6% on incremental sales.

Electronic Components — INR 22,919 crore outlay targeting PCBs, display modules, camera modules, lithium-ion cells, resistors, capacitors, and inductors. Korean component manufacturers supplying Samsung, LG, and Hyundai supply chains are natural applicants.

Advanced Chemistry Cells (ACC) — INR 18,000 crore for battery cell manufacturing. Korean battery giants and their Tier 1 suppliers should evaluate this closely.

Automobiles and Auto Components — INR 26,000 crore for EV and hydrogen fuel vehicles, directly aligned with Hyundai-Kia expansion plans.

Specialty Steel — relevant for Korean steelmakers like POSCO, which already operates in India and is in discussions for the Thoothukudi shipyard steel supply.

White Goods (ACs and LEDs) — LG and Samsung both qualify and have expanded manufacturing under this scheme.

Telecom and Networking Products — relevant for Korean 5G equipment and component manufacturers.

Key eligibility requirement: The manufacturing entity must be incorporated and registered in India, meet sector-specific investment thresholds, and achieve incremental sales targets above the FY 2019–20 base year. PLI incentives are performance-linked — disbursed only after verified output expansion.

FEMA & RBI Compliance: Critical First Steps

Every Korean company establishing an India entity must navigate the Foreign Exchange Management Act (FEMA) framework:

FDI reporting — within 30 days of share allotment, the Indian entity must file Form FC-GPR (for equity issuance to foreign investors) with the RBI through its AD bank. Delayed or incorrect filings attract compounding penalties.

Pricing guidelines — shares issued to the Korean parent must be at or above fair market value determined by a SEBI-registered merchant banker or a practising Chartered Accountant using prescribed valuation methods (DCF for unlisted companies).

Downstream investment — if the Indian subsidiary makes further investments in other Indian entities, downstream investment regulations and reporting requirements apply.

External Commercial Borrowings (ECBs) — if the Korean parent lends to the Indian subsidiary, the loan must comply with ECB regulations (eligible borrower, recognised lender, all-in cost ceiling, minimum average maturity, and end-use restrictions).

Branch Office / Liaison Office — requires RBI approval through an AD bank, with annual activity certificates from a Chartered Accountant.

Repatriation of profits — dividends, royalties, and service fees are freely remittable after applicable TDS deduction and Form 15CA/15CB certification by a CA. India does not impose capital controls on legitimate profit repatriation by foreign companies.

Transfer Pricing: Getting It Right from Day One

Korean companies with Indian subsidiaries will invariably have cross-border transactions — technology licensing, management services, shared costs, inter-company loans, procurement of components. Every such transaction must be at arm's length, documented in a Transfer Pricing Study (Form 3CEB filing), and benchmarked against comparable uncontrolled transactions.

Common transaction types for Korean-Indian structures:

• ✓

  Royalty payments for technology, brand, or IP licensing (benchmark against comparable licence agreements; DTAA caps WHT at 10%)

• ✓

  Management or technical service fees from the Korean parent (must satisfy the "benefit test" — the Indian entity must demonstrably receive value)

• ✓

  Cost-sharing or cost-contribution arrangements for shared R&D

• ✓

  Inter-company loans (must comply with ECB pricing norms and arm's length interest rate benchmarking)

• ✓

  Purchase of components or finished goods from the Korean parent or affiliates (TNMM or CUP method benchmarking)

The India–Korea DTAA now permits bilateral APAs and MAP for transfer pricing disputes, which is a meaningful de-risking tool for Korean companies with material inter-company flows.

Practical Checklist: Setting Up a Korean Company in India

1. ✓

   Structure decision — Subsidiary (WOS) vs. Branch Office vs. Liaison Office vs. JV. For manufacturing or services with Indian revenue, WOS is almost always the right answer.

2. ✓

   Entity incorporation — Director Identification Numbers (DIN), Digital Signature Certificates (DSC), name reservation, MOA/AOA drafting, Certificate of Incorporation from MCA.

3. ✓

   Post-incorporation compliance — PAN, TAN, GST registration, Professional Tax registration (state-specific), Shops & Establishments registration, bank account opening (requires physical presence of at least one director in India).

4. ✓

   FDI compliance — Share allotment at fair value, Form FC-GPR filing within 30 days, Foreign Liabilities and Assets (FLA) return to RBI annually.

5. ✓

   Tax registrations — Income Tax, GST, TDS. If the entity will make payments to the Korean parent (royalties, services, interest), TDS under Section 195 must be deducted at the time of credit or payment, whichever is earlier, and Form 15CA/15CB must be filed before remittance.

6. ✓

   Transfer pricing documentation — inter-company agreements must be in place before the first transaction. Form 3CEB is due by the tax audit due date.

7. ✓

   Ongoing compliance — statutory audit (mandatory for all companies), annual ROC filings, GST returns (monthly/quarterly), TDS returns (quarterly), advance tax payments (quarterly), board meetings (minimum four per year), AGM (within six months of financial year end).

Why Work With a Specialist India-Entry Advisory Firm

The India opportunity for Korean companies is clear. The regulatory and compliance landscape, however, rewards precision. Entity structuring decisions made at incorporation — choice of entity, share capital, inter-company agreement terms, transfer pricing policy, FEMA reporting — have tax and operational consequences that compound over years.

India Company Setup, backed by PGA & Co. Chartered Accountants (Ex-Big 4, KPMG-trained), provides end-to-end advisory across the entire India-entry lifecycle: structure advisory, incorporation, FEMA compliance, transfer pricing, GST, payroll, statutory audit, and ongoing compliance management. We work with foreign companies from the USA, UK, UAE, Singapore, the EU/DACH region, Australia/NZ — and increasingly, South Korea.

Median time from engagement to operational Indian entity: 22 business days.

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