In January 2005, the two sides formed a joint task force to assess the feasibility of a free trade agreement between the two countries. Over the next four years, the Joint Study Group reviewed existing trade between the two countries worth $7.1 billion and negotiated an agreement that respected the weaknesses and economic strengths of the two countries` markets. Rahul Khullar, India`s trade minister and member of the Joint Study Group, says such cooperation took place during discussions on the agricultural sector, which is particularly weak in South Korea but thrives in India.  Membership of the RCEP would have made India part of the rules of the world`s so-called largest trade agreement. It was also expected that the RCEP would push India to implement much-needed domestic policy reforms to make manufacturing more competitive. First, there are already bilateral free trade agreements with ASEAN, Korea and Japan in India, and negotiations with Australia and New Zealand; India knew these savings. China`s entry into the RCEP – with which India has a trade deficit of $54.7 billion in 2018 – half of the country`s total trade deficit – has worried Indian negotiators. This trade gap has widened considerably since China joined the World Trade Organization (WTO) in 2001. It was therefore worrying: how a new wave of liberalization under the RCEP, which would further reduce customs limits for more products, would exacerbate this large trade deficit.
One of the main problems India has faced with regard to its free trade agreements is the widening of the trade deficit that widened after the signing of the free trade agreement. (The exception to this pattern is trade relations with Sri Lanka.) The increase in the trade deficit poses a serious problem for India, as it involves a payment charge that must be paid in foreign exchange and reserves, which could otherwise lead to a balance-of-payments crisis. The total cost and benefits to India of being part of RCEP are not known. However, it is a fact that the current level of the trade deficit is unsustainable. India should consider whether it could reduce its deficit with its various trading partners. Given the growing trade deficit with Japan, India may also have to compensate in other areas, such as investment. Finally, India is considered one of the main investment objectives for Japanese companies.  Overall, India`s current share of the EU as a whole in Japan remains low. Total investment from Japan between 2000 and June 2019 was about $32 billion (Japan is the third largest investor in India. ) Japanese direct investment in India has mainly occurred in the automotive, appliance, telecommunications, chemical, finance (insurance) and pharmaceutical sectors. In 2014, India launched a Japan Plus program that proposed that Japan invest 3,500 billion yen ($33.5 billion) in India over the next five years, through public and private investment and financing.  It is outside the scope of this mandate to examine these investments, but argues that India should address the main obstacles facing Japanese investors.