Why Piyush Goyal thinks Hyundai and Kia misused FTA costing India trade deficit?

Union minister of commerce and industry, Piyush Goyal, has said in his speech at the Asia Economic Dialogue that two South Korean auto manufacturers, Hyundai and Kia have cost India billions of dollars in trade deficit. The minister contended that India has a Free Trade Agreement (FTA) with South Korea among other countries, and using provisions of that, Hyundai and Kia have imported components for their cars liberally from their principals in their home country and other countries, resulting in such a trade deficit for India.

The minister has emphasised that automakers like Hyundai and Kia cost India billions of dollars in trade deficit by misusing the free-trade agreement between India and South Korea. "The Korean auto industry, specifically Hyundai and Kia, are clearly two of the laggards. They have enjoyed the benefits of our free-trade agreement with Korea and Japan and continue to import indiscriminately," Goyal said. He further added that a small investment of half a billion or a billion dollars had cost India dearly in terms of billions of dollars of trade deficit the abovementioned auto companies have caused India directly with South Korea or other countries.

Goyal contended that South Korean companies like Hyundai and Kia are driven by a strong nationalistic spirit that propels them to buy raw materials from suppliers from their origin country instead of India, which can supply them with key raw materials like finished steel. The minister explained that these companies prefer to buy their home-manufactured raw materials, despite those having a higher price tag than made-in-India products.

However, despite considering the minister's comment, the two car manufacturers are neither circumventing nor breaking any rule or law by engaging in such liberal component imports from their parent companies rather than manufacturing them here in India. Also, the minister has not mentioned the export duty earnings in US dollars to enrich India's foreign exchange reserves by these two car makers.