India and the Gulf Cooperation Council (GCC), a consortium of six nations – Saudi Arabia, UAE, Qatar, Kuwait, Oman, and Bahrain, have agreed to negotiate a Free Trade Agreement (FTA). The gulf region holds immense strategic significance for India due to historical, economic, political, and cultural reasons.
Importance of GCC for India
The gulf countries, particularly Iran and Qatar, have maintained a long-standing friendly relationship with India. Qatar alone accounts for 41% of India’s total natural gas imports. In addition to abundant oil and gas reserves, the Gulf region is also home to a significant number of Indian expatriates who contribute to India’s economy through remittances. According to a Reserve Bank of India research paper, remittances from the UAE were around USD15.40 billion in the financial year 2020-21, amounting to 18% of India’s total inward remittances.
Current State of India-GCC Trade Relationship
The value of India’s exports to the GCC countries soared by 58.26% to approximately USD 44 billion in 2021-22 as compared to USD 27.8 billion in 2020-21. The bilateral trade involving goods has surged to USD 154.73 billion in 2021-22 from USD 87.4 billion in 2020-21. Furthermore, the services trade between the two regions stood at around USD 14 billion in 2021-22. The GCC countries contribute roughly 35% of India’s oil imports and 70% of its gas imports. India’s crude oil imports from the GCC in 2021-22 totaled about USD 48 billion, while LNG and LPG imports in the same financial year amounted to USD 21 billion.
India’s Trade Agreements with Other Countries
India has recently made significant progress in establishing trade agreements with other countries. The Australian parliament ratified the India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA), marking India’s first FTA with a major developed nation in over ten years. India also resumed its FTA negotiations in goods and services with the European Union (EU) in 2021 after an eight-year hiatus. Besides, India and the United Kingdom are slated to initiate discussions on an FTA in the coming months.
India’s Other Comprehensive Economic Partnership Agreements
India has also entered into a Comprehensive Economic Partnership Agreement (CEPA) with the UAE that took effect on May 1, 2022. This agreement facilitates an institutional mechanism to boost trade between the two nations. Additionally, India and Canada have confirmed their intent to conduct the fourth round of discussions to secure an Early Progress Trade Agreement (EPTA), a stepping stone towards a CEPA.
Future Prospects
The ongoing volatility in the GCC region necessitates that India safeguard its considerable economic, political, and demographic interests in the area. The proposed India-GCC Free Trade Agreement (FTA) can potentially enhance these relations.
Additional Information
The GCC, established in 1981, aims to encourage economic, security, cultural, and social collaboration among its members. Iran is not part of this alliance. The member nations convene annually to discuss cooperative measures and regional affairs.
