India and the Gulf Cooperation Council (GCC)

In News

• Recently, India and the Gulf Cooperation Council (GCC) have decided to pursue resumption of Free Trade Agreement (FTA) negotiations. 
  • Earlier attempts were made in 2006 and 2008 but were not successful. 

What is a Free Trade Agreement (FTA)?

• A free trade agreement is a pact between two or more nations to reduce barriers to imports and exports among them.  
• Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange. 
• The concept of free trade is the opposite of trade protectionism or economic isolationism.

Gulf Cooperation Council (GCC) 

• The GCC comprises:
  • Saudi Arabia
  • UAE
  • Qatar
  • Kuwait
  • Oman
  • Bahrain
• GCC is currently India’s largest trading partner bloc with bilateral merchandise trade valued at over 154 billion US dollars in the financial year 2021-22. 
• Bilateral trade in services between India and the GCC was worth 14 billion US dollars.
• GCC countries contribute almost 35 per cent of India’s oil imports and 70 percent of gas imports.
  • India’s overall crude oil imports from the GCC in 2021-22 were about $48 billion, while LNG and LPG imports in 2021- 22 stood at about $21 billion.
• India’s exports to the GCC member countries grew by over 58% to about $44 billion in 2021-22 against nearly $28 billion in 2020-21.     

Significance of the India and GCC FTA  

• Trade potential: The GCC region holds huge trade potential and a trade agreement would help in further boosting India’s exports to that market.
• Oil and gas reserves: The GCC’s substantial oil and gas reserves are of utmost importance for India’s energy needs.
• Good relations: India shares good relations with most of the countries in the Gulf.
• India can increase its exports: GCC is a major import dependent region. India can increase its exports of food items, clothing and several other goods. 
  • Duty concessions under a trade agreement will help in tapping that market.
• India needs to develop a cohesive approach to develop ties in diverse areas such as renewables, water conservation, food security, digital technology and skills development.

Source: PIB