India-GCC Free Trade Agreement (FTA)

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India and the Gulf Cooperation Council (GCC) member countries are expected to start negotiations for a free trade agreement next month to boost economic ties between the two regions.

• India has already implemented a free trade pact with the UAE in May this year. Terms and Conditions for this one are also being finalised.

About Gulf Cooperation Council (GCC)

• GCC is a union of six countries in the Gulf region — Saudi Arabia, UAE, Qatar, Kuwait, Oman and Bahrain.

• It was established by an agreement concluded in 1981 among Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE in view of their special relations, geographic proximity, similar political systems based on Islamic beliefs, joint destiny and common objectives.
• The Secretariat is located in Riyadh, Saudi Arabia.
• It is a political, economic, social, and regional organisation according to its charter.

Image Courtesy: TH

India and GCC: Contours of cooperation:

• The Gulf Cooperation Council (GCC) as a collective entity has tremendous significance for India. 
• The Gulf constitutes the “immediate” neighbourhood of India separated only by the Arabian Sea. India, therefore, has a vital stake in the stability, security and economic well-being of the Gulf.
• Strategic relations:  From the strategic point of view, India and GCC share the desire for political stability and security in the region. The common political and security concerns of India and GCC translate into efforts for peace, security and stability in the Gulf region and South Asia. The emerging common security perceptions create further opportunities for GCC-India cooperation in the future
• Economic and commercial relations: India imports predominately crude oil and natural gas from the Gulf nations like Saudi Arabia and Qatar, and exports pearls, precious and semi-precious stones; metals; imitation jewellery; electrical machinery; iron and steel; and chemicals to these countries.
  • India’s exports to the GCC increased by 58.26% to about $44 billion in 2021-22 against $27.8 billion in 2020-21.
  • The share of these six countries in India’s total exports has risen to 10.4% in 2021-22 from 9.51% in 2020-21. 
  • Similarly, imports rose by 85.8% to $110.73 billion compared to $59.6 billion in 2020-21.
  • The share of GCC members in India’s total imports rose to 18% in 2021-22 from 15.5% in 2020-21.
• Country wise : Saudi Arabia was India’s fourth-largest trading partner last fiscal. From Qatar, India imports 8.5 million tonnes a year of LNG and exports products ranging from cereals to meat, fish, chemicals, and plastics.
  • Kuwait was the 27th largest trading partner of India in the last fiscal, while the UAE was the third-largest trading partner in 2021-22.
• Indians Diaspora: Gulf nations are host to a sizable Indian population.
  •  Out of about 32 million non-resident Indians (NRIs), nearly half are estimated to be working in Gulf countries.
    • These NRIs send a significant amount of money back home.
• Remittances:  According to a November 2021 report of the World Bank, India got $87 billion in foreign remittances in 2021. 
  • Of this, a sizable portion came from the GCC nations.

Potential 

• The GCC region holds huge trade potential and a trade agreement would help in further boosting India’s exports to that market.
  • The GCC’s substantial oil and gas reserves are of utmost importance for India’s energy needs.
• India has enjoyed centuries of good relations with countries like Iran, while smaller gas-rich nation Qatar is one of India’s closest allies in the region. India shares good relations with most of the countries in the Gulf.

Way Ahead

• GCC is a major import dependent region. We can increase our exports of food items, clothing and several other goods. Duty concessions under a trade agreement will help in tapping that market. It will be a win-win situation for both sides.
• They need to adopt an integrated and cohesive approach to develop ties in diverse areas — renewables, water conservation, food security, digital technology and skills development.

Source: TH