India and Gulf Cooperation Council

Topic- International Relations [ GS Paper-2]

Context-  Recently India and the Gulf Cooperation Council (GCC) has agreed to pursue a Free Trade Agreement (FTA) between the two regions and resume the negotiations.

Key Highlights 

• India and the Gulf Cooperation Council (GCC) have decided to expedite the legal and technical requirements for a formal resumption of the free trade agreement (FTA) negotiations.
• With forward-looking and solution-oriented deliberations, the bilateral engagements witnessed significant progress on all matters of mutual interest across the entire gamut of bilateral economic relations between India and the GCC nations.
• The agreement is foreseen to be a modern, comprehensive Agreement with substantial coverage of goods and services.
• Both countries emphasized that the FTA will create new jobs, raise living standards, and provide wider social and economic opportunities in India and all the GCC countries.
• They have also agreed to significantly expand and diversify the trade basket in line with the enormous potential that exists on account of the complementary business and economic ecosystems of India and the GCC.

Significance of Gulf Region for India

• India has enjoyed years 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 very good relations with most of the countries in the Gulf.
• The two most significant reasons for the relationship are oil and gas, and trade.
• 41% of India’s total natural gas imports are from Qatar.
• Two other reasons for their relationship are the huge number of Indians who work in the Gulf countries, and the remittance they send back home.
• As per a research paper published by the Reserve Bank of India, in the financial year 2020-21, remittances from the UAE to India were USD15.40 billion, which accounts for 18% of India’s total inward remittances.

The State of the India-GCC Trade Relationship

• India’s exports to the GCC member countries grew by 58.26% to about USD 44 billion in 2021-22 which was USD 27.8 billion in 2020-21.
• Bilateral trade in goods has also increased to USD 154.73 billion in 2021-22 from USD 87.4 billion in 2020-21.
• Services trade between the two parties was valued at around USD 14 billion in 2021-22, with exports aggregated at USD 5.5 billion and imports at USD 8.3 billion.
• Gulf Cooperation Council countries contribute almost 35% of India’s oil imports and 70% of its gas imports.
• India’s overall crude oil imports from the GCC in 2021-22 were about USD 48 billion, while Liquefied Natural Gas and Liquefied Petroleum Gas imports in 2021-22 stood at about USD 21 billion.

Indian Trade Agreements with Other Countries

India-Australia Trade Agreement:

• Lately, the Australian Parliament approved the India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA).
• It is the first ever Free Trade Agreement (FTA) that India has signed with a major developed country in over a decade.
• The Agreement circumscribes cooperation across the entire gamut of bilateral economic and commercial relations between the two friendly countries.

India-European Union FTA:

• India and the EU restarted their FTA negotiations in goods and services in early 2021 after almost a gap of eight years.
• The two regions aim to work out pacts in investments and geographic indications parallel to the FTA engagement.
• Round three of India-EU FTA talks is to begin later this year at Delhi.

India-UK FTA:

• Over the next few months, India and the United Kingdom are to start talks on a free trade agreement (FTA).
• The agenda of discussion is securing a patent regime against evergreening by pharma companies, seeking easier work visas as well as access to Indian movies in the region under the proposed FTA.

India-UAE Comprehensive Economic Partnership Agreement

• The Comprehensive Economic Partnership Agreement (CEPA) between India and the United Arab Emirates (UAE) came into existence from 1st May, 2022
• This provides for an institutional mechanism to encourage and improve trade between the two countries.

India-Canada CEPA:

• Canada had been working to advance negotiations on a Foreign Investment Promotion Protection Agreement (FIPA) and a CEPA.
• In August 2022, India and Canada have confirmed that they would hold the fourth round of negotiations to secure an Early Progress Trade Agreement (EPTA), an intermediate step till a Comprehensive Economic Partnership Agreement (CEPA) is reached.

Way Ahead 

• The Gulf region has historical, political, economic, strategic and cultural importance for India. 
• India-GCC Free Trade Agreement (FTA) can also provide a boost to the relations.
• Presently, the GCC region is volatile, hence, India needs to safeguard its large economic, political and demographic stakes in the region.

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