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India-GCC free trade agreement: High time for boosting India’s economic ties with the Gulf countries.
Nov 01, 2022

The India-UK Free Trade Agreement (FTA) may be on the backburner due to the political turmoil in the country in recent months, but India is pressing ahead with other deals with partners in a bid to boost export-oriented domestic manufacturing.
 
India is reportedly reviving the FTA negotiations with the Gulf Cooperation Council (GCC), a bloc of six Arab countries including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and UAE. India and the GCC share historical ties due to their proximity and ancient trade and cultural links. India and GCC hope to leverage the existing partnership to deepen trade among the members.
 
Major gains for all sides
 
An India-GCC FTA has major gains for all sides. An economic times report identified at least 1,100 products, including washing machines, ACs, refrigerators, spices, tobacco, cotton fabrics, textiles and leather that can see higher exports through the pact.
 
According to the Ministry of Commerce, India’s export to the gulf countries has increased by 58.26 per cent to about $44 billion in 2021-22 against $27.8 billion in 2020-21, with Gulf countries. Bilateral trade between India and the GCC grew from $ 87.35 billion in FY 2020-21 to $ 154.66 billion in FY 2021-22. This is an enormous leap of 77.06 per cent on a year-on-year basis.
 
India shops for crude oil and natural gas from Gulf nations such as Saudi Arabia and Qatar. India exports pearls, precious and semi-precious stones; metals; imitation jewellery; electrical machinery; iron and steel; and chemicals to these countries which are predominantly import dependent.
 
An FTA is being regarded as a win-win for all sides.
 
Other FTAs on the horizon
The Russia-led Commonwealth of Independent States (CIS) has also reportedly approached India for an FTA. Besides this, India has fast-tracked negotiations with Canada and the European Union (EU). New Delhi already has
 
On 18 February 2022, a comprehensive economic partnership agreement (CEPA) was finalised with the UAE. This wrapped up within a record 90 days of commencement of negotiations and was implemented on 1 May 2022. An Economic Cooperation and Trade Agreement (ECTA) with Australia was also concluded on 2 April 2022.
 
The highly-anticipated FTA with UK has hit a speed bump due to a domestic crisis but the momentum with which India is seeking and finalising FTAs is strong.
India is driven to strike FTAs with a two-pronged goal – to safeguard supply chains and diversify sources. In addition, India sees itself as the manufacturing hub of the world. It has set an ambitious target of $400 billion worth export annually. It achieved the target in FY22 but to sustain its record, India would have to get preferential access to markets via FTAs.
 
The ‘gulf’ with west is closing
 
The GCC had suspended FTA negotiations for several years. It is now picking up the threads of the halted negotiations with India as per reports.
 
The GCC may also consider revitalising efforts at forging a region to region FTA between the EU and its bloc. Negotiations between EU and GCC had been frozen when the western block reportedly imposed high taxes on the GCC and connected the trade deal with issues such as human rights and counter terrorism.
 
However, the gulf between GCC and the west is closing. The Arab countries have emerged as strong players on the world stage. Qatar will even be the first Middle Eastern country to host the FIFA world cup. The Ukraine war has sparked a global energy crisis which is recalibrating geopolitical ties. Regardless of the Arabs’ human rights record, US president Joe Biden could not treat Saudi Arabia as a pariah state as he had promised. The gulf is on an influential position.
 
Meanwhile as far as India-GCC is concerned, with the gulf’s star rising and India 'a bright spot on a dark horizon' according to the IMF, partnership between the two holds great potential.
    
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