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DAILY NEWS ANALYSIS

  • 01 November, 2022

  • 6 Min Read

India-GCC Free Trade Agreement (FTA)

India-GCC Free Trade Agreement (FTA)

  • India and member countries of the Gulf Cooperation Council (GCC) are expected to begin negotiations for a free trade agreement next month in order to strengthen economic ties between the two regions.
  • In May of this year, India implemented a free trade agreement with the UAE. This one's terms and conditions are also being finalized.

About the Gulf Cooperation Council (GCC)

  • The Gulf Cooperation Council (GCC) is a grouping of six Gulf countries: Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman, and Bahrain.
  • It was founded in 1981 by an agreement signed by Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE in recognition of their special relations, geographic proximity, similar political systems based on Islamic beliefs, shared destiny, and common goals.
  • The Secretariat is located in Riyadh, Saudi Arabia.
  • According to its charter, it is a political, economic, social, and regional organisation.

India and the Gulf Cooperation Council: Cooperation Contours:

The Gulf Cooperation Council (GCC) as a whole is extremely important to India.

  • The Gulf is India's "immediate" neighbour, separated only by the Arabian Sea. As a result, India has a critical stake in the Gulf's stability, security, and economic well-being.
  • Strategic alliances: From a strategic standpoint, India and the GCC share a desire for regional political stability and security. India and the GCC share common political and security concerns, which translate into efforts for peace, security, and stability in the Gulf region and South Asia.
  • Economic and commercial relations: India imports primarily crude oil and natural gas from Gulf countries such as Saudi Arabia and Qatar, and exports to these countries pearls, precious and semi-precious stones; metals; imitation jewellery; electrical machinery; iron and steel; and chemicals.
  • India's GCC exports increased by 58.26% to approximately $44 billion in 2021-22, up from $27.8 billion in 2020-21.
  • These six countries' share of total Indian exports has risen to 10.4% in 2021-22 from 9.51% in 2020-21.
  • Similarly, imports increased by 85.8% to $110.73 billion in 2020-21, from $59.6 billion.
  • GCC members' share of total Indian imports increased to 18% in 2021-22, up from 15.5% in 2020-21.
  • Saudi Arabia was India's fourth-largest trading partner last fiscal year. India imports 8.5 million tonnes of LNG from Qatar each year and exports products ranging from cereals to meat, fish, chemicals, and plastics.
  • In the previous fiscal year, Kuwait was India's 27th largest trading partner, while the UAE was the third-largest trading partner in 2021-22.

Diaspora of Indians:

  • The Gulf nations have a sizable Indian population.
  • Nearly half of the estimated 32 million non-resident Indians (NRIs) work in Gulf countries.
  • These NRIs send a substantial amount of money home.
  • Remittances: According to the World Bank's November 2021 report, India received $87 billion in foreign remittances in 2021.
  • A sizable portion of this came from the GCC countries.

Potential

  • The GCC region has enormous trade potential, and a trade agreement would aid in increasing India's exports to that market.
  • The GCC's substantial oil and gas reserves are critical to India's energy needs.
  • India has had centuries of good relations with countries such as Iran, and the smaller gas-rich nation of Qatar is one of India's closest regional allies. India has friendly relations with the majority of Gulf countries.

Way Forward

  • The GCC is a heavily reliant on imports. We can increase our exports of food, clothing, and a variety of other goods.
  • Duty reductions under a trade agreement will aid in entering that market. Both parties will benefit from this arrangement.
  • They must take an integrated and cohesive approach to building ties in a variety of areas, including renewables, water conservation, food security, digital technology, and skill development.

Source: The Hindu


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