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

 

Details

  • India is likely to start negotiations with the Gulf Cooperation Council for a free trade agreement.
  • This FTA will be aimed at boosting economic ties between the regions. It will also be a shot in the arm for India’s ambition to significantly shore up its share in global exports.

 

About Gulf Cooperation Council –

  • The GCC is a political and economic alliance of countries in the Arabian Peninsula.
  • The Kuwait government formulated a proposal for an organisation to link the six Arabian Gulf States which have special cultural and historical ties. Accordingly the Riyadh Agreement was issued which proposed cooperative efforts in cultural, social, economic and financial affairs.
  • It was established in 1981 to foster socio-economic, security, and cultural cooperation.
  • Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE are its members.
  • The GCC consists of the Supreme Council, the Ministerial Council, the Cooperation Council, the General-Secretariat and various Committees on economic, social, industrial and trade and political affairs.

 

Significance

  • Huge untapped potential —
      • Experts believe, the GCC region holds huge trade potential and a trade pact will help in further boosting India’s exports to that market.
      • GCC is a major import dependent region. India can increase its exports of food items, clothing and several other goods.
      • Sectors like chemicals, textiles, gems and jewellery and leather will get a major impetus by this agreement.
  • Boost to already existing trade ties —
      • India’s exports to the GCC stands at USD 44 billion in 2021-22 and imports for the same period stands at USD 110.73 billion.
        • The share of GCC members in India’s total imports rose to 18 per cent in 2021-22 from 15.5 per cent in 2020-21.
      • Bilateral trade has increased to USD 154.73 billion in 2021-22 from USD 87.4 billion in 2020-21.
      • India imports predominately crude oil and natural gas from the Gulf nations like Saudi Arabia and Qatar.
      • It exports pearls, precious and semi-precious stones; metals; imitation jewellery; electrical machinery; iron and steel; and chemicals to these countries.
  • Major source of remittances —
      • Gulf nations are host to a sizeable Indian population. Out of about 32 million non-resident Indians (NRIs), nearly half are estimated to be working in Gulf countries.
      • According to a November 2021 report of the World Bank, India got USD 87 billion in foreign remittances in 2021.
        • Of this, a sizeable portion came from the GCC nations.
  • Good relationship with most of the countries in the region —
      • 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.
  • Boost to India’s own ambition of increasing its global trade —
      • India targets to ramp up exports of goods and services to $2 trillion by 2030.
      • It also eyes to raise the share of its exports in global trade to 3% by 2027 and 10% by 2047 from the current 2.1%.
      • At the same time, India is working towards promoting hundred Indian brands as global champions.