India–GCC Begin Formal Talks for Free Trade Agreement

India–GCC Begin Formal Talks for Free Trade Agreement

Why in News? 

Recently India and the Gulf Cooperation Council (GCC) have signed the Terms of Reference (ToR) to start negotiations for a Free Trade Agreement (FTA). The ToR sets the roadmap, scope, and structure of talks covering trade in goods, services, investment, and economic cooperation. 

Evolution of India–GCC FTA Negotiations 

• In 2003, India and the Gulf Cooperation Council (GCC) initiated structured engagement with the first India-GCC Political Dialogue, laying foundations for formal cooperation in energy, trade, and diaspora welfare. 
• On 25 August 2004, India and the GCC signed a Framework Agreement on Economic Cooperation to explore trade liberalization and a Free Trade Agreement (FTA). Following this, two negotiation rounds occurred in 2006 and 2008. However, the talks later stalled due to a GCC pause in global negotiations. 
• By 2011, the India–GCC FTA negotiations were paused as the GCC suspended talks with all countries and economic blocs. This created a long hiatus, leaving the potential FTA dormant for over a decade despite growing economic exchanges. 
• The India–UAE Comprehensive Economic Partnership Agreement (CEPA) came into force in May 2022, eliminating tariffs on most goods and boosting bilateral trade sharply. CEPA became a template for wider GCC negotiations.
• After years of inactivity, talks revived when the GCC Secretary-General visited India in November 2022. Later in October 2023, the GCC shared an updated Terms of Reference (ToR) draft, indicating both sides’ seriousness in restarting FTA discussions. 
• In 2024, India stepped up its GCC engagements, including the first India-GCC Senior Officials Meeting in Riyadh and adoption of a Joint Action Plan (2024–28) to expand cooperation in trade, energy, security, agriculture, health, and food security. 
• On 18 December 2025, India signed a Comprehensive Economic Partnership Agreement (CEPA) with Oman to boost bilateral trade and market access. The pact granted India zero-duty access on most exports and India reciprocated with tariff concessions, reinforcing India’s strategy of expanding FTAs in the Gulf.
• On 5 February 2026, India and the GCC formally signed the Terms of Reference (ToR) in New Delhi, officially restarting the Free Trade Agreement (FTA) negotiations.

India–GCC Economic Partnership

• Trade Volume: The GCC is India’s largest regional trading partner, with bilateral trade reaching $178.56 billion in FY 2024-25, representing over 15% of India’s total global trade. While India faces a significant trade deficit of approximately $64.8 billion due to energy imports, the India–UAE CEPA (2022) and the India–Oman CEPA (signed December 2025) serve as blueprints for broader regional integration. The UAE is India’s largest GCC partner (~USD 100 billion).
• Energy Security and Petrochemicals: The Gulf remains India’s energy lifeline, supplying roughly 35% of its oil and 70% of its gas. Recent long-term pacts, such as the $78 billion LNG deal with Qatar (through 2048), ensure sustained supply. Cooperation is now expanding into downstream petrochemicals and the development of the Ratnagiri Refinery project. 
• Major Export Commodities: India’s export basket to the GCC is diversifying beyond traditional goods. Key sectors include engineering goods, refined petroleum products, gems and jewellery, and pharmaceuticals. Agricultural exports, particularly basmati rice, cereals, and organic produce, are critical to the region’s food security strategies. In return, GCC states export crude petroleum, LNG, petrochemicals, fertilizers, aluminum, and other raw materials critical for India’s industrial and energy needs.
• Investment and Sovereign Wealth Funds: GCC nations are primary sources of Foreign Direct Investment (FDI) for India, with cumulative inflows exceeding $31.14 billion by September 2025. Massive commitments from the Public Investment Fund (PIF) of Saudi Arabia and the Abu Dhabi Investment Authority (ADIA) are targeting India’s digital infrastructure, logistics, and GIFT City projects. 
• Joint Action Plan (2024–2028): Adopted in late 2024, the Joint Action Plan institutionalises cooperation across health, security, agriculture, and education. It facilitates joint research in medical technology and establishes frameworks for climate-resilient farming, aligning India’s agricultural prowess with the Gulf’s food sustainability goals. 
• Digital Economy and MSMEs: Beyond goods, service trade — including IT, financial services, tourism, and transport — continues to expand. Collaborative platforms and buyer-seller meets, especially in food & beverages, help MSMEs access GCC markets. Initiatives like linking India’s UPI and UAE’s payment systems aim to ease cross-border transactions.
• Cultural Bridge and Diaspora: Nearly 10 million Indians reside in GCC countries, making up the world’s largest expatriate community. They contribute roughly 30% of India’s total inward remittances, a vital pillar of the Indian economy. Cultural diplomacy is reinforced through the Indian Council for Cultural Relations (ICCR) and the growing presence of Indian universities in the Gulf.

Strategic and Geopolitical Significance of India–GCC Cooperation

• Energy Security: The Gulf supplies over 60 % of India’s crude oil, making it indispensable for India’s expanding economy and industrial needs. Long-term LNG supply agreements, including Qatar’s extended deal until 2048, and collaborations on green hydrogen and renewable energy with UAE’s Masdar and Saudi partners signal a shift from dependency to strategic leverage. India has also opened its Strategic Petroleum Reserves (SPRs) to investments by Gulf national oil companies to “buffer” against disruptions and price shocks. 
• West Asia Policy: With the Gulf region being central to India’s foreign policy under its Link West initiative, New Delhi maintains balanced diplomacy among rival powers like Saudi Arabia, UAE, Iran, and Israel while safeguarding national interests. India’s ability to navigate regional tensions, including conflicts involving Palestine and shifting alliances, underscores its diplomatic agility and reinforces its role as a trustworthy partner in West Asia.
• Maritime Security: Maritime security is critical as India’s trade and energy routes transit the Arabian Sea and Strait of Hormuz. Disruptions — from piracy to geopolitical conflicts — directly threaten energy supplies and commerce. To address this, India has enhanced naval cooperation with Gulf states, participates in exercises, and supports initiatives like Blocking alternative routes.
• China’s Influence: China’s presence in West Asia via the Belt and Road Initiative (BRI) and infrastructure investment — including major port projects — poses a strategic challenge. China’s trade with Saudi Arabia and Gulf states continues to grow, prompting India to strengthen connectivity alternatives, which offers a resilient corridor and counters China-centric routes.
• Joint Defense Cooperation: India and several GCC states, especially UAE, Saudi Arabia, and Oman, have expanded defense cooperation through joint military exercises, including naval exercises like Al Mohed Al Hindi with Saudi Arabia, intelligence sharing, and maritime drills. This defense engagement strengthens regional security architecture and collective response capabilities against terrorism and maritime threats.
• Connectivity Project: The India-Middle East-Europe Economic Corridor (IMEC) is a flagship initiative linking Indian ports to Gulf and European markets via rail, road, and maritime networks. Backed by Gulf states, the EU, and the U.S., IMEC strengthens supply chain resilience, reduces logistics costs, and bolsters India’s geoeconomic footprint. It is a strategic counterbalance to competing infrastructure projects.

Challenges in India–GCC Cooperation

• Persistent Trade Imbalance: India’s trade with the GCC is heavily import-oriented, with imports (primarily crude oil and natural gas) far exceeding exports of Indian manufactured goods. For FY 2024-25, India’s exports were USD 56.87 billion, while imports reached USD 121.66 billion, yielding a large trade deficit that weakens India’s negotiating leverage and economic symmetry in talks. 
• Regulatory and Non-Tariff Barriers: Non-tariff barriers such as differing sanitary and phytosanitary standards, technical barriers to trade, and halal certification requirements particularly impact sectors like processed foods and poultry exports. Regulatory misalignment inhibits growth of sectors where India has competitive strengths. 
• Labour Welfare Issues: Millions of Indian workers in GCC countries continue to face labor rights concerns, including poor working conditions and limited mobility under systems like Kafala. Ensuring welfare and protection of Indian expatriates remains a diplomatic and humanitarian challenge.
• Geopolitical Instability: Regional conflicts, such as the Yemen war, Israel-Palestine tensions, and Saudi-Iran rivalry, create uncertainty and complicate India’s strategic positioning. Maintaining balanced relations amid competing regional interests is difficult. 
• Economic Transparency and Investment Barriers: Differences in investment regulations, lack of transparent policies, bureaucratic red tape, and limited data availability in some GCC markets deter foreign investors, slowing deeper economic integration. 

Way Forward 

• Conclude a Balanced Free Trade Agreement (FTA): To truly deepen economic ties, India and the GCC must move beyond signing the Terms of Reference and conclude a comprehensive FTA that ensures equitable market access, reduced tariffs, and clear rules of origin for goods and services. This will boost trade volume and reduce trade imbalance.
• Strengthen Diplomatic and Track 1.5 Engagements: Forums like the Kochi Dialogue 2025 can help bridge diplomatic and policy gaps by bringing government, industry, and civil society together. Institutionalizing such dialogues will support sustained diplomatic engagement and practical policy alignment.
• Implementing the Joint Action Plan Effectively: Regular review and implementation of the India-GCC Joint Action Plan (2024–28) is essential to operationalize cooperation across trade, energy, security, agriculture, and technology sectors with measurable milestones. 
• Promote Regulatory and Financial Connectivity: India should harmonize customs procedures, standards, and digital systems with GCC partners to ease trade and investment flows. Integrating platforms like UPI with GCC payment systems can enhance financial connectivity and transaction efficiency.
• Boost Private Sector and PPP Participation: Projects like the India-Middle East-Europe Economic Corridor (IMEC) need active public-private partnership (PPP) models where private firms lead infrastructure design and financing alongside governments.
• Expand Sectoral Cooperation Beyond Energy: Future cooperation should prioritize technology, services, renewable energy, health, and food security, creating diversified engagement that reduces dependency on hydrocarbons. 
• Protect Diaspora Interests and Labour Welfare: A key forward step is strengthening labour welfare frameworks, social security mechanisms, and bilateral labour agreements to protect the rights and well-being of millions of Indian expatriates in the GCC.