For Prelims: Types of Trade Agreements, India and Gulf Countries

For Mains: Importance of India-Gulf Relations, Opportunities for India with the Free Trade Agreement (FTA)

Why in the News?

External Affairs Minister S. Jaishankar has arrived in Riyadh, Saudi Arabia, to participate in the inaugural India-Gulf Cooperation Council (GCC) Foreign Ministers’ Meeting.

What’s in Today’s Article?

• Gulf Cooperation Council (GCC)
• The Importance of GCC for India
• India-GCC Relations
• Way forward

Gulf Cooperation Council (GCC)

• The GCC (Gulf Cooperation Council) is a union of six Gulf countries—Saudi Arabia, the UAE, Qatar, Kuwait, Oman, and Bahrain. It is the largest trading bloc for India.
• Founded in 1981, the GCC aims to foster economic, security, cultural, and social cooperation among its member states.
• The council convenes an annual summit to discuss matters of cooperation and regional affairs.

India and GCC Relations:

• Introduction:
  • The Gulf region, separated from India by the Arabian Sea, forms its immediate neighbourhood.
  • The GCC has become a significant trading partner for India and holds substantial potential as a key investment partner.
• Geostrategic Considerations:
  • The GCC countries are situated along the Persian Gulf, a crucial maritime route for global trade. From a strategic perspective, both India and the GCC prioritize political stability and security in the region.
  • India has maintained strong relations with countries such as Iran for centuries, while Qatar, a smaller gas-rich nation, stands out as one of India’s closest allies in the region.
  • Overall, India enjoys positive relations with most Gulf countries, primarily driven by two key factors: oil and gas, and trade.
  • Qatar alone supplies 41% of India’s total natural gas imports.
  • Additionally, the large Indian workforce in the Gulf and the remittances they send home further strengthen these ties.
  • According to a Reserve Bank of India research paper, remittances from the UAE to India amounted to USD 15.40 billion in the financial year 2020-21, representing 18% of India’s total inward remittances.

Political Dialogue

• The inaugural India-GCC Political Dialogue took place in 2003 on the sidelines of the United Nations General Assembly.
• In September 2022, India and the GCC signed a Memorandum of Understanding (MoU) on Mechanisms of Consultations.
• The MoU establishes a framework for annual dialogues between India’s External Affairs Minister (EAM) and the GCC Troika (comprising the GCC Secretary-General, the Foreign Minister of the current GCC presidency holder, and the Foreign Minister of the incoming GCC presidency holder), as well as other Foreign Ministers or Senior Officials from GCC countries.

Economic and Commercial Relations

• The region is currently diversifying beyond the energy sector into areas like tourism, construction, and finance, creating new opportunities for trade and investment for countries such as India.
• For FY 2023-24, bilateral trade between India and the GCC totalled USD 161.59 billion.
• India’s exports to the GCC were USD 56.3 billion, while imports from the GCC amounted to USD 105.3 billion during the same period.
  • India’s economic ties with the GCC have been growing steadily, particularly due to increased oil imports.
  • The rise in economic linkages in FY22 was driven by higher oil prices following the Russian-Ukrainian conflict and the rebound in demand after the COVID-19 pandemic.

India-GCC Free Trade Agreement (FTA)

• In August 2004, India and the GCC signed a Framework Agreement to enhance and develop economic cooperation between the two parties in New Delhi.
• The India-GCC FTA is currently under negotiation and might gain renewed momentum following the India-UAE FTA.

Energy Cooperation

• GCC countries hold nearly half of the world’s oil reserves.
• The GCC supplies approximately 35% of India’s oil imports and 70% of its gas imports.
• India is currently implementing the second phase of its Strategic Petroleum Reserve (SPR), with several GCC nations showing interest in participating.

Indian Diaspora and Remittances

• As of the latest figures, about 8.9 million Indian expatriates reside in GCC countries, accounting for approximately 66% of non-resident Indians.
• According to the RBI Remittances Survey 2021, the share of remittances from the GCC region in India’s total inward remittances decreased from over 50% in 2016-17 to around 30% in 2020-21, though it still remains a significant component of India’s overall remittances.

Way Forward

• The Gulf region holds substantial historical, political, economic, strategic, and cultural importance for India. The India-GCC Free Trade Agreement (FTA) could significantly enhance these relations.
• Given the current volatility in the GCC region, India must protect its substantial economic, political, and demographic interests there.

Explore our courses: https://apnipathshala.com/courses/

Explore Our test Series: https://tests.apnipathshala.com/