Trade Pact with GCC

Why in news?

Despite the Gulf region being home to the largest Indian expatriate community with long-standing relations, its enormous economic potential remains unexplored.

What is GCC?

• The Gulf Cooperation Council (GCC) is a regional political and economic alliance of 6 countries in the Gulf region - Saudi Arabia, the UAE, Qatar, Kuwait, Oman and Bahrain.
• The GCC was established by an agreement concluded in 1981 in Riyadh.
• Headquarter - Riyadh, Saudi Arabia
• Aim - To achieve ever closer union between the energy rich Gulf countries.
• Significance - GCC has over 8.5 million non-resident Indians, constituting around 65% of total NRIs.
• GCC was the source of the largest foreign inward remittances, garnering 30% of total remittances.

How about the India-GCC trade relation?

• Economic Cooperation - A Framework Agreement on Economic Cooperation between Republic of India and Gulf Cooperation Council was signed in 2004.
• Since then, hardly any worthwhile progress has been made despite holding two rounds of negotiations in 2006 and 2008.
• Trade deficit - India has a trade deficit of 66.8 billion dollars with GCC in 2021-22.
• India had the highest trade deficit (2021-22) with Saudi, followed by the UAE and Qatar whereas India had a trade surplus with Bahrain.
• Top imports - Petroleum and petroleum products are among India’s top imports from GCC accounting for 66% of its total imports in 2021-22.
• Top exports - India is a supplier of agricultural and manufactured products to GCC.
• Among the GCC countries, the UAE is India’s major destination for exports, followed by Saudi Arabia and Oman in 2021-22.

How about the profile of GCC?

• The fall in global oil prices led to decline in GCC exports’ share in the world market from 5.7% in 2013 to 3.3% in 2021.
• Owing to a revival in oil prices in 2022, the World Bank expects the economies of GCC to expand which might rise the trade deficit that India has with the GCC.
• Major GCC imports (2021) consist of electric machinery and equipment, machinery and mechanical appliance, vehicles and pharmaceutical products.
• Among the GCC, Saudi Arabia has the highest exports.

What is needed for the mutual benefit of the two countries?

• GCC provide for India’s energy security, while India ensures their food security.
• India and the GCC need to go beyond the Free Trade Agreement (FTA) and include investments and services as a part of comprehensive economic partnership.
• In a rapidly emerging multipolar world, early and effective implementation of Comprehensive Economic Partnership Agreement CEPA would provide a boost to India and GCC countries.

References

1. The Hindu Businessline | Prioritise trade pact with GCC
2. India Today | Why Gulf countries are crucial for India’s economy