India and GCC revive their economic partnership: Resumption of negotiations on a free trade agreement

Ahead of Prime Minister Narendra Modi’s visit to the United Arab Emirates later this week, India’s engagement with the Gulf Cooperation Council (GCC) has gained momentum as Free Trade Agreement (FTA) talks between the two parties resume.

dr Ausaf Sayeed, Secretary (CPV&OIA) at the Ministry of Foreign Affairs, highlighted the positive development during the 6th India-Arab Partnership Conference, saying that preliminary documents were exchanged and delegations met, showing a promising path towards realization of the FTA. This renewed commitment has the potential to open up new opportunities for companies on both sides.

In addition to the Free Trade Agreement, alternative forms of trade between India and the GCC countries are being considered. dr Sayeed mentioned discussions about rupee trading, bartering and other options, especially given the challenges many countries face in dealing with foreign currencies. This exploration of innovative trading mechanisms reflects a proactive approach to adapting to evolving economic circumstances.

Building on the progress made, India and the GCC countries expressed their commitment to a free trade agreement in November last year and resumed negotiations. Originally scheduled for March 2023, these talks marked a significant step forward in strengthening economic ties between the regions.

The GCC, made up of Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman and Bahrain, is India’s largest trading bloc. In fiscal year 2021-22, India’s exports to GCC member countries saw a substantial increase of 58.26 percent, reaching about US$44 billion compared to US$27.8 billion last year, according to the Ministry of Commerce.

Bilateral trade in goods also saw notable growth, rising from US$87.4 billion in 2020-21 to US$154.73 billion in 2021-22. In addition, services trade between India and the GCC regions reached an estimated value of around US$14 billion in 2021-22, with exports accounting for US$5.5 billion and imports accounting for US$8.3 billion. amounted to dollars.

Recognizing the significant economic interdependence, both sides have expressed their mutual commitment to proceed with the Gulf Cooperation Council-India Free Trade Agreement. The aim of these negotiations is to reach a final agreement as soon as possible. It is worth noting that the GCC countries play a crucial role in India’s energy security, contributing almost 35% of its oil imports and 70% of its gas imports. In FY2021-22 alone, India’s crude oil imports from the GCC countries were around US$48 billion, with LNG and LPG imports amounting to around US$21 billion.

While this renewed focus on an FTA demonstrates a determination to deepen economic cooperation, it is worth noting that previous attempts at such a pact in 2006 and 2008 met with obstacles and failed for various reasons. However, the current negotiations represent a renewed attempt to create a mutually beneficial trade framework.

The implementation of the Free Trade Agreement between India and the Gulf Cooperation Council holds huge potential for enhancing trade and investment opportunities, boosting economic growth and strengthening the already strong partnership between the two regions.

Indo-Arab partnership

The conference also highlighted seven priority areas of the Indo-Arab partnership: food security, supply chains, healthcare and pharma, energy security, renewable energy (including green hydrogen and green ammonia), chips and semiconductors, and technology (inclusive). FinTech and HealthTech). Entertainment, tourism and culture have also been identified as promising growth areas.

Notably, significant foreign direct investment has already cemented close ties between India and the Arab world. dr Sayeed stressed that while the Gulf States have invested around US$20 billion in India, Indian companies have also made significant investments in West Asian countries. This mutual trust forms the foundation of the partnership.

Energy security plays a crucial role in the relationship as the Gulf States provide a significant portion of India’s oil and gas imports. However, the energy partnership is evolving beyond a simple buyer-seller dynamic. Some countries are investing in strategic partnerships, others are offering oil blocks to Indian companies. The focus on renewable energies, particularly green hydrogen and green ammonia, represents an important avenue for bilateral cooperation and underscores the shared commitment to sustainability.

During the conference, various officials expressed their optimism about the future of the Indo-Arab partnership. dr Khalid Hanafi, Secretary General of the Union of Arab Chambers (UAC), stressed the potential for a new technology-based relationship and called for a shift from a traditional to a technology-driven alliance. dr Fadi Salti al-Khalil, Chairman of the Commission for Planning and International Cooperation of the Syrian Arab Republic, stressed the partnership’s role in improving economic capabilities and advocated a new economic bloc centered on the fourth industrial revolution. dr Siddeek Ahmed, Co-Chair of the FICCI Middle East Council, stressed the importance of working together and leveraging shared strengths and interests to overcome challenges and maximize opportunities in a post-pandemic world.

Overall, the resumed FTA talks and exploration of alternative forms of trade, coupled with a focus on key sectors and a shared vision of a technology-led partnership, underscore the dynamism and potential of Indo-Arab cooperation. This evolving relationship is intended to promote economic growth, prosperity and sustainable development in both regions.

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