India- Gulf Ties

Table of Content

Why in the News?

Recently, few countries in the Gulf region had summoned the Indian ambassadors in their nations to register their protest on a controversy erupted over a religious issue.

Key Points:

About Persian Gulf region Countries:

The Persian Gulf region includes Iran, Oman, United Arab Emirates, Saudi Arabia, Qatar, Bahrain, Kuwait, and Iraq
Saudi Arabia, Oman, Qatar, United Arab Emirates (UAE), Bahrain, and Kuwait are members of the Gulf Cooperation Council (GCC)
There is a commonality of interest among them in being major producers of crude oil and natural gas, and thereby contributing critically to the global economy and to their own prosperity
Traditionally, India has enjoyed centuries of good relations with countries in the Gulf region

India’s Engagement with Gulf Region:

Trade and Investment:

In 2021-22, India recorded a total trade of about $189 billion with seven Gulf countries—Saudi Arabia, United Arab Emirates (UAE), Oman, Qatar, Bahrain, Kuwait and Iraq—accounting for 18.3% of its combined value of imports and exports
India’s exports to GCC countries stood at $43.9 billion, with the trade deficit amounting to $66.8 billion
At 43.2% of total trade with these countries, the India-GCC trade deficit is higher than India’s overall trade deficit of 18.4%
The UAE and Saudi Arabia are India’s third and fourth-largest trading partners respectively
Further, the UAE features in the top 10 sources of FDI inflows into India
The Backbone of trade and investments has been the hydrocarbon sector
For 2019-20, India’s hydrocarbon trade with the region was worth $62 billion, which is 36% of the total hydrocarbon trade
India has emerged as a “global pharmacy” that also substantially caters to the needs of the Gulf region
The Gulf countries look at India as a fast-growing economy which holds the potential to compete with the major world economies
In February 2022, India and the UAE signed a free-trade agreement (FTA), which will allow zero-duty access to 97% of Indian products and 90% of products from the UAE over the next 10 years

Energy:

The Gulf region is a reliable partner for energy security for India while India augments food security in the region
A third of India’s oil imports come from Bahrain, Kuwait, Qatar, Oman, Saudi Arabia, and the UAE, also known as Gulf Cooperation Council (GCC)
GCC suppliers account for around 34% of our crude imports and national oil companies in Saudi Arabia and Abu Dhabi are partners in a $44 billion investment in the giant Ratnagiri oil refinery
Qatar is also India’s leading supplier of LNG
India gets around 60% of its hydrocarbon requirements from West Asia. On an annualised basis, India saves up to $1.35 billion for each $1 drop in oil prices

Remittances:

As per data from the ministry of external affairs, 27.7% of overseas Indians stay in the GCC countries
The UAE tops the list in the region with over 3.4 million Indians, followed by Saudi Arabia (2.6 million) and Kuwait (1 million)
The UAE is the biggest source as immigrants settled there had sent back $13.8 billion in 2017. Saudi Arabia is third, at $11.2 billion, followed by Kuwait and Qatar at $4.6 billion and $4.1 billion, respectively

Strategic Cooperation:

By forging ties in sectors other than energy and trade with the Gulf region, India has been developing a warm relationship with the Muslim world
This would help in building up India’s engagement with organisations like the Organisation of the Islamic Conference (OIC) and the Arab League
India and GCC share the desire for political stability and security in the region

Why is the Strait of Hormuz important?

Geographical Identity: The Gulf (also known as the Persian Gulf or the Arabian Gulf) lies between Iran and the Arabian Peninsula
- - Besides Iran and Saudi Arabia, Oman, the UAE, Qatar, Bahrain, Kuwait and Iraq also share the Gulf coastline
  - With Iran on its northern coast and the UAE and an Omanian enclave on the south, the Strait, at its narrowest point, has a width of 34 km
  - The Strait opens to the Gulf of Oman which is connected to the Arabian Sea

Economic Significance:
- - A third of crude oil exports transported via ships pass through the Strait, which makes it the world’s most important oil artery
  - If the Strait is closed or if the flow of oil and gas is disrupted, it would have a serious impact on global energy stability and thereby on the world economy

Gulf Cooperation Council (GCC):

Gulf Cooperation Council (GCC) is a political and economic alliance of six Middle Eastern countries:
- - Saudi Arabia
  - Kuwait
  - The United Arab Emirates
  - Qatar
  - Bahrain
  - Oman
It was established in Riyadh, Saudi Arabia, in 1981
Purpose: To achieve unity among its members based on their common objectives and their similar political and cultural identities, which are rooted in Arab and Islamic cultures
Presidency of the council rotates annually
The Highest decision-making entity of the GCC is the Supreme Council, which meets on an annual basis and consists of GCC heads of state

Way Forward:

The Look West Policy has certainly accelerated India’s engagement with the Gulf region. As India has huge stakes in the region, the policy should be supplemented with more proactive Indian involvement in the various sectors
With the rapid economic growth and rising profile of India, devising such a policy of engaging with the extended neighbourhood has become imperative for India
Further, in the longer run, India should find new drivers beyond energy, and trade relations for the India-Gulf synergy
This search could begin with cooperation in healthcare and gradually extend outward towards pharmaceutical research and production, as well as the economic activities in bilateral free zones along the Arabian Sea coast eventually leading to an India-Gulf Cooperation Council Free Trade Area