India–GCC Free Trade Talks Gain Momentum with Formal Launch of Negotiations

Why in News ?

India and the Gulf Cooperation Council (GCC) have signed the Terms of Reference (ToR) for a Free Trade Agreement (FTA) in New Delhi, formally launching negotiations for a comprehensive trade pact.

The move marks a significant step in deepening India’s economic engagement with West Asia, a region that plays a critical role in India’s energy security, diaspora welfare, remittance inflows, and trade diversification.

Background and Context

• The Gulf region has long been central to India’s foreign policy due to:
  • Heavy dependence on Gulf countries for crude oil and natural gas
  • Presence of over 9 million Indian expatriates, forming the largest migrant community in the region
  • Strong trade, remittance, and investment linkages
  • While India has bilateral trade agreements with individual Gulf countries, a comprehensive bloc-level FTA with the GCC has been under discussion for over a decade.
• The signing of the Terms of Reference (ToR) signals renewed political will on both sides to:
  • Expand trade beyond hydrocarbons
  • Build resilient supply chains
  • Integrate India more deeply into West Asian and global value chains
• The development aligns with India’s broader trade strategy, following recent trade agreements with the UAE, Australia, EFTA, and the UK.

About the Gulf Cooperation Council (GCC)

• Established: 1981
• Nature: Regional political and economic alliance
• Member Countries:
  • Bahrain
  • Kuwait
  • Oman
  • Qatar
  • Saudi Arabia
  • United Arab Emirates (UAE)
• Headquarters: Riyadh, Saudi Arabia
• Objective: To foster cooperation in:
  • Economic integration
  • Security and defence
  • Cultural and social development
  • Regional stability

Organisational Structure of the GCC

1. Supreme Council

• Highest authority of the GCC.
• Composed of the heads of member states.
• Presidency rotates alphabetically.
• Meets annually in regular sessions.

2. Ministerial Council

• Composed of foreign ministers or their representatives.
• Responsible for proposing policies and implementing Supreme Council decisions.

3. Secretariat General

• Based in Riyadh.
• Prepares studies and coordinates joint Gulf projects and initiatives.
• Facilitates cooperation, integration, and policy execution.

India–GCC Economic Engagement

Trade Profile

• India’s Exports to GCC:
  • Engineering goods
  • Rice
  • Textiles and apparel
  • Machinery
  • Gems and jewellery
• India’s Imports from GCC:
  • Crude oil
  • Liquefied natural gas (LNG)
  • Petrochemicals
  • Precious metals such as gold

Strategic Importance

• The GCC collectively accounts for:
  • A significant share of India’s energy imports
  • A large portion of India’s foreign remittances
  • Growing sovereign and private investments in Indian infrastructure, real estate, fintech, and renewable energy

Significance of the Proposed India–GCC Free Trade Agreement

1. Trade Diversification and Market Access

• The FTA could:
  • Reduce tariffs and non-tariff barriers
  • Improve access for Indian goods in Gulf markets
  • Expand services exports in IT, healthcare, education, and professional services

2. Strengthening Energy and Supply Security

• A structured trade framework can:
  • Enhance predictability in energy supply contracts
  • Facilitate long-term LNG and green hydrogen partnerships
  • Support joint investments in refining, petrochemicals, and clean energy

3. Investment and Value Chain Integration

• The FTA may encourage:
  • Increased GCC sovereign fund investments in Indian infrastructure and manufacturing
  • Integration of Indian firms into West Asian and global value chains
  • Joint ventures in logistics, ports, fintech, and digital services

4. Strategic and Geopolitical Alignment

• Deepening economic ties strengthens India’s strategic presence in West Asia.
• It complements India’s Act West policy and supports a multipolar regional order.
• Enhances India’s diplomatic leverage amid global trade realignments.

5. Employment and Diaspora Welfare

• Higher economic integration can:
  • Generate employment opportunities for Indian workers
  • Improve labour mobility frameworks
  • Strengthen social security and welfare mechanisms for the Indian diaspora

Way Forward

• India and the GCC must:
  • Conclude negotiations on goods, services, investment, rules of origin, and dispute settlement in a time-bound manner.
  • Ensure that sensitive sectors are protected while maximising export competitiveness.
  • Align the FTA with India’s domestic reforms under Make in India, Digital India, and Atmanirbhar Bharat.
• Parallel diplomatic engagement should focus on:
  • Labour welfare agreements
  • Green energy cooperation
  • Regional security and maritime stability in the Indian Ocean and the Gulf.