India and the UAE are expected to push dialogue on a free trade agreement (FTA) between India and the Gulf Cooperation Council (GCC) ahead of the visit of Abu Dhabi crown prince Shaikh Mohammed bin Zayed Al Nahyan later this month. Ahmed Al Banna, UAE’s ambassador to India, told FE: “UAE is committed to sign the India-GCC FTA.”
As earlier reported by FE, commerce minister Nirmala Sitharaman had said: “We are engaging actively with the UAE so that we open up with the rest of the GCC members.”
According to sources, India is expected to seek greater safeguards for its chemicals and petrochemical industry. This is being done with a view to protect the domestic players who find it difficult to handle competition as the cost of crude oil is extremely low in the GCC. Other issues include rules of origin and differential tariffs and the absence of customs union across the six states.
The FTA is expected to remove restrictive duties, push down tariffs on goods and pave the way for more intensive economic engagement between the nations.
The GCC is India’s second-largest trading partner and the largest single origin of imports into India and the second-largest destination for exports from India.
The GCC, which groups the UAE, Kuwait, Saudi Arabia, Qatar, Bahrain and Oman, has tremendous significance for India. The GCC constitutes the immediate neighbourhood of India separated only by the Arabian Sea. India, therefore, has a vital stake in the stability, security and economic well-being of the Gulf.
Weak implementation of intellectual property right (IPR) in the country and different legal systems operative in the member-nations of the Gulf Cooperation Council (GCC-6) have led them to seek individual free trade agreements (FTAs) with India.
The GCC members have now been pushing for an early conclusion of the India-GCC FTA and operationalising the framework agreement. India is keen that the GCC nations participate in the ‘Make in India’ campaign, in particular in the Mumbai-Delhi industrial corridors.
A framework agreement to bolster economic cooperation between India and the GCC was signed in New Delhi in 2004 and since then both sides have held several rounds of talks to develop the deal into a full FTA on the grounds that it will benefit both. In 2007, following visits to India by a high-level delegation from the Gulf countries, the crucial third round of talks which got almost deadlocked were revived.
The GCC is India’s largest trading partner with $137.7-billion (Dh506 billion) trade in 2014-2015, up from only 5.5 billion (Dh20 billion) in 2001. More than 50 % of India’s oil and gas come from the GCC countries which host over seven million Indian nationals.
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Bilateral trade between the UAE and India is around $60 billion. Both sides have agreed to increase the bilateral trade by 60% over the next five years and also to encourage the investment institutions of the UAE to raise their investments in India, including through the establishment of UAE-India Infrastructure Investment Fund, with the aim of reaching a target of $75 billion.
India is UAE’s number one trading partner while the Gulf nation is India’s third-largest trading partner after the US and China. UAE is India’s second-largest export destination too. For India’s energy security, UAE is an important country as it gets 9.38 % of total crude requirement from that country.