Column: Bridge with the Gulf

Written by Rituparna Bhuyan | Updated: Nov 26 2009, 02:29am hrs
One of the side effects of the economic crisis will be the way nations trade. For countries like India, this means reconsidering the way we do business with the world by diversifying into new markets. Statistics show that global trade tectonics are starting to shift. The US is no longer the biggest buyer of Indian goodsit lost that long-held position to the UAE in 2008-09. This did not happen just because US demand for Indian goods nosedived but also because our trade engagement with the UAE saw greater traction during the same period. Of course, India is concerned about the absolute quantum of economic engagement. Even in those terms, Indian exports to the US are down 18.7% in the first half of FY10. But export growth to the UAE will stay robust.

In fact, the entire Gulf Cooperation Council (GCC)including Bahrain, Saudi Arab, Oman, Qatar and Kuwaitimported more made-in-India stuff last year. Exports to the GCC bloc of nations grew a sharp 44.44% in 2008-09 and stood at over $31 billion, when overall exports grew only 14%. While we look for new and emerging markets to buffer the US and the EU demand slowdown, Indian trade diplomats must buttress ties with the GCC, which has a GDP of over $1.2 trillion. Though talks have been on for a duty-free trade deal with the oil-rich bloc, little progress has been made. The kind of energy used in the deal with the Asean bloc needs to be replicated.And just like Singapore is for the Asean nations, the UAE is a strategic re-export hub for the Gulf bloc. The third-largest re-export address, the UAE also serves as a transit point for Indian goods to reach Iran and even Pakistan. If we do not step on the gas, we may find the Chinese stealing a march yet again as they are negotiating a free trade deal with the GCC.

As for the US, one major reason for the slide in Indian exports was its withdrawal of a special regime for gems & jewellery. While Indian diamond merchants have absorbed the decline in US demand by re-routing business to the UAE, withdrawal of similar sops for hand-made carpetsmade largely in UPcould spell political trouble for the sugar-struck UPA.