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Context

India and the Gulf Cooperation Council (GCC) initiated the process for negotiating a Free Trade Agreement (FTA) by signing the Terms of Reference (ToR).

What is Gulf Cooperation Council (GCC)? 

It is a regional political and economic union of six Arab countries located in the Arabian Peninsula. 

Established in 1981, the alliance focuses on achieving unity and coordination among its member states through shared cultural, religious, and economic ties. 

Member States

The GCC comprises six monarchies that border the Persian Gulf: 

• Saudi Arabia (Absolute Monarchy)
• United Arab Emirates (UAE)  (Federal Monarchy)
• Qatar (Constitutional Monarchy)
• Kuwait (Constitutional Monarchy)
• Oman (Absolute Monarchy)
• Bahrain (Constitutional Monarchy) 

Key Objectives

The council was formed to address shared security challenges, such as threats from the Iran-Iraq war at the time of its founding, and to promote regional integration. Its core goals include: 

• Economic Integration: Establishing a common market and a customs union (fully operational since 2015).
• Unified Regulation: Formulating similar laws in finance, trade, education, and administration.
• Security & Defence: Operating the Peninsula Shield Force, a joint military unit established in 1984.
• Scientific Progress: Encouraging joint ventures and scientific research in fields like industry and mining. 

Organizational Structure

The GCC operates through three main bodies: 

• Supreme Council: Highest authority, composed of the heads of member states. Its presidency rotates annually among members in alphabetical order.
• Ministerial Council: Consists of foreign ministers who meet every three months to propose policies and coordinate cooperation.
• Secretariat General: Administrative arm based in Riyadh, Saudi Arabia, responsible for implementing decisions. 

Significance of the India-GCC Partnership

The FTA seeks to evolve the relationship beyond a traditional energy buyer-seller dynamic into a comprehensive and strategic economic partnership.

Trade and Investment  

Massive Trade Volume

In FY 2024-25, bilateral trade reached USD 178.56 billion, representing 15.42% of India’s total global trade. The FTA aims to boost Indian exports to address the existing trade deficit. (Source: Ministry of Commerce & Industry)

Energy Security & Diversification

While India imports about 35% of its crude oil and 70% of natural gas imports from the GCC, the FTA will promote joint ventures in petrochemicals and renewable energy, especially Green Hydrogen. (Source: Ministry of Petroleum and Natural Gas)

Key Source of FDI

The GCC is a major source of Foreign Direct Investment (FDI) for India, with cumulative investments surpassing USD 31.14 billion by September 2025. (Source: PIB)  

Diaspora and Remittances

Large Indian Community: The GCC hosts a vibrant community of over 10 million Indians, the largest Indian diaspora globally.

Remittance Powerhouse: India received nearly 38% of remittance originating from the GCC region, an FTA will help create a more stable environment for Indian workers and facilitate smoother financial flows. (Source: RBI)

Strategic Importance and 'Act West' Policy

Regional Stabilizer

In a region facing geopolitical uncertainties, a formal economic framework with India provides stability and strengthens India's role as a reliable partner.

Connectivity & Counterbalance

The FTA will provide the soft infrastructure needed for major connectivity projects like the India-Middle East-Europe Economic Corridor (IMEC). 

• By streamlining trade and tariffs, it enhances IMEC's viability as an alternative to China's Belt and Road Initiative (BRI).

Proven Success Model

The FTA negotiations are expected to draw lessons from the successful India-UAE Comprehensive Economic Partnership Agreement (CEPA) of 2022, which led to a 14% increase in India's non-oil exports to the UAE within two years. (Source: Ministry of Commerce Report)

Key Challenges in FTA Negotiations

While the potential benefits are immense, negotiators must navigate several complex challenges to finalize a balanced agreement.

Divergent Economic Interests

Individual GCC members have different priorities. For example, Saudi Arabia's "Saudization" (Nitaqat) policy restricts foreign labor, which conflicts with India’s demand for easier access for its professionals and service providers.

Protecting Domestic Industry

Indian industries, particularly the chemical sector, are concerned about the potential dumping of cheap petrochemicals from the GCC, where feedstock costs are very low. The FTA must include adequate safeguard measures.

Rules of Origin (ROO)

Strict ROO are essential to prevent third countries (like China) from using a GCC country as a transit hub to export goods to India at lower tariff rates.

Labor Standards

Balancing modern trade agreement norms on labor rights with the GCC's distinct labor laws, including ongoing reforms to the Kafala system, will require careful diplomatic negotiation.

Way Forward For India

Shift from Defensive to Offensive

Move beyond protecting sectors like agriculture and focus on securing market access for India’s strengths, such as Services (Fintech, IT, Healthcare) and high-value manufacturing.

Forge an Energy Transition Partnership

Agreement should include provisions for green energy collaboration, including interconnecting power grids under the One Sun One World One Grid (OSOWOG) initiative and joint exploration for critical minerals.

Implement a Skill Mobility Partnership

India should negotiate a framework for skill harmonization, ensuring Indian workers are trained for the high-tech jobs emerging from the Gulf's economic diversification plans like Saudi Vision 2030.

Lessons from Global Best Practices

India can draw valuable lessons from other successful trade agreements to structure an effective India-GCC FTA.

• The ASEAN Model: Ensure the GCC negotiates as a single, cohesive bloc to prevent fragmentation and create a unified market access protocol, similar to the ASEAN-India Trade in Goods Agreement (AITIGA).
• The EU Model: Push for Mutual Recognition Agreements (MRAs) to harmonize standards for professional services like IT, nursing, and engineering.  
• The Vietnam Model: Strategically use the FTA to position India as a primary supplier for the Gulf's needs, such as becoming the "food basket" for the region, similar to how Vietnam leveraged its FTA with the EU to become an electronics manufacturing hub.

Conclusion

The India-GCC FTA has the potential to create a robust US$ 300 billion trade corridor by 2030. Its successful conclusion will not only boost economic growth but also solidify a lasting strategic partnership, anchoring India's interests in the West Asian region.

Source: PIB