Dubai: Trade remains the bedrock of ties between India and the GCC, according to a recent report by the Dubai Chamber of Commerce and Industry.
The total value of trade between India and the GCC exceeded $91 billion (Dh334.1 billion) in 2008 and grew at an average annual rate of 50 per cent between 2004 and 2008 according to the study.
"The Indian economy is one of the fastest growing economies in the world along with China and it has already been two years since India became the number one trade partner, replacing China," Mohammad Al Asoomi, a UAE-based economic adviser, told Gulf News.
The UAE and Saudi Arabia are the largest two partners in terms of trade with India, and the GCC is the leading origin of imports and second largest destination of exports for India. The GCC's share of India's trade increased from 8.6 per cent in 2004 to 18.7 per cent in 2008.
"There are many factors contributing toward this increase in trade activity. One of them is that India is doing a lot to develop and diversify its economy, adding new supply, materials and products to the international market and another is that the demand in the UAE market has increased over the last five years," said Al Asoomi.
Free trade pact
A factor set to accelerate these trade ties is the signing of a free trade agreement between India and the GCC which is in their final stages according to Al Asoomi.
"Once this free trade agreement is signed, it will remove taxes and duty costs and will help considerably the trade ties between the two entities," he said.
India has long been a major export source for agricultural products. Certain easing of trade policies has also contributed to improved trade ties.
"The liberalisation of key sectors have been beneficial for countries wanting to export from India. There have been several policies which are helping the trade ties at the moment such as the introduction of export credit and incentives that are being offered to Indian merchants," Khalid Maniar, managing partner at Horwath Mak, told Gulf News.
Relationship
The current economic relationship between the GCC countries and India is based largely on oil and merchandise. Demand in India for this is increasing.
In 2007, India consumed approximately 2.8 million barrels per day, making it the fifth largest consumer of oil in the world.
Oil demand grew to nearly 3 million barrels per day in 2008.
India meets 70 per cent of its energy needs through imports and the GCC has been the principal oil source for India. "Along with an increased demand from the UAE market there has always been an increased demand in the Indian economy for GCC products such as petrochemicals and aluminium," said Al Asoomi.
While trade and oil continue to lead the economic ties between the two blocs, new investment areas like infrastructure, ICT, food processing industry and skill based industries are also emerging.
India's IT products and services exports to the GCC are growing at more than 30 per cent annually, according to industry estimates demonstrating the increasing number of investment opportunities in the IT industry.
