India has a deep trade relationship with the six countries that form the Gulf Cooperation Council (GCC). These countries are the UAE, the Kingdom of Saudi Arabia (KSA), Qatar, Kuwait, Oman and Bahrain. In 2021-22, the last financial year, the total goods trade between India and the GCC countries stood at $154.9 billion or around 15 per cent of the total goods trade carried out by India. The total goods trade carried out by a country is the sum of the goods exports and the goods imports.
In 2021-22, the UAE was India’s third-largest goods trading partner after the USA and China. This trade relationship has been strong over the years.
Interestingly, crude oil and petroleum products form the bulk of India’s imports from the GCC countries. India’s total imports from the GCC countries in 2021-22 stood at $110.9 billion. Crude oil and petroleum products formed nearly two-thirds of this at $73.3 billion. As per the data, India imported crude oil at a cost of $18.14 billion in May compared to $9.47 billion in the corresponding period last year. The figure shows a 92 per cent jump in import of crude oil on a year-on-year basis.
Meanwhile, New Delhi is in talks to increase Russian oil imports from Rosneft, despite the Western sanctions on Moscow because of the ongoing conflict with neighbouring Ukraine.
Of India’s total oil imports of $161.8 billion, around 45 per cent or $73.3 billion was imported from the GCC countries. In 2021-22, India had an import dependency of close to 86 per cent when it came to crude oil and petroleum products. This means that India produces very little of the total oil that it consumes and in 2021-22 imported 86 per cent of the oil and the petroleum products that it consumed during the year.
A bulk of this comes from the GCC countries, making them very important in the overall scheme of things for India. Interestingly, in 2021-22, India imported the maximum amount of oil from Iraq (not a part of the GCC countries) with the KSA coming in next. The total oil import bill from these two countries amounted to $31.5 billion and $27.6 billion, respectively.
Over the years, the USA has become a big source of oil imports for India. During 2021-22, oil worth $14 billion was imported from the USA. The oil import bill from the USA in 2020-21 had stood at $7.4 billion.
When it comes to Indian exports to the GCC countries, manufactured goods form a bulk of it. The total Indian exports of manufactured goods to the GCC countries stood at $18.8 billion. This has fallen from a peak of $26.9 billion achieved in 2012-13.
While it’s easy for the GCC countries to source these goods from other parts of the world, it’s not easy for India (or any other country for that matter) to import oil from countries other than the GCC countries.
Besides, many Indians live and work in these nations.
Close to three and a half million non-resident Indians and persons of Indian origin live in the UAE. More than two and half million Indians live in the KSA.
The only country that has more Indians living there is the USA, which has 4.46 million Indians. In comparison, the United Kingdom (UK) has 1.76 million Indians.
From the money they make working in the GCC countries these Indians send back money to their families. These inward remittances coming from Indians working abroad stood at a total of $50.2 billion in 2020-21. It had stood at $56.2 billion in 2019-20. The remittances fell in 2020-21 primarily due to the spread of the Covid-19 pandemic, which led to many Indian losing jobs abroad and having to come back home. Incomes fell for many Indians who continued to live and work abroad. This led to a fall in inward remittances.
A lot of these inward remittances come from the GCC countries. Data from the Reserve Bank of India (RBI), India’s central bank, shows that in 2016-17 close to half of the inward remittances to India came from the GCC countries. A lot of this money is received along India’s coastal states.
The RBI points out that ‘58.7 per cent of total remittances was received by four states namely Kerala, Maharashtra, Karnataka and Tamil Nadu’. These are states with long coastlines.
More than 70 per cent of the remittances have an average size of $500 or more. Also, 27 per cent have an average size of between $200-$500. These inward remittances help in two ways.
First, it helps families of India’s migrant workers to meet their expenses. When they receive and spend this money it helps the Indian businesses and the overall economy in general. Second, the remittances help fund India’s trade deficit. India imports much more than it exports.
This difference is referred to as the trade deficit and it needs to be funded. India needs money coming in from abroad to fill up this gap. The inward remittances help precisely in doing that. In this scenario, it is important that the GCC countries and India continue to maintain a cordial relationship.
Vivek Kaul is the author of Bad Money
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