India’s trade relations with the Arabian Peninsula trace their genesis back several millennia, when trade took place with Harappans by ships that travelled along the sea coast. The west coast region of India, especially Malabar and Konkan, were active trading hubs, where Arab traders oftentimes would visit on their way to South East Asia. This should clear away misconceptions that trade with the Arab world has only recently been significant to India’s foreign trade. India will never spoil its relations with the Gulf countries because of various reasons which will be discussed in this article.
In 2021-22, India’s bilateral trade with the GCC stood at nearly $154 billion and its trade deficit at around $67 billion. India’s one-third oil imports come from Bahrain, Kuwait, Qatar, Oman, Saudi Arabia, and the UAE, also known as Gulf Cooperation Council (GCC). Qatar is also India’s leading supplier of LNG which in turn means that the bulk of India’s energy requirements is taken care of by the six GCC countries. The GCC nations accommodate near about 9 million Indian migrant workers with the highest number in UAE (34,20,000 migrant workers) as per the data shared by Ministry of External Affairs in February 2020 and which accounts for gigantic annual remittances of more than $80 billion in last three years. Around half of remittances to India come from just five Gulf countries. The data shared by Ministry of Commerce showed that India’s exports to the GCC countries in 2021-22 increased to about USD 44 billion as against USD 27.8 billion in 2020-21—a growth of over 58 per cent. This accounted for 10.4 per cent of India’s total exports in 2021-22. On the import front, India witnessed a rise of 85.8 per cent as compared to 2020-21, with total imports summing up to USD 110.73 billion, thereby accounting for 18 per cent of India’s total imports.
The linkage with the countries of GCC has multiple dimensions. The first is that of trade dependence. India’s trade with the GCC countries nearly doubled in just one year since 2020-21, and is at 155 billion dollars at present. The share of India’s exports that go to GCC is now above 10 per cent and needs to rise. India’s growth requires access to global export markets, and GCC is an important destination, for all sectors, ranging from food, agro-processed products, labour-intensive products like textile and leather, engineering goods, chemicals, and pharmaceuticals. India’s imports from GCC are also crucial and went up by 86 per cent in one year. Imports include the critical energy component. Oil imports from West Asia are needed not only to meet India’s own consumption requirements, but also as feedstock for India’s huge export of diesel and petrol, done by private sector companies like Reliance and Essar. Petro product exports of India constitute nearly one-fifth of all manufacturing exports in dollar terms.
The GCC countries also constitute an important destination for software and other services exports. These increasing figures assume significance as India is looking at negotiating a free trade agreement with the grouping. The country has already implemented a comprehensive trade pact with the UAE on May 1, with an aim to boost bilateral trade to USD 100 billion in the coming years.
Trade composition of India with the Arab world:
UAE: The UAE was India’s third largest trading partner in 2021-2022, and second largest for both exports (USD 28 billion) and imports (USD 45 billion) when these are counted individually. In terms of total trade volume, the UAE (USD 72.9 billion) was behind the United States (USD 1.19 trillion) and China (USD 1.15 trillion). The UAE accounted for 6.6% of India’s total exports and 7.3% of imports in the last financial year, up 68.4% since the previous year when international trade was impacted by the pandemic.
Saudi Arabia: At a total volume of USD 42.9 billion in 2021-22, Saudi Arabia was India’s fourth largest trading partner. While exports were low at USD 8.76 billion (2.07% of India’s total exports), imports from Saudi Arabia were the fourth largest at USD 34.1 billion (7%), up 50% from the previous year. Most of it was crude oil.
Iraq: It was India’s fifth largest trading partner in 2021-22 at USD 34.3 billion.
Qatar: The total trade was USD 15 billion, accounting for just 1.4% of India’s total trade, but the country is India’s most important supplier of natural gas. Qatar accounts for 41% of India’s total natural gas imports. The UAE accounts for another 11%.
Oman: For Oman, India was the 3rd largest (after UAE and China) source for its imports and 3rd largest market (after UAE and Saudi Arabia) for its non-oil exports in 2019. Major Indian financial institutions have a presence in Oman. Indian companies have invested in Oman in sectors like iron and steel, cement, fertilisers, textile etc.
Oil imports
On import of oil from Gulf countries, 239 million tonnes of oil petroleum imports were worth USD 77 billion and accounted for nearly one-fifth of the country’s total imports in 2021.
The share of Persian Gulf countries in India’s crude imports has remained at around 60% over the last 15 years.
In 2021-2022, the largest exporter of oil to India was Iraq, whose share has gone up from 9% in 2009-2010 to 22%.
Saudi Arabia has accounted for 17-18% of India’s oil imports for over a decade. Kuwait and UAE remain major oil exporters to India. Iran used to be the second largest oil exporter to India in 2009-2010, its share went down to less than 1% in 2020-21, due to US sanctions.
Agreements
India and Oman signed a Programme of Cooperation (POC) in the fields of Science and Technology for the period 2022 – 2025. The POC for Cooperation in the fields of Science and Technology was signed in pursuance of the Agreement for Cooperation in Science and Technology(S&T) concluded on 5th October, 1996 between Oman and India.
In September 2021, India and the UAE formally launched negotiations on the India-UAE Comprehensive Economic Partnership Agreement (CEPA).
In 2021, the Indian External Affairs Minister met the Foreign Minister of the Kingdom of Saudi Arabia, where both countries discussed bilateral cooperation in multilateral forums such as the United Nations, G-20 and Gulf Cooperation Council (GCC).
In 2021, India and Bahrain agreed to strengthen their historic ties, including in areas of defence and maritime security.
As the Gulf countries are leaping beyond oil based economy and diversifying their economy massively and investing in a variety of new projects comprising renewable energy, higher education, technological innovation and space commerce, at the same time for India there are numerous long-term economic possibilities to explore with the Gulf world in future which would be beyond just oil.

The writer is an Economics lecturer at Kashmir Harvard higher secondary school, Naseem Bagh, Srinagar. He is a Gold-Medallist in Business & Financial Studies from Kashmir University.

Zubair Mushtaq