Gulf Cooperation Council – India Relations

India and the states of the Gulf Cooperation Council (GCC) have a complex and rapidly growing relationship. The Gulf region presents a myriad of natural, political, economic, and strategic opportunities and interests of India. Despite the significant size, historical ties, and geographic proximity, India has not yet become an active participant in the Middle East. However, ties between India and GCC have grown closer and continue to increase in intensity as both parties have taken strategic interests in each other.

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Both are driven by concerns about the global and regional balance of power, while India is confidently establishing itself as a regional security provider. Meanwhile, the GCC sees increasing value in establishing economic ties and a strategic partnership with India for its long-term objectives of diversifying its outreach. This report will examine the ongoing relations between India and GCC states from the perspectives of trade, security, and cultural exchange.

Background and Current Developments

The trade relationship between India and GCC countries such as Saudi Arabia goes back to the ancient era of the third millennium BC. The trading relationship formed one of the world’s oldest maritime routes and served as the foundation of the prospering Arabian economy by 100 century AD. Eventually, European imperialism shifted the regional networks and power. However, Arab traders were often the sole traders of Indian spices, and a link remained. In 1947, India achieved independence, and the Gulf region was yet to be developed. The GCC was founded in 1981 when UAE and Bahrain were established as countries (Anderson, 2017).

From a global perspective, India and many GCC states are new countries. However, it is evident that the cultural and economic ties which connect them are much older, helping a prospering relationship into the modern-day.

In the early 2000s, India experienced rapid growth in its economy and international trade. This inherently led to the development of relationships with both developed and developing countries in order to establish trading networks. It has been part of India’s active objective to continue negotiations with a variety of countries and regional economic blocs with the purpose of expanding the export market and diversify trade. These circumstances led to the gradual establishment of communication with GCC states. There was some trade amongst the regions, mostly in the energy sector, which remained static through the 1990s.

However, the rapid economic growth helped to establish a more comprehensive dynamic relationship. The GCC countries became of critical strategic importance for India regarding aspects of energy, trade, national security, foreign direct investment, and remittances (Calabrese, 2017).

Despite a close relationship between India and GCC countries such as UAE and Saudi Arabia based on economic ties and strategic security and defense partnership, this union could not be possible two decades ago. The relationship has improved beyond a basic buyer-seller interaction (Chaudhury, 2018). Both parties have aimed to bolster the partnership with various strategic initiatives.

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It began with trade, when then Prime Minister of India, Manmohan Singh, set up a government project known as “Look West Policy,” which focused on increasing ties with Gulf Countries. In 2006, King Abdullah bin Abdul Aziz Al-Saud of Saudi Arabia visited India with a historical official visit. This paved the way for friendly partnerships and numerous trade agreements on a governmental level, as well as the increasing development in the private sector (Alam & Ahmed, 2015).

Three agreements were signed as well as a historic Memorandum of Understandings (MOU) on Combating Crime. The measures eliminated numerous barriers to trade and promoted investment through the removal of double taxation, as well as cultural aspects such as cooperation in athletics and the development of youth. At the end of the visit, the Delhi Declaration was signed, which was the first time that an official document was signed by the King of Saudi Arabia with any country.

The Delhi Declaration was a vital document whose principles guide the bilateral relationship to this day, promoting cooperation and enhanced understanding. In 2010, when Singh visited Saudi Arabia, a renewed Riyadh Declaration was signed, which established India as a strategic partner for Saudi Arabia and, by extension, for most of the GCC states (Alam & Ahmed, 2015).

As mentioned, India has focused on creating trade networks since the early 2000s, signing more than ten free trade agreements, with many undergoing negotiations. In August of 2004, India signed the Framework Agreement on Economic Cooperation which underwent two rounds of talk around expectations on the trade of goods, services, and foreign direct investment. By 2015, the Indian government referred to the Gulf region as “an extended part of our neighborhood” and sought to establish an official India-GCC free trade agreement that would extend any previous economic cooperation deals. (Calabrese, 2017).

Meanwhile, the Arab countries were encouraged to invest in Prime Minister Modi’s “Make in India” initiative. During Modi’s official visit to Saudi Arabia in 2016, there was a mutual concern on issues of terrorism in relation to Pakistan, which drove the strategic partnership. Furthermore, joint ventures in petrochemical exploration and development were established. By 2017, Prince Sheikh Mohamed bin Zayed al-Nahyan of UAE was able to negotiate an agreement for the Abu Dhabi National Oil Company to provide a significant part of New Delhi’s strategic oil reserve (Chaudhury, 2018). Through these agreements, India and GCC have established strategic alliances and reliance in terms of energy. The relationship between these countries has turned a new corner of increasing cooperation to the future.

Economics and Trade

India’s Middle East policy in recent years has been attempting to find a balance between its relationship with GCC and Iran, as well as a potential dialogue with Israel. However, GCC states such as Saudi Arabia have unfriendly relations with both Iran and Israel. Since GCC countries remain a vital route for addressing India’s energy needs as well as the flow of income from investment and remittances of the diasporic population, it is crucial for India to maintain a positive relationship with them. A 2015 report by the International Energy Agency has noted a doubled demand in India’s energy needs in the last decade. The country remains the third-largest importer of crude oil and has to rely on imports in the long-term future due to the low availability of fossil fuels on the subcontinent (Pant & Mehta, 2018).

India has attempted to diversify its energy imports and sources. However, GCC countries are central to meeting the energy demands of the growing industries in India, which require oil and gas imports. In 2016, the GCC states provided more than half of India’s energy-related imports. Identifying the value of their cooperation and seeking to expand the relationship, India and Saudi Arabia signed a mutual agreement on forming joint ventures in the creation of petrochemical plants as well as enhancing research and development in the industry. Simultaneously with this came agreements to explore defense and security cooperation.

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In 2017, India also entered into a strategic partnership with the UAE, which created a fund of $75 billion to be invested into India’s economy and infrastructure (Pant & Mehta, 2018). This economic cooperation highlights India’s close relationship with major member countries of the GCC.

The agreements became a catalyst for India, greatly improving relations with the Saudis going beyond petroleum and trade. They became partner nations as India is becoming an important entity in the Gulf Region’s economic trade. While the GCC states continue to fulfill India’s vital energy and investment needs, India can provide essential exports as well. India provides spices, textiles, agricultural and food products, electronic and information technology, and machinery to GCC countries. Due to the climate and soil of the GCC countries, they are dependent on the import of agricultural goods to maintain their growing populations.

India’s geographical proximity and liberal trade agreements provide numerous options for the exchange of such goods. Meanwhile, investment is a secondary aspect of economic collaboration, greatly enhancing the bilateral relationship (Alam & Ahmed, 2015). India’s economic growth in the last two decades has been significantly aided by GCC investment. However, the structure and patterns of the trade networks will require diversification.

Analytical studies have shown that India’s trade with GCC states is larger in scope and intensity than with any other region of the world. Patterns indicate annual growth as the trading increases into new sectors. While GCC offers energy, investment, and infrastructure, India can focus on commodity sectors. This includes animals and food products such as fish, dairy, meats, and vegetable products. India can offer exports of chemicals, textiles, minerals, leather, plastics, metals, and wood, along with other various manufacturing materials (Alam & Ahmed, 2017). While GCC states often import many of these commodities from China or the United States, India provides an opportunity for diversification of trade sources as well.

Therefore, the case for creating an India-GCC free trade agreement is logical. It would reduce tariffs and duties while expanding trade frameworks and networks, which will likely cause a steep increase in economic engagement. As discussed, both markets offer each other significant opportunities for products as India and GCC strongly complement each other’s needs. A free trade agreement would result in an increased trade yield and establish a base for small and medium-sized businesses to prosper within the bilateral trade climate. Furthermore, the free trade deal will provide greater investment access as there would be fewer barriers to cash flow and governmental regulation (Calabrese, 2017).

The move to go beyond a traditional buyer-seller relation inherently leads to the establishment of a production and service network in a regional value chain. This allows for the promotion of interdependencies and economic engagement at every stage of value creation.

As a result of the dynamic relationship of India with the GCC and subsequently growing private sector, both parties can increase their contributions to the global value chain and expand their respective economies with leading high-tech sectors in order to remain competitive (Pant, 2017). This amicable and bilateral relationship is enhanced by favorable intergovernmental policies. Both parties offer each other vital and strategic commodities and a range of goods that continue to be expanded and diversified, opening up a potential for further economic cooperation.

Strategic Partnership

The biggest influencing factor in India-GCC relations is the multipolarity of external powers in the Middle East. The United States is gradually withdrawing from its traditional role, while Russia is gaining more influence, and China continues its rapid expansion. These forces are inherently unpredictable and spur the India-GCC engagement as both parties are interested in protecting each other’s interests. India wants to avoid being economically isolated, while GCC is seeking alliances with non-major powers.

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Economic factors are at play since trade markets are exponentially more important in Asia rather than the West. The GCC states have had some engagement with Russia and China, willingly overlooking issues of Syria and Iran (Pethiyagoda, 2017). This creates prospects that the GCC will generally overlook India’s cooperation with Iran and Israel.

The GCC sees India as stable sovereignty, which maintains territorial integrity and a policy of non-interference. India attempts to create an image of friendship with everyone and has in the past supported Palestinians (which the GCC supports against Israel). Therefore, GCC states, who despise foreign interferences in their respective domestic affairs, value the relationship with India. This is despite fully knowing that India is maintaining this position due to its vulnerable position in terms of energy needs.

Prime Minister Modi, who has been criticized by both Western and Eastern powers due to his approach to anti-Muslim riots, is still viewed as friendly in the Middle East. Modi’s policies and development agenda seem to be inclusive of everyone, including Indian Muslims (Pethiyagoda, 2017). For GCC states, this is indicative of a neutral and trustworthy government.

Through its growing relationship with the GCC states, The Modi administration is hoping to disable the Saudi-Pakistani ties, which are largely based on religion. By positioning itself as a global trading partner, India wants to isolate Pakistan and its military-industrial complex. Meanwhile, Saudi Arabia hopes to use India’s expertise in information technology and the digital sector to diversify its economy away from financial dependence on oil as part of its 2030 Vision. Furthermore, both parties aim to hamper Pakistan’s shielding and use of terrorism as a state instrument that destabilizes the whole region (Pant & Mehta, 2018).

Countering radicalization and preventing the misuse of religion is a primary driver in the India-GCC strategic relationship. This is important since some GCC states, such as the UAE, formally recognized the Taliban as the official Afghanistan government in the past. Therefore, a condemnation of any state to use religion as a justification for funding, supporting, or protecting terrorist organizations is unacceptable (Chaudhury, 2018).

Both India and the UAE spoke against the use of terrorism by countries against competitors and attempting to promote religious and sectarian radicalism in political issues. Although not directly named, it was evident that Pakistan and Iran were amongst such condemned countries. Furthermore, Pakistan implemented various policies and failed to send troops to Yemen alongside Saudis, both of which served to distance it.

This is critical since GCC states have traditionally been partners with Islamabad. Prime Minister used this opportunity to significantly increase security cooperation with the GCC countries to focus on dismantling terrorist networks and infrastructure. The cooperation encompasses sharing the flow of information and regulating the terrorism-associated flow of funds which could be potentially used for radicalization purposes.

Terrorist organizations and individuals are identified, and counter-terrorism measures were taken against them. National security advisors have also agreed to meet every six months in order to enhance points of contact and improve operational security partnerships. Furthermore, there is a dialogue to undertake strategic joint defense projects, including co-production of military equipment (Chaudhury, 2018).

Demographics and Cultural

The Gulf region is a popular destination for Indian expatriates and tourists. The UAE, for example, has a 2.6 million Indian population who have contributed significantly to the local economy and set up major businesses while also benefiting India through remittances (Chaudhury, 2018). Indians are the largest workforce in the GCC states as Saudi Arabia hosts 3 million Indians, a majority of which are blue-collar workers and 15-20% are white-collar professionals (Pethiyagoda, 2017). Expatriate workers are valuable to the regional economy and functioning of GCC states as well as services to improve the image of their country as Indian communities are commonly accommodating, tolerant, and peaceful.

Any instability in the Gulf region concerns India due to the large size of its expatriate population living there. It provides a relatively large source of income as remittances accounted for 3.9% ($70 billion) of India’s GDP in 2012, with more than 50% coming from GCC states (Pant & Mehta, 2018). Since remittances sent by expatriates play a large role in the growth of India’s economy, it is prerogative for it to maintain good relationships with the Gulf countries.

India’s global image is shaped by culture, more so than most of its regional neighbors, who are defined by ideological tendencies. In part, the connection that India is attempting to establish with the GCC is based on the traditional linkage of the extended neighborhood as a method of addressing security concerns. India is appealing to the identity, and cultural history shared between India and the Middle East through centuries-old maritime routes. Meanwhile, the GCC is aware of India’s Islamic heritage when ruled under the Mughal dynasty and the fact that the country holds one of the largest Muslim populations on the planet (Pethiyagoda, 2017). Considering the importance of pan-Islamic identity and values to the GCC states, India has inherent cultural ties which it can capitalize on.

India and GCC favorably view each other’s values, although they have different approaches on practical issues. India is a democracy, while GCC states hold a monarchy structure of some type. Nevertheless, there is admiration from Arab countries for the pluralism of India’s politics in which everyone, including Muslims, receives fair treatment. India maintains a culture of tolerance and peace, regardless of race, ethnicity, or religion.

This inherently applies to India’s foreign policy, which values tolerance, non-interference, and minimal violence. Despite maintaining a sizable military force, India avoids military conflicts and advocates defense capabilities (Pethiyagoda, 2017). Despite criticism of India for not taking a position on many Middle East conflicts, it has positioned the country with the advantage of being viewed as non-threatening. These values strongly appeal to the GCC and, along with cultural ties, enhances the possibility of economic and strategic long-term partnerships.

Conclusion

This report discussed the emerging dynamic relationship between India and the GCC countries as well as the strategic factors influencing it. Aspects such as oil prices, counter-terrorism, and geopolitics are shaping the interests of both parties. The solely economic relationship that India and GCC states have maintained is no longer sufficient. The current governments recognize this fact and have strived to improve strategic cooperation and focus. India is fully committed to building relationships in the Middle East, while GCC states recognize the value of an investment in the Indian subcontinent.

Despite shared values, it is not guaranteed that strategic interests will constantly overlap, and divisive policies may be pursued. However, it is in the interests of each party to balance a complex web of global relationships that will protect national interests in the Middle East and Southeast Asia regions.

References

Alam, I., & Ahmed, S. (2015). India- Saudi Arabia bilateral trade relations: Recent experiences and future opportunities. International Journal of Economics and Empirical Research. 3(7), 327-342.

Alam, I., & Ahmed, S. (2017). Prospects of India–GCC trade relations. Foreign Trade Review, 52(2), 118-129. Web.

Anderson, R. (2017). India and the GCC: Bound by history. Gulf Business. Web.

Calabrese, J. (2017). ‘Linking West’ in ‘unsettled times’: India-G.C.C. trade relations. Web.

Chaudhury, D. R. (2018). Bridging the Gulf: UAE-India relations have turned a new, exciting corner. Economic Times. Web.

Pant, G. (2017). Redefining the drivers of India-G.C.C. economic relations. Web.

Pant, H. V., & Mehta, K. (2018). India in Chabahar. Asian Survey, 58(4), 660-678. Web.

Pethiyagoda, K. (2018). India-GCC relations: Delhi’s strategic opportunity. Web.

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