Bahrain Tribune | 15 August 2007
No headway in GCC-India FTA
Bilateral trade rose to $25b in 2006
By K.V.S. Madhav
The much-awaited Free Trade Agreement (FTA) between India and GCC appears to have hit yet another roadblock with the Indian Revenue Department opposing the inclusion of crude oil in the pact, citing a huge dent on the customs revenue.
Crude oil accounts for a substantial share of India-GCC bilateral trade and its inclusion in the FTA would bring in revenue losses on account of customs duty exemption, officials maintained.
"The Revenue Department is opposed to allowing crude oil imports at zero duty and wants that this item be kept out of the FTA with the GCC," reports quoting a senior Indian government official said in New Delhi.
However, such a stance may put a spoke in the FTA plans.
The issue came up at a recent briefing session by Commerce Ministry officials on the progress of FTA plans with various countries, including the GCC bloc, at the Prime Minister’s Office.
More than 70 per cent of India’s crude oil imports worth $60 billion originate from the GCC bloc — Saudi Arabia, Kuwait, Bahrain, Qatar, UAE and Oman.
Despite a framework agreement with six members of GCC signed in 2004, the FTA plan did not make much headway and was bogged down by inter-ministerial differences and negotiations over various components of the economic cooperation agreement.
But the Indian Ambasador in Bahrain, Balkrishna Shetty, exuded confidence that the negotiations, which were in the final stage, would be completed soon and the FTA was likely to be signed in the first-quarter of next year.
"Such hiccups are inevitable when an agreement of this magnitude is signed. There will be gains and losses on both sides. Some sectors are bound to benefit and offset the imminent losses in other areas, but the overall outlook for the India-GCC FTA is bright and trade is bound to boom," said Osman Sharief, Bahrain Asian Traders Committee of the Bahrain Chamber of Commerce & Industry.
Bahrain, in particular, can gain more once the FTA comes by. "Asians in the Gulf region can play a big role in pushing forward the efforts to achieve the FTA," he maintained.
"Bahrain is keen on the FTA, but if there are hold-ups it will go ahead with an agreement with India on its own. The scope for further cooperation is immense based on the historical friendship and mutual understanding and the current economic boom and developmental efforts in both countries," the Ambassador said.
Manufacturing, services, education, training, infrastructure projects, petrochemicals, information technology, tourism and healthcare were promising areas for joint ventures between the countries.
The FTA is expected to remove restrictive duties, push down tariffs on goods and pave way for more intensive economic engagement between the nations.
The GCC is India’s second largest trading partner and the largest single origin of imports into India and the second largest destination for exports from India. Bilateral trade rose to nearly $25 billion in 2006, excluding energy imports by India worth approximately another $22 billion.
In fact it registered a more than four-fold rise from $5.55 billion in 2000-01 to $23.42 billion in 2005-06, the period marked by buoyancy in exports and imports.
The UAE emerged as the single largest investor in India among the GCC countries, accounting for nearly 79 per cent of the total inflow from the region, followed by Bahrain, Oman, Saudi Arabia, Kuwait and Qatar.