India has started talks on a free trade agreement (FTA) with the UAE, with expectations of a larger pact with the group of Gulf Cooperation Council (GCC) countries taking place subsequently, a person tracking the matter has said.

“As UAE has been very keen to advance an FTA between India and the GCC, which has been pending for a long time, the two countries decided to first go ahead and work out a deal amongst themselves,” the official explained.

The initial talks have started on a virtual mode.

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The GCC, which includes Bahrain, Kuwait, Oman, UAE, Saudi Arabia and Qatar, is of both economic and strategic interest to India as it has emerged as one of the largest trading partners. Its substantial oil and gas reserves is also of great importance for the country’s energy needs. Moreover, it is a source of increased foreign investments into India.

“The India-GCC FTA talks, which started in 2004, were suspended in 2008, but with the active involvement of the UAE, they were revived again recently. However, now UAE and India have decided to work on a separate free trade pact as it would not need as much coordination,” the official said.

Trading numbers

The UAE is the third largest trading partner of India despite a dip in both exports and imports in 2020-21 due to the pandemic. India’s exports to UAE last fiscal were valued at $16.7 billion while imports from the country were at $26.6 billion.

The country is also among the top 10 investors into India with an estimated $11 billion investments more than half of which is in the form of FDI. UAE is home to the largest number of Indians abroad at 3.5 million generating the highest remittances from abroad.

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“While UAE’s import duties on most items, barring a few such as carbonated and sweetened drinks, alcohol and tobacco, are low, an FTA would benefit India by bringing down existing tariffs further and also facilitate the use of the country as a hub for exports to other destinations including other GCC member country markets,” the official said.

An FTA with UAE would also increase market access for the services sectors and open up wider possibilities for its service providers.

Most importantly, it would help India forge an FTA with the GCC, something that it has been attempting for a decade and a half.

“It is very clear that India does not want to get into any FTA that would include China or be heavily influenced by China. That is why it is looking at forging FTAs with partners such as the US, the EU and the GCC including the UAE,” the official said.

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