India, Gulf Bloc move closer to FTA with signing of Terms of Reference

India on February 5 signed the Terms of Reference (ToR) for a proposed free trade agreement (FTA) with the six-nation Gulf Cooperation Council (GCC), formally reviving negotiations that have been stalled for nearly two decades and signalling a push to deepen economic engagement with one of its most important trading regions.  

FTA talks between India and the GCC began with the signing of a framework agreement in 2004, followed by two rounds of negotiations in 2006 and 2008. However, the process was put on hold in 2011 after the GCC paused trade negotiations globally. Momentum returned after the GCC Secretary General’s visit to India in November 2022. A revised ToR was shared by the bloc in October 2023, with both sides exchanging updated drafts since then, culminating in Thursday’s signing.  

Calling the move a major milestone, Union Commerce and Industry Minister Piyush Goyal said, “A momentous day as we sign the Terms of Reference for an FTA between India and the 6-nation Gulf Cooperation Council (GCC).” He added that sectors such as food processing, infrastructure, petrochemicals and information and communications technology are expected to benefit significantly once the agreement is concluded.  

The GCC comprises Saudi Arabia, the United Arab Emirates (UAE), Qatar, Kuwait, Oman and Bahrain. India’s economic linkages with the bloc have expanded steadily, underlining the strategic importance of restarting trade talks.  

India-GCC trade

In FY 2024-25, India-GCC bilateral trade stood at $178.56 billion, with imports at $121.68 billion and exports at $56.87 billion, accounting for 15.42% of India’s total global trade. Total trade had risen from $154.6 billion in FY22 to $184.55 billion in FY23, before moderating to $161.59 billion in FY24 and rebounding again in FY25.  

The UAE remains India’s largest trading partner within the GCC, with bilateral trade surging to $100.06 billion in FY25, up from $83.6 billion in FY24. Imports from the UAE stood at $63.42 billion, while exports reached $36.64 billion.  

Saudi Arabia is India’s second-largest GCC trade partner, with bilateral trade of $41.88 billion in FY25, compared with $42.9 billion in FY24. India imported $30.12 billion worth of goods from Saudi Arabia and exported $11.76 billion during the year.  

Trade with Qatar amounted to $14.15 billion in FY25, followed by Oman at $10.61 billion, Kuwait at $10.22 billion, and Bahrain at $1.64 billion.  

Beyond merchandise trade, the GCC region is a key source of investment for India. Cumulative GCC investments in India crossed $28.28 billion by December 2024, reinforcing the region’s growing role in India’s long-term economic strategy.  

The Gulf is also home to a large Indian diaspora, with around 8.9 million Indians residing across GCC countries, accounting for nearly 66% of India’s non-resident population abroad. While the share of remittances from the GCC declined from over 50% in 2016-17 to about 30% in 2020-21, it continues to represent a major component of India’s inward remittance flows.