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There was a time when Indian currency and postage stamps were in circulation in the Gulf, and Mumbai (formerly Bombay) was the premier marketing centre for pearls and dates from the region.
A deep-rooted friendship between the Gulf countries and India was developing, which continues to the present day. No wonder, for over five million Indians the Gulf is their second home, as they work together with the local community in the process of nation-building.
The relationship is not just limited to providing the region with professional, skilled and semi-skilled manpower. The GCC is the largest single origin of imports into India and the second largest destination for exports from India.
India's relations with the GCC countries are based on the fundamental premise that the Gulf region is part of its natural area of economic interaction. Also, in recent years, India has crafted and implemented a 'Look-West' policy reflecting its commitment to strengthen its relations with the Gulf countries.
An India-GCC Free Trade Agreement became logically the next step in the scheme of things.
What are the economic factors that become the cornerstone of such an FTA?
One, India is likely to emerge as the world's third largest consumer of oil in 2030 and its reliance on the Gulf will increase substantially in the future.
The next is that India has positioned itself to absorb some $500 billion in investment in the next decade to meet its growing infrastructural needs. It is here that the Indian government sees the new horizon of its engagement with the Gulf region.
Economic growth in India represents an opportunity for economies in its neighbourhood, including this region, and indeed for the global economy. The biggest opportunity is in infrastructure development where public-private partnerships are being encouraged, as the public sector would not be able to deliver on its own. India's rural areas have become the target area for massive investments in infrastructure development and connectivity enhancement.
"This approach also creates an employment safety-net. The government is equally committed to the revival of urban areas through a nation-wide programme of development of urban infrastructure and service delivery mechanisms," says India's Vice-President M Hamid Ansari, who visited Kuwait recently.
The emergence of India has been accompanied by indigenous development and harnessing of new scientific and technological capabilities. Many of these can be fruitfully utilised by its partners and friends. These relate, in the first instance, to the knowledge-based industries.
Indian IT (information technology) companies have played a critical role in the growing e-economy and e-business across the globe and have given India a new global image. Likewise, its proven capabilities in bio-technology, pharmaceuticals, health sector and in environmental protection and conservation could be tapped by its partners also.
Ansari says freedom of navigation and safety of sea lanes and access to markets for trade, technology, investments and workforce would boost India-Gulf relationship in the future.
A significant untapped area for co-operation pertains to foreign direct investments and portfolio investments. Fertiliser production, for instance, offers opportunity for GCC businessmen and investors wanting to safeguard their investments in these troubled times and earn a profitable return.
"Fertilisers and sources of energy such as oil and LNG are inseparably linked. We are encouraging joint venture projects for production of urea near the source of gas/LNG so that cost of feedstock is minimal. Thereafter, long-term buy back arrangements with India ensure the financial profitability of such joint ventures. The success of the Oman India Fertiliser Company is a case in point," says Ansari.
India's Prime Minister Manmohan Singh, on his maiden visit to the region late last year, held discussions on the FTA with Oman, which took over the chairmanship of GCC this year.
Of the three components of the FTA a broad understanding on investments and services sector have been reached.
Oman, however, wants time to examine duty concessions on trade of goods. The two nations agreed to set up a special committee to identify follow-up actions and eliminate any delays in implementation of any decisions in economic sphere agreed upon. The committee would submit its report within six months.
A joint working group on trade and commerce will define the contours of a preferential/free trade agreement with GCC, which accounts for 11 per cent of India's exports.
The FTA is expected to remove restrictive duties, push down tariffs on goods and pave the way for more intensive economic engagement between the nations. The two sides, seeking to boost bilateral trade, have been discussing the FTA since August 2004 when they signed a 'Framework Agreement on Economic Co-operation'.
In 2007, following visits to India by a high-level delegation from the Gulf countries, the crucial third round of talks, which got almost deadlocked, were revived.
India is likely to seek greater safeguards for its chemicals and petrochemical industry. This is being done with a view to protect domestic players who would find it difficult to handle competition as the cost of crude oil is extremely low in the GCC. Other issues include the rules of origin and differential tariffs.
