GCC-India trade tumbles as New Delhi snaps up Russian oil

• Trade with the GCC six falls to $162bn
• India buys 26% of its oil from Russia
• UAE remains largest partner in Gulf

India’s trade with the GCC countries fell 12 percent to $162 billion in 2023-24, according to its Ministry of Commerce and Industry.

The drop from $184 billion in 2022-23 comes as energy-hungry New Delhi snaps up discounted Russian crude and slashes imports of Gulf oil.

Ajay Srivastava, founder of the Global Trade Research Initiative think tank, pinpointed crude oil and petroleum imports as the primary cause of the trade decline.

Russia’s share of India’s crude oil imports has jumped from 1.5 percent in 2021-22 to 26 percent in 2023-24, he said. The Gulf’s share was 34 percent in 2023-24, down from 43 percent a year earlier.

Trade with the UAE dipped by less than 2 percent in 2023-24, but it remains India’s largest partner in the GCC with total trade of almost $84 billion.

Although the drop is small, it has heightened scrutiny of the comprehensive economic partnership agreement (Cepa) between the two nations.

The 2022 pact, which aims to transform economic ties, yielded only a 2.5 percent increase in non-oil bilateral trade in its first 17 months.

Afaq Hussain, co-founder and director of the Bureau of Research on Industry and Economic Fundamentals in New Delhi, said oil accounts for nearly 90 percent of the drop in imports from the UAE and Saudi Arabia – but he is bullish about other trade areas.

“As time passes and more commodities get to the zero-tariff threshold, we will see further increase in trade between the two countries,” he said.

Aseem R Mahajan, joint secretary for the Gulf at India’s Ministry of External Affairs, told a conference in New Delhi last week: “While overall trade figures may fluctuate, India’s exports to the GCC have consistently grown.”

He pointed to growth potential for Indian exports in sectors such as food processing, synthetic fibres and yarns, textiles, pharmaceuticals, engineering and chemical products. 

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Mahajan did not mention the 2023-24 decline, but said the GCC now accounts for 15 percent of India’s total trade.

However, Srivastava has cautioned that other bright spots of India-UAE trade are already under pressure.

Gold bullion imports, which increased by 37 percent in 2023-24, helped to cushion the overall decline, he said – but the UAE’s lucrative trade in precious metals and gemstones is facing scrutiny for its impact on Indian businesses.

“This increase may not last,” Srivastava said.

“These exports, largely from the UAE, are driven by tariff arbitrage available under Cepa, much of which was probably unintended.”

New Delhi, which has protectionist tendencies, has called for a review of the Cepa terms.

In June Manjari Chatterjee Miller, a senior fellow at the Council on Foreign Relations, warned that trade ties needed to expand beyond gemstones, jewellery and oil to sustain growth.

To achieve the target of $100 billion in non-oil trade by 2030, Srivastava said the countries needed an annual trade growth rate of 7.85 percent. “Diversifying trade beyond oil and gold will make it easy to achieve this goal."