Why the backlash from West Asian countries matters to India

A close look at data on trade and inbound remittances shows why diplomatic censorship may have triggered sudden action, even though Nupur Sharma, one of the spokespersons, had already been reserved for her comments a while ago. week.

In 2021-2022, India recorded total trade of around $189 billion with seven Gulf countries – Saudi Arabia, United Arab Emirates (UAE), Oman, Qatar, Bahrain, Kuwait and Iraq – accounting for 18.3 % of its combined import and import value. exports, shows data from the Ministry of Commerce.

Apart from trade, India’s large expatriate population in Arab countries lends critical importance to the region, and a backlash could have turned into a larger or formal boycott had it not been resolved. In 2017, Gulf Cooperation Council (GCC) countries alone accounted for 55.6% of total remittances to India.

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Seven Gulf countries account for almost a fifth of India’s total trade

Most of the GCC countries expressed their displeasure with the BJP spokespersons’ remarks, as did Iran, which is not a member of the GCC. The Organization of Islamic Cooperation, a grouping of 57 Islamic countries, also condemned the remarks.

“In today’s interconnected world, bilateral trade is not only a function of the relationship between the political leaders of two countries, but is also shaped by public opinion as a whole. Moreover, in the Arab world, politics and religion are intertwined, making it a powerful mix,” said Biswajit Dhar, a professor at the Center for Economic Studies and Planning at Jawaharlal Nehru University.

The United Arab Emirates, Saudi Arabia, Iraq, Qatar, Kuwait, Oman and Bahrain are the seven Arab states in the Persian Gulf. Six of them, with the exception of Iraq, are part of the GCC.

India recorded $154.7 billion in trade with GCC countries in 2021-22, 77% above the subdued base of 2020-21 and 28% higher than in 2019-20. Notably, these countries are among India’s top trading partners: UAE, Saudi Arabia and Iraq ranked third, fourth and fifth respectively in terms of total trade with India in 2021-22. .

India’s exports to GCC countries stood at $43.9 billion, with a trade deficit of $66.8 billion. At 43.2% of total trade with these countries, the India-GCC trade deficit is larger than India’s overall trade deficit of 18.4%.

“India’s trade relations with the Gulf countries are of dual importance: dependence on oil and a potentially large export market for India there. We have to be careful not to offend our major trading partners,” said Saon Ray, visiting professor at the Indian Research Council on International Economic Relations.

In February, India and the United Arab Emirates signed a free trade agreement (FTA), which will allow duty-free access to 97% of Indian products and 90% of products from the United Arab Emirates during the next 10 years. It entered into force on May 1 and is the first FTA finalized by the Narendra Modi government. India is also considering a broader trade pact with the GCC.

Over half of India's inbound remittances come from six Gulf countries

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Over half of India’s inbound remittances come from six Gulf countries

Meanwhile, Arab countries host many Indian immigrants (non-resident Indians and people of Indian origin), and the countries are also a major source of remittances to India. Consider this: 27.7% of overseas Indians remain in GCC countries. The United Arab Emirates tops the list in the region with more than 3.4 million Indians, followed by Saudi Arabia (2.6 million) and Kuwait (1 million), according to data from the Ministry of Affairs. exterior.

Hence, these Indians also send money home which is known as inbound remittances. Gulf countries are among the top 10 sources of inward remittances. The United Arab Emirates is the main source, as immigrants who settled there sent back $13.8 billion in 2017. Saudi Arabia is third, with $11.2 billion, followed by Kuwait and Qatar with $4.6 billion and $4.1 billion, respectively, according to data compiled by the Pew Research Center. These are the latest data available with a breakdown by country.

“Trade could still be affected (as a result of such controversies) as consumers may switch to substitute products, but remittances are unlikely to be unaffected as Indians working in these countries share a long-term relationship with their employers,” Dhar said.

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