India’s ruling party has been thrown into prompt damage control mode as the country’s diplomatic envoys faced music over the weekend from key West Asian trading partners over alleged anti-Prophet remarks by a spokesperson during a TV debate. The Bharatiya Janata Party suspended one spokesperson and expelled another on Sunday as tensions raged over social media calls for a boycott of Indian products in the Gulf region.
A close look at data on trade and inbound remittances shows why the diplomatic censure may have prompted sudden action, even though Nupur Sharma, one of the spokespersons, had already been booked for her comments a week ago.
In 2021-22, India recorded a total trade of about $189 billion with the seven Gulf countries, accounting for 18.3% of its total combined value of imports and exports. Apart from trade, the significant expatriate population that India has in Arab nations lends critical significance to the region, and a backlash could have snowballed into a bigger, or formal boycott if not addressed. In 2017, five Gulf countries alone accounted for 54% of total remittance flow into India.
Trading partners
The United Arab Emirates (UAE), Saudi Arabia, Iraq, Qatar, Kuwait, Oman and Bahrain are usually referred to as Gulf countries because they lie on the border of the Persian Gulf. Six of these, barring Iraq, are part of the Gulf Cooperation Council (GCC).
India recorded trade of $154.7 billion with GCC countries in 2021-22, 77% above the muted base of 2020-21, and 28% higher than 2019-20. Notably, the UAE, Saudi Arabia and Iraq were India’s third, fourth and fifth biggest trading partners in 2021-22.
India’s exports to GCC countries stood at $43.9 billion, with the trade deficit amounting to $66.8 billion. At 43.2% of total trade with these countries, India-GCC trade deficit is higher than India’s overall trade deficit, 18.4% of total trade.
In February 2022, India and the UAE signed a free trade agreement (FTA), which will allow zero-duty access to 97% of Indian products and 90% of products from the UAE over the next 10 years. It came into force on 1 May and is the first FTA finalized by the Narendra Modi government. India is also considering a wider trade pact with the GCC.
Expat power
Meanwhile, Arab countries host a large number of Indian immigrants (non-resident Indians and persons of Indian origin) and the countries are also a critical source of inward remittances into India. Consider this: 28% of overseas Indians stay in the Gulf countries and Iran. The UAE tops the list with over 3.4 million Indians, followed by Saudi Arabia (2.6 million) and Kuwait (1 million), as per data from the Ministry of External Affairs.
Consequently, these Indians also send money back home, known as inward remittances. Gulf countries are among the top 10 sources of inward remittances as well. Indian immigrants in the UAE sent back a whopping $13.8 billion in 2017. Saudi Arabia is third, at $11.2 billion, followed by Kuwait and Qatar at $4.6 billion and $4.1 billion respectively, shows data compiled by Pew Research Center.
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