India–GCC Free Trade Agreement Terms of Reference

Background of India–GCC Engagement

India–GCC Free Trade Agreement Terms of Reference: India and the Gulf Cooperation Council share a long-standing economic and strategic relationship rooted in trade, energy, and diaspora links. The decision to formalise cooperation through a Free Trade Agreement marks a structured shift from transactional trade to a comprehensive economic partnership.

The Framework Agreement of Economic Cooperation between India and GCC was signed in 2004 in New Delhi, laying the foundation to explore an FTA. The newly agreed Terms of Reference (ToR) provide clarity on how negotiations will be conducted and what areas will be covered.

Static GK fact: The Gulf region has historically been India’s largest source of crude oil imports, making it strategically vital for India’s energy security.

What the Terms of Reference Define

The Terms of Reference act as a guiding document that defines the scope, structure, and modalities of negotiations for the proposed India–GCC FTA. It identifies priority sectors, negotiation principles, and institutional mechanisms.

The ToR ensures that negotiations move in a phased, predictable, and mutually beneficial manner. It also reflects a shared commitment to transparency and balanced outcomes.

Static GK Tip: In trade diplomacy, ToR documents are non-binding but crucial for setting negotiation boundaries and expectations.

Economic Significance for India

The GCC region represents a combined market of 61.5 million people (2024) with a GDP of approximately USD 2.3 trillion at current prices. An FTA has the potential to unlock the full economic potential of this relationship.

India’s trade with GCC reached USD 178.56 billion in FY 2024–25, accounting for 15.42% of India’s global trade. Reduced tariffs and streamlined regulations can significantly boost exports of goods and services.

Energy and Sectoral Diversification

One of the key strategic gains from the India–GCC FTA is diversification of energy sources. The agreement is expected to stabilise long-term energy supplies amid global volatility.

Beyond energy, sectors such as food processing, infrastructure, petrochemicals, and Information and Communication Technology (ICT) are expected to benefit. These sectors align closely with GCC’s economic diversification goals.

Static GK fact: GCC countries are actively pursuing post-oil economic diversification under national vision plans like Saudi Vision 2030.

Trade, Investment, and Supply Security

The region is a significant source of Foreign Direct Investment, with GCC investments in India exceeding USD 31.14 billion as of September 2025. The FTA framework is expected to improve investor confidence and legal predictability.

The agreement also aims to strengthen supply chain resilience, ensuring continuity of critical imports during global disruptions. This assumes importance amid geopolitical and economic uncertainties.

People-to-People Dimension

The GCC region hosts nearly ten million Indians, making it one of the largest Indian diaspora concentrations globally. Enhanced economic cooperation is expected to deepen people-to-people ties through employment, services trade, and mobility.

The FTA is also likely to create better institutional safeguards for Indian workers and professionals in the region.

Static GK fact: Indian expatriate remittances from the Gulf form a major share of India’s total inward remittances.

About the Gulf Cooperation Council

The Gulf Cooperation Council was established on 25 May 1981 through a cooperative agreement among six nations. Its core objective is regional coordination, integration, and unity.

The GCC consists of United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar, and Kuwait, with its headquarters located in Riyadh, Saudi Arabia.

Static Usthadian Current Affairs Table

India–GCC Free Trade Agreement Terms of Reference: