GCC countries and India: A new era of economic collaboration
The deep, intensifying economic transformation of the Gulf Cooperation Council (GCC) region is a key global macro story that will play out for decades and inevitably shape economic and geopolitical alliances in the process. Much like improved US-GCC ties, the GCC’s strategic partnership with India supports our positive long-term outlook for the region, given complementary strengths in areas like trade, human resources, and capital flows.
India as a key GCC trading partner
The GCC as a group is quite integrated in global trade, even if on a narrow, energy-dominated basis. Exports-to-GDP ratios range from about 35% in Saudi Arabia to about 60% for Kuwait, Oman, and Qatar—and exceed 100% for the UAE. As such, shifts in global demand patterns directly impact GCC economies.
China’s share in the global economy has quadrupled since 2001 (Figure 1). It has become the GCC’s largest export market, accounting for 19% of shipments in 2024. But that bilateral trade relationship is not quite as deep or lucrative for the GCC as one might expect. Exports to China are not much higher than exports to India, despite the latter’s much smaller size (Figure 2). India’s proximity and the reorientation in China’s energy imports towards Russia help explain much of this. Moreover, the GCC region had a $25 billion trade surplus with China compared to a $60 billion trade surplus with India in 2024.
Given India’s faster future economic growth and faster rate of industrialization, it may be a more promising export destination for the GCC going forward. For example, the IEA anticipates India to become the largest crude oil importer in the world by 2030 (it is currently the second largest).
The bilateral trade relationship is important, but it is also quite symbiotic. While India needs GCC crude oil, the GCC needs Indian agricultural products. India is by far the dominant source of GCC rice and beef imports, with a market share of about 60% and 50%, respectively.
India as a critical source of labor supply for the GCC
Of the 18+ million Indians living abroad in 2024, about 45% reside in GCC countries, especially UAE (3.25 million) and Saudi Arabia (1.95 million). Unlike most emerging market economies, GCC countries rely very heavily on migrant workers, with India and Pakistan being top origin countries. This is not merely an additive labor flow; rather, it is a critical and dominant one, especially in areas such as construction where migrants can account for over 90% of employment.
This is another symbiotic aspect of the GCC-India economic relationship: while the GCC has insufficient labor resources, India has an overabundance. The GCC has access to a large pool of workers while Indian workers benefit from better paid employment. Although, historically, these labor flows were dominated by low-skill workers, this is gradually shifting, and we expect this to continue as the GCC services economy evolves.
GCC as a critical source of capital for India
India tends to run persistent current account deficits, which require capital inflows to finance (Figure 4). Most GCC countries are in the opposite situation, with large current account surpluses resulting in capital accumulation looking for productive deployment.
Given the size of the two regions’ economies relative to other major global capital sources/destinations, neither of the two trading partners play a dominant role in each other’s capital flow story, but each plays an important one (Figure 5). In this regard, the GCC may be more important to India than the other way around, at least for now.
Figure 6. Main invested sectors, by all countries
| Equity flow ($ million) | Percentage out of total FDI equity inflow (in USD) | |
|---|---|---|
| Services | 118,843 | 16 |
| Computer software and hardware | 110,698 | 15 |
| Trading | 47,572 | 7 |
| Telecommunications | 40,072 | 5 |
| Automobile industry | 37,854 | 5 |
| Construction (infrastructure) activities | 36,163 | 5 |
| Construction development | 27,139 | 4 |
| Drugs and pharmaceuticals | 23,419 | 3 |
| Chemicals (other than fertilizers) | 23,207 | 3 |
| Non-conventional energy | 21,900 | 3 |
Source: Government of India, Ministry of Commerce and Industry, Department for Promotion of Industry & Internal Trade, RBI, as of July 2025.
GCC advances negotiations for free trade agreement with India
Amid rising global tariff tensions, a positive development has emerged: a renewed global push for comprehensive trade agreements. While a few individual GCC countries have signed trade-related deals with India, the bloc as a whole is also advancing negotiations for a free trade agreement (FTA) with India.
This initiative dates back to 2004, when a Framework Agreement on Economic Cooperation was signed. Formal negotiations are expected to begin this year, as confirmed by GCC Secretary-General Jasem Mohamed Al-Budaiwi.
The momentum behind this FTA reflects its strategic importance. For GCC countries—especially Saudi Arabia and the UAE—it holds the potential to drive both oil and non-oil sector growth. The agreement aligns with long-term national visions such as Saudi Vision 2030 and UAE Centennial 2071, both of which aim to diversify economies beyond oil. These ambitions also complement India’s development roadmap for 2047.
As part of the negotiations, GCC nations are seeking broader access to India’s vast consumer market. To institutionalize this cooperation, the GCC General Secretariat and India have agreed on a Joint Action Plan extending through 2028. This plan spans multiple sectors, including trade, energy, security, and agriculture. Formal discussions are expected to commence later this year.1
Progress on bilateral trade agreements
The UAE has already taken a significant step by signing a Comprehensive Economic Partnership Agreement (CEPA) with India in February 2022. This agreement eliminated or reduced tariffs on 80% of traded goods, leading to a near doubling of bilateral trade.
Meanwhile, discussions are underway for a similar CEPA between Qatar and India, with the goal of doubling bilateral trade to $28 billion over the next five years. Additionally, India has signed a $78 billion deal with Qatar for the supply of 7.5 million tons of gas annually, starting in 2028 and continuing through 2048.2
Oman is also nearing a breakthrough. According to Indian Commerce Minister Piyush Goyal, a bilateral trade agreement is close to finalization. Current trade between the two nations stands at approximately $10.5 billion, largely driven by energy exports from Oman to India. Ongoing discussions are focused on labor policies and are in an advanced stage.
Toward a shared future of financial strength
India and the Gulf Cooperation Council (GCC) are forging a high-impact economic corridor defined by complementary strengths in energy, labor, and capital. As India accelerates its industrialization and the GCC advances its diversification agendas, the two regions are becoming increasingly interlinked—creating new opportunities for investors. In light of US-China strategic competition, investors are reassessing their engagement with the world’s two largest economies. Emerging economies such as India and GCC offer both diversification and growth benefits, especially as it becomes clearer that relying on broader acronyms and groupings (BRICs, emerging markets) is less helpful in driving returns than in the past. As global supply chains reshape as a result of US trade policy, India stands to gain; as the GCC becomes a more dynamic player in new industries, it stands to gain economically. Both countries gain from closer integration and investors gain from expanding exposure to the two regions.
As India’s growth story continues to unfold, the GCC stands out as an increasingly attractive destination for global investors. We have previously highlighted the region’s equity market outperformance relative to the broader emerging market index. Moreover, the GCC’s fixed income market has matured significantly, with issuance tripling since 2019—offering greater depth and liquidity compared to India’s relatively smaller and less developed bond market.