India - GCC trade to reach $130 billion

Discussion in 'Economy & Infrastructure' started by ejazr, Oct 4, 2011.

  1. ejazr

    ejazr Stars and Ambassadors Stars and Ambassadors

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    Gulf Times – Qatar’s top-selling English daily newspaper - Qatar

    GCC – India bilateral trade could exceed $130bn by 2014, Doha Bank Group CEO R Seetharaman has said in a note.
    The bilateral trade between India and the GCC countries exceeded $80bn in nine months up to December 2010, Seetharaman said in the context of the 2nd World Tamil Conference in Dubai this week.
    India is in talks with members of the Gulf Co-operation Council (GCC) to conclude a free trade agreement. A framework agreement for the FTA has already been signed, he said.

    The GCC countries - Oman, the UAE, Bahrain, Kuwait, Qatar and Saudi Arabia have identified various sectors such as petroleum oil and energy, gas and fertilisers, information technology, higher education, civil aviation and agriculture for potential co-operation with India.
    The FTA will remove restrictive duties and push down tariffs on goods being traded. This will provide Indian pharmaceutical and chemical industry to export their products to the Gulf region. India is the third country apart from Japan and the United States to have become a dialogue partner of the GCC.
    There are several potential sectors for investments by Indian entrepreneurs, which include information technology, software development, telecommunications, education, training and healthcare services, tourism and hotel industry, banking and financial services, oil, gas and petrochemicals, electricity, housing, road and rail network.

    GCC investment in India has significantly increased in the last two years and is now estimated at more than $125bn, Seetharaman said.
    The sectors that have attracted these investments are the infrastructure sector with cumulated investment of $112bn, the special economic zones with investment of $12bn, agricultural and food processing $900mn, real estate $700mn and oil and gas $500mn.
    On Qatar – India bilateral trade, Seetharaman said it could have exceeded $5bn in March 2011. The bilateral trade between the two countries had seen a growth between 2006 and 2010.

    Qatari exports to India had steadily increased in the last four years, reflecting rising demand for Qatar’s hydrocarbon in India.
    Qatar exports to India include petrochemicals, LNG, fertilisers, sulphur and iron pyrites. India is also a major buyer of Qatar’s ethylene, propylene, ammonia, urea and polyethylene.
    Qatar’s imports from India include accessories, manmade yarn, fabrics, cotton yarn, transport equipment, machinery and instruments, metals and minerals.
    India has sought to purchase 15mn tonnes of liquefied natural gas from Qatar in addition to the 7.5mn tonnes that it already imports from Qatar.

    India also purchased 4mn tonnes of oil from Qatar in 2010. India will be one of the largest gas markets for Qatar apart from China.
    Co-operation in power sector between India and Qatar is under deliberation.
    An agreement has been signed by India and of Qatar to avoid double taxation and prevent fiscal evasion with respect to income tax.
    India has a large agricultural sector and is therefore a huge market for fertilisers. Qatar is a major producer of fertilisers and hence there is ample business opportunity for both sides in the fertiliser sector, he said.
     
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  3. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    A few questions:

    Will bringing in of petro products in the FTA amount to these products getting less expensive or will the government come up with new taxes within the country? As far as I recall the GoI was not interested in having the petro products as tradable commodity under FTA because that would then attract less taxes and do less landing price in the country.

    Can someone please provide with the breakup of trade figures, who imports and exports how much in value terms, and of that how much is petro products and the rest.

    the figure of 125b usd and 112b usd look staggering, do these include the fii inflow? i suspect that to be the case since the cumulative fdi inflow stood at 191b usd till last fiscal and no way i expect the GCC to walk away with pretty much whole of the cake there.
     
  4. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    This number will increase as the IOI pipeline is developed and if Qatar also joins.
     
  5. ejazr

    ejazr Stars and Ambassadors Stars and Ambassadors

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    @thakur_ritesh

    Free trade in petrochemical products will definitely make fuel e.t.c. cheaper than what it is now because Indian state companies and private companies like Reliance will have to compete with GCC based companies. So overall it will be good for the consumers. This will also indirectly impact products like Plastics and polymers and even fertilisers.
    But there will be a strong pressure from domestic lobbying groups to not go ahead as this will cut into their guaranteed profits.

    I think the FTA is really stuck on this part where India wants to apply taxes on petrol and petrochemical products but UAE and Saudis want these products to be included in the FTA as this is where there traditional area where they are most competitive in. GoI will have to take concerns of both sides into account and make a decision.

    On the investment numbers, I think it could be more than just FDI figures as they are certainly huge. Although it is cumulative and could therefore include data since 1990s. Also the GCC trading bloc continued to be the largest trading partner of India ahead of EU, China and North America, so it won't be surprising if they had a big share in Indian investments as well.

    The figures come from Doha Bank Group CEO Mr R Seetharaman; so until he explains his methodology we won't get a clear breakdown of how he came about these figures. But since the sub-prime crisis there has been extensive efforts by GoI to woo GCC investments. The GCC has a lot of hard cash courtesy the oil wealth and instead of investing in western countries traditionally with their current weak economies, they are also inclined to invest in China and India which are growing at 8+% per annum. This IDSA policy paper is a good read on this aspect. India Woos GCC’s Sovereign Wealth Fund: Policy, Scope and Precautions | Institute for Defence Studies and Analyses

    Going back to 2008, there was an Indo-Arab Conclave led by Pranab Mukerjee that identified and signed MoUs on around $150bn worth of projects and the numbers seem similar to what is quoted here and it could be that most of the investment is basically the realization of these MoUs.


     
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  6. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    Ejaz,

    thanks a lot for the reply.

    i think the GoI would not be interested in putting the petro products in the FTA list, reason being if that gets done then the government will stand to lose huge amount of revenue, as such our revenue generation is extremely low, just take a comparison between india and china, india generated a revenue of 185.4b usd last fiscal (gdp - 1.73t usd), in contrast china raised a revenue of 1,149 b usd (gdp - 6t usd), which reflects china generated a near 20% of gdp to india's around 11% which is not a good situation to be in and and even in ppp terms the difference is more or less the same for india at 450b usd (gdp 4.2t usd), china at 1,900b usd (gdp 10t usd).

    the other reason, there will be other blocks/countries which will raise alarm because then their petro products will be a lot more expensive than those from GCC which will make their product uncompetitive and they will then demand a treatment likewise something i doubt our economy (in terms of revenue generation) can afford.

    do you think it is feasible now given the above two constraints?

    coming to the FDI figures our top ten FDI investors are:

    even in the above list UAE shows at number 10 position. yes GCC could be using mauritius, singapore, cyprus route but for a fact these routes are heavily used by the US, UK and other european nations.

    i might be completely wrong, but i have developed a notion that GCC countries more believe in FII than FDI and not just in india but all over because they can then withdraw the money in no time. is it possible to get a sense of how much do the GCC countries invest through FDI and through FII all across the globe, i thin even if get that sort of a data would clear out a lot of things.
     
  7. Yusuf

    Yusuf GUARDIAN Administrator

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    Mauritius is the route Indian black money comes back to India TR.
     
  8. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    yeah heard that a lot, but in whose name do they get in this fdi?

    also wont they be more interested in getting this money in through FIIs/HNIs and put the money in the stock market? easy to get in the money, easy to invest, easy to manipulate the market/stock value and make good money, easy to take out the money and move out from the country.

    officially the governments have been saying that this route is mostly made use of by american and european companies.
     
  9. Iamanidiot

    Iamanidiot Elite Member Elite Member

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    maurtius is the biggest investor of fdi in india
     
  10. Iamanidiot

    Iamanidiot Elite Member Elite Member

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    and the moolah from there is all indian
     
  11. Yusuf

    Yusuf GUARDIAN Administrator

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    They create front companies. Holding companies and what not. Even the Ambanis created a maze of holding companies.
     
  12. ejazr

    ejazr Stars and Ambassadors Stars and Ambassadors

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    Well definitely GCC investments are not coming all through FDI route. And FDI is only one way to move in foreign capital. All GCC countries have sovereign wealth funds so FII route would make more sense. The other big way is though JVs and partnerships as global companies. For example a JV of Saudi and Indian IT companies bidding for projects in Egypt.

    I can't seem to find any current links on Sreetharaman's data and it may be a while before this investment data comes out either by the Indian or GCC govt.s But given that UAE is our top-trading partner followed by Saudi's at no.4 or that the GCC bloc is our biggest trading partner overall, it would make sense to tap into the wealthy FIIs in GCC to invest in India rather than US, EU or even China where their money is going at present.


    On the revenue and petrochemical import duties and taxes part, I fundamentally hold the view that we should slowly but surely move towards small government in business which little or no taxes. However, taxes maybe used to alter consumer behavior like on cigarettes for example but should not be used as a revenue generation tool only.

    At present, the biggest chunk of taxes on fuel are actually state taxes not centre. On top of that we spend a huge amount in subsidizing fuel as well. What we have is a very inefficient circular distribution of wealth were we are taxing AND subsidizing the same product. What should be done is completely get rid of all subsidies and maybe half the taxes. This way we reduce govt. expenditure on subsidies and also help the consumer without adding burden to the deficit.

    Revenue generation is ofcourse a very important aspect to look into, but the plans of rolling out a GST is probably the best solution. This could be a singular achievement and probably the best thing since the reforms of 1992 if this gets passed as this will rationalise all taxes (VAT, excise duty e.t.c) into a single structure and include a lot of products that are not included at present. (GST may push up India's GDP by 1.4 -1.6%: Assocham).

    This will also boost govt. revenues by around 1.5 lakh crores ANNUALLY. And as the economy grows, this will grow as well. And the tax-GDP ratio is expected to jump by another 2% as well.

    However, unfortunately, the BJP ruled states are opposing this and this the tragedy of the BJP. For purely political reasons, a reform that will help Indian business massively is being blocked. At present, the UPA has brought in SK Modi to head the GST panel which is an interesting choice, but the BJP should eventually come around to support this as the sooner this gets done the better.
     
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  13. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    India, Gulf 'can achieve higher growth together'

    India, Gulf 'can achieve higher growth together'


    India and the Gulf countries have the opportunity to play a key role in each other’s bid to achieve accelerated economic growth, according to S M Krishna, External Affairs Minister of India.

    Krishna told the global publishing, research and consultancy firm, Oxford Business Group (OBG) that the partnership between India and the GCC provided solid foundations for the two sides to build on as the Gulf countries embarked upon knowledge-based economic expansion.

    “India and the Gulf have historically enjoyed close relations. Both regions aspire to similar objectives, including accelerated economic development and inclusive growth. India and the GCC therefore have a lot to learn from each other,” he said.

    The full interview with Krishna will appear in a range of OBG’s forthcoming country reports which are set to explore the economic activity and investment opportunities across the Gulf.

    The group’s publications will include a detailed, sector-by-sector guide for foreign investors, together with a wide range of interviews with leading national and international political, economic and business leaders.

    Krishna said India’s business leaders could provide an insight into how the country’s move to liberalise its markets through economic reforms had paved the way for more forward-looking industry and service sectors.

    He added that India would benefit from the GCC’s expertise across a range of sectors, including agriculture, petrochemicals, pharmaceuticals and science.

    Krishna also highlighted the benefits that both sides would gain from stepping up cooperation on small and medium-sized enterprises (SMEs). “This is an area that offers us many possibilities to gain from each other’s strengths,” he said.

    The minister said that although the GCC had become one of India’s largest trading partners, certain areas of cooperation, such as bilateral manufacturing, remained largely untapped.

    He added that the free trade agreement (FTA) which India and the GCC were drawing up should boost economic cooperation between the two sides.

    “The GCC is the leading origin of imports and one of the largest destinations of Indian exports. GCC investment in India has also significantly increased in recent years,” he said.

    “Negotiations are in progress to finalise a FTA, which will further strengthen the mutually beneficial economic ties between us,” he said.

    OBG’s country reports mark the culmination of more than six months of on-the-ground research by the group’s analysts.

    They provide information on opportunities for foreign direct investment and act as a guide to the many facets of the country including its macroeconomics, infrastructure banking and sectoral developments. The reports can be viewed online and are also available in print form. – TradeArabia News Service
     
  14. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    cobra commando Tharki regiment Veteran Member Senior Member

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