Trade deficit with Gulf nations dips 77% in 3 yrs
The Dollar Business Bureau
The charm that was once distinct with the Gulf is fast waning. India’s export and remittances figures show there has been a decline, but trade pundits predict that it is not as bad as the numbers may seem to be.
India’s trade deficit with the Gulf Cooperation Council (GCC) has declined $46 billion, or 77% in three years, to $14 billion due to a rapid decline in imports claim analysts at the global analytical firm Crisil. The remittances from GCC have dipped for the first time in last six years, it said.
Remittances from the GCC have decreased 2.2% to $35.9 billion in FY 2016 from $36.7 billion in the same period last year. But these remittances have more than made up the decrease by over- funding the goods trade deficit with a surplus of $22 billion, according to Crisil. Indian exports to the GCC have also come down 18.7% in FY 2016. Falling oil prices could be the main reason for this declining trend as one-fourth of the exports to GCC are petroleum products.
Oil producing countries of GCC are severely impacted by the sharp decline in oil prices. This has led to a dent in their revenues. Over 50% of India’s remittances come from GCC. Though the oil prices have brought down the country’s exports to GCC, India’s net external trade with GCC is unaffected. As the imports from GCC also have fallen 34.5%, this has balanced the trade deficit to some extent, Crisil said.
Despite a sharp 47% dip in oil prices last year, there was a marginal slowdown in remittances from GCC. This proves that GCC nations, particularly Saudi Arabia and the UAE, are comparatively less dependent on oil revenues. Many of the GCC countries are planning to diversify their economies, as per the objectives of the Saudi Arabia Vision 2030.
When compared to other Asian countries, India is less dependent on GCC remittances. The country’s trade deficit has come down not only with GCC but also with other countries of the world. If oil prices continue to narrow for more time, it may lead to an economic slowdown in GCC due to financial pressures. This can further affect the remittances from GCC to India, Crisil predicted.