Why Arab nations’ censure over anti-Prophet remarks matter to India

India’s ruling party has been thrown into fast-track harm reduction mode when the country’s diplomatic envoys were confronted this weekend with music from key West Asian trading partners over alleged anti-prophet statements by a spokesman during a TV debate. The Bharatiya Janata Party on Sunday suspended a spokesman and expelled another from the country as social media tensions called for a boycott of Indian products in the Gulf region.

A close look at the data on trade and inbound remittances shows why the diplomatic censure may have prompted sudden action, even though Nupur Sharma, one of the spokespersons, was booked out for her comments as early as a week ago.

In 2021-22, India recorded total trade of approximately $189 billion with the seven Gulf countries, accounting for 18.3% of the total combined value of imports and exports. Aside from trade, India’s significant foreign population in Arab countries gives vital significance to the region, and a backlash could have turned into a larger or formal boycott if not addressed. In 2017, five Gulf countries alone accounted for 54% of total remittances to India.

trading partners

The United Arab Emirates (UAE), Saudi Arabia, Iraq, Qatar, Kuwait, Oman, and Bahrain are commonly referred to as Gulf States because they are located on the border of the Persian Gulf. Six of them, with the exception of Iraq, are part of the Gulf Cooperation Council (GCC).

India recorded $154.7 billion in trade with GCC countries in 2021-22, 77% above the muted 2020-21 base and 28% higher than 2019-20. Notably, the UAE, Saudi Arabia and Iraq were India’s third, fourth and fifth largest trading partners in 2021-2022.

India’s exports to GCC countries totaled $43.9 billion, with a trade deficit of $66.8 billion. With 43.2% of total trade with these countries, the trade deficit between India and the GCC is higher than India’s total trade deficit, which is 18.4% of total trade.

In February 2022, India and the UAE signed a Free Trade Agreement (FTA), which will allow duty-free access to 97% of Indian products and 90% of UAE products over the next 10 years. It entered into force on 1 May and is the first free trade agreement concluded by the government of Narendra Modi. India is also considering a broader trade pact with the GCC.

Expat power

Meanwhile, Arab countries are home to a large number of Indian immigrants (non-resident Indians and persons of Indian descent) and the countries are also a critical source of domestic remittances to India. Consider this: 28% of overseas Indians remain in the Gulf States and Iran. The UAE tops the list with more than 3.4 million Indians, followed by Saudi Arabia (2.6 million) and Kuwait (1 million), according to data from the Ministry of Foreign Affairs.

That is why these Indians also send money home, the so-called incoming remittances. Gulf states are also among the top 10 sources of inbound remittances. Indian immigrants in the UAE sent back as much as $13.8 billion in 2017. Saudi Arabia ranks third with $11.2 billion, followed by Kuwait and Qatar at $4.6 billion and $4.1 billion respectively, according to data collected by Pew Research Center.

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