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Indian investment in GCC falls despite increased trade

Indian prime minister Narendra Modi (left) completed a visit to the UAE in February to sign deals on trade cooperation via Reuters
Indian prime minister Narendra Modi (left) completed a visit to the UAE in February to sign deals on trade cooperation
  • Indian FDI almost halves since 2013
  • Focus on domestic investment
  • GCC-India trade up 15%

Investment from India into Gulf countries has dropped considerably despite growth in bilateral trade due to the country adopting a more protectionist approach.

Trade between India and the group of six GCC countries – Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and the UAE – reached almost 16 percent of the country’s total in the last year. This compares with the EU’s 11.6 percent share of India’s total trade.

Despite this growth, cumulative foreign direct investment from India to the GCC dropped from almost $10 billion in the five years from 2013 to 2017 to just over $5 billion from 2018 to 2022, according to the latest report from Alpen Capital.



“Uncertain global macroeconomic conditions in recent years have led to a reduction in investments made by Indian companies in overseas markets,” said Raghu Mandagolathur, CEO of Marmore Mena Intelligence.

The value of India’s global outbound cross-border mergers and acquisition deals fell by nearly half last year compared with 2022, as per a report from consultants Deloitte.

“The relative strength of the domestic economy, the Indian government’s incentivisation program to invest in local manufacturing – called Make in India – are some other drivers that have resulted in the reduction of FDI outflows from India,” said Mandagolathur.

Make in India is an initiative of Indian prime minister Narendra Modi, launched in 2017 to revive the country’s domestic manufacturing sector, boost investment and position India as a global hub for manufacturing.

India’s investment and credit ratings agency ICRA estimates GDP growth will hit close to 8 percent this year, the highest level among G20 countries.

“More Indian companies and investors are opting to keep investment domestic, rather than abroad,” said James Swanston, Mena economist with Capital Economics.

The GCC hosts almost 9.5 million Indian expatriates, who contribute close to $125 billion in remittances back to their homeland annually.

The UAE is India's top trading partner within the Gulf region. It is also India's third-largest trading partner overall, with Saudi Arabia following in fourth place. 

Bilateral trade between the UAE and India has increased by 15 percent since a comprehensive economic partnership agreement was implemented in May 2022.

The value of trade rose from $73 billion to $84 billion between 2021 and 2023 and is expected to surpass the $100 billion mark by the end of the decade.

Senior officials from the UAE and India were due to meet this month to start work on the first phase of the India-Middle East-Europe Economic Corridor (Imeec), according to a media report.

The shipping and rail transportation corridor linking countries across the Middle East, South Asia and Europe was announced in September 2023 at the G20 summit in New Delhi.

In February Modi completed a two-day visit to the UAE – his seventh since becoming premier – in which deals were signed to expand cooperation on trade, investment, energy and technology.

Results of the Indian general election will be announced next month.

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