DUBAI, May 3: Investments from the GCC countries to India remain negligible relative to trade flows and represent just a small percentage of total FDI from the region to the world, says a report.
“Foreign Direct Investment from Gulf Co-operation Council to India has picked up pace in the recent years but remains negligible relative to trade flows in terms of magnitude, said Sameena Ahmad, Managing Director at Alpen Capital in the research paper.
“It also represents just a small percentage of total FDI from GCC countries to the world. With the economic forecasts pointing to strong GDP growth in both the economies, we emphasise that there is an ample scope of strengthening economic ties between GCC and India,” Ahmad said.
GCC countries include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates.
The report analyses the development of bilateral trade (both merchandise and services) and investment capital flows over the last 10 years, and covers the future growth potential of trade and capital flows between the two.
It says that bilateral merchandise trade between India and the GCC has grown substantially over the last decade (CAGR of 35.9 per cent over 2001-10 to USD 88.8 billion). Trade intensity between the regions has also risen led by numerous bilateral trade agreements signed in the recent past.
According to the report, capital flows in the form of FDI from GCC to India have gathered pace in the recent years, cumulating to USD 2.6 billion over April 2000 to January 2012.
Accordingly, its contribution to total FDI inflows into India (on a cumulative basis) has increased from 0.6 per cent in 2005 to 1.7 per cent as of January 2012.
However, it remains negligible relative to trade flows in terms of magnitude and largely represents rising investments by expatriates.
Cumulative FDI investments (April 2000 to January 2012) represented less than 3 per cent of the annual bilateral merchandise trade flows reported in 2010.
“While the GCC needs to promote more industrialisation and SME participation in order to realise its diversification dream and create jobs for its rapidly expanding population, India needs to further improve its basic infrastructure and reduce complexity in the regulatory practices,” said Sanjay Vig, Managing Director at Alpen Capital.
“We recommend GCC investors to further diversify their investment portfolio by taking positions in the promising Indian investment avenues as the return on investment remain relatively robust,” he added.
Vig said that due to its locational advantage and abundance of natural resources, GCC has the potential to serve as a manufacturing base as well as an export hub for Indian companies. (PTI)
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