India-UAE trade gap falls to 3-year low as oil imports slump
Informist, Thursday, May 2, 2024
By Krity Ambey
NEW DELHI - India's trade deficit with the United Arab Emirates fell to a three-year low in the year ended March due to a sharp decline in crude oil imports from the Gulf nation, according to provisional data sourced from the commerce and industry ministry. India’s trade deficit with the UAE narrowed to $12.39 bln in 2023-24 (Apr-Mar) from $21.62 bln a year ago.
While exports to the country grew 12.7% in 2023-24, imports--for the first time since the pandemic year of 2020-21
declined 9.8%. From being the top-imported commodity from the UAE for 12 consecutive years till 2022-23, crude oil fell to second on the list in 2023-24. At $9.36 bln, pearls and precious stones were the top-imported commodities from the UAE last fiscal.
India imported crude oil worth $139.86 bln last year, out of which oil worth $8.96 bln came from the UAE, down 87.9%, as per data sourced from the commerce ministry. The import of crude oil from the UAE has declined in value as well as volume terms.
The volume of crude oil imported from the UAE declined 42.7% during Apr-Feb, as per the latest data available with the commerce department. The department will release disaggregated data on volume of oil imported in March and 2023-24 by June.
Crude oil imports from the UAE fell because Russian oil was available at a cheaper price, experts said. Russia has been the top source of crude oil import for India since 2022-23.
During Apr-Feb, the volume of crude oil imported from Russia rose 76.2%. Consequently, Russia's share in India's total oil imports increased to 36.1% in Apr-Feb from 20.3% a year ago. In the same period, the share of UAE declined to 5.7% from 9.8% a year ago.
India has been importing large volume of crude oil from Russia at a discounted price after Western nations imposed
economic sanctions on Moscow for invading Ukraine in 2022. But the decline in UAE's share in India's total oil imports was more pronounced in the last fiscal than in 2022-23, when oil imports from Russia grew over 12 folds.
In 2022-23, UAE's share in India's total oil imports declined to 9.3% from 9.7% a year ago, while that of Russia increased to 21.5% from 2.1% in 2021-22. The growth of oil imports from Russia in 2022-23 was on a low base, so it did not have too much of an impact on the share of oil imports from other sources, Federation of Indian Export Organisations Director General and Chief Executive Officer Ajay Sahai told Informist. "But in 2023-24, even with a high base, the import of crude oil from Russia has nearly doubled."
India also has a Comprehensive Economic Partnership Agreement with the UAE that came into effect in May 2022. Following this, India's total trade with the UAE grew 16.4% in 2022-23, that included exports worth $31.61 bln, up 12.7%. In the same year, imports were up 18.7% at $54.23 bln.
The Reserve Bank of India had signed an agreement with the UAE in July 2023 to settle trade between the two countries in local currencies. India has a similar agreement with Russia as well.
"India maintains strong economic and strategic ties with the UAE and other GCC (Gulf Cooperation Council) countries, and its decision to buy oil at the best rates doesn't affect these relationships," Global Trade Research Initiative Founder and former trade ministry official Ajay Srivastava told Informist.
The share of GCC in India's total oil imports declined to 24.4% in Apr-Feb from 34.2% a year ago. Among the top five
import source nations for crude oil, the share of the other four in India's total oil imports declined in Apr-Feb. Besides the UAE, these nations are Iraq, Saudi Arabia, and the US.
The decline in oil imports from the UAE is also due to India's effort towards source diversification, Indian Council for Research on International Economic Relations Professor Arpita Mukherjee said. "Russia has emerged as a major source after the Ukraine war, and it is kind of eating into the business of UAE, and Saudi (Arabia)." End
