Remarks on Prophet Muhammad: No major trade impact seen as business trumps over politics

Remarks on Prophet Muhammad: No major trade impact seen as business trumps over politics

9 Jun    Finance News

As a now-suspended BJP spokesperson’s comments on Prophet Muhammad drew condemnations from Islamic nations, especially those in western Asia, a look at India’s relations with these countries suggests that if the issue is allowed to escalate, it could have serious economic implications for both.

Trade or business relations, however, haven’t yet been impacted. “No report of any cancellation of export or import order has been received so far,” a senior government official told FE.

Senior trade executives discounted fears of any major disruption in India’s trade with West Asian countries due to this incident. Business is likely to trump politics in this case, especially because these are remarks of a few individuals who don’t represent the Indian government and against whom action has already been taken by the ruling BJP, one of them said.

Moreover, there are factors as well. “While India depends heavily on West Asian nations for oil supplies, no economy that relies so much on oil revenue can afford to sever ties just like that,” he added.

About 38% of India’s fuel requirements in FY22 were met by members of the Gulf Co-operation Council (GCC) members — such as Saudi Arabia, the UAE, Qatar, Kuwait, Oman and Bahrain — and Iran. The oil dependence, thus, reinforces the idea that these countries do matter to India.

Similarly, they make up about 54% of India’s inward remittances. India’s goods imports from these countries were to the tune of $111 billion in FY22 — 18% of its total purchases from overseas. Similarly, India’s exports to these countries stood at $45 billion last fiscal, or 11% of its total outbound shipment.

See also  Asia Markets: Asian markets rise after Powell expresses confidence in recovery

So while India’s reliance on these countries is well documented, these nations, too, depend on New Delhi for various supplies, especially of essential items, trade analysts said. For instance, some of these economies, such as the UAE and Oman, have sought wheat supplies from India after New Delhi banned its exports. Similarly, India is a major supplier of grains, meat, chemicals, capital goods and automobiles and spices to the West Asian countries, among a plethora of other products. Given that about 9 million Indians reside in the GCC nations, they are also a large consumer base for Indian products there.

Trade analysts say any friction in the buyer-seller engagement hurts both the sides. It’s not easy for any party to diversify their supply base all of a sudden. In FY22, India had a huge trade deficit of $66 billion with the GCC countries and Iran put together. This means New Delhi is no small customer to snap the ties with, said the analysts.

These are organic relationships, which can’t just be rejected whimsically, a Delhi-based trade expert said. Calls for boycotting Indian products in a few places in countries like Kuwait are unlikely to dent India’s exports to the region, he said. “Normalcy should return in the short run.”

Similarly, replacing skilled Indian workers by the GCC nations with those from other countries is much easier said than done. So, remittances are unlikely to be impacted much.

“No government can publicly take the blame for the action of certain individuals, because if it does so, it will prove that these individuals were acting at its behest, which isn’t true in this case. Moreover, in a democracy, it’s not possible at all,” said another trade expert, who didn’t want to be named. “So, a public apology, as demanded by a few of these countries, can’t be entertained.”

Leave a Reply

Your email address will not be published. Required fields are marked *