Unprecedented rise in India-Saudi strategic relations

India's trade outreach is fast becoming the centrepiece of its deepening relationship with the Middle East. A relationship that is based on trust, mutual respect, and growth for the populations of two regions. India's relations with Saudi Arabia have also witnessed unprecedented growth in recent years, marked by a remarkable rise in trade and other investments. Saudi Arabia's abundance of natural resources, economic and cultural influence, its critical location in the Middle East, and connectivity are complemented by India's unparalleled capability to provide cost-effective innovative technologies. Besides, ample human resources, capital, and marketing opportunities contribute to their symbiotic bilateral relationship. India's rapidly growing economy, digital public infrastructure, and institutional stability have rapidly transformed the country into the preferred trade and investment destination.

India-Saudi Economic Relations: A Game Changer

Over the years, Saudi Arabia has emerged as India's trusted strategic partner for trade and investments, with enormous strategic and economic complementarities. In view of rapidly transforming global economic realities, Saudi Arabia is actively pursuing its economic diversification strategy beyond hydrocarbons to newer domains by exploring innovative investment tools and new collaborations from across the world. India emerged as the preferred partner to offer cost-effective, innovation-based technology with economic and political stability amid a turbulent world. India is the fourth country after the UK, France, and China to partner with Saudi Arabia to establish the India-Saudi Arabia Strategic Partnership Council (SPC) in 2019. This aims to take forward mutual collaborations on the economy, investments, as well as social, political, and security matters.

India offers enormous complementarities in trade and investment to Saudi Arabia, as it contributes to India's energy security, and India complements Saudi countries in their food security. India is highly dependent on imports for its energy needs, importing 87 per cent of oil consumed, and the Middle East accounts for over 60 per cent of India's crude oil imports. India sources crude petroleum, petroleum products, fertilisers, raw plastic, organic and inorganic chemicals from Saudi Arabia. Conversely, Saudi Arabia is largely import-dependent for its food needs and manufactured goods, including textiles. Therefore, the bilateral trade and investment relationship between the two countries is highly symbiotic.

Established in October 2019, the Future Investment Initiative (FII) has rapidly grown as an effective global platform for businesses and countries, identifying areas for innovation for sustainable and inclusive growth. The recently held seventh edition of the FII in the Saudi capital, Riyadh, during 24-25 October 2023, focused on the theme 'The New Compass'. This deliberated upon the re-emerging world economic order in view of present-day realities and provided an effective platform to the international business community and its leaders for dialogue, trade, and investment promotion. Among the civil leaders from across the world, Indian minister Piyush Goyal, who holds commerce, industry, textile, food, and consumer affairs portfolios, was instrumental in forging trade and investment linkages between the two countries and their industry captains.

Saudi Arabia has a keen interest in Indian collaborations in the area of lab-grown diamonds based on technological innovations. A leading Saudi jewellery firm, Dana Al-Alami, partnered with Indian firm Green Lab Diamonds earlier this week. India and Saudi Arabia also committed to collaborate earlier this month in electrical interconnections, exchanging electricity during peak times and emergencies, co-development and co-production of green hydrogen and renewable energy, and jointly establishing sustainable and resilient supply chains.

In a rapidly emerging multipolar world, exacerbated by the Israel-Palestine armed conflict in the Gulf, after being severely affected by the Russia-Ukraine war, US-China tensions, and post-pandemic economic woes impending fears of a worldwide recession, an effective bilateral institutional mechanism for trade and investment between India and Saudi Arabia would indeed be mutually synergistic and provide a much-needed economic boost to both countries alike.

Moreover, India's credibility as a preferred trade and investment destination received a major boost by a series of international events hosted by India across the country during its G20 presidency. Saudi Arabia is critical to establishing the ambitious new trade route, the India Middle East European Corridor (IMEC), from India through the Middle East to Europe, as part of the G20 summit declaration. In recent years, structural reforms by Saudi Arabia in policies encouraging foreign investments, corporate governance, and capital markets have created tremendous opportunities for trade and investments for Indian firms. Moreover, India provides immense opportunities, that too highly cost-effective, in the area of contemporary interests for Saudi businesses in the fields of artificial intelligence, robotics, education, health, and sustainability.

India's trade with the Arab world has already surpassed an all-time high of $240 billion a year. India is the second-largest trading partner of Saudi Arabia. India's foreign trade with Saudi Arabia reached an all-time high of $52.75 billion in FY23. Motor vehicles, refined and value-added petroleum products, rice, organic chemicals, copper products, telecom equipment, buffalo meat, and aluminium products are India's major exports to Saudi Arabia. In contrast, it imports crude petroleum, fertilisers, plastic raw materials, organic and inorganic chemicals, etc. India is a highly fascinating trade and investment destination for Saudi Arabia, being its second-largest export destination with $46.2 billion in 2022, with a trade surplus of $36 billion.

Despite the Gulf region being home to the largest Indian community residing overseas, with longstanding historic relations, its enormous economic potential remains unexplored. Countries of the Gulf Cooperation Council (GCC), consisting of six countries: the United Arab Emirates (UAE), Saudi Arabia, Oman, Qatar, Kuwait, and Bahrain, with over 8.8 million non-resident Indians, constitute over 66 per cent of total NRIs. The GCC remains the largest region with a 30 per cent share to receive the highest foreign inward remittances, as per the Reserve Bank of India (RBI) report. The large Indian diaspora in the Gulf, at every level from grassroots workers to top management, keen to engage with Indian firms for mutually rewarding economic activities, is indeed an asset that has hardly been tapped to realise its full economic potential.

The writer is the director, IIPM, Bengaluru, and professor, Indian Institute of Foreign Trade, New Delhi. Views are personal.