Originally published in SPS’ India Review & Analysis here
Written by Sourajit Aiyer
The Middle East had ancient trade ties with India due to its geographic proximity, resulting in cultural, linguistic and religious assimilation. In modern times, India’s ties with the Gulf states within West Asia were buoyant owing to India’s energy imports and manpower exports, despite the two technically being in opposite camps during the Cold War. More recently, the Indian administration’s ‘Link West’ policy has further catalysed India-Gulf ties to expand beyond energy and manpower to non-oil trade, investment in infrastructure, people-to-people-ties and defence and security. These sectors have broadened the canvas further. India de-hyphenated its relationships in the region to promote productive ties with all nations. Advantages like geographic proximity, cultural commonalities and increasing demand in key sectors (with inadequate domestic supply) can result in India’s ties with the Gulf generating a higher trajectory of returns relative to other geographies, perhaps making the Gulf states the most critical in India’s geopolitical outreach.
Discussions of a reduction in US military presence in the Gulf opens the room for security cooperation with India. In 2019, India’s military ranked fourth in the world, ahead of the 15th ranked Pakistan, the Gulf states’ traditional partner in South Asia. India has demonstrated prowess in defence training, as apparent from its engagement with developing countries, and it is building capabilities in defence technology and production. Its geographic proximity makes it a relatively cost-effective partner. For India, the growing multipolarity in West Asia and its neutral stance with the key players offers it an opportunity to deepen defence ties without threatening anyone’s hegemony. It also has a motivation to secure the trade routes in the Indian Ocean’s western flanks, a region where it is positioning itself as a security-provider. Momentum is picking up, as India has signed agreements with Saudi Arabia, the UAE, Oman and Qatar. Apart from enhanced military exercises, training support and defence sales, it secured access to the Duqm port in Oman for military logistics. Its support to Saudi Arabia has expanded to mountain-warfare training and exploring defence co-production. These augur well to build the region’s capacity while enhancing India’s capabilities with the region. Counter-terrorism apart, cooperation has extended to extradition. The UAE extradited individuals wanted for the AgustaWestland case while Saudi Arabia has extradited individuals wanted on terrorism charges.
The coffers of the Gulf-based sovereign wealth funds offer a substantial draw for India, as they could help fund its domestic development agenda. The fact that the Gulf states now prefer government deals rather than corporate deals bodes well for increased pledging by these funds. The UAE proposed to commit to a $75 billion Infrastructure Investment Fund, apart from setting up a $3 billion platform with India’s National Investment and Infrastructure Fund. Saudi Arabia’s Aramco and Sabic are investing in India. Qatar has promised to invest in India’s infrastructure. Kuwait plans to double its investments in India from $5 billion. The Oman India Joint Investment Fund has invested in infrastructure. Investment ties are taking the shape of a strategic relationship, with India entering in third-country projects with the UAE. It’s partnerships with Saudi Arabia and Kuwait would also allow exploring third countries. The relationship works both ways, as the diversification strategy of the Gulf states opened scope for Indian engineering firms. Moreover, in the digital economy, India’s experiences with e-governance could prove invaluable for the region.
The West Asia/Middle East region is home to over eight million Indians and remittances from the Gulf states were half of the $79 billion in total remittances that India received in 2018. With three million Indians each, the UAE and Saudi Arabia house the lion’s share. But there is ample headroom for this to grow in the other countries, especially as the Gulf states move further in their economic diversification strategies and demand Indian talent. People-to-people is seeing renewed focus, with India accorded Guest of Honour status at the Saudi National Heritage and Culture Festival in 2018. This held considerable diplomatic symbolism. India has also offered medical assistance in advanced areas like prosthetics, which further opens the opportunity for Indian medical exports. The reverse flow of students and patients from the Gulf states to India offers another compelling opportunity to deepen people-to-people ties and deepen the stakes.
Initial results are showing for India, with strategic partnerships signed with key nations like Saudi Arabia and the UAE. Political engagement has shot up, as seen from increased bilateral visits. For the energy exporters, India is a lucrative market of a size that is unparalleled. But while energy remains preeminent, the scope has widened across trade, investments, people and defence/security. While it is tough to quantify the true potential across all the areas, the combination of other advantages like geographic proximity, culture commonalities and increasing demand in critical sectors (with inadequate domestic supply in both areas) can catalyse this relationship much more than India’s ties with any other geography.