The growing political and security engagements notwithstanding, the Indo-Saudi economic cooperation has acquired a fresh dynamism in the past few years. It is not only Saudi Arabia which has shown confidence in the Indian market. Indian businesses and industries too have been boosting their presence in the expanding Saudi market.

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A key component of PM Modi’s foreign policy is to enhance foreign investments in India through forging commercial ties with potential partners. A major success in this regard is the evolution of ties with Saudi Arabia. This was achieved through active diplomacy and regular political engagements and as a result Saudi Arabia has emerged as India’s most important partner in the Gulf. 

The growing political and security engagements notwithstanding, the Indo-Saudi economic cooperation has acquired a fresh dynamism in the past few years. Both India and Saudi Arabia are G-20 economies and have a youthful demography needing fast economic growth to address issues such as skill development and employment generation. This has led to the two prioritising commercial engagements through trade, business and investments.

The most significant aspect of this burgeoning commercial relation is energy security. Saudi Arabia is the world’s largest producer and exporter of crude petroleum and India is among the top energy consumers. This has led to a robust partnership whereby Saudi crude contributes nearly 17 percent of India’s total oil imports.

This energy partnership has now acquired a strategic component. Saudi Aramco, the world’s largest oil company has decided to focus on the Indian market to enhance its global presence. Along with Abu Dhabi’s ADNOC and a consortium of three Indian oil companies – IOCL BPCL and HPCL, it has committed to develop the world’s largest refinery-cum-petrochemical complex, the Ratnagiri Refinery & Petrochemicals Ltd (RRPCL) in Maharashtra. Estimated to cost US$44 billion, the RRPCL will have an output capacity of 60 million tonnes per annum and contribute in securing India’s future energy needs.

Saudi Aramco’s interest in the Indian market goes beyond RRPCL. Recently, Mukesh Ambani led Reliance Industries Ltd (RIL) announced that it has entered into a US$75 billion deal with Aramco to sell 20 percent of stakes in RIL’s oil-to-chemicals (OTC) business. As per the deal Aramco will supply 500,000 barrels per day (bpd) of crude oil to Reliance’s Jamnagar refinery in lieu of the stakes and this will help RIL expand the capacity of the refinery from 1.4 million bpd to 2 million bpd.

Business and investment plans go beyond the energy sector. During his visit to India in February 2019 the Crown Prince Mohammed bin Salman announced that the kingdom plans to invest US$100 billion in India across a range of sectors including energy, refining, petrochemical, infrastructure, agriculture and manufacturing over the next few years. In infrastructure sector, the Saudi investments will be routed through the National Infrastructure Investment Fund which is a flagship project of the government of India to enhance public infrastructure to give a boost for industrial development in all parts of India.

It is not only Saudi Arabia which has shown confidence in the Indian market. Indian businesses and industries too have been boosting their presence in the expanding Saudi market. The Vision 2030, a flagship programme of the Crown Prince, to revitalise and diversify the Saudi economy has created a new dynamism in the market with industries such as entertainment, sports, tourism, logistics expected to see humungous growth. A number of Indian companies such as Larsen & Tubro, Shapoorji Paloonji, TCS, Wipro and others have been engaged in various infrastructure and developmental projects in Saudi Arabia.

In February, during the visit of the Crown Prince, in addition to the five MoUs signed between the two governments, the Saudi Arabian General Investment Authority (SAGIA) signed 11 MoUs and four investment agreements to facilitate participation of Indian companies in Saudi private sector businesses. Some of the companies, such as AWJ Energy, SecurEyes, Carnival Cinemas and Red Sea Arabia, have been granted licences by SAGIA to establish operations in Saudi Arabia.

While two-way flow of investments has intensified, bilateral trade too has witnessed a significant growth. Saudi Arabia is the fourth largest trading partner of India while India too is among the top five trading partners of the kingdom. In 2018-19, the bilateral trade reached US$34 billion, a 23 percent growth from US$27 billion in 2017-18. There is significant scope for furthering the bilateral trade with capacity building and better marketing Indian products. India and Saudi Arabia have also been discussing the possibilities for joint investment in defence production and this can further diversify the economic relations.

With the commitment to partner in each other’s growth story and promises of a bright future, the Indo-Saudi economic relations have evolved into a unique and growing partnership.

* Dr. Muddassir Quamar is a Strategic Analyst on West Asia and Associate Fellow with the Institute for Defence Studies and Analyses (IDSA), New Delhi. 

Note: Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.