Economic Relations between India and the Gulf States Reality, Challenges and Opportunities

India and the Gulf states’ recognition of the importance of increased cooperation, particularly economic cooperation, allows both parties to achieve their interests and thus have a positive impact on their economies.
20 November 2017

As one of the most significant dimensions of international relations in the 21st century, economics and economic considerations have a direct impact on national policies and strategic plans. Published by Al Jazeera Centre for Studies, Economic Relations between India and the Gulf States: Reality, Challenges and Opportunities, shows how India, starting in the late 20th and early 21st centuries, sought to market itself as an effective, influential power on the regional and international stage. To do this, it aimed to improve its relations with countries that had come to wield international influence in order to achieve its own interests as a major regional power. The Arab region, and the Middle East in general, was one area with which India worked to improve ties, particularly economic ties, in light of its geographic position and its role in the non-aligned movement throughout the Cold War.

The author, Dr. Muhannad Abdel Wahid al-Nadawi, believes that India’s relations with the Gulf states is of crucial and growing importance at the present time given the expanding role that both parties play on the regional and international fronts. As an emerging global power, India is anticipated to exercise much influence on the international scene in the foreseeable future. Similarly, the Arab Gulf region is of key geostrategic and economic significance to international powers due to the important waterways in the region, its energy stores and its economic weight in the wider Arab region and Middle East.

India and the Gulf states have improved their ties in an effort to institutionalise cooperation across the Indian Ocean. Their relations have developed swiftly over the past decade to cover numerous arenas, with economic issues contributing significantly to closer ties, particularly in the field of trade, investment and energy sources, both oil and gas.

The book’s major premise is that India and the Gulf states’ recognition of the importance of increased cooperation, particularly economic cooperation, allows both parties to achieve their interests and thus have a positive impact on their economies. With this premise in mind, the book seeks to answer the following questions:

  • What are the significant points in the development of Indian-Gulf relations?
  • What are the major contributions of the expatriate Indian community in developing Indian-Gulf economic ties?
  • What role did Indian-Gulf cooperation forums play in the development of relations?
  • What are the major developments in Indian-Gulf economic relations?
  • What is the future of Indian-Gulf economic ties in light of the capacities and opportunities available to each side?

In support of his thesis, the author employs various approaches to answer the questions he poses. Any academic treatment of an issue or phenomenon, especially in humanities, requires a defined methodological approach to reach rational conclusions. Since humanities research, including political studies, offers a wide range of methodological and analytical tools, the author chose not to restrict himself to one specific approach, but to adopt a more inclusive, comprehensive approach able to incorporate all aspects of the research material. The study thus seeks to establish its thesis using several academic approaches. It employs a descriptive, historical methodology in dealing with the roots of Indian-Gulf relations, particularly since the mid-20th century, while employing a comparative, quantitative methodology to analyse economic facts and data and their evolution in recent years. It then analyses the relationship systematically to speculate about future interaction and cooperation between the two parties, particularly in the economic field.

The book is divided into five chapters. The first looks at the history of Indian-Gulf relations, focusing on the factors driving closer relations in the last decade of the 20th and early 21st centuries. Tracing the evolution of Gulf-Indian relations reveals its ancient roots and also the major significance of these ties. India was a centre for sorting and marketing pearls from Gulf countries, and as evidenced by the Silk Road, an extensive network of trade relations existed. The impact of these ties on the Gulf economy was clear, with the Indian rupee being a unit of currency in several Gulf states. Ties were strengthened and diversified starting in the early 21st century, particularly in economic affairs, after India liberalised its economy and encouraged foreign trade, including with Gulf countries. At the same time, the geostrategic and economic importance of Gulf states gave them an economic edge in the Arab region and the larger Middle East.

The second chapter discusses Indian expatriate communities, particularly in the Gulf, examining their role in the development of ties between the two parties and their contributions to stronger economic ties. Although Indian labour began to flow to the Gulf states in 1935, the increase in oil prices in the 1970s boosted flows substantially, particularly semi- and non-skilled labour. In the 1980s, skilled labourers began heading to Gulf states that saw improved economic conditions, first and foremost the the United Arab Emirates and Saudi Arabia. In turn, this drew the Indian government’s attention to Gulf states, prompting it to invigorate its relations with these countries. India views Indian migrants as a source of economic strength, and since 2011 has been the single largest recipient of remittances, valued at more than $64 billion.

In the third chapter, the author highlights the role of Indian cooperation forums in supporting Gulf-Indian economic cooperation. The two parties generally adopted a strategy of “summits” and the establishment of cooperation forums, both regional and bilateral. This allowed both sides to become acquainted with areas of cooperation that could advance economic relations between them, giving greater priority to trade, investment, energy and joint projects as well as other secondary fields.

The fourth chapter looks at the status of Indian-Gulf economic ties after Gulf countries came to occupy an important place in global trade since the early 21st century, when both sides sought to develop their ties in trade, investment, joint projects and cooperation in energy and aviation. The researcher found that cooperation in energy, particularly oil, is still the most important factor in economic relations given India’s rapid economic growth and its concomitant high demand for oil.

Chapter five focuses on the future of Indian-Gulf economic relations, highlighting the opportunities and challenges that could strengthen or alternately limit economic cooperation in the near future. The study concludes that Indian-Gulf economic ties will persist despite obstacles in their path and that these ties have had a positive influence on other fields as well—political, diplomatic and cultural—due to both sides’ recognition of the importance of mutual cooperation.


Publication details

Title: Economic Relations between India and the Gulf States: Reality, Challenges and Opportunities

Author: Muhannad Abdel Wahid al-Nadawi

Publisher: Al Jazeera Centre for Studies and al-Dar al-Arabi lil-Ulum

Date: 2017