Saudi Crown Prince Mohammad bin Salman’s India visit on 14 November will be his second visit since 2019.
New Delhi: India and Saudi Arabia are seeking to expand their cooperation beyond the parochial hydrocarbon economy into diverse areas such as renewable energy, investments, technology, agriculture, etc. The relationship is undergoing a paradigm shift, and both countries need to cooperate strategically to realise their potential in the evolving global order.
The upcoming India visit by Saudi Crown Prince Mohammad bin Salman (de facto ruler of the Kingdom) on 14 November, en route to the G20 summit in Indonesia, is significant. It is his second visit since 2019, which reflects on the growing bonhomie among the countries and congruence of interests across regional and global issues. The relations have been historically amicable but were largely limited to crude oil and gas imports by India, and to Hajj pilgrimage by Indian Muslims. Saudi Arabia is home to approximately a 2.5 million strong Indian community, making it the largest expatriate community in the Kingdom that contributes towards human resource needs of the oil rich country.
The historic visit of King Abdullah to India in January 2006 was a watershed moment that resulted in the signing of the “Delhi Declaration”, imparting a fresh momentum to the bilateral relationship. The reciprocal visit by Dr Manmohan Singh to Saudi Arabia in 2010, and the Riyadh Declaration signed during the visit, elevated the bilateral relationship to a “strategic partnership”. More recently, the visit by Crown Prince Mohammad bin Salman to India in February 2019 further took forward this momentum. During his visit, the Kingdom announced an investment of US$100 billion in India in areas such as energy, refining, petrochemicals, infrastructure, agriculture and manufacturing. Saudi Arabia is also investing in the IT industry, and India can help the Kingdom expand and strengthen its “IT footprint”. This is an opportune time that India moves beyond providing low skilled workers to a more high skilled and qualified talent pool to Saudi Arabia to move up the value chain.
The Saudi Aramco and UAE’s ADNOC are jointly participating in the development of US $44 billion “West Coast Refinery & Petrochemicals Project Limited” in Maharashtra. Saudi Arabia also joined the International Solar Alliance (ISA), a group of “solar resource-rich countries” initiated by India to promote solar energy. In addition, Saudi companies like Alfanar and Aljomaih have invested in India’s Wind and Solar Energy projects. Furthermore, both countries are collaboratively exploring Hydrogen Energy as a future source of energy, thereby ushering in the new era of energy diplomacy. As of March 2021, Saudi Investments in India amounted to US$3.13 billion. Major Saudi investment groups include SABIC, ZAMIL, E-holidays, and Al Batterjee Group. Additionally, Soft Bank’s Vision Fund has invested in Indian start-ups such as Delhivery, FirstCry, Grofers, Ola, OYO, Paytm and PolicyBazaar. This reflects a growing potential for greater funding opportunities for our future unicorns. In June 2020, Saudi Arabia’s Public Investment Fund (PIF) announced a US$1.49 billion (2.32% stake) investment in Reliance Industries’ Jio platforms, and in November 2020, PIF announced another investment of US$1.3 billion (2.04% stake) in Reliance Retail Ventures Limited.
India needs cheap oil as it imports 85% of its oil requirement and Saudi Arabia plays an important role in India’s energy security. On the trade front, Saudi Arabia is India’s fourth largest trade partner (after the US, China and the UAE) and a major source of energy as India imports around 18% of its crude oil requirement and 22% of its LPG requirement from the Kingdom. Saudi’s major imports from India include engineering goods, rice, petroleum products, automotive and machinery, chemicals, textiles, food products. In FY 2021-22, bilateral trade was valued at US $42.8 billion. During this period, India’s imports from Saudi Arabia reached US $34.01 billion and its exports were worth US $8.76 billion registering an increase of 49.5% over last year. The total trade with Saudi Arabia accounted for 4.14% of India’s total trade in FY 2021-22.
Both countries are exploring the possibility of starting a rupee-riyal trade mechanism as part of efforts to boost economic ties between the nations. Besides that they are also discussing avenues of trade diversification and expansion, removal of trade barriers, and fast-tracking authorisation and marketing of Indian pharma products in Saudi Arabia. Although the trade is heavily tilted in favour of the Saudi Arabia as it is one of the biggest suppliers of crude oil to India, which is the world’s third largest oil importer and consumer. In April-July, the first four months of this fiscal year to 31 March 2023, India’s imports from Saudi Arabia rose by 93% to $15.5 billion, while exports were up by about 22% to $3.5 billion, according to Indian commerce ministry data. The growing avenues of cooperation could take cues from India-UAE relations which have bolstered over the past few years and with the formalization of a free trade agreement (FTA) between the two earlier this year. Using this as a template for a possible India-Saudi FTA could also pave the way for a wider India-GCC (Gulf Cooperation Council) FTA in the future.
The visit of Crown Prince Salman could give time to introspect on the investments in bilateral projects, ways to bolster trade beyond hydrocarbons, discussion on the Ukraine conflict, oil production by OPEC+ members, turmoil in Iran, etc. Also, a part of the discussion could be reviewing the proposed 1,600-kilometre cable under the sea from Mundra port in Gujarat to the coastal city of Fujairah in Saudi Arabia, connecting the countries with a renewable energy grid with the project costing $15-18 billion and with the possibility of the UAE joining in the project.
From a geopolitical perspective, Saudi Arabia has considerable clout over the Islamic world. A burgeoning relationship with Saudi Arabia could wield its influence over Pakistan with which it has strong “brotherly” relations to keep a check on cross-border terrorism in the region. In the wake of the assassination attempt on Imran Khan, Pakistan seems to be plunging into a deeper political turmoil. This is where again the Gulf powerhouse could be leveraged to ensure stability and peace in our immediate neighbourhood.
The visit by the future King of Saudi Arabia could explore new thrust areas of cooperation. In order to realise the full potential of their commercial relations in multitude and magnitude, India and Saudi Arabia are emphasizing on the diversification of bilateral trade ties beyond the conventional field of oil. There is also scope of future cooperation in areas such as counter terrorism, defence, technology, education, health, tourism, entertainment. India, on its part, could support Saudi Arabia as the latter seeks a membership of the BRICS bloc.
As PM Modi mentioned in 2019, the “time has come to convert our energy relationship into a strategic partnership”. “The biggest refinery in the world and Saudi participation in India’s strategic petroleum reserve elevate our relationship from a mere buyer-and-seller relationship.” It can be said that the time has really come to convert the “energy relationship” into a deepening “strategic partnership” between the two.
Dr Mohit Anand is Professor of International Business and Strategy at EMLYON Business School, France. Rajesh Mehta is a leading consultant and columnist working on market entry, innovation and public policy.