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#4193, 26 November 2013

Special Commentary

India and the Gulf: Looking Beyond Energy, Islam and the Diaspora
Ranjit Gupta
Distinguished Fellow, IPCS

During the past decade, India's relationship with the GCC countries has expanded more rapidly and more satisfyingly both in absolute terms and when compared with India’s relations with any other region in the world.

Close interaction between the peoples of India and of the Gulf region began with the dawn of history millennia ago and has continued on an uninterrupted basis since then. Few countries can match this historical connection. Factors such as bilateral trade, gas and oil interdependency, remittances and the huge Indian passport holding diaspora living and working in these countries, makes GCC countries India’s leading socio-economic partner in the world. The political and diplomatic relationship is becoming stronger by the day. Overall, it is a relationship of increasing mutual symbiotic advantage and synergy and increasingly significant strategically for both sides.

The Energy Factor
In today’s world geo-economics dictates geopolitics. For India to become a global power it must grow at 8-10 per cent annually for the next two decades at least. The assured availability of adequate energy resources will be a key factor. India is seriously energy deficient. Even allowing for increasing domestic oil and gas availability, increasing imports from other countries and regions, and the rising proportion of usage of alternative non-conventional energy, India will still need incrementally rising amounts of oil and gas each year; in fact India’s hydrocarbon import dependency has been predicted to rise from the current 70 per cent to almost 92 per cent by 2030. India’s oil imports from GCC countries as a proportion of its total oil imports has been rising steadily growing from 1190 barrels per day in 2001-02 to 1604 barrels per day in 2011-12. Also, India’s oil imports from the GCC countries as a proportion of its total hydrocarbon imports are already the highest amongst all oil importers from the GCC countries.

China provides the greatest competition. Even though Chinese oil imports from the Gulf region are larger than India’s and are likely to continue increasing, China even now and almost certainly in the future will not be as critically dependent on the GCC countries as India is, as the proportion of its imports from them to its total imports is significantly lower than India’s. China’s oil import dependence on the Gulf region in 2010 was 47 per cent and in 2030 is projected to be 74 per cent, with Iran and Iraq likely to be playing increasingly even more major roles, whereas India’s oil import dependence on the Gulf region in 2010 was 63 per cent and in 2030 is projected to be 85 per cent with GCC countries and Iraq likely to be playing the major role. Furthermore, compared to India, China has been acquiring new external production sources and diversifying import sources of oil and gas with much greater success. Both China and the US are also well ahead of India in the development of alternative new and renewable sources of energy. In fact, China is already the world’s leading producer of wind and solar energy. 

In the light of such projections and the new energy geography that the renowned expert Daniel Ergin is projecting that the Americas are likely to become a larger oil producer and exporter than the Gulf region, the GCC countries’ need of a reliable, large and long term buyer of increasing quantities of its oil and gas would become an imperative for them. India fits the slot perfectly as a long term partner. The main source and a market constantly increasing in size and being geographically proximate to a very much greater degree than any other market/source combination for both the buyer and the seller, suggest a very realistic potential of the development of a truly symbiotic, mutually beneficial, long term mutually inter dependent oil and gas relationship.

The Trade Factor 
In 2011-12 total trade (oil and non-oil) between India and the GCC countries amounted to US$ 145.7 billion rising in 2012-13 to US$ 181 billion. India’s trade with GCC countries greatly outstrips the financial volumes of trade ties that India has with other regions of the world such as the EU, NAFTA, ASEAN etc. The total trade between India and the EU – the second ranking regional group - was US$ 109.86 billion in 2011-12 and stood at only US$ 94.43 billion during April-February 2012-13. Just to provide perspective, Indo US trade was about US$ 65 billion. The UAE remains India’s top trading partner with total trade at US$74.7 billion and also India’s top export destination. Saudi Arabia has become India’s fourth largest trading partner. During 2012-13 total trade with it jumped to over US$43 billion and India’s exports to it increased by 27 per cent. India’s exports to Oman doubled during 2012-13.  

In 2012, total India GCC trade made it the third largest trading partner of GCC countries, India having overtaken the US and staying marginally ahead of China with only the EU and Japan ahead of it. The major trade partners of the Gulf region/GCC countries have been the EU, China, Japan, South Korea and the US – these are the topmost global trading entities and therefore their high rankings are understandable. China has overtaken the US to become the world’s top trading nation. However, India is not even amongst the top 15 trading nations of the world and, therefore, this statistic of GCC trade with India underlines the enormous significance of the bilateral trade relationship for both sides.

As in the case of energy, on the trade front too, China will provide the main competition for India in the years ahead. Some extracts from a paper written by an expert on the subject, Prof Tim Niblock of the Exeter University, are rather enlightening: “The growth in China’s and India’s trade with the Gulf since 2000 has been phenomenal…. In both cases, the increases have been many-fold greater than the increases in EU, US, Japanese or South Korean trade with the Gulf...The growth in India’s Gulf trade has been even more substantial than China’s. This runs counter to the common perception, where attention is usually focused on China’s growing share of the market. .. increase in trade between China and the Gulf region between 2000-2008 was 908% and between India and the Gulf region 1600%. Over the 2005-2012 period, India’s Gulf trade rose by 771.5% while China’s rose by 379.9%. In 2010 India’s Gulf trade, for the first time since the 1990s, overtook that of China – although only by a narrow margin. China, as well as India, are now substantial exporters to the Gulf region as well as oil importers from it. The economic relationships, therefore, are not shaped solely around their need for oil but involve a more symbiotic set of exchanges.”  
Over the last several years, India has been able to capitalise on its strong capabilities in the IT-enabled services sector to increase its share of services exports globally. Though overall amounts are not available, according to industry estimates India's IT products and services exports to the GCC countries are substantial and have been increasing at a growth rate of above 30 per cent annually during the past decade.

These facts and figures provide a very clear indication of the enormous dynamism that has characterised energy and trade relations between India and the GCC countries in the first decade of the 21st century. The trends clearly indicate that the future looks particularly rosy.

The Diaspora Factor
The frenetic construction and economic development activity that exploded in the GCC countries triggered by the spectacular oil price rise in 1973 had one very major consequence of great significance for India - the movement of Indian manpower to the GCC countries, which today totals around 7 million. Their numbers have increased steadily over the decades and Indians today constitute about 38 per cent of the total expatriate population in GCC countries, making them the largest expatriate community both cumulatively in the GCC as a whole and individually in each GCC country. Given that GCC countries are highly internal-security conscious Muslim countries, these facts clearly represent an enormous vote of confidence by the governments and people of the six GCC countries in Indians and by extension in India. 

Anybody who has lived in any of the GCC countries knows just how vital the Indian community is to the logistics and mechanics of the daily functioning of life in each of the 6 GCC countries. The processes which propelled such large numbers of Indians into the GCC countries took place organically responding to the laws of demand and supply with little or no governmental role in pushing this; a strong contributory factor has been the high comfort level with Indians due to the millennia old people to people interaction. Over recent decades, Bollywood is watched avidly on TV in most Gulf households being the programme of first preference.

A significant byproduct has been the huge and growing remittances sent by the Indian community back home. These have been of utterly vital importance in providing the means of livelihood to millions of family members in India on the one hand and to keeping India’s balance of payments manageable on the other. Last year, at US$ 70 billion, India was the largest recipient of remittances from its diaspora abroad of any country in the world and of that about US$38 billion came from the GCC countries.

In the context of the high employment in Saudi Arabia, which has almost nine million expatriates, constituting one-third of the total number of people living in the country, the Saudi government has understandably cracked down hard on illegal immigrants believed to be several million. Several ministerial delegations from India visited Saudi Arabia in recent months in this connection. The position is that of the 2.8 million Indians living and working in Saudi Arabia, 1.3 million needed to have their status regularised and have done so and only 1,34,000 returned voluntarily; however, even after this the overall number of Indians has increased due to new people going there. In contrast to communities of many other countries the Indian community has faced the least harassment. In fact, a new agreement relating to the domestic workers sector is due to be signed very soon.  

The diaspora factor and growing economic interaction have resulted in another significant fact - flight connections between India and GCC countries are almost 50 per cent of the total flight connections between India and the rest of the world put together.  

Thus, as far as the bilateral dimension is concerned, the energy, trade and diaspora factors taken together clearly substantiate the assertion that I made that the GCC countries constitute India’s largest socio-economic partner in the world. India is well set to become the largest socio-economic partner of the GCC countries in the world too if present trends continue, as is more than likely.

The Islamic Factor
India has the world’s third largest Muslim population and the world’s second largest Shia population. The Gulf region is the heartland of the Islamic world with Islam’s two holiest places being located in Saudi Arabia and of the Shia sect of Islam located in Iraq. Around 1,70,000 pilgrims from India go to the Haj annually constituting the third largest contingent in the world, apart from a couple of hundred thousand who go each year for the Umrah pilgrimage to Saudi Arabia and to the Shia holy places in Iraq.

Islam initially came to India from the Arabian Peninsula through traders within the first decade or so of the emergence of this great religion and has flourished ever since. Muslim dynasties have ruled in India for centuries before the British arrived. India has a very rich Islamic heritage, an inextricable part of Indian civilisation and of the idea of India, and of which the country and its people are justly proud. These facts make the Islamic factor another very significant bond for India’s relations with the Gulf region.

One of the very major consequences of the turmoil in the Arab world for the past two years has been the rise of political Islam.

India with its pluralist civilisation, large Muslim population and long term Islamic connections is quite comfortable with political Islam. In fact, India’s interaction with Egypt under its Muslim Brotherhood regime was already better than it had been under Mubarak. India considers political Islam to be a natural phenomenon in Islamic countries. 

However, there is a dangerous dimension too. In the wake of 9/11 US policies in particular have led to a steady increase in the rise of radical and extremist elements in the region and its immediate neighbourhood. Ominously, violence perpetrated by extremists in the name of religion is now not only an increasingly integral part, but getting to be the preeminent and most dangerous element, of the tumult that is spreading across the Arab world. Most GCC countries and in particular Kuwait, Saudi Arabia and the UAE have become particularly wary of radicalism. Their celebration of the recent removal of the Muslim Brotherhood regime in Egypt is an eloquent indicator of their deepening concern. 

The reactions of the GCC countries to the terror attacks in Mumbai in November 2007 were particularly satisfying; since then cooperation in counter-terrorism between India and the GCC countries in general and with Saudi Arabia and the UAE in particular has been developing very well. In this context, the extradition of two high profile terrorists to India by Saudi Arabia last year despite exceptionally strenuous efforts made by Pakistan to prevent it, is a watershed development and is a very significant indicator of just how far bilateral relations between India and Saudi Arabia have come. The UAE has been similarly helpful for some years now. It may be mentioned that this cooperation has been more satisfying than the cooperation that India has received from the US.

The Political Factor
The political arena, too, has witnessed a remarkable upswing. During the first decade of this 21st century, rulers of all GCC countries – the Qatari Emir twice - have paid state visits to India and the Prime Minister of India has paid state visits to Oman (twice), Qatar and Saudi Arabia. King Abdullah of Saudi Arabia chose India as the second country to visit after ascending the throne, and was the chief guest at India's Republic Day celebrations in January 2006. This was the first visit of a Saudi monarch to India after nearly 50 years. The Saudi king does not personally sign documents with foreign leaders but he signed the Delhi Declaration in 2006 and later when the Indian Prime Minister visited Saudi Arabia in 2010, the Riyadh Declaration. These unprecedented, landmark, path-breaking documents spell out the parameters of a wide-ranging strategic partnership covering security and defence cooperation also. Pakistan has long had a very special relationship with the GCC countries in general and with Saudi Arabia and the UAE in particular. These two countries have now consciously de-hyphenated their relations with India and Pakistan and the perceived veto that the latter had enjoyed over the GCC countries’ relationships with India has now been cast aside. Mention needs to be made of the fact that visits by India’s Presidents, Vice Presidents and a flurry of Ministers holding different portfolios including the first ever visit by an Indian Defense Minister to Saudi Arabia and an equal flurry of visits of crown princes, Prime Ministers and senior Ministers from the GCC side also have now become a regular feature of India GCC interaction. Special Envoys, National Security Advisers, Intelligence Chiefs, Armed Forces Chiefs, etc, from both sides have been making frequent visits too.

As would be evident from the foregoing account, India has now become so intrinsically interlinked with the GCC countries that India’s destiny in the years ahead will be greatly influenced by what happens in the GCC region and how India-GCC relations evolve further.

Originally presented at IPCS workshop on India’s Foreign policy and Regional Security for students of Davidson College, US in November 2013

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