By Anisur Rahman
The Gulf region has always been significant to India, but it became strategically more important due to its geo-strategic location, adequate availability of energy resources, a home for a considerable number of Indians and also a big source of remittance for India along with the emerging prospects in the field of social sector such as education and health. Not only this, centuries old interactions between the two and its pivotal role in the Muslim world makes this region also politically and diplomatically important to India.
It is now evident that since the past four decades, energy and human resources have been the two principal drivers of India’s economic relations with the Gulf countries. India has been heavily dependent on energy supplied from the region, while Indian expatriates have constituted a substantial number in the composition of the regional labor market.
This is true that this relationship has been mutually advantageous to both. Hence it is the need of the time that this mutually beneficial relationship is required to be made more diversified and productive than it was in the past. We must work hard to make India a significant player in international trade. For this, the region has the potential to play a defining role in India’s overarching strategic objectives of expanding its power beyond its immediate neighbourhood.
It is further observed that the import of energy and export of human resources in fact play a crucial role in the socio-economic development of a country like India. The Gulf region must be considered as an integral part of India’s extended neighbourhood.
This is primarily owing to its strategic location and proximity with tri-continental-Asia, Europe and Africa that makes it crucial in international politics. This is noted that India has developed its relation with Israel that is considered to be a pragmatic strategic shift in India’s foreign policy as the security cooperation with Israel is a strategic move for India.
However, since the last quarter of the twentieth century, the Gulf countries have been playing a vital role in India’s economic growth as it supplies nearly two-thirds of India’s total oil import. This is also evident that the bilateral trade is also flourishing in recent years particularly with UAE and other Arab states of the Persian Gulf.
India is in fact largely dependent upon the Gulf oil and gas which has maintained strong and cordial relations with most of the major supplier nations such as Iran, UAE, and Qatar.
It is thus seen that the Indian government had little choice but to depend on the Gulf countries as India had an annual trade of $90 billion in 2020-21 that rose to $154 billion in 2021-22. At a time when the Indian economy seems to be going through a stellar rise, it is useful for India to develop a policy of engagement with the countries of West Asia, more particularly the Gulf countries.
In the ongoing economic relations between India and the Gulf countries, it is understood that threats and challenges to India’s energy security which is solely dependent on the supply of petroleum, natural gas, coal, nuclear reactors, bio gas, hydro electricity, wind power, solar energy, wood gas and other alternative means that comes from external sources.
Energy is the very fundamental need of citizens across the globe today to fulfill personal and professional needs. Despite being a global economic power, India still continues to face policy challenges and security dilemmas as being highly dependent on energy coming from outside the country. This is further seen that the need of energy is increasingly important for the sustenance of the Indian economy.
We can argue that India’s ties with the Gulf must be strengthened in order to promote our national interest due to its strategic significance and a great source of energy and remittances. Today, it is also noted that the Gulf countries are hosting more than nine million Indians in their countries.
These countries are namely, Bahrain, Qatar, United Arab Emirates, Saudi Arabia, Kuwait, and Oman. Indian human resources in the region have benefited India and the Gulf countries in terms of the remittances and diversification of Gulf economies.
However, in the contemporary scenario, it is evident that with the coming of Prime Minister Narendra Modi to power, India’s foreign policy has achieved pragmatism and incremental shift concerning the external engagement with the world. The orientation of India’s Look West policy was ushered in the direction to establish a multi-dimensional relationship with the Gulf countries, particularly the Arab Gulf, Iran, and Israel.
The first visit by the Indian Prime Minister to Israel in 2017 was a significant step in this direction and later to the Gulf countries. In this context, let us look at the reorientation in India’s foreign policy from the view point of multi-alignment with particular reference to the Gulf. Indian Diaspora which is considered as soft power assets for India is getting prominence as the strategic assets in India’s foreign policy.
It is further observed that India has developed a special relation with the United Arab Emirates (UAE) which is the third-richest country in the world with a GDP per capita of $57,744. As per DGCI&S Report, India-U.A.E bilateral trade saw a growth of 68.3 percent in 2021-22 with a total trade volume of US$ 72.87 billion.
The mainstay of its economy is the production of goods and provision of services related to petroleum, petrochemicals, aluminum and cement. The much hyped ‘Oil Economy’ contributes to only 30 percent of its GDP. Its fast growing and business-friendly free zones are counted as the country’s strategic assets. However, Covid -19 pandemic hit the Gulf state hard last year, both via the shock of low oil prices and the huge toll it took on vital non-oil economic sectors.
According to central bank estimates, real non-hydrocarbon GDP declined by 5.7 percent last year whereas oil GDP is likely to remain constant because of agreed production cuts as destined by OPEC and its allies. Real GDP growth in the non-oil sector is expected to be due to increased government spending, increased lending and employment, relative stabilization of the real estate market and the 2021 Dubai Expo.
The central bank is also expecting that the full economic recovery is expected to be in 2022, with growth rising to a 3.6 percent rate. Being one of my most favorite tourism destinations, events such as the Dubai Expo world fair scheduled to be held during October–March 2022 and the soccer World Cup- 2022 in Qatar are also likely to provide economic boost and restoration of the economy in upcoming days.
UAE’s competitiveness when it comes to economic growth and development make it a viable strategic partner. It is ranked 9th for the second consecutive year as per IMD World Competitiveness Ranking 2021. Apart from petroleum, tourism is a major contributor to the country’s economic growth.
The sector’s contribution to the GDP grew from 3 percent in the mid-1990s to more than 16.5 percent by the end of 2010. In 2019, the travel and tourism sector contributed 10.9 percent to United Arab Emirates GDP (percent of GDP) which has increased from 4.2 percent in 2000 to 10.9 percent in 2019, with an average annual rate of 5.80 percent. This sector is supported by large public investments in tourist projects that include aviation, transport, hotels and infrastructural development.
Significantly, the Indian population working in the UAE constitutes about 30 percent of the country’s total population. It is estimated that around 15 percent of the Diaspora is in the Emirate of Abu Dhabi and remaining in 6 other Emirates including Dubai (ANI: Oct, 2021).
Indians in the UAE are partnering in economic development as investors, skilled, semi-skilled and unskilled workforce. India remains a critical partner of UAE and the trade between both countries is valued, conservatively, at over $75 billion. India is amongst the top five trade partner countries of the UAE. Nonetheless, the role of the Indian Diaspora as a soft power has been a subject of study by strategic analysts.
Indians as contributors to the economic development of the UAE can no longer be overlooked. Both the countries are benefiting from each other. The large Indian community of 3.5 million contributes significantly by sending the huge amount of remittances of over US$ 17.56 billion in 2018 to India whereas according to the Reserve Bank of India report India received around US$16 billion in 2020-21 which was 18 percent of total remittances received to India from abroad. This downward shift in remittances is due to the pandemic effect which certainly will wither with time and it is likely to be on the path of recovery soon.
The money has helped foster education, infrastructural development, investment in skill education and healthcare in both the countries. It has been a critical contributor to raising the human development indices. In the long run the economic foundation of socio-political strategic interests will contribute to the stability and strength of a rapidly diversifying and deepening bilateral relationship between these two countries.
Author is Professor and Director, UGC- Human Resource Development Centre, Jamia Millia Islamia, New Delhi.
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