India and Saudi Arabia enjoy warm and friendly relations, reflecting the centuries old economic and strong socio-cultural ties. The establishment of diplomatic relations in 1947 was followed by high-level visits from both the sides. The historic visit of King Abdullah to India in 2006 and a reciprocal visit by Prime Minister Dr. Manmohan Singh in 2010 raised the level of bilateral engagement to ‘Strategic Partnership’ and captured the spirit of enhanced cooperation in political, economic, security and defense realms.
Saudi-Indo partnership has improved tremendously during recent years. The economic complementarities are helping this relationship to grow stronger. In February 2014, the visit by King Salman, the then Crown Prince and Minister of Defense, has imparted fresh momentum to ties between India and Saudi Arabia. The high-profile visit of the Saudi dignitaries has built on the foundations of two earlier game-changing outings.
The signing of a defense pact during the Saudi royal’s visit implies that the focus imparted to military ties, during Defense Minister A.K. Antony’s visit to Saudi Arabia in 2012, has been emphatically retained. An acknowledgement that a new thrust on promoting investments is required augurs well for the evolution of a substantial, multi-faceted relationship.
In November 2014, on the sidelines of G20 meeting in Brisbane, Australia, Prime Minister Narendra Modi met Custodian of the Two Holy Mosques King Salman. King Salman congratulated Prime Minister Modi for assuming charge and stressed on improving bilateral relations between the two countries.
Trade and cultural links between ancient India and Arabia date back to third millennium BC. By 1000 AD, the trade relations between southern India and Arabia flourished and became the backbone of the Arabian economy. Arab traders held a monopoly over the spice trade between India and Europe until the rise of European imperialist empires. India was one of the first nations to establish ties with the Third Saudi State.
Formal diplomatic relations between contemporary India and Saudi Arabia were established soon after India gained independence in 1947. Relations between the two countries have strengthened considerably owing to collaboration in regional affairs and trade. Saudi Arabia is one of the largest suppliers of oil to India, which is one of the top seven trading partners and the fifth biggest investor in Saudi Arabia.
In history there have been three visits to Saudi Arabia by an Indian Prime Minister, Jawaharlal Nehru (1955), Indira Gandhi (1982) and Manmohan Singh (2010). The two countries share similar views on combating terrorism.
Economic and Trade Relations
With a changed global geopolitical environment and increasing economic interdependence, Saudi Arabia today considers India not only a strategic economic partner, but also as a potential ‘bridging power’ that can play a constructive role for regional peace and stability. Saudi Arabia is the fourth largest trade partner of India and the bilateral trade stood at $48.75 billion in 2013-14. The import of crude oil by India forms a major component of bilateral trade, with Saudi Arabia being India’s largest supplier of crude oil, accounting for almost one-fifth of its needs.
Saudi Arabia is the fourth largest market in the world for Indian exports and is destination of more than 4.11 percent of India’s global exports. On the other hand, Saudi Arabia is the source of 6.71 percent of India’s global imports. For Saudi Arabia, as per data available, India is the fifth largest market for its exports, accounting for 9.26 percent of its global exports. In terms of imports by Saudi Arabia, India ranks seventh and is source of around 3.46 percent of Saudi Arabia’s total imports.
Investment and Joint Ventures
The bilateral investments between the two countries are growing steadily. Since mid-2000, a number of Indian firms have taken advantage of the new Saudi laws and established joint venture projects or wholly-owned subsidiaries in the Kingdom. According to Saudi Arabian General Investment Authority (SAGIA), it has issued 426 licenses to Indian companies for joint ventures/100 percent owned entities, bringing total investments worth $1.6 billion in Saudi Arabia. These licenses are for projects in diverse sectors such as management and consultancy services, construction projects, telecommunications, information technology, pharmaceuticals, etc. On the other hand, Saudi Arabia is the 50th biggest investor in India with investments from April 2000 to October 2014 amounting to $46.57 million.
Moreover, several Indian companies have established collaborations with Saudi companies and are working in the Kingdom in diverse sectors such as designing, consultancy, financial services and software development. According to reports, Tata Motors is exploring the possibility of building their third largest assembly plant for Land Rover vehicles in the Eastern Province. Recently L&T has bagged a part of the Riyadh Metro project. Tata Steel won an order to supply high-quality rails for a new high speed rail line linking the two holy cities of Makkah and Madinah. Tata Consultancy Services (TCS) launched its ‘all female services center’ in Riyadh in collaboration with General Electric, and Saudi Aramco.
Educational ties are another area of significant importance for India and Saudi Arabia. India has also pledged to assist Saudi Arabia in setting up an Information and Communication Technology (ICT) Center of Excellence as well as institutes of higher learning, involving both education and research in the field of technology. Both the countries have signed a memorandum on higher education in the year 2006, which calls for exchange of teaching faculty and students, to encourage direct scientific and educational communications among the institutions and exchange of delegations between the two countries.
India and Saudi Arabia are developing countries and need two-sided flow of investment in infrastructure and development. Progressive growth has been observed between the countries in bilateral investment after the liberalization policy of India in 1991 and little bit faster increase in new millennium. Saudi Arabia is ranked at 15th position in country-wise FDI joint venture in India and it is second in Arab countries followed by UAE. Saudi has $21.55 million worth value in FDI joint venture during 2004–05 to 2007–08. Saudi is also among the major FDI investing countries in India, it has invested 422 million ($6.2 million) during August 1991 to December 1999 and 691 million ($10 million) during January 2000 to August 2008.
Investment is observed in diverse fields such as paper manufacture, chemicals, computer software, granite processing, industrial products and machinery, cement, metallurgical industries, etc. Indian firms also has shown interest in Saudi market after new Saudi laws and established joint venture projects or wholly owned subsidiaries in the Kingdom. According to Saudi investment authority survey, India has 56 FDI projects having worth of SR304 million during 2005 in Saudi Arabia. These licenses are for projects in different sectors such as management and consultancy services, construction projects, telecommunications, information technology, pharmaceuticals, etc. Moreover, several Indian companies have established collaborations with Saudi companies and working in the Kingdom in the areas of designing, consultancy, financial services and software development.
Indian Community in Saudi Arabia
The 2.8 million strong Indian community which include around 2 million workforce in Saudi Arabia is the largest expatriate community in the Kingdom and is the ‘most preferred community’ due to their expertise, sense of discipline, law abiding and peace loving nature. The contribution made by Indian community in the development of Saudi Arabia is well acknowledged.
Indian doctors, lawyers, engineers, chartered accountants and managers have left their marks in their core domains. The Indian Diaspora has a significant role to play in helping to strengthen the bilateral ties between the two countries. Indian expatriates in Saudi Arabia can be categorized as under:
- Professionals (15 percent): It comprises doctors, engineers, chartered accountants, managers etc
- White collar staff (25 percent): It comprises clerks, accountants, store keepers, booking clerks, secretaries etc.
- Laborers or technicians (60 percent): Those working on project sites, industrial establishments and on operation and maintenance jobs.
The present level of cooperation between India and Saudi Arabia is beyond the actual potential. There is a huge scope for improvement in core sectors including economic and trade ties, defense and security ties, etc. Both the nations need to work hard if they are to strengthen the present level of ties, which is not comprehensive in nature as of now, in order to impart strategic character. This partnership will enable both the countries to harness the vast potential of bilateral relations, drawing upon complementarities and each other’s intrinsic strengths, and work together to address regional and global challenges. In the long run, India will continue to remain an important partner for Saudi Arabia and vice versa.