India and Saudi Arabia Seek Closer Economic Ties

India is considering investing in new major projects led by Saudi Arabia. The Gulf state recently announced a $500 billion project to expand diverse global investment into the Kingdom beyond just oil. As their oil reserves dwindle, Saudi Arabia is looking to the future and knows that it must diversify its economy to stay relevant as a world player. “Neom”, is the name of the futuristic $500 billion mega city that Saudi Arabia hopes to build with its new surge in global investment. Neom would include new roads and railroads, airports and sea ports, as well as the development of an entertainment city and a Red Sea tourism project. India plans to explore investment and contracts opportunities in Neom.  

As a sign of genuine interest regarding Saudi Arabia’s future economic growth, Indian delegates will be meeting in Riyadh on November 27th and 28th to discuss the numerous investment opportunities available. The delegation was organized by the Economic Diplomacy Division of Ministry of External Affairs and Trade Promotion Council of India. The delegation to Riyadh will be headed up by External Affairs secretary Manoj Bharti. The Indian team will meet with Saudi delegates is discuss possible contracts and investments in regard to infrastructure, housing, allied sectors and the entertainment industry of Riyadh and Neom.

Saudi Arabia’s Vision 2030 is the plan to reduce their dependence on oil and to strongly diversify their economy. It also plans to further develop public service sectors like health, education, infrastructure and tourism. Vision 2030 aims to increase non-oil industry trade through goods and consumer products, in which India is a prime success story. The 2030 project is expected to open up new opportunities for Indian companies and professionals in sectors like railways, hospitality, tourism, airports, housing, information technology and entertainment. The Saudi Arabian General Investment Authority has issued more than 400 licenses to Indian firms to operate within the Kingdom. There is the potential that Indian companies will partner in the construction process for the high-speed 450-kilometer railway linking Mecca and Medina, and in the construction of an airport in Jeddah.

As these talks take place, it is important to understand the strength of the Indian-Saudi Arabian relationship. Indian investments into Saudi Arabia have totaled $1.5 billion, while Saudi Arabia has only invested $16 million into India. However, on the other hand, Saudi Arabia is the fourth largest trading partner of India. The bilateral trade between the two countries has exceeded $25 billion in just 2016-2017. Saudi Arabia is India’s largest supplier of crude oil, with the country accounting for 20% of India’s total annual imports. 2.7% of India’s exports were sent to Saudi Arabia, while 5.5% of India’s imports came from Saudi Arabia.

Another point of strength between the two countries is the number of expats living abroad. There are about 3.2 million Indians inside of Saudi Arabia, making up the largest expatriate group in Saudi Arabia. Indians inside Saudi Arabia send $10 billions of annual remittances back to India. Former Indian Prime Minister Manmohan Singh visited the gulf kingdom in 2010 during a three-day visit. Current Indian Prime Minister Narendra Modi has also made a visit to Saudi Arabia in 2016, where PM Modi received Saudi Arabia’s highest civilian honor, the Order of King Abdulaziz.

As Saudi Arabia attempts to move their country forward beyond oil, India seeks to cash in on that opportunity. These fresh rounds of economic investment will bring the countries much closer. Though India has primarily invested into Saudi Arabia, it is very likely that Saudi Arabia will return the favor and invest back into India. Vision 2030 will change the way Saudi Arabia aligns itself across the globe, as it seeks to move beyond relationships built solely on oil.