Reasons for high economic stakes of India in West Asia

Contact Counsellor

Reasons for high economic stakes of India in West Asia

  • The diplomatic fallout from the provocative and communally charged comments made by two erstwhile spokespersons of the ruling Party forced the government into firefighting mode after several West Asian nations as well as the 57-nation Organisation of Islamic Cooperation (OIC) and the six-member Gulf Cooperation Council (GCC) took strong exception to the remarks denigrating Islam and the Prophet Muhammed.
  • In response, Indian officials strenuously asserted that the government stood by the country’s traditional values and respected all religions.
  • It also tasked its diplomats to reach out to individual OIC member states and reassure them on India’s position of an ‘inclusive’ approach to all communities.

Reasons which prompted the government response

  • India’s cultural, economic and trade ties with the countries of the West Asian region are deep and abiding.
  • The maritime trade, exchange of goods, services and cultures between the people of the Gulf region including those on the western shores of the Arabian Sea and the people of India’s southern and western States reaches back several millennia and significantly predates even the foundation of the Islamic faith.
  • Trade: countries of the West Asian region collectively account for well over a sixth of India’s total bilateral merchandise trade and contribute about three fifths of India’s crude oil supplies.
  • Job provider: The region is also a major provider of jobs and economic opportunities to Indian workers, professionals and entrepreneurs and houses about 89 lakh Indians.
  • Remittance: non-resident Indians (NRIs) annually send home about $40 billion, and account for more than 55% of the country’s total remittance inflows.
  • Investments: investments from sovereign wealth funds and other large investors from the GCC have also climbed steadily in recent years and India, which earlier this year signed a Comprehensive Economic Partnership Agreement (CEPA) with the UAE, is looking to significantly boost trade ties with the region by negotiating more such trade and investment pacts.
  • Interconnectedness: It is the sizeable and rapidly growing economic interconnectedness that the government is keen to insulate from any fallout over this sensitive and potentially disruptive issue.

Reasons for India’s dependence on West Asian countries for its energy needs

  • Domestic crude production, which has been declining over the years, meets less than a fifth of the country’s oil requirement, forcing India to take recourse to imports to fill the gap of more than 80%.
  • Crude oil imports: an Observer Research Foundation (ORF) April 2022 paper analysing ‘India’s oil imports: Trends in diversification’ notes that out of India’s total imports of crude oil, the share of the Gulf countries has remained fairly steady at about 60% over the last 15 years.

India’s reliance on West Asia for non-oil trade

  • Over the five years from 2017 through 2021, Iran and the GCC member states comprising the UAE, Saudi Arabia, Bahrain, Oman, Kuwait and Qatar accounted for a 15.3% share of India’s cumulative two-way merchandise trade
  • The region is today a key market for several Indian commodities ranging from tea and basmati rice to electrical equipment, apparel, and machinery.

Exam Track

Prelims takeaway

  • GCC
  • OIC
  • Geographical location of West Asia
  • Comprehensive Economic Partnership Agreement (CEPA) with UAE

Mains Track

Q Explain the reasons why India is highly dependent economically on West Asian countries.