India and Saudi Arabia are seeking to expand their cooperation beyond the parochial hydrocarbon economy into diverse areas such as renewable energy, investments, technology, agriculture, etc. The relationship is undergoing a paradigm shift, and both countries need to cooperate strategically to realise their potential in the evolving global order.
The upcoming India visit by Saudi Crown Prince Mohammad bin Salman (de facto ruler of the Kingdom) on 14 November, en route to the G20 summit in Indonesia, is significant. It is his second visit since 2019, which reflects on the growing bonhomie among the countries and congruence of interests across regional and global issues.
The relations have been historically amicable but were largely limited to crude oil and gas imports by India, and to Hajj pilgrimage by Indian Muslims. Saudi Arabia is home to approximately a 2.5 million strong Indian community, making it the largest expatriate community in the Kingdom that contributes towards human resource needs of the oil rich country.
The historic visit of King Abdullah to India in January 2006 was a watershed moment that resulted in the signing of the “Delhi Declaration”, imparting a fresh momentum to the bilateral relationship. The reciprocal visit by Dr Manmohan Singh to Saudi Arabia in 2010, and the Riyadh Declaration signed during the visit, elevated the bilateral relationship to a “strategic partnership”. More recently, the visit by Crown Prince Mohammad bin Salman to India in February 2019 further took forward this momentum.
During his visit, the Kingdom announced an investment of US$100 billion in India in areas such as energy, refining, petrochemicals, infrastructure, agriculture and manufacturing. Saudi Arabia is also investing in the IT industry, and India can help the Kingdom expand and strengthen its “IT footprint”. This is an opportune time that India moves beyond providing low skilled workers to a more high skilled and qualified talent pool to Saudi Arabia to move up the value chain.
The Saudi Aramco and UAE’s ADNOC are jointly participating in the development of US $44 billion “West Coast Refinery & Petrochemicals Project Limited” in Maharashtra. Saudi Arabia also joined the International Solar Alliance (ISA), a group of “solar resource-rich countries” initiated by India to promote solar energy. In addition, Saudi companies like Alfanar and Aljomaih have invested in India’s Wind and Solar Energy projects.
Furthermore, both countries are collaboratively exploring Hydrogen Energy as a future source of energy, thereby ushering in the new era of energy diplomacy. As of March 2021, Saudi Investments in India amounted to US$3.13 billion. Major Saudi investment groups include SABIC, ZAMIL, E-holidays, and Al Batterjee Group. Additionally, Soft Bank’s Vision Fund has invested in Indian start-ups such as Delhivery, FirstCry, Grofers, Ola, OYO, Paytm and PolicyBazaar.
This reflects a growing potential for greater funding opportunities for our future unicorns. In June 2020, Saudi Arabia’s Public Investment Fund (PIF) announced a US$1.49 billion (2.32% stake) investment in Reliance Industries’ Jio platforms, and in November 2020, PIF announced another investment of US$1.3 billion (2.04% stake) in Reliance Retail Ventures Limited.
India needs cheap oil as it imports 85% of its oil requirement and Saudi Arabia plays an important role in India’s energy security. On the trade front, Saudi Arabia is India’s fourth largest trade partner (after the US, China and the UAE) and a major source of energy as India imports around 18% of its crude oil requirement and 22% of its LPG requirement from the Kingdom. Saudi’s major imports from India include engineering goods, rice, petroleum products, automotive and machinery,