Saudi Arabia is sitting on $500 billion of investable funds, but where are most of them going?
Rajeev SharmaIndia is increasingly pursuing an unannounced policy of Looking Mid-West, a region comprising the Gulf and WANA (West Asia-North Africa), spanning Iran to Syria. As much as 60 percent of India’s oil and gas requirement is sourced from this region.
Saudi Arabia is one of the most important countries when one talks about New Delhi’s unstated policy of Looking Mid-West.
The Saudis are sitting over huge investible funds worth almost $500 billion and India figures on top of the Kingdom’s investment list because of the huge returns investments in India are likely to yield.
It is in this context that the visit of Crown Prince Salman, deputy premier and minister of defense to New Delhi assumes significance. Crown Prince Salman is accompanied by a high-level delegation of Cabinet ministers, senior officials, and captains of industry and will meet the top brass of the Indian government, including Prime Minister Manmohan Singh during his three-day visit.
Similarly, Kuwait has sovereign wealth fund of $350 billion, which is increasing by $25 million every year.
The importance of the Gulf and the six Gulf Cooperation Council (GCC) countries for India cannot be overstated when India’s overall economic and commercial engagement with the Gulf region is around $160 billion per annum. The Gulf has emerged as another top concern of Indian foreign policy architects, a region, which New Delhi considers as its extended neighborhood. Significantly, out of the first five largest exporters of oil to India, four are located in Gulf countries. Besides, the largest LNG supplier is in Gulf countries for India.
There are over seven million Indians in the Gulf who send huge remittances back home. Out of the World Bank’s report of $70 billion remittances annually that India received last year, the lion’s share has come from the six GCC countries. Twenty percent of the GDP of the southern Indian state of Kerala is dependent on the Gulf, as expats from Kerala send over $35 billion in remittances back home every year.
Mridul Kumar, joint secretary (Gulf and Haj) in the Indian Ministry of External Affairs, sums up the role of the Gulf countries for India thus: “The Gulf is practically the only region left which has got huge investible surplus. This means a lot for a country like India, which requires investment of over $150 billion within the next five years to tone up its infrastructure. This kind of humongous money can be generated only from countries like those in the Gulf which have got investible surpluses.” India’s trade with UAE is to the tune of $75 billion and has the potential of overtaking in a few years India’s single biggest trade partner, the United States, with which India has an annual trade of $100 billion. Just about four decades ago, India’s trade with UAE was a paltry $180 million. Moreover, the UAE has one of the largest sovereign wealth funds — over $750 billion. There are 700 direct flights per week between various destinations of India and the UAE. On April 23, 2013 Jet and Etihad Airways signed an $8 billion agreement, where Etihad airlines would be investing $379 million in Jet Airways for a 24 percent stake in the shareholding. The UAE is the tenth biggest investor in India in terms of foreign direct investment (FDI) with the total FDI from UAE to India pegged at $2.36 billion as per November 2012 figures.
India and the UAE also have robust defense cooperation since the two sides signed a Defense Cooperation Agreement in June 2003. Potential areas of bilateral cooperation in the defense field are production and development of defense equipment; joint exercises of armed forces, particularly naval exercises; sharing of information on strategy and doctrines; technical cooperation in respect of Intermediate Jet Trainer etc.
India is very much interested in political stability in this region as turmoil in the region can have disastrous impact on the Indian economy. Even though India is on the cusp of general elections, which are likely to throw up a completely new regime in New Delhi, India is staying engaged with this region pro-actively through a steady stream of high-level to-and-fro visits. Nabil Elaraby, secretary general of the Arab League, was recently in India and Indian External Affairs Minister Salman Khurshid paid a visit to the North African states of Morocco, Tunisia and Sudan — important sources of phosphates and energy.
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