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Saudi Arabia’s role in India’s economic development

Saudi Arabia’s role in India’s economic development

Hyderabad: India and Saudi Arabia enjoy multifaceted relations reflecting the centuries old economic and socio-cultural ties. India and Saudi Arabia are old business partners; their trade relations go back several centuries in time.

According to Ministry of External Affairs, Govt. of India, apart from a major trade partner, India sees the Kingdom as a major pillar for its energy security and an important economic partner for investments, joint ventures, transfer of technology projects.

Trade and cultural links between ancient India and Arabia date back to third millennium BC. Formal diplomatic relations between contemporary India and Saudi Arabia were established soon after India gained independence in 1947.

Saudi Arabia is one of the largest suppliers of oil to India, accounting for almost one-fifth of its needs. Saudi Arabia has played a vital role in India’s economic development. Saudi Arabia is the 5 the largest market in the world for Indian exports and is destination of 3.6% of India’s global exports.

Saudi imports from India amounted to $7 billion or 2.7% of India’s overall exports in 2015. The major commodities exported from India to Saudi Arabia are, oil, cereals, machinery, iron or steel products, organic chemicals, meat, vehicles, ceramic products, electronic equipment and clothing. On the other hand Saudi Arabia caters to a number of industry needs of India as it ranks third globally among the 10 countries with the most plentiful and valuable natural resources. Saudi exports to India amounted to $21.4 billion or 5.5% of India’s overall imports in 2015.

The major commodities exported from Saudi Arabia to India are, oil, organic chemicals, plastics, fertilizers, gems, precious metals, aircraft, spacecraft, Inorganic chemicals, aluminum, copper and other chemical goods.Saudi Arabia is ranked at 15th position in country-wise FDI joint venture in India.

It has invested ₹422 million (US$6.3 million) during August 1991 to December 1999 and ₹691 million (US$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.

Saudi Arabia also provides business opportunities to Indian firms on its land. According to Saudi investment authority survey, India has 56 FDI projects having worth of 304 million SAR during 2005 in Saudi Arabia.

According to Saudi Arabian General Investment Authority (SAGIA), it has issued 426 licenses to Indian companies for joint ventures/100% owned entities till April 2015. These licenses are for projects in diverse 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 are working in the Kingdom in the areas of designing, consultancy, financial services and software development.

Major Indian companies operating in KSA include Larsen & Toubro (L&T), Tata Consultancy Service (TCS), Telecommunication Consultancy India Ltd. (TCIL), Tata Motors, WIPRO, Dayim Punj Llyod, Shapoorji Pallonji, Infosys, Air India, Godrej & Boyce, Jet Airways, State Bank of India, AFCONS, Kalptaru Power Transmission, Engineering Projects of India Limited (EPIL) etc.

In January 2006, King Abdullah of Saudi Arabia made a special visit to India, becoming the first Saudi monarch in 51 years to do so. The Saudi king and the Indian Prime Minister Manmohan Singh signed an agreement forging a strategic energy partnership that was termed the “Delhi Declaration.”

The pact provides for a “reliable, stable and increased volume of crude oil supplies to India through long-term contracts.” Saudi Arabia annually supplies to India nearly 175 million barrels (25 million metric tonnes) of crude oil.

The reciprocal visit by Prime Minister Dr. Manmohan Singh to Saudi Arabia in 2010 raised the level of bilateral engagement to “Strategic Partnership” and the “Riyadh Declaration” signed during the visit captured the spirit of enhanced cooperation in political, economic, security and defence realms.