MENA-India: Strategically driven, historically bound

MENA Outlook Quarterly
MENA-India: Strategically driven, historically bound

Our regional theme this quarter analyses growing relations between the GCC and India with a focus on energy and merchandise trade, FDI and remittances. We also highlight opportunities for scaling up.

  • India’s dependency on energy imports is expected to rise to ~92% by 2030, with the GCC countries likely to be the major beneficiaries.

    • India’s oil imports from the GCC countries as a proportion of its total hydrocarbon imports (about 50%) represent the second highest among all oil importers from the GCC countries after China. This share is expected to rise.
  • Overall bilateral trade between the GCC and India has grown at an annual average of 5% in the last decade to USD 118B. It is expected to reach USD 130B by 2020 and to exceed USD 190B by 2030.
    • The changing dynamics in the relationship have gone beyond energy security and traditional trade and commerce, to incorporate a rich diaspora factor. Remittances from its citizens in the GCC are an important contribution towards India's substantial foreign exchange reserves.
    • The Free Trade Agreement being discussed with the GCC would be a step towards achieving more synergies. In short, both the GCC and India offer tremendous potential for cooperation in trade, investment, energy and workers.
  • Ties between Iran and India have been restrained since US President Donald Trump's administration decided in April not to renew the waivers India had to import oil from Iran. India could seek to negotiate with Washington to get its waivers back, but the likelihood of the US administration granting this is distant given that it aims to exert “maximum pressure” on Iran.
    • While India is likely to continue to preserve its close partnership with the US, we do not expect its relationship with Iran to be derailed, either.
    • There is room for growth in non-oil trade, especially through Iran's southern Chahbahar port (on the Gulf of Oman) which has been exempted from US sanctions.

In our MENA update, we note that political uncertainties continue to impact the regional economic outlook, but we analyse how individual countries are showing varying degrees of resilience.

  • Volatile oil prices, conflict and continued uncertainty combined with precarious global growth have led the IMF to revise its average MENA growth projections for 2019 down to 0.1% from the 1.3% it forecast in April.

    • Growth in the region in 2020 has also been revised down to 2.7% from 3.2% in the April forecast.
  • In our Country Pages, we highlight a mixed story of resilience in some countries, such as  Egypt, and pockets of opportunity in the non-oil sector in Saudi Arabia, the UAE and Qatar which will benefit from projects related to Vision 2030, Expo 2020 and the 2022 World Cup.
    • But there is also prolonged economic hardship and stalemate in Iraq, Lebanon, Libya, Syria and Yemen.

Florence Eid-Oakden, Ph.D, Chief Economist
Charlene Rahall, Robin Mills, Leila Lajevardi, Mingqiao Zhao & Ghalia Bajali, Analysts

The MENA Outlook publication presents Arabia Monitor’s insights on global markets, outlines and analyses regional future trends and defining themes, and then focuses on individual country macroeconomic views. Each publication is laid out in a concise bullet point format and features a Special Feature interview with regional leaders including central bank governors, ministers and executives.

For more information on how to access the full report, please click here.