India and Saudi Arabia to Deepen Trade Relations

Syllabus: GS2/IR

Context

• A high-level Saudi Arabia delegation met the Secretary, Union Ministry of Textiles, to advance bilateral cooperation in the textile sector.

Major Highlights

• India and Saudi Arabia have a bilateral trade reaching USD 41.88 billion in FY 2024–25. 
• India emerged as the second-largest supplier (USD 517.5 million) to Saudi Arabia’s textile and apparel sector, capturing an 11.2% share of Saudi Arabia’s total textile and apparel imports in 2024. 
  • Both sides expressed strong commitment to further deepening this trade relationship.
• A key point of the meeting was the mutual recognition of Saudi Arabia’s strength in petrochemical-based industries and India’s expanding capabilities in Man-Made Fibre (MMF) and technical textiles.

Brief on India and Saudi Arabia Relations

• Political Relations: The two countries established diplomatic relations in 1947. 
  • The royal visit of 2006 resulted in the signing of the Delhi Declaration, which was followed in 2010 by the Riyadh Declaration that elevated bilateral ties to a strategic partnership.
  • The Strategic Partnership Council (SPC) Agreement was signed during the 2019 visit of the Indian PM to Riyadh, which established a high-level council to steer the Indo-Saudi relationship. 
• Economic Relations: India is Saudi Arabia’s second-largest trade partner; Saudi Arabia is India’s fourth-largest trade partner.
  • In FY 2023-24, bilateral trade stood at USD 42.98 billion, with Indian exports at USD 11.56 billion and imports at USD 31.42 billion.
• Energy Cooperation: Saudi Arabia remained India’s third largest Crude and Petroleum products sourcing destination for FY 2023-24.
  • India imported 33.35 MMT of crude oil in FY 2023-24 from Saudi Arabia, accounting for 14.3% of India’s total crude oil imports. 
  • In FY 2023-24, Saudi Arabia was the 3rd largest LPG sourcing destination for India, accounting for 18.2% of the total LPG imports of India for 2023-24. 
• Indian diaspora: As of 2024, there were 2.7 million Indians in Saudi Arabia. This is the second largest number of foreign workers in the country, after Bangladesh. 
• Defence Cooperation: India and Saudi Arabia are focusing on strengthening defence ties to achieve self-reliance and mutual growth in defence manufacturing.
  • Under Vision 2030, Saudi Arabia is aiming to transition from a defence consumer to a defence producer, with a target to localise 50% of its spending.
  • Saudi Arabia signed a $250 mn contract for ammunition from Munitions India Limited, a Defence Public Sector Undertaking.
  • Saudi Arabia has procured the 155mm Advanced Towed Artillery Gun System (ATAGS) from Bharat Forge. 
  • Joint exercises:
    • Sada Tanseeq: The inaugural Army exercise held in 2024.
    • Al Mohed Al Hindi: Bilateral naval exercise initiated in 2022.

Areas of Concerns

• Trade and Economic Imbalance: The trade basket remains heavily dominated by crude oil imports from Saudi Arabia, leading to a persistent trade deficit for India.
• Regional Geopolitical Divergences: India maintains balanced relations with Iran, Israel, and the U.S., while Saudi Arabia has complex ties with each.
• Pakistan’s Role in the Islamic World: Pakistan often leverages its religious identity to influence Saudi perceptions and align itself with OIC (Organisation of Islamic Cooperation) positions.
  • This has led to OIC statements critical of India, particularly on Kashmir, backed historically by Saudi Arabia and its allies.
• Labour and Diaspora Challenges: Around 2 million Indian workers in Saudi Arabia face wage disputes and labour rights violations.
  • Uncertainty due to ‘Saudization’ policies, aimed at replacing foreign workers with locals.

Way Ahead

• The shared aspiration to reduce dependence on defence imports and boost local production presents significant opportunities for both nations. 
• Joint ventures and collaboration in cutting-edge technologies such as AI and cybersecurity can enhance strategic autonomy.
• By aligning their goals under Vision 2030 and Make in India, India and Saudi Arabia can emerge as pivotal partners in shaping the global defence landscape.

Source: PIB