Reimagining India’s Economic Engagement with the West Asian Region

India's economic engagement with the West Asian region, of which many countries are in its extended neighbourhood, is more of an impulse driven by age-old civilisational exchanges. So, one must return to the basics of our relationships, geographical proximity, and strategic location from the ease with which Indian goods, culture, and ideas formed a part of Arab social life, and the Arabs have been the carriers of Indian goods and ideas to the Western part of the world. In contemporary times, policies and efforts are moving in the right direction to harness complementarity between mutual resources, skills, and capabilities. Nevertheless, given the region's turmoil, there are concerns about the prospects of India's stakes, interest and ambitious connectivity projects like IMEC (India-Middle East Economic Corridor) and INSTC (International North-South Transport Corridor). Besides, India is constantly assessing itself from the yardstick of China’s expanding regional footprints.

A good way to look at this is to ask, can India make a difference and navigate the current turmoil, sidestep the regional fault lines and take its economic engagements with the region to the next level?

India can reasonably do things differently by leveraging its three powerful Ds: Demography, Diversity and Development Diplomacy. Putting all these in compelling logic of the geographical proximity and strategic location makes India and the West Asian countries integrate as vital nodes of global supply chain dynamics. Today, 40 percent of global trade is in intermediates, and flows of supply chains are connecting different parts of the world more than war or conflicts could block them. The transit and commerce along the Eurasian land bridge (connecting Russia with Europe) continued even during the deteriorating relations between Russia and Europe in recent years.

India is increasingly integrated into the global supply chain, with a 20 percent share in global exports of generic drugs, 5 percent in textiles and garments, and 2 percent in electronics. India is also a key player in the global automobile industry and IT services. India and UAE signed the Comprehensive Economic Partnership Agreement (CEPA) in 2022. While CEPA makes Indian drugs approved by the regulatory authorities in developed countries gain automatic access to the UAE market, imagining them in the regional supply chain dynamic would entail a much larger synergetic collaboration. Collaboration in R&D can be used to develop new drugs, and joint investment in advanced technologies such as automation, artificial intelligence, and blockchain can enhance efficiency and transparency along the pharmaceutical supply chains. Joint manufacturing centres in both countries can leverage India’s manufacturing capabilities and UAE's strategic location and logistics for distribution. There are prospects for collaboration in logistical services, warehouses, and cold chains for the efficient distribution of pharmaceuticals between India and the UAE. So, a supply chain creates an economic corridor of commercial engagements and a network of human resources that generate and transmit skills and capacities.

The first D is demography, which is just not about numbers. India's demography is youthful and innovative. There is much interest in Indian startups in Egypt, Jordan and other countries that need to be scaled up. India-UAE Startup corridor, established in 2022, aimed to incubate about 50 startups from India and UAE, 10 of which will become unicorns by 2025. About 30 startups have been reported as validated in education, logistics, and finance. Then, there are various exchanges of best practices in supporting social entrepreneurs that provide business solutions to social challenges. India's demography is also about growing middle class with increased spending capacity. India is becoming a fast-growing source of outbound tourism, especially for short-haul destinations. About 70 percent of the international tourists in Dubai in 2023 were Indians. Similarly, they are among the most prominent tourists in several countries in the region. To tap into this opportunity, airlines from India and West Asia are asking for grants for more seats under the existing bilateral agreements to increase connectivity. However, there have been discussions and interest in potentially adopting an open sky policy with some West Asian countries, such as the UAE, to enhance connectivity and market access. India airlines view it as a challenge to their ability to utilise their capacity additions. A supply chain logic would entail greater integration of aviation, tourism and hospitality, and creative or cultural enterprises.

India’s second important D is its diversity, which makes incredible business sense to any trading partner or investor. Its diverse physiography, climatic conditions, and skill produce various agricultural, minerals and manufacturing goods. “Make in India” derives its strength from this diversity. The aim should be to project "Make in India" as a comparative advantage rather than a protectionist approach. India’s diverse demography is very comfortable with diverse cultural traditions, gastronomy, festivities, and lifestyle consumables, and Indians have an immense appetite for diverse cultural products. India has a significant creative economy that revolves around the business of original ideas like design, music, publishing, architecture, film and video, crafts, visual arts, fashion, TV and radio, yoga, literature, computer games, etc. According to the Asian Development Bank, the creative industries in India contribute to about 8 percent of employment. During India's presidency of G20, much emphasis was placed on culture as a key driver of commerce and SDGs. Hence, there are many avenues of co-creation with positive spillover on societies, education, skill building, and, more importantly, cross-cultural communications.

The third D is development diplomacy at the core of India's international engagement. The IMEC and I2U2 (India, Israel, UAE and US) aim to cater to the developmental needs of energy, water, transport, food security, space and health. In that context, IMEC is not just a transit route that needs to be evaluated in terms of cost and time. It is an economic corridor with potential for regional growth and stability. Much of the connectivity is already in place, or stages go implementation either as part of GCC (Gulf Cooperation Council) infrastructural development or national rail and road projects. Trial runs have been done between UAE and Israel by transport companies. European countries are well connected through standard gauge railways that allow seamless connectivity across borders. Besides, many supply chains prefer speedier transport than economic ones, especially in electronics, automobiles, pharmaceuticals, edible items, and feel.

India's trade with West Asian countries increased from US$177 billion in 2014 to US$239 billion in 2022-23. Noteworthy is that India's trade relations with smaller countries, such as Bahrain, Jordan, and Israel, nearly doubled, speaking volumes of its inclusive and development-focussed foreign policy. Commercial relations with Bahrain improved so much that there was growth even during 2020–21, with COVID-induced economic contraction. In 2021–22, India-GCC non-oil trade was about US$71 billion, and trade in services was about US$14 billion, both illustrative of a widening spectrum of economic ties. Seven West Asian countries have signed the India-led International Solar Alliance Framework Agreement. Thus, harnessing its three Ds of demography, diversity and development diplomacy, India can significantly scale up its economic engagement in the supply chain paradigm, making its connectivity initiatives commercially viable and generating positive outcomes in terms of contributing to regional growth, employment and stability.

(The paper is the author’s individual scholastic articulation. The author certifies that the article/paper is original in content, unpublished and it has not been submitted for publication/web upload elsewhere, and that the facts and figures quoted are duly referenced, as needed, and are believed to be correct). (The paper does not necessarily represent the organisational stance... More >>