Gulf region's importance for India

Context (IE): The Gulf region has become an increasingly important strategic partner of India and an integral part of its ‘extended neighbourhood’.
Energy security is significant not only for industrial growth but also for power and transportation sectors that are critical for the functioning and growth of the economy.

Bilateral ties

The strengthening of bilateral political and strategic ties, especially since the early 2000s, has played a crucial role in making the Gulf a dependable partner.
The bilateral ties, especially with UAE, Saudi Arabia, and Qatar, have helped India overcome challenges due to sanctions on major global oil and gas suppliers such as Iran & Venezuela, the impact of regional conflicts during and after the Arab Spring (2010-12), and the global COVID-19 pandemic.

For the Gulf suppliers, India has been a stable and large market for crude oil and natural gas as it is one of the biggest global consumers.
This has made India an attractive destination for Gulf investments in the energy sector, with mega Gulf energy corporations such as Saudi Aramco and Emirati ADNOC committing big long-term investments.
In 2023-24, of the total US$1.11 trillion foreign trade, US$208.48 billion came from the Gulf and West Asia region, comprising 18.17% of India’s foreign trade.
According to the DPIIT, total FDI from the GCC countries into India between 2000-2024 was US$24.09 billion with UAE (7^th), Saudi Arabia (19^th) and Qatar (24^th) being among the top 25 sources of FDI.
Indian investments and participation in the GCC market have witnessed a sharp rise, with
Indian companies such as Larsen & Toubro, Shapoorji-Pallonji and Tata, while Indian businesses, such as the Lulu hypermarket chain, made their mark in the GCC market.

As per official estimates, nearly 8.5-9 million Indians live and work in the six GCC countries and comprise the region’s largest expatriate community.
The diaspora has been instrumental in making India the largest remittance recipient country in the world, contributing nearly 40-50% of the total remittances received by India over the years.
- In 2023, India received US$125 billion in remittances.

Historically, the Persian Gulf states, namely the six Gulf Cooperation Council (GCC) countries and Iran and Iraq, have been India’s primary oil and gas suppliers, contributing nearly 55-60% of total O&G imports.
The Gulf countries have been among India’s top petroleum suppliers since the 1980s and have remained the most dependable suppliers despite the fluctuations in the international market and supply chains.
In recent years, with concerns about carbon emissions and volatility in the international oil and gas market, India has deliberately tried diversifying its energy consumption sources and petroleum imports, with Russia, the United States, Australia, and Nigeria emerging as important sources.
However, the Gulf region has remained critical to India’s energy security due to its geographical proximity to India and the established buyer-seller networks.
Capacity and commitment of the Gulf states, such as Saudi Arabia, the UAE and Qatar, to supply oil and gas at special prices work in their favour. This is important given the volatility in the international market.

India is the world’s third-largest energy consumer after China and the United States.
According to the Statistical Review of World Energy, 2024, India’s total primary energy consumption was 39.02 exajoules, comprising 6.3% of total global energy consumption in 2023.
India’s total primary energy production in 2022-23 was 19.55 exajoules, and total consumption during the same period was 35.16 exajoule (Energy Statistics India, 2024)
Only about 68% of the demands were met through domestic production.

Coal is India’s largest source of primary energy supply, comprising 58.12% of the total in 2023.
Despite significant domestic coal production at 16.75 exajoules in 2023, India has to source part of its coal demands externally, given the huge consumption at 21.98 exajoules in 2023.

Oil and gas is the 2nd largest source of primary energy supply in India at 35.44% in 2023 (NITI Aayog).
India’s total oil consumption was 5.44 million barrels per day in 2023, while total oil production was 0.73 million barrels per day (Statistical Review of World Energy, 2024).
Similarly, natural gas consumption was 62.6 billion cubic metres, while natural gas production was only 31.6 billion cubic metres.
This meant that most oil and gas are sourced externally, underlining India’s dependence on imports for its energy security, especially in meeting the oil and gas demands.