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Thu 30 May 2019 10:20 AM

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Video: India Elections 2019 - impact on the Middle East

Dubai's ruler H.H. Sheikh Mohammed bin Rashid Al Maktoum congratulated re-elected Prime Minister Narendra Modi over his landslide victory by securing 303 out of the 543 seats in the Lok Sabha.

But what does this mean for India and the GCC? ABTV's Shruthi Nair explains.

Modi starts his second innings as Prime Minister of the world’s largest democracy on May 30.

As per his election manifesto, his party BJP has promised to turn India into a $5 trillion economy by 2025 but before that, he needs to address these issues:


Thus far, Modi's government has failed to create jobs for more than a million Indians entering the labour market every month. According to reports, Indian’s unemployment rate is the highest right now since the 1970s.

Shadow Banking

The collapse of the Infrastructure Leasing and Financial Services (IL&FS) last year triggered a series a defaults across the shadow banking sector. Modi’s government will have to address this sooner rather than later as there is no safety net and legal system for loan recovery.


Indian government has proposed an e-commerce policy and a move for data localisation. Amazon is also opposed to India’s proposed e-commerce policy, which limits the expansion of US e-commerce companies in India. This issue has surfaced as Mukesh Ambani of Reliance Industries, prepares to launch his own e-commerce platform. If the Modi government does not address these concerns foreign investment may be withdrawn from India leading to a loss of jobs.

Social Issues

In its cover story ahead of the elections, Time magazine described Modi as “India’s divider in chief.” The BJP’s rightwing agenda has exacerbated divisions between Hindus and Muslims and Modi’s re-election is likely to further alienate minorities. With crop prices depressed and farmers protesting and committing suicide in their thousands, Modi’s ability to keep this vital section of the population will be a task. He has promised to double farmer’s income by 2022but again he had promised to pay farmers 50% more than their cost of production. But that remains a promise that wasn’t kept.


This is related to the U.S.- Iran war that we discussed in the previous explainer. India imports over 80 percent of its crude oil requirements and has stopped buying from Venezuela and Iran under US pressure.

This has pushed India to source oil from elsewhere, including from Saudi Arabia, pushing refiners to spend more in dollar terms. Any oil price spike, for example on the back of tensions in the Middle East, could push up fuel prices and therefore inflation, which has long dogged the Indian economy.

Now how is Modi’s next 5 year reign going to impact the GCC?

Well, to begin with, there are about 8.5 million Indians residing in the Gulf states that send more than half of India’s $80 billion in remittances every year. India is also a large market for the Gulf’s corporate giants too.

Energy interdependence continues to be the key to India-GCC relations. With the supply of 36.8 million tons of crude oil, Saudi Arabia accounted for 16.7 percent of India’s total imports in 2017-18.

India’s exports and imports trade with the Gulf region registered growth last year. They went up from $21.09 billion in the two quarters beginning April 2018, compared to $20.55 billion during the same period a year ago.

Until 2017, nearly 85 percent of the Indian investments into the GCC was in the UAE, an Alpen Capital report revealed.

So basically, the bilateral trade numbers and figures have been huge between the two countries.

One thing we need to see is if Modi can help the India-GCC FTA wheels turning. The India-GCC FTA has completed two rounds of discussions and it is expected to evolve further. The FTA is expected to remove restrictive duties and push down tariffs on goods. In the proposed FTA, India is likely to seek greater safeguards for its chemicals and petrochemical industry. This is being done with a view to protect domestic players who would find it difficult to handle competition as the cost of crude oil is extremely low in GCC. Negotiations have stalled several times, and there is no convergence of views.

Also, under the Modi government, a lot of investments, collaborations, and MoUs have been signed. Indian firms have signed deals with ADNOC, Saudi Aramco is investing in India’s $44 billion Ratnagiri petrochemical complex, there are defense deals being signed between the UAE and India and 8 agreements were signed between India and Oman during his visit to the Sultanate last year.

Are we going to see the GCC nations and India reap the benefits of these investments this year?

(Source: Arabainbusiness.com YouTube channel)