By R. Sasankan

India and Saudi Arabia are two emerging nations with gigantic ambitions pushing for change in an ossified world order.

Let’s face it: both are two of the fastest-growing economies. India is expected to close fiscal 2023-24 ended March 31 with a GDP growth rate of 7 per cent. Saudi Arabi clocked a GDP growth rate of 8.7 per cent in calendar 2022. Clearly, there is no stopping their growth or limiting their ambitions; their time has come.

India, which is set to become the most populous nation in the world later this year pipping China, has the large economy, ranking third in Asia behind China and Japan with an overall GDP of $ 3.17 trillion. Saudi Arabia is the sixth largest in Asia at $ 834 billion. But Saudia Arabia’s GDP per capita in purchasing power parity terms works out to $ 44,339 a year – 6.7 times India’s fairly modest $ 6592.

In one sense, they are natural allies: Saudi Arabia is the largest producer of crude oil in Asia and India is the world’s third largest importer of crude oil. Any sort of collaboration between these two nations, especially in the area of petroleum, would be mutually beneficial. Both nations have a dynamic leadership that are ready to do anything to achieve the pinnacles of their ambition. They have taken a wrecking ball to smash centuries of privilege, patriarchal prejudices and hidebound cultural practices to propel their peoples into a new digital age.

At one time, it did appear that the leaders on both sides had cottoned on to the benefits that would flow from cooperation. Saudi Arabia figured prominently in Prime Minister Narendra Modi’s scheme of things and Saudi’s crown prince Mohammed bin Salman responded in equal measure to Modi’s warmth.

In 2019, Crown Prince Salman announced that his country would be investing $ 100 billion in India in the next two years. And then suddenly, for no apparent reason, matters started to stall. It was easy to blame it all on the outbreak of the pandemic and the debilitating effects of the Ukraine war. But as India started to nudge closer to Russia, drawn by the promise of cheap Russian crude, the Saudis started to inch closer to China which achieved a diplomatic coup recently when it was able to persuade Prince Salman to agree to confer with sworn enemy Iran.

But it isn’t too late for the two nations to resume talks on areas where they can successfully collaborate to derive mutual benefits. Experts on both sides appear to be re-assessing the opportunities that exist. India is a large producer of fertilizers and petrochemicals and a large importer of liquefied petroleum gas (LPG). The major raw materials for fertilizer manufacture are hydrocarbon sources. In the previous financial year ended March 2022, India produced over 42 million metric tons of fertilizers. The India fertilizer market is expected to grow at a CAGR of 4.7% between 2023 and 2028, reaching a projected value of $ 1160.18 billion by 2028. The market growth is being driven by increasing demand for food production and improvements in agriculture processes.

India ranks sixth globally and fourth in Asia in terms of the global sale of chemicals. In fact, it manufactures more than 80,000 varieties of chemicals and petrochemicals and the industry employs more than two million people. The key raw materials in the petrochemical industry include products of petroleum oil refining. Petrochemical goods include ethylene, propylene, and benzene.

India is Asia’s largest exporter of petroleum products but it is also the third largest importer of liquefied petroleum gas (LPG). Last year, India imported 17 million metric tonnes of LPG, a substantial portion of which came from Saudi Arabia. Total LPG consumption in India amounted to 21,256 thousand metric tonnes during April-December 2022, up 1.8% from a year earlier.

It is obvious that India can bring a new area of relevance to Saudi Arabia. Saudi Arabia’s Basic Industries Corporation (SABIC), the associate company of Aramco, has already created enormous capacity in all these areas. Indian PSUs can partner it in creating fertiliser and petrochemical capacity in Saudi Arabia and transport the products to India or export it to third countries. A similar arrangement is possible for LPG as well.

India Versus Saudi Arabia

PPP: Purchasing Power Parity
(Source: tradingeconomics.com)

Saudi Arabia is looking for investment opportunities India. Why can’t the Kingdom participate in India’s Strategic Petroleum Reserves (SPR) Program to start with? It may take more time to crystallise ideas in other areas. In fact, India has already extended an offer to it. India’s strategic crude oil storages are located at three underground locations in Mangalore, Visakhapatnam and Padur (Udupi, Karnataka) with a total capacity of 5.33 million tonnes. All these are located on the east and west coasts of India that the refineries can readily access.

With the second phase which is under implementation, the storage capacity will reach 11.83 million tonnes. Here is an opportunity for Saudi Aramco to store its crude. India obviously will have the first right to use it. Such a gesture from the Saudi kingdom will give a new dimension to the relations between the two countries.

Saudi Arabia is already India's fourth largest trade partner (after USA, China and UAE). The future beckons and the decision-makers must grab the opportunity to build on the firm platform of trust they have already created.