Author : Kabir Taneja

Originally Published 2020-04-25 11:01:33 Published on Apr 25, 2020
Eight million Indians work in the region and send over $50 billion in remittances. This will change
West Asia is staring at an economic crisis. India has to be prepared

Often jocularly called “India’s fifth metropolis” or “India’s cleanest city”, Dubai is the economic power centre of not just West Asia but increasingly the global financial system as well. There are over 300 weekly passenger flights between Dubai and various Indian cities, showcasing its importance, and of the larger region, to the Indian economy and society. Of the 3,336 coronavirus disease (Covid-19)-positive Indians currently abroad, 2,061 are reportedly in the Gulf.

However, larger problems await New Delhi in the extended Gulf region with the global economy heading towards a critical downturn. Some analysts suggest that the crisis will be bigger than the Great Depression.

Fractures have already started to show in the Gulf economies, as markets crash, lockdowns are imposed, businesses stall, and an oil price war plays out in the Organization of the Petroleum Exporting Countries (Opec) and beyond. Over eight million Indians work in the larger West Asian region, with the United Arab Emirates (UAE) and Saudi Arabia taking the bulk of those numbers. These eight million-plus workers are also responsible for sending more than $50 billion in remittances back to India annually. Now, the World Bank predicts a 23% overall drop in remittances this year.

Estimates suggest that the Gulf economies may need in excess of $40 billion in this fiscal infused into the regional financial ecosystem to cushion the Covid-19 blow. The Indian skilled and semi-skilled workers in the region will feel the significant fallout of this, as they lose contracts with major events in the region such as DubaiExpo 2020 and others being postponed till next year.

Kerala, which has over 1.5 million of its citizens working in the Gulf, is expecting a return of up to 400,000 of its people soon after the lockdowns are removed due to the pandemic fallout. Migration figures had started to slow down over the past few years, with a record number of semi-skilled labour returning. The reasons behind this trend have varied, from wage stagnation, cost of living, inflation, oil prices, migration policies of the Indian government and a shift towards the requirement of more skilled labour than semi-skilled. Even in Dubai, once synonymous with general Indian labour, the Indian chief executive officer and the Indian engineer are now more sought after.

Beyond the immediate crisis, the pandemic is also certain to put a ner in the process of regional reforms. For example, Saudi Arabia — with its king-in-waiting, Mohammed bin Salman (MBS)’s grand plans of opening up the Saudi economy in efforts to wean the kingdom away from its reliance on oil — will certainly experience turbulence, putting the country’s “Vision 2030” plan under duress and possibly draining foreign exchange reserves.

With oil prices stunningly falling below $25 per barrel in the recent past due to both a crash in global demand reeling from the pandemic and disagreements between Saudi Arabia, the United States and Russia over crude production, the political and economic faultlines in an already conflict-ridden neighbourhood will deepen. While it is true that these low oil prices are good news for New Delhi, it will come as a bounty for the Indian government only if the economy is thriving, and consumption is robust. The latest GDP data from the International Monetary Fund for India’s growth over the next year puts the figure at 1.9% in the current fiscal. For now, the biggest boon of these low prices is only in topping up the country’s strategic crude reserves cheaply.

It is also imperative to remember that while the UAE and Saudi Arabia take a lot of the spotlight when it comes to trade and migration issues between India and West Asia, smaller Gulf nations such as Kuwait, Oman and Bahrain also hold a significant stake. Kuwait, where New Delhi recently sent medical teams to help fight the pandemic, is home to nearly one million Indians. Together, these three small countries alone have around 1.5 million Indians as residents and workers. Beyond this, even conflict-ridden states like Iraq have Indians working as oil workers, truck drivers and logistics handlers — there were over 17,000 working in the country as of last year.

A significant reverse-migration in the post-Covid-19 era will add extra strain on the Indian economy, as the returning workers will add pressure on an already faltering job market along with the exchequer losing out on remittances that could go into billions of dollars.

India’s outreach during the pandemic towards West Asia, from Saudi Arabia to Israel to Iran has been robust. However, the government should also use this crisis to empower states to have a larger say on migration and economic resettlement issues as part of the Centre’s foreign policy. The time is opportune to prepare and act collectively.


This commentary originally appeared in Hindustan Times.

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Author

Kabir Taneja

Kabir Taneja

Kabir Taneja is a Fellow with Strategic Studies programme. His research focuses on Indias relations with West Asia specifically looking at the domestic political dynamics ...

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