How the Gulf became indispensable to India’s rise

For most of the modern era, the Gulf states’ relationship with India was limited. The Gulf was seen largely only as a place to buy oil and send workers for remittances. More than two decades after the first India-Gulf Cooperation Council political dialogue in 2003, however, the Gulf is now stitched into the fabric of India’s growth story. New Delhi’s energy security, infrastructure financing, physical trade routes, current account, defense posture and strategic hedge against a slowing China all now run through Gulf capitals.

The energy relationship is the most visible example of this. India remains one of the world’s largest crude importers and a December 2024 report by the Standing Committee on Petroleum and Natural Gas put the Gulf’s share of Indian crude imports at more than 60 percent. That share has been volatile since the closure of the Strait of Hormuz following the US-Israeli air campaign against Iran beginning in February, with New Delhi accelerating its diversification toward other routes.

The structural dependence, however, has only deepened. In February 2024, India secured its long-term gas future through a 20-year agreement signed between Petronet and QatarEnergy for 7.5 million tonnes of liquefied natural gas annually between 2028 and 2048, a contract that effectively writes Qatar into India’s energy planning for the next generation.

The Gulf provides the physical route through which Indian goods, data and clean energy will reach Europe

Zaid M. Belbagi

The relationship has also climbed up the value chain. In April 2025, India and Saudi Arabia agreed to jointly construct two oil refineries on Indian soil, anchored in Riyadh’s $100 billion investment pledge across energy, petrochemicals and adjacent sectors. Aramco is now in talks on an $11 billion refinery and petrochemical complex in Andhra Pradesh.

In 2018, the Abu Dhabi National Oil Company became the first international company to store crude in India’s strategic petroleum reserve facility at Mangaluru, an arrangement that hands Abu Dhabi commercial flexibility and grants New Delhi an emergency cushion. India and the UAE are also positioning themselves jointly as future producers of green hydrogen, with complementary national strategies aimed at the same export markets in Europe and East Asia.

The International Energy Agency expects India to become the single largest source of global oil demand growth through 2030, just as China’s demand softens.

Beyond energy, the financial dependence answers a specific Indian need. Infrastructure-led growth requires patient capital and Gulf sovereign wealth funds, with their long investment horizons, are tailored precisely to that profile. The UAE now ranks among India’s top investors, with cumulative foreign direct investment equity inflows totaling about $25 billion up to September 2025, propelled by the 2022 Comprehensive Economic Partnership Agreement and the bilateral investment treaty that came into force in August 2024. Abu Dhabi has separately committed up to $75 billion to Indian infrastructure. India and the UAE also hope to double bilateral trade to $200 billion over the next six years.

The India-Middle East-Europe Economic Corridor, announced at the 2023 G20 Summit in New Delhi, is designed to link Indian ports to Europe through Gulf rail networks, undersea cables and pipelines, with the UAE, Saudi Arabia, Jordan and Israel forming the connective tissue.

Etihad Rail has already linked Fujairah to the Saudi border, the first operable cross-GCC segment of what will become the spine of this corridor. The shrewd strategy driving this decision has become clearer with every shock to the alternative routes, such as the Houthi campaign against shipping in the Bab Al-Mandab Strait, which destabilized the Suez Canal. The closure of the Strait of Hormuz has demonstrated how exposed Asian energy and trade flows remain to a single chokepoint.

The India-Middle East-Europe Economic Corridor is being reframed in real time from an ambitious connectivity project into resilience infrastructure. For India, this matters in a way the financial and commercial channels cannot match. The Gulf provides the physical route through which Indian goods, data and clean energy will reach Europe.

As US-China tariff escalations turn overexposure to Beijing into an open risk, Gulf capitals are diversifying their Asian bets and India sits at the head of the queue. The International Monetary Fund’s April forecasts put India’s 2026 growth at 6.5 percent against China’s 3.7 percent, with India retaining its status as the fastest-growing major economy. Standard Chartered has identified India as the Gulf’s top market for sourcing, manufacturing and export. Where China offers an aging population and a shrinking workforce, India offers demographic depth, rising consumption and a strategic foothold between Asia, the Gulf and Europe.

The Gulf is not a single bloc but its two largest economies are now woven into different layers of India’s strategic posture

Zaid M. Belbagi

In January, India and the UAE signed a letter of intent toward the conclusion of a bilateral strategic defense partnership covering defense-industrial co-production, defense innovation, advanced technology, special operations, cyberspace and counterterrorism. Indian hardware including BrahMos supersonic missiles, the Akash missile system and the Tejas light combat aircraft are gaining traction in the UAE’s procurement plans. Desert Cyclone II, the second joint India-UAE military exercise, was conducted in Abu Dhabi last December with a focus on urban warfare and counterdrone operations.

The relationship has therefore crossed a threshold, now operating in the domain of security architecture. But the picture is not uniform across the Gulf. Saudi Arabia signed a mutual defense pact with Pakistan last September and Riyadh’s strategic alignments differ from Abu Dhabi’s in important ways. India’s defense partnership is strongest with the UAE, while its economic and energy partnerships run deep with both. The Gulf is not a single bloc but its two largest economies are now woven into different layers of India’s strategic posture.

Finally, India is the world’s largest recipient of remittances, drawing in a record $138 billion in 2024. The GCC accounted for 37.9 percent of that total, according to the Reserve Bank of India, with the UAE alone contributing 19.2 percent. The GCC share has receded from a peak of above 46 percent a decade ago. The Gulf nonetheless remains the single largest regional source of remittances and those inflows quietly absorb pressure on India’s current account deficit year after year.

The institutional plumbing is deepening alongside the headline numbers. This year’s operationalization of the local currency settlement system has lowered transaction costs for Indian workers in the Gulf. The diaspora is no longer only sending money home. Wealthier and middle-class nonresident Indians are increasingly channeling their savings into Indian equities and financial instruments rather than real estate, turning the Gulf into a consequential source of portfolio capital for Indian markets.

What these channels share is duration. None of them can be unwound on short notice and that separates an external partner from an indispensable one. India trades with many countries and courts capital from many more, yet it is difficult to identify another region whose presence is woven so tightly into the basics of how it grows.

• Zaid M. Belbagi is a political commentator and an adviser to private clients between London and the Gulf Cooperation Council.

X: @Moulay_Zaid