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India and GCC Countries Amid COVID-19 Pandemic

Dr Prasanta Kumar Pradhan is Research Fellow at the Manohar Parrikar Institute for Defence Studies and Analyses, New Delhi. Click here for profile
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  • May 13, 2020

    The spread of COVID-19 pandemic in the Gulf Cooperation Council (GCC) countries is a cause of concern for India. It stems from the fact that India has large and varied interests in the region, which would be affected if the situation in the GCC countries continues to worsen. On its part, India has extended support to the countries in the region by providing Hydroxychloroquine tablets to Bahrain, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE); sending a 15-member medical team to Kuwait at the request of its government; and another team of 88 medical and healthcare professionals to the UAE to help the country fight against the pandemic. By quickly providing medical aid and expertise to the GCC countries, India has reinforced its image of a strong and reliable friend standing alongside in an hour of crisis. However, given the close economic link it has with the GCC countries, it will be difficult for India to insulate itself from the economic fallouts of the spread of COVID-19 in the Gulf.

    GCC is a key trade partner of India with annual bilateral trade of around US$ 121 billion in 2018-19.1 Among the GCC countries, the UAE and Saudi Arabia are the two key trade partners of India with annual bilateral trade of US$ 60 billion and US$ 34 billion, respectively.2 The disruption of industrial and commercial activities in the GCC countries would, therefore, impact the bilateral trade and commerce with India. The GCC countries have started feeling the early impact of the pandemic on their economy and are adopting several austerity measures. Saudi Finance Minister Mohammed Al Jadaan stated that the kingdom has lost 50 per cent of its oil revenues because of the fall in oil prices. He added that the country is prepared to take painful financial measures including delaying projects and reducing expenditures to tackle the economic fallouts of the pandemic.3 The Saudi Government has also allowed the private sector to cut the salaries of its employees by 40 per cent for a period of six months and thereafter the contract can also be terminated.4 Along with the slump in the oil prices, the closure of pilgrimage has also affected government’s revenues.

    In April, Dubai decided to cut administrative and general expenses by at least 20 per cent and freeze spending on construction projects.5 The tourism sector which contributes 11.9 per cent to the UAE’s GDP and creates around 745,000 jobs in the country has been badly affected.6 Qatar has also postponed several projects worth US$ 8.2 billion.7 The spread of COVID-19 in the Gulf at the time of falling oil prices further constrains their capacity to deal with the situation.

    In the current scenario, a large number of the nine million strong Indian expatriate workers are at the risk of losing their jobs in the GCC countries. Many of them want to return to India at the earliest. In April, India began the registration process for its nationals who wanted to come back to India. In response, a large number of Indians in different Gulf countries have registered themselves to fly back to the country. More than 150,000 Indian nationals have registered in the UAE alone, with 25 per cent of them wanting to come back as they have lost their jobs.8 Absorbing them in the local job market would remain a challenge for the respective state governments in the months to come. The fate of those choosing to stay back in the Gulf, in the hope that they will continue with their jobs after the worst phase is over, will depend on the state of the economy of the host countries in the post-pandemic period. As a large number of Indians work in the private sector, their chances of continuing with their employment would depend upon the capability and resilience of this sector in the Gulf region.

    India has been the biggest recipient of remittances in the world, receiving US$ 79 billion in 2018.9 More than half of its total remittances come from the GCC countries alone.10 Disruption of economic activities and loss of employment in the Gulf will affect the inflow of remittances to India. The World Bank has already made a prediction that global remittances are going to witness sharpest decline in recent years as a result of the disruptions created by the COVID-19 pandemic.11 In the event of thousands of Indians coming back from the Gulf, the inflow of remittances to India will be significantly affected.

    Prolonged pandemic situation might lead the GCC countries to strictly implement their workforce nationalisation policies. This would further affect the Indian workers in the region. Oman, for instance, has called for replacing all the expatriate workers with the locals in the government sector amidst the pandemic.12 Although this move is not specifically aimed at the Indian workers, it would potentially affect the number of Indians working in Oman.

    Thus, driven by the COVID-19 pandemic, the economic challenges for India emanating from the Gulf region are highly imminent and discernible. Although the magnitude of it remains to be seen, India will need to be prepared to face the economic challenges coming from the Gulf region.

    Views expressed are of the author and do not necessarily reflect the views of the Manohar Parrikar IDSA or of the Government of India.