📰India and the Middle East

IIndia’s ties with the Middle East are often simplified to oil deals and controversial labor agreements to build skyscrapers and gilded palaces in the Gulf. The Gulf is no longer just a fuel stop or a labor market; it’s becoming a political stage where India is auditioning for great-power status.

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Macro

• India plans to keep importing Russian crude despite U.S. tariffs and trade talks, with refiners expecting strong November–December demand. Flows dipped to two-year lows after U.S. pressure and supply disruptions, but ample Urals supply and easing U.S. pushback should lift imports.

• BlackRock says Indian bonds are poised for a rally as Fed rate cuts boost foreign inflows, with India’s strong domestic growth and limited U.S. export reliance adding to appeal. Low foreign ownership and wide yield spreads offer room for gains.

• India responded cautiously to Saudi Arabia’s mutual defense pact with Pakistan, saying Friday it expects Riyadh to respect “mutual interests and sensitivities.” The deal, signed Wednesday, could give Saudi Arabia a de facto nuclear shield via Pakistan, analysts noted.

• India’s central bank is expected to back keeping its current 4% headline inflation target, within a 2–6% band, for the third time in a row. Sources said stakeholders favored headline inflation over core, with upcoming CPI revisions reducing food-driven volatility.

• India’s Commerce Minister Piyush Goyal is expected to visit Washington soon for trade talks, ET Now reported citing PTI. The trip comes as New Delhi and Washington work to ease recent strains in their bilateral economic relationship.

• The Indian rupee ended the week nearly flat at ₹88.09/$, up 0.2% weekly. It saw sharp swings, hitting 87.72 before the Fed’s decision, then retreating near record lows as stronger U.S. yields offset the Fed’s rate cut. Slight weakness may linger.

Equities

• Mercantile Ports & Logistics has launched legal action against its lenders after refinancing talks collapsed, alleging unfair treatment. The Mumbai-area port operator said a third party also bid for its debt, further complicating efforts to resolve the standoff.

• Adani Group stocks surged $8.5 billion (₹748.9 trillion) in value, their best day since May, after SEBI dismissed some Hindenburg allegations. All 10 firms rallied, led by Adani Enterprises’ 5% jump, though shares remain below pre-2023 short-seller report levels.

• Urban Company, India’s largest home-services provider, plans to expand instant services that can be delivered within an hour, CEO Abhiraj Singh Bhal said. The push follows its blockbuster IPO debut and aims to meet rising demand for on-demand convenience.

• GK Energy’s IPO was fully subscribed on its opening day, boosted by strong retail demand and optimism over India’s clean energy growth. Analysts cited attractive valuations and its leadership in solar-powered agricultural pump systems as key drivers of interest.

• The oneworld Alliance is exploring adding an Indian carrier to its 15-member network, CEO Nat Pieper said. With India’s aviation market expanding rapidly, the group sees strong potential for a local partner to enhance global connectivity.

Alts

• High-frequency trading firms in India are offering interns record pay, with IMC Trading giving up to $14,000 (₹1.25 million) a month and Quadeye $8,500 (₹750,000). Despite tighter regulations and probes, competition for top talent remains fierce as algorithmic trading surges.

• India’s sugar mills are set to export about 775,000 tons this season, missing the government’s 1 million-ton quota, as cheaper Brazilian supplies weigh on global prices and cut Indian competitiveness. The shortfall comes despite efforts to offload surplus stocks.

Policy

• The RBI is pressing banks to cut retail service charges on products like debit cards, late fees, and balance violations. Aimed at protecting low-income customers, the move threatens lucrative bank fee income, which rose 12% last quarter.

• India’s central bank has urged states to stagger borrowings across maturities and provide clearer fundraising plans. With states set to borrow a record $136.2 billion (₹12 trillion) in FY26, rising yields have already disrupted bond markets by 30–60 basis points.

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India and the Middle East: From Oil Buyers to Power Brokers

India’s ties with the Middle East are often simplified to oil deals and controversial labor agreements to build skyscrapers and gilded palaces in the Gulf. The Gulf is no longer just a fuel stop or a labor market; it’s becoming a political stage where India is auditioning for great-power status. Trade corridors, investment pacts, and even defense alignments are now part of the story, pulling India deeper into the region’s shifting balance. And here’s the catch: for decades, Delhi prided itself on being a “friend to all” in West Asia. Today, that balancing act is harder to maintain, and the cost of getting it wrong is much higher.

Historically, India’s relationship with the Gulf and the broader Middle East was shaped by necessity. Post-independence, New Delhi relied heavily on oil imports (from what were often unstable suppliers), and waves of migration to the Gulf underpinned remittances, employment, and economic freedom. The classic triangular script was simple: the region provided India with energy; India provided manpower; and both benefitted from trade in staples like spices, textiles, and in modern times, pharmaceuticals and machinery.

Over the past decade, especially, that script has evolved. Under Modi, India began pushing more aggressively into diversified economic ties: things like clean energy, food security deals, fintech cooperation, and investment treaties. India-UAE relations are the model many look to: CEPA (Comprehensive Economic Partnership Agreement) signed in 2022 has helped cause non-oil trade to surge, bilateral investments to rise, and trade overall to cross the $100 billion (₹8.8 trillion) mark in FY 2025. At the same time, India has made moves to stretch its strategic footprint: the India–Middle East–Europe Economic Corridor (IMEC) is an effort to knit connectivity from India through the Gulf to Europe, bypassing chokepoints and aligning more of trade, logistics, and geopolitical strategy in Delhi’s favour.

There are also new tensions that underscore the shifting balance. The recent Saudi-Pakistan defence pact, where Riyadh and Islamabad agreed to mutual defence obligations, rekindled old sensitivities for India. India’s response has been diplomatic but firm: emphasising “mutual interests and sensitivities” with Saudi Arabia, and noting its deepening strategic partnership with Riyadh including energy cooperation and joint petrochemical or refinery sector dialogue. This is significant, not merely a diplomatic nuance but a reminder that India’s Middle East relationships no longer operate in a vacuum. Regional defense pacts, security alignments, and the changing U.S. posture in the Gulf all affect Indian strategy.

What all of this adds up to is a turning point. Economically, India is diversifying its dependencies. Oil remains central: Saudi Arabia and Iraq remain large suppliers, and the Gulf still supplies over half of India’s crude imports. But beyond hydrocarbons, Delhi is betting on things like supply chain resilience (factories, trade corridors), alternative energy, food security (investment from Gulf states into India’s agriculture), and using its diaspora (8–10 million strong in the Gulf) not just as remittance senders but as bridges for investment, ideas, and influence. Politically, India is more willing to partner with Israel, Saudi Arabia, UAE, Qatar etc., in multilateral security, counterterrorism, and supply chain initiatives. Its policy stances have shifted: less ideological distance, more transactional alignment, and an appetite for institutional mechanisms like corridors and treaties.

Still, none of this is without risk. For one, the balancing act is getting harder. India must avoid being seen as aligned too closely with one bloc at the expense of others (Iran, for instance), especially as regional tensions escalate. The new Saudi-Pakistan defence pact could put pressure on India to either distract more diplomatically or deepen its own security infrastructure in the Gulf, which will cost political capital. Also, rapidly increasing economic interdependence means exposure: disruption in energy, geopolitical instability in the Gulf (e.g. spillovers from Israel-Iran tensions), or volatility in oil prices, will ripple back strongly to India’s macroeconomy.

Looking ahead, the future of India-Middle East relations seems likely to follow three intertwined trajectories. First, deepening economic corridors and infrastructure linkages. Projects like IMEC are emblematic of this. India is building deep-water ports, expanding rail and road connectivity at its western coast, exploring rupee-dirham settlement mechanisms, and trying to draw investment in clean energy, tech, and food supply chains. These will give India more control over logistics, reduce dependency on intermediaries, and improve trade efficiency.

Second, a more institutionalised defense and strategic component. India is likely to expand joint military manufacturing, intelligence sharing, maritime cooperation, and even coordination in regional security dialogues. While India still avoids formal alliances (in part due to non-aligned legacy, in part domestic politics), the lines are getting blurrier: shared strategic threats (terrorism, supply chain security, regional instability) are pushing cooperation. India’s reactions to agreements among other Middle East actors (like the Saudi-Pakistan defence pact) already show it is watching closely and ready to calibrate its policy accordingly.

Third, soft power and diaspora will remain levers. The Gulf diaspora remains a cushion and conduit for influence. Remittances matter. Cultural ties, religious pilgrimage (especially to Saudi Arabia’s Hajj and Umrah), and education exchanges all of these help India retain goodwill even in uneasy moments. But increasingly, the diaspora also expects investment, employment, and returns. India will need to deliver more than nostalgia: concrete opportunities, business ties, and legal protections.

What does this mean for India’s global positioning? Quite a bit. If India successfully builds stronger economic, political, and strategic ties in the Middle East, it gains something rare: a platform to project power not simply across its neighbourhood, but across the Indo-Pacific and Europe. It softens security gaps (energy and logistics), strengthens foreign investment inflows, and gives India wiggle room in global diplomacy (e.g. balancing U.S., China, Russia interests in the region).

On the economic front, the numbers suggest the promise is already materialising. India-UAE non-oil trade aimed at $100 billion (₹8.8 trillion) in 3-4 years is one such marquee target. Bilateral investment flows are rising. Joint ventures in infrastructure and energy are multiplying. And India is no longer just a buyer of oil or manpower, but increasingly a partner in infrastructure, clean energy, trade finance, and strategic connectivity.

If India wants to make this shift durable, it must focus on consistency and institutional depth. That means ensuring that trade corridor projects aren’t just MoUs, but get built; that investment treaties provide protection, that regulatory alignment (tariffs, customs, logistics) follows through; that energy supply contracts include diversification and contingency; and that security cooperation is anchored in both political will and technical capacity.

All told, India-Middle East relations have entered a new era, not just transactional, but strategic. The shift is well underway, and its breadth suggests this is more than diplomacy for show. For India, the Middle East is no longer merely a region of necessity; it is becoming a region of opportunity. Markets, supply chains, energy, and strategic posture are all being recalibrated. And in a world where geography meets geopolitics, that recalibration may define India’s next decade on the global stage.

See you Monday.

Written by Eshaan Chanda & Yash Tibrewal. Edited by Shreyas Sinha.

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