India and Saudi Arabia to Deepen Trade Relations

India-Saudi Arabia Trade Ties: Beyond Energy Reliance?

India supplied $517.5 million worth of textiles and apparel to Saudi Arabia in 2024, capturing an 11.2% share of the Kingdom’s total textile imports. This number might look insignificant against the mammoth $41.88 billion bilateral trade between the two nations in FY 2024-25, but it is telling. It hints at a shift—albeit modest—from a trade basket disproportionately dominated by crude oil to more diversified sectors like textiles, technical fabrics, and petrochemical-based products.

Earlier this month, during a high-level meeting between the Ministry of Textiles and a Saudi delegation, both sides underscored the potential for further cooperation in this domain. India’s growing capabilities in man-made fibre (MMF) and technical textiles were described as complementary to Saudi Arabia’s strength in petrochemicals. But as with all such declarations, intent needs to translate into institutional action, financial prioritization, and geopolitical alignment. The challenge lies as much in reshaping entrenched trade patterns as in navigating the complex politics of the Indo-Saudi relationship.

The Policy Instrument

At the center of this discussion lies the strategic partnership framework cemented by the 2019 Strategic Partnership Council (SPC) Agreement. While primarily envisioned as a mechanism covering energy, security, and investment, the SPC structure is increasingly extending into newer domains like regional supply chain integration and defence manufacturing. The latest textiles-focused dialogue marks an incremental but noticeable shift in priorities.

Trade imbalances persist, with Indian exports standing at $11.56 billion in FY 2023-24 compared to $31.42 billion of imports. The principal import remains crude oil—India imported 33.35 MMT of crude from Saudi Arabia last year, accounting for nearly 14.3% of total imports. While energy security has driven the bilateral relationship for decades, agreements targeting downstream diversification—whether through textiles, technical fabrics, or defence—are being framed as pathways to redress trade deficits.

Yet, no substantial budgetary commitment was unveiled in the recent dialogue. Nor is there clarity on the regulatory or tariff interventions needed to encourage Indian textiles to penetrate further into Saudi Arabia’s $4.6 billion annual apparel import market. Saudi Arabia’s Vision 2030, an ambitious modernization blueprint, acknowledges the need to localize industrial inputs and diversify trade partnerships. Whether this syncs meaningfully with India’s Make in India initiative remains to be seen.

The Case For Stronger Trade Ties

The rationale for deepening trade relations with Saudi Arabia finds justification in cold economic logic. India is Saudi Arabia’s second-largest trade partner, and the Kingdom, conversely, is India’s fourth-largest. As economies diversify post-pandemic, the Gulf Cooperation Council (GCC) is gently but visibly repositioning its trade priorities eastward—away from Western stagnation toward Asian dynamism—a trend India must capitalize on.

Textiles and technical fabrics offer particular promise. India aims to boost global MMF exports from its current 2% share to 10% by 2030. Given that Saudi Arabia is among the global leaders in petrochemicals—key raw materials for MMF—this creates a natural complementariness. Moreover, the petrochemical-textile nexus helps cushion the trade deficit. Every dollar of Indian exports to Saudi Arabia in sectors like textiles and apparel offsets the import of crude oil or other petrochemical derivatives.

Global precedents underscore this opportunity. Consider Vietnam, which used targeted free trade agreements with South Korea to significantly expand upstream apparel exports. Vietnam went from $500 million in textiles imports from South Korea in 2010 to $2.4 billion a decade later. Targeted policy frameworks, incentives for joint ventures, and tariff calibrations paved the way—choices that India and Saudi Arabia might emulate.

The Case Against Overreach

But optimism can obscure structural pitfalls. Saudi Arabia’s Saudization policy—designed to replace foreign workers with domestic labor—creates inherent uncertainties for Indian exporters and industries engaging the Kingdom. India’s 2.7 million-strong diaspora in Saudi Arabia faces wage disputes and selective compliance with labor protections. Regulatory opacity complicates the already fragile ecosystem for small and medium enterprises.

The economic argument alone doesn’t stand immune to geopolitical complications. Saudi Arabia’s history of aligning with the Organisation of Islamic Cooperation (OIC) against India on sensitive issues like Jammu and Kashmir clouds its narrative as a neutral economic partner. While political dependence on Saudi oil makes India diplomatically cautious, this imbalance hardly incentivizes Riyadh to meaningfully align trade agreements in New Delhi’s favor. Furthermore, Pakistan’s robust lobbying within the OIC, occasionally backed by Saudi endorsements, threatens bilateral goodwill.

Finally, questions around institutional follow-through linger. Indian diplomacy is often hobbled by fragmented inter-ministerial coordination, and Saudi bureaucracy is infamous for delays in implementing bilateral commitments. Without concrete timeframes, structured financing mechanisms, and transparent dispute resolution frameworks, declarations like the recent textiles cooperation dialogue risk becoming just another aspirational footnote.

What Others Did: Lessons from Indonesia

Indonesia presents a strikingly relevant parallel. Also an emerging economy heavily reliant on Gulf region energy imports, Indonesia recalibrated its trade dynamic with Saudi Arabia post-2015. Through the Indonesia-Saudi Arabia MoU on Trade and Investment, Jakarta leveraged reciprocal investments in downstream refining industries and textiles manufacturing. Over five years, Indonesia narrowed its trade deficit with Saudi Arabia from $5 billion to $3 billion—not by reducing energy imports but by incentivizing exports in niche industries like processed textiles and halal-certified products.

India could also push for a structural framework addressing non-tariff barriers, much as Indonesia did to simplify certifications for food products and textiles entering Saudi markets. Whether Saudi Arabia, routinely rigid on regional tariffs, entertains these provisions with India remains a key question.

Where Things Stand

To sleepwalk towards deeper India-Saudi economic integration would be folly. Bilateral trade might diversify at the margins—apparel or defence—but strategic dependencies on crude oil imports remain firmly entrenched. Saudi Arabia simply does not need India as much as India needs Saudi Arabia.

That said, incremental steps in textiles could mark a tentative departure from energy-locked bilateralism if accompanied by systemic safeguards. For India, the larger ambition should not just be advancing trade volumes but restructuring trade asymmetries. The success—or failure—of the textiles dialogue will serve as a barometer for India’s ability to play a simultaneously economic and geopolitical balancing act.

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