The Government of India has introduced SWADES, to rehabilitate workers returning from the Gulf.
India’s links with the Gulf Co-operation Council (GCC) block of Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates have strengthened in recent years. With The UAE, Saudi Arabia and Qatar, strategic and defence ties have expanded significantly, in addition to economic links.
India’s total trade with the GCC is estimated at $121 billion.
Ties between India and The GCC have witnessed a significant shift. Two important components of the relationship are remittances and oil imports from the region. In recent years, India has been looking at alternative options. It has been seeking to reduce its dependence on the Gulf. The GCC accounts for a significant proportion (34%) of India’s total oil imports.
In 2019, for instance, India received a whopping $83 billion worth of remittances, the bulk from the Gulf. Pre-Covid, there were about 8-10 million Indians in the GCC, the largest proportion being in the UAE followed by Saudi Arabia. The majority of migrants to the GCC in 2019 were from Uttar Pradesh (26%), Bihar (18%), Rajasthan (9%), Tamil Nadu (9%), and Kerala (8%). The largest percentage of immigrants in the Gulf is from the State of Kerala, though the number from other states like Telangana, UP, Bihar has been rising in recent years.
India and South Asia’s dependence upon remittances from the Gulf
In addition to India, countries from South Asia such as Pakistan, Bangladesh, and Nepal receive remittances from the Gulf, their economies being similarly dependent. In 2019, Pakistan received $23 Billion, Bangladesh $18 Billion and Nepal $8.64 billion. respectively.
Watch: South Asia faces a remittances crisis amid COVID-19 pandemic
A prime example of such dependence is Nepal, where remittances account for a whopping 27% of the country’s GDP. Nepal could see a staggering contraction of 28.7% in remittances in 2020. In Bangladesh, remittances account for 6% of the country’s GDP and the $18.3 Billion received in 2019, was equivalent to 30% of the country’s budget.
In the aftermath of Covid-19, nearly eight hundred thousand Indian immigrants in the Gulf have returned home, and Gulf countries have also given clear signals that they are likely to reduce their dependence upon expats. In this context, a number of policy decisions have been taken. In Kuwait, the decision was taken to reduce the percentage of expats from 70% to 30% of the population, risking about 800,000 Indians. In Oman, it has been decided that foreign expat workers should be replaced with locals in the government sector. This spells a very uncertain future for Indian, and other South Asian expats, especially blue-collared workers, who have been the backbone of the gulf economy.
Paradigm shifts that precede the pandemic
Even before Covid-19, the drop in oil prices had begun to take a toll on GCC countries. They had begun to give clear indications they would reduce their dependence upon oil and focus elsewhere. A look at the visions of the United Arab Emirates (UAE Vision 2021) and Saudi Arabia (Saudi Vision 2030) strongly reiterate this point. It is the intent of these countries to become post-oil economies similar to Bahrain, steering away from dependence upon oil to other sectors such as infrastructure, technology and tourism. Both countries are looking to emerge as knowledge economies.
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Kerala had already begun to think in terms of policies geared to employ workers returning from the Gulf, as well as encourage some of them to start their own enterprises. Post Covid-19, the state government has developed investor-friendly policies to encourage entrepreneurship and investment specifically in sectors like agriculture.
In addition to Kerala, other states with significant numbers of immigrants in the Gulf will need to adapt to this dynamic. The Government of India has introduced SWADES to rehabilitate workers from the Gulf. The program will be working on skill mapping of migrants coming back to India, with the intention of assimilating them back into the Indian workforce.
The prospects for proper implementation, however, look grim. Other South Asian countries are trying to draft policies to provide temporary relief to blue-collar workers and their families in the midst of the pandemic as well as to ensure that they can get back on their feet economically. In Bangladesh, an $85 million fund has been incepted to help returned migrants (they are offered a soft loan without collateral). The aim of this loan is to help workers tide over the current crisis and to look for employment opportunities. The government is also encouraging returning workers to start initiatives that help generate employment.
What is interesting is that while blue-collar workers are suffering, GCC countries like the UAE are seeking to attract professional workers in order to implement their economic vision. It remains to be seen whether the GCC countries will seek to attract South Asian professionals from other parts of the world, especially countries like the US, where they are facing an uncertain future. In recent years, GCC countries like the UAE, Bahrain, Kuwait and Saudi Arabia have emerged as preferred destinations for engineers, IT professionals and bankers from South Asia.
The need for South Asian Co-operation council mirroring the GCC
There is little doubt that India and and other regions of South Asia will be impacted by the reduction of remittances from the Gulf and will need to adapt. States like Kerala that are heavily dependent upon remittances will be the most impacted by this change, being forced to respond with imaginative policies. South Asia faces a common threat from the sudden drop in Gulf remittances, and this can pave the way for greater cooperation between India and other South Asian countries at the SAARC level since other countries in the region are also likely to be severely impacted.
SAARC member states can try and find common ground and come up with collective policies to deal with this situation. This could pave the way for the exploration synergies in other areas. It is also important for GCC countries to realize that an excessively inward looking approach will not benefit their economies, and they need to guard against being excessively insular.
The Article is co-authored by Madhav Grover, a Student at the Warwick Law School, UK.