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India-Saudi trade to touch $7 bn

Bilateral trade is expected to more than double, to reach $7 bn by 2010 from the present level of $3 bn.

india Updated: Jan 24, 2006 13:17 IST

Bilateral trade between India and Saudi Arabia is expected to more than double, to reach $7 billion by 2010 from the present level of $3 billion in which the Indian textile sector will play a major role, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

"The exports of Indian textile products to Saudi Arabia will play a dominant role despite competition from Pakistan, Sri Lanka, Bangladesh and even China," ASSOCHAM said in its background paper on 'Indo-Saudi Arabia Trade Prospects'.

The Paper, which will be circulated on January 25, when the King of Saudi Arabia addresses the Indian industry, points out that India's current exports to Saudi Arabia stagger around $1.3 billion dollars while its imports from Saudi Arabia restricts within the range of $1.2 billion.

Major Indian items exported to Saudi Arabia constitute both basmati and non-basmati rice, readymade garments and machinery while imports are dominant in the areas of both organic and inorganic chemicals, metal scrap, leather and gold.

The Paper forecast that currently India's textile exports to Saudi Arabia constitute about 40 per cent of its total exports worldwide and their demand in Saudi Arabia will increase manifolds because of the price factor and smooth export transactions that Saudi Arabia provides for the Indian industry.

Although, China, Sri Lanka, Bangladesh and even Pakistan will continue to pose severe competition for Indian textile products to Saudi Arabia, India will be able to survive such a competition because of its good bilateral relations with Saudi Arabia, says the Paper.

The other areas of higher prospects that will accelerate India's exports to Saudi Arabia will include gems and jewellery, organic food products and products like meat and fish.

In all these areas of economic activities in Saudi Arabia, the Indian demand will keep increasing and thus lead to the escalation of India's higher trade to Saudi Arabia.

The Paper also says that Saudi Arabia will also import communication devices, readymade clothes, blankets, furniture, sanitary equipment, construction materials, car spare parts, medical equipment, cars, trucks and agriculture products.

The bilateral investments between the two countries will, however, grow steadily. A number of Indian firms have taken advantage of new Saudi laws and established joint ventures projects or wholly-owned subsidiaries in the Kingdom.

Several Indian companies have established collaborations with Saudi companies and are working in the Kingdom in the areas of designing, consultancy, financial services and software development.

All these activities will grow faster, and cement our business ties with Saudi Arabia, the chamber said.

India, on the other hand, will have to simplify some of its restrictions and bureaucratic hurdles to attract Saudi Arabian investments in India as our system still provides for stringent restrictions that restrict the inflow of the Gulf capital into India.

The Paper therefore has suggested that just as India has been offering sops to ASEAN countries in terms of tariff relations and simple procedures, similar treatment should also be extended to Gulf region, particularly Saudi Arabia so that their capital flies towards India, concludes the Paper.

First Published: Jan 23, 2006 15:40 IST