The recent Middle East Investment Forum in Sharjah underscored the deepening economic relationship between India and the Gulf states. As US President Donald Trump’s tariffs erode the competitiveness of Indian exports, Indian firms are increasingly turning to the United Arab Emirates as a bridge to American markets, strengthening cross-regional ties.

As a result, what was once a relationship based on the exchange of oil for labour has evolved into a partnership spanning technology, finance and security. The Gulf and India are no longer merely trading partners; together, they are spearheading a geoeconomic realignment and redrawing the map of global trade.

The relationship between India and the Gulf has deep historical roots. For centuries, caravans and merchant ships, carrying spices and textiles, established enduring cultural and commercial ties between the two regions. Moreover, under the British Raj, much of the Gulf was administered from New Delhi.

In the decades following India’s independence, ties became largely transactional: oil flowed one way, labour the other, and wealth moved in both directions. Only recently have India and the Gulf states rediscovered the strategic value of their historic partnership and begun to reimagine it for the 21st century.

By the mid-2010s, the two sides’ strategic priorities began to align. In 2015, Indian Prime Minister Narendra Modi visited the UAE – the first such visit in 34 years – as Gulf leaders like UAE President Mohamed bin Zayed Al Nahyan and Saudi Crown Prince Mohammed bin Salman launched ambitious plans to diversify their economies beyond hydrocarbons.

This convergence was driven by domestic shifts. The Gulf states recognized the risks of fossil fuel dependence and began channelling resources into renewables, tech and tourism. Meanwhile, India – racing to industrialize and digitize – found eager partners in the Gulf with the necessary capital and ambition. India sought investment and expertise, and the Gulf sought scale and new avenues for growth.

What followed was a period of intense economic and diplomatic engagement, from the establishment of the I2U2 partnership – which includes India, Israel, the UAE and the United States – to Gulf leaders honoured at India’s national celebrations. The numbers speak for themselves: India-UAE trade has risen to US$100 billion this year, while India-Saudi trade reached US$43 billion in 2023-24.

Equally important is where that capital is flowing. Sovereign wealth funds like Abu Dhabi’s Mubadala and Saudi Arabia’s Public Investment Fund have invested heavily in Indian start-ups, infrastructure and green-energy projects. These are not one-off transactions but long-term bets on the future of the geopolitical alliance.

Building on this momentum, the revitalized India-Gulf axis is now looking outward. The proposed India-Middle East-Europe Economic Corridor promises to reshape global trade routes, linking Indian ports to the Mediterranean through Gulf rail networks and establishing modern, resilient supply chains alongside the Suez Canal.

In this sense, the partnership represents a modern-day equivalent to the old spice routes. But the spices have been replaced by advanced technologies, and the caravans have given way to container ships, fibre-optic cables and digital payments. India’s Unified Payments Interface is crossing borders, while undersea power cables and green hydrogen projects are laying the groundwork for a shared energy and digital ecosystem.

The fledgling partnership is now expanding into Africa. The UAE has pledged over US$100 billion in investments across the continent, while Saudi Arabia has announced US$41 billion in development initiatives. India, for its part, brings decades’ worth of goodwill – built through peacekeeping missions, development projects and a vibrant diaspora network – that complements Gulf capital and amplifies the bloc’s influence.

Emerging trilateral ventures, with Emirati capital financing infrastructure built by Indian firms in Africa, represent a compelling alternative to the great powers’ projects on the continent, which often lead to debt traps and come with political strings attached. For medium-sized economies wary of being caught in the middle of the US-China rivalry, the India-Gulf alliance offers infrastructure without unsustainable debt, technology partnerships without hidden agendas, and security cooperation without foreign interference.

The India-Gulf partnership also shows how digital tools can drive development. By combining India’s affordable, open-source digital architecture with Gulf capital, the partnership is delivering modern infrastructure, inclusive digital IDs and climate-conscious ventures that generate well-paid local jobs.

But this is not non-alignment 2.0. Instead, the India-Gulf story is one of multi-alignment – a pragmatic geopolitical strategy rooted in shared interests, mutual benefit and autonomy.

To be sure, the alliance faces powerful headwinds: regional rivalries, domestic frictions and global volatility. Yet the confidence is unmistakable: no longer bound by others’ strategies, India and the Gulf states are charting their own course.

If their partnership endures, it will be more than a bilateral success. The India-Gulf nexus could become a new centre of gravity in an increasingly multipolar world – and a template for other emerging economies seeking open-source technology, resilient trade and broad-based prosperity without subordination.

Vivek Agarwal is a country director for India at the Tony Blair Institute for Global Change, and Alexander George is a senior director at the Tony Blair Institute for Global Change.

Copyright: Project Syndicate