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India Rides Gulf Wave

India Rides Gulf Wave

September 18, 2025 • Estimated Reading Time: 11 minutes

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Good Morning. For years, India’s trade relationship with West Asia only made one think of oil. Now it’s shifting to contracts and order books. From L&T bagging megaprojects to jewellery chains and fintech startups planting flags, Indian firms are chasing the region’s trillion-dollar transformation. The question is whether they can scale up fast enough — before global giants crowd them out.

And in one of the most anticipated overnight news developments, the US Federal Reserve cut rates by 0.25% to 4.00%-4.25%, citing labour market weakness and persistent inflation, and signalled two more cuts in 2025. Newly appointed Governor Stephen Miran was the lone dissenter, favouring a larger cut.

Meanwhile, Indian shipments to the US see a sharp drop in August amid tariff chaos.

DECODE THE NEWS

India Inc Rides West Asia’s Trillion Dollar Transformation

By Amritha Pillay

What?

For every Rs 100 worth of orders that engineering giant Larsen & Toubro (L&T) booked in the first quarter of FY2025-26, nearly Rs 40 came from West Asia.

It’s a statistic that tells a bigger story. L&T is not an exception. Indian firms across industries are weaving themselves into the region’s attempt to reinvent itself beyond oil.

From tech firms, consumer giants to jewellery brands, Indian firms are increasingly setting up shop in West Asia.

For years, India’s ties with the countries in the region have been dominated by oil imports and migrant Indian labour. But now things are changing.

Why?

Flush with wealth and eager to diversify, countries like Saudi Arabia, the United Arab Emirates (UAE) and Qatar are setting up cities in the desert, and opening up their economies to foreign firms.

For Indian firms, it's both a massive opportunity and a competitive space.

Indian business’s interest in West Asia can be viewed in two baskets – the initial move-ins by core sector companies to tap the region’s infrastructure, energy and real estate boom, and later those from the consumer, start-up and finance economy, lured by a growing consumption market and regulatory ease.

What Next?

The scale of ambition is staggering. Saudi Arabia’s Vision 2030 blueprint. The NEOM city alone, being built in Tabuk Province in Saudi Arabia, which is supposed to be high-tech and sustainable and only powered by nuclear energy, has a budget of $500 billion.

The state oil producer Aramco is spending another $100 billion in developing its Jafurah gas project. In its immediate neighbourhood, the liquified natural gas (LNG) company, Qatar Energy is spending multi-billion dollars to double its LNG prospects. UAE plans to spend more than $150 billion by 2050 to expand clean energy sources, while Oman has its own multi-decadal vision plans of development.

For Indian companies, this spending spree has translated into contracts. India is not the only country jumping on West Asia’s reinvention bandwagon. Cashing in on this growth also presents considerable challenges from other big, multinational names, fighting for the same pie.

How can India keep up?

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CORE NUMBER

$6.7 billion

This was the value of India’s exports to the US in August 2025, down 16.3% from July’s $8 billion — the sharpest monthly fall this year, according to Global Trade Research Initiative (GTRI).

Why It Matters: The drop reflects the blow from escalating US tariffs, which surged to 25% on August 7 and doubled to 50% by August 27, eroding the competitiveness of Indian goods.

The Slide: July exports had already slipped 3.6% month-on-month, following a 5.7% fall in June. August marked the fourth straight decline, reversing May’s brief growth spurt.

Expert Speak: “The slide in exports closely tracks the rapid escalation of tariffs … September could show an even steeper fall, as it will be the first month fully exposed to the 50% rate,” said Ajay Srivastava, founder, GTRI.

FROM THE PERIPHERY

Ties Over Tariffs

The European Commission on Wednesday outlined plans to expand cooperation with India in defence, technology and trade, even as tensions persist over New Delhi’s close ties with Moscow. Brussels and New Delhi are in the final stretch of free trade agreement talks, aiming for a deal by year-end, Reuters reported.

Backstory: Relaunched in 2022, negotiations have accelerated in response to US President Donald Trump’s tariff push, with the EU also pursuing pacts with Mexico, Mercosur and Indonesia.

What's Next? While India has boosted Russian oil imports and joined Russian-led military exercises, EU foreign policy chief Kaja Kallas stressed the bloc would not push India “into Russia’s corner.” The EU paper identifies India as a strategic partner for supply chains, green hydrogen, defence and innovation, reflecting its rise toward becoming the world’s third-largest economy by 2030.

EV Makers Clash With Suppliers.

India’s electric two-wheeler makers are clashing with suppliers over rare-earth magnets, a core component of EV motors. Under FAME-II, which the government launched in 2019, firms get subsidies if they meet a 50% localisation norm. But rare-earth magnets are almost entirely imported from China, making the rule hard to meet.

Catch Up Quick: Manufacturers want temporary exemptions to keep EVs affordable, while suppliers insist that relaxing norms will stall India’s push for self-reliance.

Pivot: The standoff reflects a bigger dilemma: balancing rapid EV adoption with building a domestic supply chain.

Ozempic Out, Generics In.

Indian pharmaceutical companies are preparing for the expiry of patents on Novo Nordisk’s weight-loss drugs Ozempic and Wegovy, expected in 2026. Firms such as Dr. Reddy’s, Macleods, Granules India, and Torrent are setting up facilities to produce semaglutide, the active ingredient, while smaller manufacturers are also scaling up capacity.

By the Numbers: The global market for these therapies could reach $94 billion by 2035, creating a significant opportunity for generic players.

The Twist: However, producing semaglutide at scale is technically complex, and Indian firms are likely to face strong competition from Chinese suppliers that already dominate the global active pharmaceutical ingredient (API) supply chain.

Trade Talks Progress.

India and the US held trade talks this week that New Delhi described as “positive” and “forward-looking.”

Context: A US delegation led by Assistant Trade Representative Brendan Lynch met Indian officials headed by Chief Negotiator Rajesh Agrawal in New Delhi. Both sides agreed to intensify efforts toward an early, mutually beneficial trade agreement.

Implications: The meeting took place after President Donald Trump adopted a more conciliatory tone following the US’s punitive tariffs on India over oil purchases from Russia. But major issues like US demands for access to the Indian agriculture and dairy sectors remain unresolved.

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