Will Gulf dream turn sour for Indians?

For majority of young resident Indians, flying overseas and settling abroad is the first ambition. Careers like civil services whose members decide fate of the country in long-run, and domestic IT jobs come next. And they are the choices made by those who fail to land in a lucrative job overseas.

With the cream of India's talent migrating overseas in search of high-valued currencies, we rarely get to see talented youngsters in elite civil services. Of course, as always, there are exceptions to this rule, but that's different story altogether.

Nonetheless, choices for those Indians who are eager to convert their status into NRI (Non-resident Indian) are far and wide. From Australia in this part of the world to Canada on the other side with the US and the UK, the dream destinations of every living immigrant, thrown in, there are plenteous opportunities.

However, every Indian wants to settle in the US and the UK if given a chance. But that's not possible because only well-educated people can survive and make a decent living there.

Overseas-bound Indians got a shot in the arm when the Gulf countries opened doors even for uneducated as the oil-rich region was - and is - in need of people to do manual labour and work as domestic servants. Consequently, in the last two decades, the Middle East replaced the US as the top destination for Indians going abroad.

According to the 2015 UN data, India now has the world's largest Diaspora with 15.6 million (1.56 crore) Indian-born people residing outside the country. And majority of them are in the Gulf. In fact, over two million people moved overseas in the past five years alone.

But do you know which country accounts for the largest number of NRIs? It's the United Arab Emirates (UAE) which comprises seven emirates (kingdoms) including the much-sought after Dubai. More than 35 lakh Indians live in the UAE, making up 30 per cent of its total population. Of course, the US comes second with a population of two million Indian-born people.

The positive dimension of the strong Indian Diaspora is that it brings cheers to Indian economy, though the cheaper Indian currency hits locals hard. The World Bank data shows India has received a whopping $62.7 billion in NRI remittances during 2016. But the NRI inflows registered nine per cent fall from $68.9 billion in 2015, largely due to fall in oil prices and fiscal tightening in the oil-rich countries across the Middle East.

However, shrinking opportunities in the Gulf region and increasing protectionism in the US, don’t seem to deter Indians from planning for an overseas life. A recent report released by the International Organisation for Migration (IOM), an UN body, rated India as a country with second highest number of adults planning to migrate.

The report says 48 lakh people in India are ready to fly out in search of green pastures. Strife-torn Nigeria topped the list with 51 lakh people there expressing their desire to move away from that country in a year.

Will the Gulf countries be able to support such a large Indian population in long-run? It doesn't look like so. Most of these countries which heavily depend on petrodollars for sustenance are already reeling under economic stress as crude oil prices have fallen to historic lows. Crude oil price was at a record high in July 2008 when it reached $147.27 per barrel.

Thereafter, the price was on a downward spiral, falling to $22.48/bbl, less than one-sixth of its record high, in January 2016. Though the price moved up for some time and reached $110.48 in June 2014, it took the downward curve yet again, leaving the Gulf economies in a lurch. At present, crude oil (OPEC reference basket) is priced at around $46.

The adverse impact of low oil prices is already visible with countries like Saudi Arabia sending back thousands of foreign workers. Furthermore, tax-free salaries are the main incentive for those working in Gulf countries, but Saudi Arabia began collecting what it calls family tax.

Under this, every family member of a foreign employee or overseas citizen doing business there, is required to pay 100 Saudi riyals (nearly Rs 1,700) a month as family tax. The oil-dependent countries will obviously search for more such avenues to fill their coffers if the oil prices don't go up.

And, going by the current global trends, it is very unlikely that oil prices will go up to the previous peak levels anytime soon. The changing patterns of global energy consumption offers some explanation on why crude prices will continue to remain low in future. Gradually, the world is moving away from fossil fuels and instead focusing on clean energy sources including renewable energy such as solar and wind.

This apart, the global petroleum industry that funnels $700 bn into the coffers of oil producing nations every year is now facing existential threat from the growing popularity of electric vehicles. A recent research note from Bloomberg New Energy Finance sees over 540 million electric cars plying on the roads worldwide by 2040.

These vehicles will reduce oil demand by a whopping 8 million barrels, a lot higher than the current combined output of Iraq and Iran. OPEC is not blind to this either. The apex body of petroleum producing countries revised its 2040 forecast to 266 million electric vehicles from 46 million it anticipated a year ago. The impact of electric vehicles on oil industry will be huge because transportation sector consumes 70 per cent of oil produced globally.

Recently, Swedish carmaker Volvo announced that it would go all electric from 2019, rivaling US-based Telsa Motors as an electric vehicle (EV) major. Geely Automobile Holdings, Volvo’s Chinese owner, also turned its focus on EVs. In all likelihood, other automakers will also go the electric way someday, sounding a death knell for petrol and diesel cars.

Surely, it will be a while before the world adopts electric vehicles fully because there is no sufficient infrastructure and ecosystem in developing countries for such vehicles. But that's bound to happen sooner than later. Consequently, demand for petrol products will come down even as supplies go up, keeping crude oil prices at rock bottom.

That will send the Gulf economies, whose survival is linked to oil money, into a tailspin. In that eventuality, lakhs of Indians who work in the Gulf region will be at the risk of losing their jobs.

Dreams of many, who want to go there, will turn sour. And the Indian government will have to deal with huge unemployment crisis if people working in the Gulf come back to India. States like Kerala and Telangana will feel the heat as a large number of people from these two states work in the oil-rich Arabian desert.

By P Madhusudhan Reddy