India- UAE Relations

In News

• Recently, the External Affairs Minister of India met with his UAE counterpart and noted that bilateral trade has shown appreciable growth under the Comprehensive Economic Partnership Agreement (CEPA).

Key Highlights

• Minutes: 
  • Cooperation in the areas of energy, food security, trade and defence.
  • Reviewed the continuous progress in bilateral relations across different domains, since the 14th Joint Commission meeting held by them in September 2022. 
  • Appreciated the progress in bilateral relationship, especially in trade, investment, consular matters, education and food security.
    • Trade has shown appreciable growth under the CEPA.
  • Exchanged views on the global situation and various regional hotspots. 
• Exports and Imports:
  • India’s exports to the UAE between April and September this year were about $16 billion, an increase of 24 per cent year-on-year, while India’s imports increased 38 per cent to reach $28.4 billion in the same period.

India- UAE Relations

• Diplomatic:
  • India and the United Arab Emirates (UAE) established diplomatic relations in 1972. 
  • UAE opened its Embassy in Delhi in 1972 & India opened its Embassy in Abu Dhabi in 1973.
  • The traditionally strong bilateral relations enjoyed by India & UAE received impetus with the visit of PM Modi to UAE on 16-17 August 2015 that marked the beginning of a new strategic partnership between the two countries.
  • Modi’s last visit to the UAE was in August 2019, when he received the UAE’s highest award, ‘Order of Zayed’.
• Economic & Commercial Relations:
  • India and UAE have shared trade links through the centuries.
  • Trade, which was dominated by traditional items such as dates, pearls and fishes, underwent a sharp change after the discovery of oil in the UAE (oil exports began from Abu Dhabi in 1962).
  • The real impetus, however, started after Dubai positioned itself as a regional trading hub by the early 1990s and about the same time, the economic liberalisation process started in India.
  • Bilateral trade in FY 2021-22 was about US$ 72 billion. UAE is India’s third largest trade partner and second largest export destination.
  • UAE’s FDI in India has increased over the past few years and currently stands at over $12 billion.
• Cultural Relations:
  • The importance given to Indian culture by the UAE was further highlighted in April, 2019 when India participated as the Guest of Honour Country in Abu Dhabi International Book Fair 2019. 
  • Indian cinema/ TV / radio channels are easily available and have good viewership; major theatres/cinema halls in the UAE screen commercial Hindi, Malayalam and Tamil films. 
  • The Emirati community also participates in our annual International Day of Yoga events and various schools of yoga & meditation centres are running successfully in the UAE. 
• Technology partnerships:
  • India and the UAE have signed a number of digital innovation, technology partnerships, and also plans for ISRO and UAESA to cooperate on missions like the Red Moon mission. 
  • The Emirates has offered “golden visa” residency permits for doctors, engineers, PhD scholars and specialists in high-end technology fields such as artificial intelligence (AI), Big Data, virology and epidemiology, and brought over the former ISRO chief K. Radhakrishnan to their space agency.
• Defence and Security Cooperation:
  • Bilateral Defence Interaction between India and UAE has been steadily growing in accordance with other aspects of the bilateral relationship. 
  • There have been regular high level & functional level exchanges between the two countries. 
  • The ships of the Navies of both countries have regularly made port calls enhancing bilateral defence co-operation. 
  • India and UAE signed a comprehensive strategic partnership in 2017, and hold annual defence dialogues. 
  • More recently, UAE is a key part of the Indian Ocean Region dialogue.
  • Both sides take part in military exercises with each other and there have been several Military chiefs visits.
•  Mediation: 
  • An interesting aside is the role the UAE says it has played in mediation between India and Pakistan, and over the past 3 years, Dubai has facilitated meetings between interlocutors including NSA Doval and Pakistan military officials.
• Indian Community:
  • The Indian expatriate community of approximately 3.4 million is the largest ethnic community in UAE constituting roughly about 35% of the country’s population.

Issues /Challenges in the Ties

• Recent Turbulence in relations: 
  • It is caused by the comments on Prophet Mohammed by Nupur Sharma and Naveen Kumar Jindal

• Balancing geopolitics: 
  • India with Iran (also played out over Yemen) and UAE with China.
• Energy pricing: 
  • As an OPEC country UAE is on the side of the debate, where India as a major oil consumer is arguing for a cap on prices- this has seen some heated words between oil ministers in the past
• India and UAE are yet to renegotiate their air services agreement, which has become a thorn in ties, because the UAE wants to increase the number of flights to India and the number of destinations, but India continues to cap these to protect Indian airlines.
• Treatment of Indian labour: 
  • This frequently flares up as Indians aren’t granted citizenship in the UAE, and conditions at Indian labour camps become a matter of concern. 
  • During the pandemic much of the labour to the gulf has had to return, and remittances are likely to be slashed in the next few years

• Treatment of minorities in India is becoming a big issue: 
  • After the CAA protests, social media controversies, now the Hijab Ban has raised concerns in Gulf countries, and the OIC issued a very strong statement. And conversely, although very few, less than 100 Indians based in the Gulf joined ISIS, or earlier Al Qaeda, the export of radicalisation is always a concern

• Legal Issues:
  • Legal problems have in the past dampened foreign investments from coming to India. 
  • Checks and regulations are needed, better streamlining of the procedures and processes help in avoiding such problems.

India-UAE CEPA trade deal

• The new strategic economic agreement will increase bilateral trade in goods to $100 billion in five years (2022-27) of the signed agreement and increase trade in services to $15 billion.
• CEPA is a kind of free trade pact that covers negotiation on the trade in services and investment, and other areas of economic partnership.
• The Agreement is a comprehensive agreement which will cover:
  • Trade in Goods, Rules of Origin,
  • Trade in Services,
  • Technical Barriers to Trade (TBT),
  • Sanitary and Phytosanitary (SPS) measures,
  • Dispute Settlement,
  • Movement of Natural Persons,
  • Telecom,
  • Customs Procedures,
  • Pharmaceutical products,
  • Government Procurement,
  • IPR, Investment,
  • Digital Trade and Cooperation in other Areas.
• It will include a digital trade element, which is a first of its kind for both countries.
• The United Arab Emirates is India’s third largest trading partner and second largest export destination.
  •   The UAE is also the eight largest investor in India with an estimated investment of US$ 18 billion.

Significance of the deal

• Enhanced market access: The agreement will provide significant benefits to Indian and UAE businesses, including enhanced market access and reduced tariffs.
• The CEPA will boost bilateral trade from the current $60 billion to $100 billion in the next 5 years.
• India welcomed investment from the Gulf country into Jammu and Kashmir that would open new routes for regional trade and connectivity and advance the collective interests of India, Israel, the UAE and the United States.
• The deepening of the relationship with the UAE would also help Indian exporters gain access to other West Asian countries, Africa and some parts of Europe.
• Digital trade: Early harvest agreement would likely include a chapter on digital trade which would be aimed at enhancing cooperation between the two countries on digital trade in the future.
  • Digital trade is likely to include frameworks on paperless trading, digital payments and online consumer protection, as well as address issues such as intellectual property rights in digital trade, and challenges to small and medium enterprises.
• The UAE hopes to get enhanced market access in India for its petrochemicals, metals and dates.
• Indian goods will flow to the other GCC countries as the UAE has no customs barriers.
• Energy ties: UAE is India’s third largest supplier of crude oil and second largest supplier of LPG and LNG. Renewable energy is the next stop for bilateral energy ties.
• It may also give a boost to India’s jewellery exports.  
• It is expected to create new jobs, raise living standards, and provide wider social and economic opportunities in both nations.

Issues/ Challenges of Trade Deal

• Lack of negotiations:
  • A free trade agreement with the GCC comprising Saudi Arabia, Kuwait, UAE, Oman, Qatar and Bahrain as its members was first envisaged in 2007, but got stuck after a couple of rounds of negotiations.
• Lacking Global Giant Experience: 
  • Despite being a US $2.5 trillion economy, Indian businesses are small in size. In fact, none of the Indian business giants come close to the big global conglomerates that have the capacity, infrastructure and experience to handle huge investments. 
• Procedural Issues: 
  • Including lack of planning, lack of complete information, bureaucratic bottlenecks continue to remain a challenge for foreign investors despite significant efforts by the government in this direction to make investments easy and convenient. 
• Legal Issues:
  • Legal problems have in the past dampened foreign investments from coming to India. For example, the investments from UAE’s Etisalat and Etihad had got stuck in legal problems, thus dampening investor enthusiasm. While checks and regulations are needed, better streamlining of the procedures and processes help in avoiding such problems.
• Political Will: 
  • There are challenges pertaining to political diversions, especially when an election year is approaching. 
  • India has a tendency to become focused inward and in the process, ignore foreign policy. 
  • The UAE with an appetite for large-scale investments needs to be continuously engaged. 

Conclusion 

• The UAE today is India’s closest partner in the Arab world and fortunately, there is enough resilience in bilateral ties to withstand the recent convulsions.
• India and UAE continue to forge closer partnership in these areas, building on their close and friendly relations and historical people-to-people connect. India-UAE has a strong energy partnership which is now acquiring a new focus on renewable energy.
• It will take a sustained public diplomacy effort to further improve the relations 

Source: IE