The relationship between India and the United Arab Emirates (UAE) has always been characterized by warmth, with roots extending back to the 1970s. This ever evolving relationship, is further supported by geographical proximity, cultural affinity, and longstanding friendship, has only grown stronger and more dynamic in recent years. The catalysts for this deepened relationship span across various dimensions, from commerce to culture, each adding a layer of complexity and collaboration between the two nations.

Trade amid Global Challenges

The aftermath of the Russia-Ukraine conflict has seen a significant bolstering of trade between India and the UAE. This uptick in commerce is partly attributed to several pivotal developments that have streamlined and enhanced bilateral trade, investments, and cultural exchanges.

Bi-lateral Agreements

A landmark decision saw the central banks of India and the UAE permitting the use of local currencies (Rupees and Dirhams) for cross-border transactions. This move, aimed at facilitating trade, remittances, and investment flows, represents a significant step towards financial integration between the two countries. The linkage of India’s Unified Payments Interface (UPI) with the UAE’s instant payment system, Aani, alongside the acceptance of India’s RuPay cards in the UAE, is set to benefit over 3.5 million Indians residing in the UAE, as well as travelers between the two countries.

CEPA

The Comprehensive Economic Partnership Agreement (CEPA), signed in February 2022, has been a game-changer for India-UAE trade relations. This agreement, aiming to elevate bilateral trade to $100 billion in the next five years, has already yielded impressive results. With the UAE being India’s second-largest export destination after the US, and India being the UAE’s second-largest trading partner after China, the CEPA has facilitated historic highs in trade volumes. The period from May 2022 to March 2023 saw a 14% year-on-year growth in bilateral trade, with significant tariff cuts and streamlined business approvals under the FTA framework.

Investment Flows and Economic Integration

The UAE’s position as a key foreign investor in India has been solidified, with the Emirates emerging as the fourth largest foreign investor in FY23. Investments from the UAE’s sovereign wealth funds, such as the Abu Dhabi Investment Authority (ADIA), in various sectors of the Indian economy, underline the deep economic ties between the two nations. The establishment of a $4-5 billion fund by ADIA to invest in India through GIFT City, Gujarat, is a testament to the growing confidence in India’s economic potential.

The Innovation and Start-up Ecosystem

The UAE’s focus on innovation has opened new avenues for Indian entrepreneurs in sectors like e-commerce, logistics, and electric vehicles. Dubai-based VC firm NB Ventures is a prime example of how Emirati investors are supporting Indian start-ups, facilitating their expansion into the UAE and beyond.

Cultural and Demographic Bridges

The demographic and cultural ties between India and the UAE serve as a foundation for their strong bilateral relationship. With Indians making up nearly 30% of the UAE’s population, the social and economic contributions of the Indian community are significant. The recent inauguration of the BAPS temple in Abu Dhabi by Prime Minister Modi, a project gifted by UAE ruler Sheikh Mohamed bin Zayed Al Nahyan, symbolizes the deep cultural connections between the two nations.

Looking Ahead

Despite the positive trajectory, challenges remain. Trade analysts point to the need for diversification in trade and addressing the low value-add in India’s exports to the UAE. The CEPA, while a significant boost, is still in its early stages, with the full potential of the agreement yet to be realized. The India-UAE relationship stands at a promising juncture, with trade, investment, and cultural ties all witnessing unprecedented growth. The strategic initiatives and agreements between the two countries are not just milestones but stepping stones towards a future of even greater cooperation and mutual benefit. As this partnership evolves, it holds the promise of setting a benchmark for bilateral relations on the global stage, underpinned by shared goals of prosperity, innovation, and sustainable development.