India-UAE Relations

• The UAE occupies a vital place in India’s West Asia policy. The political and diplomatic engagements with the UAE have seen a substantial increase in recent times. Certainly, trade, investment and energy are the most visible features of India-UAE ties, but over the past few years, another element which has been swiftly entering the discourse between the two countries is Security.
• India and the UAE established diplomatic relations in 1972. The greater push has been achieved in bilateral relations when the visit of India’s Prime Minister to the UAE in August 2015 marked the beginning of a new strategic partnership between the two countries.
• In May 2016, Manohar Parrikar became first Indian Defence Minister to visit UAE to engage with his UAE counterpart and discuss possibilities of enhancing defence relations.
• Further, during the visit of the Crown Prince of Abu Dhabi to India in January 2017 as the chief guest at India’s Republic Day celebrations, it was agreed that bilateral relations were to be upgraded to a comprehensive strategic partnership. This gave momentum to launching negotiations for an India-UAE comprehensive economic partnership agreement.
• Around 3 million Indians are living harmoniously in the UAE. As India seeks to enhance economic engagement and deepen security cooperation with the Gulf, it finds a willing partner in the UAE. 
• As UAE ‘Look[s] East’ to find partners for its economic growth and with security concerns emanating from turmoil in West Asia and growing threat from terrorism, it finds a natural partner in India. The UAE occupies a key place in India’s West Asia policy.

Areas of Cooperation

Political

• India-UAE bilateral relations have received impetus from time-to-time with exchange of high-level visits from both sides. The historic visit of Hon’ble Prime Minister of India to UAE on 16-17 August 2015 marked the beginning of a ‘new and comprehensive and strategic partnership’. The visit was historic in the sense that Indian PM Visit was the first in last 34 years. The visit had set in motion a chain of events that would broaden the bilateral beyond being just a business relationship.
• The UAE reciprocated with the visit of Crown Prince Sheikh Mohammed bin Zayed Al Nahyan to India in 2017 as chief guest for Republic Day, signifying India’s growing engagement with the Gulf. During the visit of Crown Prince of Abu Dhabi, the bilateral relation has been elevated to “Comprehensive Strategic Partnership” which is expected to facilitate the shaping of a new Indian role in the Gulf region.
• Institutional mechanism of UAE-India Strategic Dialogue established under the Comprehensive Strategic Partnership agreement has proven to be a useful mechanism to monitor the progress in the agreed areas of engagement.
• India was invited as the Guest of Honour for the sixth World Government Summit. For this, Prime Minister of India paid a State visit to the UAE from 10-11 February, 2018 further enriching the rapport established at the highest political levels between India and the UAE.
• Modi’s last visit to the UAE was in August 2019, when he received the UAE’s highest award, ‘Order of Zayed’.

Indian Prime Minister’s visit to UAE (2018)

• Signed five agreements related to energy sector, railways, manpower and financial services.
• Promote the values of tolerance, peace, inclusiveness and in countering extremist ideologies through interfaith dialogue.
• Deepen cooperation on combating extremism and further strengthen their efforts in countering terrorism.
• Deepen collaborations on maritime security, including joint anti-piracy, training and exercises, cyber space and outer space, etc.
• Reviewed the progress in realizing the USD 75 billion target for UAE investments in India committed towards infrastructure development.
• Noted the importance of efforts to disrupt and dismantle terrorist networks, their financing and movement in accordance with the relevant principles and objectives of the UN Charter and international laws.
• Will soon hold the first meeting of the Joint Task Force on prevention and combating human trafficking during 2018.
• MOU on Cooperation in the Exchange of Financial Intelligence related to Money Laundering, Associated Predicate Offences and Terrorist Financing could be signed at the earliest.
• Examine various tariff and non-tariff barriers, and agreed to focus on encouraging trade in identified commodities.

Trade and Investment

• The traditionally close and friendly India-UAE bilateral relationship has evolved into a significant partnership in the economic and commercial sphere.
• 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.
• India’s major import items from the UAE are: Petroleum and Petroleum Products, Precious Metals, Stones, Gems & Jewellery, Minerals, Chemicals, Wood & Wood Products.
  • 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.
• India and the UAE have signed an agreement for a 10 percent participating interest to a consortium of Indian oil companies in the Lower Zakum offshore oil field in February 2018 and for Emirati participation in operationalizing India’s strategic oil reserve in Mangalore. This is the first Indian investment in upstream oil sector of UAE, transforming the traditional buyerseller relationship to a long-term investor relationship.
• India’s exports to the UAE between April and September, 2022 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.

Investment

• There is an estimated US$8 billion UAE investment in India of which around US$4.03 billion (Mar. 2016) is in the form of foreign direct investment, while the remaining is portfolio investment. UAE is the tenth biggest investor in India in terms of FDI. UAE’s investments in India are concentrated mainly in five sectors: Construction Development, Power, Air Transport, Hotel & Tourism, and Metallurgical industries.
• Also, many Indian companies have set up manufacturing units either as joint ventures or in Special Economic Zones for cement, building materials, textiles, engineering products, consumer electronics, etc. in the UAE.

Culture and Diaspora

• India and UAE signed a Cultural Agreement in 1975, and the Embassy continues to organize various cultural activities on its own, as well as by collaborating with Indian Associations/Cultural Organizations based in UAE. The second International Day of Yoga was celebrated on 21st June, 2016, where His Highness Sheikh Nahyan bin Mubarak Al Nahyan graced the event.
• UAE is home to Indian expatriate community of around 3.4 million-the largest expatriate community in the UAE.
• With a large number of blue-collared Indian workers, focus of bilateral relations is also on developing efficient grievance-redressal mechanisms for the Indian workers in the UAE.
• The prime minister of India attended the foundation laying ceremony of the first Hindu Temple in Abu Dhabi during his February 2018 visit. The two countries signed an MoU that aims to institutionalize the collaborative administration of contractual employment of Indian workers in February 2018.
• 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. 

Defence Cooperation, Terrorism and Security

• India and UAE see each other as important players in maintaining peace and stability in their respective regions, and have reinforced their partnership in countering terrorism, combating radicalization and preventing terror finance through intelligence sharing.
• The most significant support from the UAE came to India after the Uri and Pathankot attack, when Abu Dhabi sent out a public statement suggesting India to take decisive action against perpetrators of the attack.
• Though India’s relations with the UAE and other countries in the Gulf and West Asia are independent of their engagements with Pakistan and Indo-Pak relations, India has stepped up efforts to raise the issue of cross-border terrorism and use of religion to incite terror activities against India during its engagements with these countries.
• The growing extremist activities in the region are of serious concern to the UAE. The assassination of five UAE diplomats in Kandahar on January 10, 2017 has raised serious concerns. This was the first time UAE diplomats were targeted in a foreign country.
• Despite such sporadic incidents, India-UAE strategic cooperation is likely to grow in future because they are based on strong economic, cultural and historical foundation. The maiden bilateral naval exercise ‘Gulf Star 1′ took place in March 2018.
• With the spread of radicalism in Gulf and South Asia, India looks to enhance security cooperation with UAE to counter terrorist threats and combat radicalization.
• ‘Desert Eagle II’, a ten day air combat exercise, was held between the air forces of India and 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.

Significance of UAE to India

Strategic

• Energy Security: UAE cooperation is vital for India’s energy security and development. UAE is 5th largest exporter of energy resources to India (2015-16) and its cooperation is also crucial for Indian Strategic Petroleum Reserve which is being developed by India for crisis period.
• Terrorism: India and the UAE signed an extradition treaty back in 1999. With the rise of global terrorist organizations and spread of radicalism in Gulf and South Asia, India looks to enhance security cooperation with the Gulf countries including the UAE to counter terrorist threats and combat online radicalization.
• Kashmir and Pakistan: In the UN, the OIC (Organization of Islamic Cooperation, 57 members) frequently tables resolutions against India regarding the situation in Kashmir and the GCC tends to lean in Pakistan’s direction on the matter. UAE’s perceived clout in both the Gulf Cooperation Council (GCC) and the Organization of Islamic Cooperation (OIC) is vital for protecting India’s interest and concern for Kashmir.
• Trade Route: Freedom of navigation and maritime security are of strategic interest to both the nations. India’s trade and energy security is inextricably linked to the security of the Straits of Hormuz and Bab-el-Mandeb.

Economic

• Investment: UAE has the largest sovereign wealth fund. Its $800 billion sovereign wealth fund is a large resource pool from which investment can be made in infrastructure development in India- progress on these lines can be seen in Abu Dhabi’s interest in Indian Highway projects. The Joint production of Defence equipment under the “Make in India” program is another important area of focus.
• It has planned to invest $75 billion in India. Greater investment from the UAE for India’s infrastructure sector, hence, becomes crucial. In this direction, UAE has operationalised a USD 75 billion sovereign fund for India of which USD one billion has already been transferred. However, it is not clear when the entire amount will be transferred or the conditions related to the investment.
• Exports: UAE is the only country in the Persian Gulf with which India has a favorable trade balance, despite it being a substantial source of crude oil for India. UAE is also seen as the gateway for India’s export to Africa and Central Asia.

Recent Agreements signed

• ONGC Videsh, Indian Oil Corp. Ltd (IOC) and a unit of Bharat Petro Resources Ltd (BPCL) paid $600 million for a 10% stake in the UAE’s offshore oil and gas field Zakum.
  • This is the first Indian Investment in upstream oil sector of UAE, transforming the traditional buyerseller relationship to a long-term investor relationship. Prime Minister Narednra Modi laid the foundation stone for the BAPS Swaminarayan temple in Abu Dhabi.
  • Both sides signed a MoU that aims to institutionalise the collaborative administration of contractual employment of Indian workers in the Gulf country.
  • Under the MoU, both the sides will work for ending the existing malpractices, combat trafficking and organise collaborative programmes for education and awareness of contractual workers. A MoU for technical cooperation in railways was also signed. This aims at cooperation in infrastructure sector especially railways. It will facilitate development of joint projects, knowledge sharing, joint research and technology transfer. A MoU between Bombay Stock Exchange and Abu Dhabi Securities Exchange was also signed.
  • It aims at enhancing cooperation between both the countries in financial services industry. It would facilitate investment in financial markets by investors from both the countries. A MoU to establish multi-modal logistics park and hub in Jammu & Kashmir comprising warehouses and specialised storage solutions.

Diaspora’s Interest

• Indian expatriates comprise around 30 per cent of the total population of the UAE. Apart from remittances, the safety of Indian Diaspora, given the volatile situation in the Gulf is a concern for India.

Significance of India to UAE

• UAE considers its relationship with India a priority and views India as a linchpin of stability and security in the Asian continent. Besides, cooperation between the navies of the two countries (as part of anti-piracy and Humanitarian Assistance and Disaster Relief operations), India and the UAE’s counter-terrorism cooperation will benefit the Emirates in a time when West Asia is in a flux.
• Also, the increasing status of India at global level, being a nuclear state, a big source of labour, big market, stable democracy, its soft power, etc. make India important for UAE.
• Geopolitical conditions as Iran is threatening continuously to close the Strait of Hormuz in case there is a conflict with Saudi Arabia or US. This will adversely affect UAE as well.
• UAE saw Pakistan as a partner and incorporated a deep economic and security relationship with it. But in the present day, Pakistan does not seem to be of much help to UAE. Already facing internal issues, Pakistan failed to come to the aid of Saudi Arabia in its war against Iran-backed rebels in Yemen and has been unable to curb jihadists operating from its land across West Asia.
• India is an important destination for oil and energy purchase as the US is on the way of becoming hydrocarbon independent. UAE’s massive sovereign wealth funds can act as a great resource in the development of infrastructure in India.
• There has been a rising convergence between India and UAE on the terror issue and both the countries talked of the need to combat terror groups without any discrimination given the fact that five UAE diplomats were killed in an attack in Kandahar in Afghanistan.
• Countries like Syria, Iraq, Libya and Yemen are suffering from violent conflicts. The Gulf Cooperation Council (GCC) has not produced expected results.

Challenges in Relations

There are some challenges to be overcome in order to realize the full potential and promise of the growing relations.

• Investment: As far as investments are concerned, the systemic problem faced due to slow implementation from Indian side is a major obstacle. For example, the UAE agreed to invest in India’s infrastructure projects through formation of a $75 billion investment fund during the prime minister’s visit in August 2015. However, even after more than two years, the modalities and governance structure for the fund has not been finalized.
• Indian companies operating in the UAE also face problems due to lack of clarity in many aspects of commercial regulations, labor laws and lack of transparency on part of Emirati businesses.
• Diaspora: There is also a need to smoothen problems faced by Indian migrants due to cumbersome and strict regulations that favour the Emirati employers. It has also been noticed that workers from other nationalities including Filipinos and Bangladeshis are replacing Indian workers and it is reflected in slight drop in remittances inflow from UAE to India in recent years.
• Pakistan: Despite the historical links, civilisational intimacy, geographical proximity, growing economic interdependence, and the presence of a large Indian labour force in the Gulf, political relations between India and the region have long been strained by the Pakistan factor.
• 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.
• Recent Turbulence in relations: It is caused by the comments on Prophet Mohammed by Nupur Sharma and Naveen Kumar Jindal.

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 

India-UAE Relations: Critical Perspectives

• The recent high level visits from both sides and the geopolitical developments in the region along with changed global circumstances on multiple fronts have necessitated both to show strong inclination, dynamism and vigor in the relationship.
• In proclaiming a “natural strategic partnership” with the United Arab Emirates and putting security cooperation including counter-terrorism at the centre of it, PM Modi has seized a rare moment of change in the Gulf and launched a new phase in India’s relations with a very critical region.
  Modi’s decision to travel to the Emirates at a short notice was based on Delhi’s recognition of the need to discard the traditional thinking on the region, and grab the new opportunities for the restructuring of relations between the subcontinent and the Gulf.
• The joint statement’s reference tothe shared commitment between the two countries to “openness , peaceful coexistence and social harmony” is not the kind of phrase that normally figures in India’s engagement with monarchies anywhere in the world.
• The reference to the UAE as “a shining example of a multi-cultural society” is a political recognition of the high stakes involved in defending the economies of the region that are so vulnerable to violent religious extremism.
• So far, India’s tendency to see the region through an “ideological lens”, letting its domestic politics define the strategy and allowing the “Pakistan factor” to limit the prospects for partnership, have long distorted its relationship with the Gulf. The prime minister now has an opportunity to help India discard its “economic mercantilism” and “political diffidence” in the Gulf and replace them with a comprehensive strategy. The factors shaping such a strategy are difficult to miss for India.
• No major power, whether it is the US, China or Russia, views ties to the region as a “zero-sum game” between the Arabs and Israel. No one in the Middle East is asking India to choose between multiple rivals in the region. All expect India to show more political interest and greater economic purpose in the region.
• On the political side, India will have to maintain the rhythm of regular high level interaction. Given the rapid pace of change in the region, with dramatic developments upsetting the status quo regularly and throwing up new challenges, regular high level meetings along with invocation of Track 2 diplomacy are also functionally desirable. This will call for a robust regional engagement at a high level in coming years, something India has not been able to achieve in the past due to its leaders’ preoccupation with domestic affairs and the wide spread perception in our media that foreign tours are essentially jaunts for pleasure.
• Modi’s visit comes after his ‘neighbourhood first’ policy’, engagement with big powers, Central Asian nations and ‘Act East’ policy. India’s relations with the countries of West Asia can be understood as a triangle, with Iran, Israel and the Gulf Cooperation Council (GCC) countries forming the three angles. The UAE visit is the first step in a comprehensive plan of engagement with the region, which sees strained relations between the three angles of the triangle. There is need of acute balance among these and de-hyphenating each other for larger goal of the region as well as India’s stature at global level. Even the GCC and other countries also accept that India’s relations with Iran and Israel will follow independent trajectories, not necessarily impeding or impinging on India’s relations with them. This is also a reflection of India’s pursuit of strategic autonomy as well as its enlightened interest as envisaged in India’s foreign policy.

Way Forward

• As India and UAE look forward to enhance their bilateral relations, there are areas that provide furtheropportunities and should be tapped to further the ties.
• There is untapped potential as far as Indian health industry and medical sector is concerned. Hence, medical tourism can be an important area where India can attract Emiratis. There is further untapped potential in the arena of renewable energy, particularly solar energy.
• There is a scope for improving the investment climate in India to attract UAE businesses. India has a huge market and there is a significant scope for growth in automobile industry, services sector, agriculture and allied industries.
• Further , there is a need for enhancing the people-topeople contacts for familiarisation and increasing interactions between think tanks, researchers and through academic exchanges.
• In Defence sector, there is a need to further enhance cooperation through joint training programs for Indian and UAE officers.
• Thus, India needs a comprehensive region-wide policy review for the Gulf, not a piecemeal one. This will enable India to extract the most benefit of its relationship with UAE.

Conclusion

• India is well positioned to emerge as a credible security and economic partner of the UAE and the larger Gulf region at a time when the West is looking inwards and China’s rise is getting hobbled by its aggressive rhetoric on territorial issues. India-UAE ties are an exemplar for the changing Indian approach towards the wider region. It is precursor of a confident India ‘Looking West’. This, in turn, will increase the extent of India’s extended neighbourhood, desirable for augmenting its stature and legitimacy at global level.