India-UAE Bilateral Relationship – Explained, pointwise

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Introduction

India and the United Arab Emirates (UAE) enjoy strong bonds of friendship based on age-old cultural, religious and economic ties between the two nations. India-UAE together have built a considerable degree of mutual trust that has enabled them to take their relationship to greater heights.

They have added another feather to their cap by signing a new Free Trade Agreement { Comprehensive Economic Partnership Agreement (CEPA)} on 18th February, 2022 in a virtual summit. The Agreement is expected to provide both the nations a greater flexibility and opportunity to leverage each other’s strengths. The signing of agreement also holds a symbolic significance as India is currently celebrating 75 years of its Independence as Azadi Ka Amrit Mahotsav and UAE is celebrating the 50th anniversary of its foundation.

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How has the India-UAE relationship evolved over time?

The relationship flourished after the accession of H.H. Sheikh Zayed Bin Sultan Al Nahyan as the Ruler of Abu Dhabi in 1966 and subsequently with the creation of the UAE Federation in 1971. Since then, both sides have been actively collaborating with each other.

In recent years, bilateral relations between India and the UAE have strengthened in all areas, and both sides have embarked upon a comprehensive strategic partnership. The Prime Minister visited UAE in 2015, 2018 and 2019 while the Crown Prince of Abu Dhabi visited India in 2016 and 2017. 

Ministerial visits between the two sides have also continued, including three visits of External Affairs Minister and a visit of Commerce and Industry Minister to UAE in 2021. 

What are the key outcomes of the India-UAE Virtual Summit?

Joint India-UAE Vision Statement 1 Joint India-UAE Statement 2

Highlights of the Joint India-UAE Vision Statement

A major achievement in the bilateral relations is the signing of the Comprehensive Economic Partnership Agreement (CEPA). Negotiations for the CEPA were launched in September 2021 and has culminated with the signing of the Agreement in February 2022. 

The Agreement will provide significant benefits to Indian and UAE businesses, including enhanced market access and reduced tariffs. It is set to reduce tariffs for 80% of goods and give zero duty access to 90% of India’s exports to the UAEIt is expected that the CEPA will lead to an increase in bilateral trade from the current US $60 billion to US $100 billion in the next 5 years.

India-UAE have also signed several Memorandum of Understandings (MoUs) which include: (a) MoU on India-UAE Joint Commemorative Stamp; (b) MoU between APEDA, DP World and Al Dahra for Cooperation in Food Corridor; (c) MoU between the International Financial Services Centers Authority (IFSCA), GIFT City and the Abu Dhabi Global Market Financial Services Regulatory Authority (FSRA) on cooperation in financial projects and services.

What have been the major achievements of the India-UAE relationship?

Economic: The India-UAE total trade merchandise has been valued at US $52.76 billion for the first nine months of the fiscal year 2021-22. This has made the UAE India’s third largest trading partner

The UAE’s investment in India is estimated to be around US $11.67 billion, which makes it the ninth biggest investor in India.

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. 

Strategic Partnerships: India, Israel, the United Arab Emirates and the United States have decided to launch a new quadrilateral economic forum.

Read More: India and the new Quad in West Asia

It builds on ongoing cooperation between the U.S., Israel and the UAE after the Abraham Accords and India. The forum is described as an international forum for economic cooperation.

Energy Cooperation: The UAE is one of India’s key energy providers and remains committed to meeting India’s growing energy demand. India imported US $10.9 billion worth of crude oil from the UAE in 2019-20. The UAE is the first international partner to invest by way of crude oil in India’s Strategic Petroleum Reserves Program.

The countries are also collaborating in the renewable energy sector as seen by mutual participation in the International Solar alliance.

Pandemic Management: Both sides had agreed on an Air Bubble Arrangement in 2020 during the pandemic which has enabled the movement of people between two countries despite the challenges posed by COVID-19. The UAE was among the first countries to receive India’s indigenous Covaxin in February 2021.

Indian Diaspora: UAE hosts a large Indian community which numbers close to 3.5 million. The nation has been a consistent provider of jobs to Indian people.

Sports: The collaboration among the two countries in the domain of sports is also rising. This is testified by the occurrence of IPL 2020 and the last T20 world cup in UAE. Although both the events were earlier scheduled to be conducted in India.

What is the significance of India-UAE relationship?

Remittances to India: India had received over US $83 billion in remittances in 2020 which was one of the highest in the world. Amongst this, a substantial portion came from the UAE. The remittances from the UAE in the first half of 2020 accounted for US $21 billion.

Strategic considerations: The UAE, due to its strategic location, has emerged as an important economic center in the world and is also a major re-export hub for India. Further good relations with the UAE are imperative to counter China’s influence in the Middle-east region.

Security of the region: The Middle-east region is still witnessing a lot of conflicts in Syria, Iraq etc. Good relations with UAE are imperative to give India a core place in discussion surrounding the Middle-east region. Further UAE can support India in strengthening the security of the Indian ocean region especially along the western coast of Somalia that is prone to piracy. India-UAE have been collaborating closely to counter terrorism as well.

Gateway to Africa: Engagement with the UAE will pave the way for India to leverage UAE’s easy access to the African market and its various trade partners. This can help India to become a part of the supply chain especially in handlooms, handicrafts, textiles and pharma.

Entry into regional groupings: UAE commands a significant respect in regional groupings like OIC (Organization of Islamic Cooperation). An improvement in relation will open India’s door for an OIC membership. 

India’s Soft Power: Good relations with UAE is a sine qua non for enhancing India’s Soft power in the Middle-east region. A recent progression of it was witnessed in 2021 when both Abu Dhabi and Dubai celebrated Diwali.

What are the challenges to the India-UAE Relationship?

Non Tariff Barriers (NTBs): Non-Tariff Measures (NTMs) have mostly been covered by Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT). The UAE has 451 SPS notifications and  534 TBT notifications. The SPS notifications are mainly related to live poultry, meat, and processed food. In addition, the TBT notifications are mainly related to fish, food additives, meat, rubber, electrical machinery, etc. These measures hamper India’s exports to UAE.

China’s Cheque Book Diplomacy: China has deep pockets and offers money at very low interest rates which crowds out Indian companies from UAE and Middle-east region.

Arab- Iran Conflict: The differences between Iran and the Arab world hinders India’s engagement in the Middle-east region. Balancing the relationship sometimes results in reluctance of some strategic agreements.

Kafala System: The inhuman conditions imposed by the Kafala system on immigrants sometimes create differences between the two countries.

What steps should be taken to further enhance the India-UAE relationship?

First, the countries should focus on completing their MOUs (memorandum of understanding) in order to take their relationship to the next level.

Second, they should establish more strategic dialogues between them like the 2+2 dialogue. Currently India has a 2+2 dialogue with U.S, Russia etc. but not with UAE.

Third, future relationships should be nurtured by the spirit of mutual sacrifice to attain common gain. For instance, in the current agreement, India gave tariff concessions to the UAE on gold, and they eliminated tariffs on jewellery.

Fourth, in recent years, the UAE, through its ‘Vision 2021’, has sought to diversify its economy and reduce its dependency on oil. This provides an opportunity for India to engage with it in new areas of renewable energy, start-ups, fintech, etc.

Fifth, India-UAE must try to bring more transparency and predictability in the use of NTBs so that their compliance becomes less cumbersome. There should be regular information sharing on labeling, licensing, permit requirements, import monitoring and surveillance requirements.

Sixth, India should actively engage with the UAE to reform the Kafala system. A reference of Qatar can be given who has promised to remove the inhuman conditions of the system.

Both nations should come together to further engage with each other, bilaterally as well as on multi-lateral fora, based on mutual trust and confidence. Their future discourse should be guided by the rules of international law and focus on making the world a better place to live keeping in mind their respective national interest.

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