The India-UAE bilateral relationship has witnessed unprecedented growth in the last couple of years, with deepening historical bonds. A visit by the Crown Prince of Abu Dhabi to India has marked the importance of the strategic partnership between the two nations. The relationship has seen remarkable progress in the political, economic, and cultural spheres, with the UAE being the second-largest export destination, third-largest trading partner, and fourth-largest investor in India. After the Comprehensive Partnership Agreement implemented in May of 2022, which pushed the gauge of total trade by almost 15% and saw non-oil trade increase significantly to 20% in 2023-24, things have been very different.
Both countries are committed to expanding their partnership from traditional power centers into emerging cities across India. Initiatives such as the UAE-India Cultural Council and the UAE-India Start-up Bridge aim at strengthening cultural ties and fostering entrepreneurship. With this multifaceted approach, there is great promise for a bright future in UAE-India relations: one that will be resilient, inclusive, and prosperous.
| GS Paper | General Studies III |
| Topics for UPSC Prelims | UAE-India bilateral relationship, Comprehensive Economic Partnership Agreement, Crude oil supplier, Foreign Direct Investment , Zayed Talwar, BAPS Hindu Temple in Abu Dhabi, I2U2 , Abraham Accords |
| Topics for UPSC Mains | Significance of UAE for India, Major Areas of Friction Between India and UAE. |
Origin of the Article
This editorial is based on “Leverage historical ties for new areas of cooperation” which was published in Hindustan Times on 09/09/2024. The article highlights that the UAE India relations have strengthened significantly in recent years, with notable growth in trade, investment, and cultural ties. The Comprehensive Economic Partnership Agreement (CEPA) and new initiatives like the UAE-India Start-up Bridge signal a promising future for this strategic relationship.
Relevance for UPSC Students
Understanding the India-UAE relationship is crucial for UPSC aspirants. It covers key areas in the UPSC syllabus such as international relations, economic cooperation, and strategic partnerships. By grasping the nuances of this bilateral relationship, students can better answer questions related to global diplomacy, trade agreements, and regional security dynamics.
Why in News
The Comprehensive Economic Partnership Agreement between India and the UAE has attracted much attention because of the transformative impact the agreement has brought into changing the course of their bilateral trade, investment, and cultural relations. This is an important topic for UPSC aspirants because it involves some critical areas, namely international relations, economic policies, and energy security-areas that are normally breached in both Prelims and Mains. Understanding the dynamics of India-UAE relations, including initiatives like the UAE-India Start-up Bridge and other cultural collaborations.
Significance of UAE for India
The UAE is of strategic importance to India in terms of the strong economic, energy, and trade relationship the two nations enjoy. The UAE is certainly one of India’s largest trading partners and one of the biggest suppliers of crude oil to the country, hence quite vital in its pursuit of energy security. In addition, there are lots of Indian expatriates in the UAE who greatly enhance the remittances flowing into India, building closer ties between the two nations.
Economic Powerhouse- Gateway to the Gulf
The UAE serves as India’s economic springboard to the Middle East and North Africa (MENA) region.
As India’s third-largest trading partner, bilateral trade reached USD 84.5 billion in FY 2022-23. The Comprehensive Economic Partnership Agreement, implemented in May 2022, has been a game-changer, eliminating tariffs on 80% of Indian exports to the UAE. This has led to a 5.8% increase in non-oil trade in the first half of 2023, with projections to reach USD 100 billion by 2030. The UAE’s strategic location and world-class infrastructure make it an ideal re-export hub for Indian goods to Africa and Europe.
Energy Security
As India’s fourth-largest crude oil supplier, the UAE plays a crucial role in India’s energy security.
Oil imports from the UAE surged by 81% in January 2024. Beyond traditional hydrocarbons, the two nations are collaborating on renewable energy projects. This partnership aligns with India’s ambitious goal of achieving 500 GW of renewable energy capacity by 2030, showcasing the UAE’s significance in India’s energy transition.
Investment Catalyst
Foreign Direct Investment (FDI) from the UAE to India jumped over three-fold to USD 3.35 billion from USD 1.03 billion in 2021-22.
The UAE-India High-Level Joint Task Force on Investments has been instrumental in facilitating investments. Abu Dhabi Investment Authority has invested Rs 4,966.80 crore into Reliance Retail Ventures Limited.
Strategic Partner
The UAE has become a crucial strategic partner for India in the Middle East, particularly in countering terrorism and ensuring maritime security.
The two countries conducted their bilateral naval exercise, “Zayed Talwar,” in 2021, emphasizing their growing defense cooperation. India’s access to the UAE’s Al Dhafra air base for refueling has enhanced its strategic reach.
Remittances and Soft Power
The 3.5 million-strong Indian diaspora in the UAE is a significant source of remittances and soft power for India.
India received close to $111 billion in remittance flows from across the world in 2022, and the UAE was among the largest sources of remittance. The diaspora contributes beyond their economic contribution through better cultural and people-to-people links. The BAPS Hindu Temple in Abu Dhabi spoke volumes about the UAE’s religious tolerance and strengthened bilateral cultural ties. It allows Indian tourists in the UAE and those living in the Emirates with bank accounts in India to use the UPI network.
Tech and Innovation Hub
The UAE-India partnership is increasingly focusing on technology and innovation.
The I2U2 (India, Israel, UAE, USA) group, formed in 2021, aims to drive technological cooperation, particularly in areas like clean energy and food security. The UAE’s USD 2 billion investment in food parks across India, announced in 2022, exemplifies this collaboration. Additionally, the UAE-India Artificial Intelligence Bridge, launched in 2018, facilitates knowledge exchange and joint research in AI, positioning both countries at the forefront of the Fourth Industrial Revolution.
Major Areas of Friction Between India and UAE
While India and the UAE are closely knit both at the level of diplomatic and economic relations, some tensions persist between them. Issues such as labor rights, more so the conditions under which Indian expatriates work, have oftentimes been a point of ill feelings between them. Besides, variance in outlook toward foreign policy has, all along, created snag moments in their relations, most especially in regional conflicts and trading dynamics.
Labor Rights Tightrope
Despite improvements, labor rights issues persist for Indian workers in the UAE.
Reports of passport confiscation, wage theft, and poor living conditions continue to surface. Indian workers in the Gulf file 1 labor complaint a day on average. While the UAE has implemented reforms like the Wage Protection System, enforcement remains a challenge. India’s delicate balancing act between protecting its citizens and maintaining strong economic ties with the UAE creates tensions in bilateral relations.
Geopolitical Juggling Act
India’s deepening ties with Israel and the UAE’s normalization with Israel through the Abraham Accords create a complex geopolitical landscape.
While this opens opportunities for trilateral cooperation (as seen in the I2U2 initiative), it also risks entangling India in regional rivalries, particularly with Iran. The UAE’s growing ties with China, exemplified by the deal for Chinese L-15 aircraft, pose potential strategic challenges for India. Balancing these relationships while maintaining its strategic autonomy remains a delicate task for Indian diplomacy.
Energy Transition Turbulence
As both India and the UAE commit to net-zero targets (2070 and 2050 respectively), their traditional hydrocarbon-based relationship faces challenges.
India’s push for renewable energy, aiming for 50% of its energy mix by 2030, potentially conflicts with the UAE’s oil export interests. Navigating this transition while maintaining energy security and economic ties requires careful calibration.
Trade Imbalance Tangle
Despite growing trade volumes, a significant imbalance persists in India-UAE trade relations.
In FY 2022-23, India’s trade deficit with the UAE stood at USD 16.78 billion. This imbalance, largely due to oil imports, creates economic vulnerabilities for India. While the CEPA aims to address this by boosting Indian exports, challenges remain in diversifying trade beyond hydrocarbons.
Maritime Security Maneuvering
India and the UAE share concerns over maritime security in the Arabian Sea, crucial for their trade and energy flows.
However, coordinating responses to threats like piracy and terrorism while respecting each other’s strategic autonomy poses challenges. The UAE’s growing naval presence, exemplified by its base in Somaliland, and India’s expanding maritime footprint in the region necessitate careful coordination to avoid potential conflicts of interest and ensure complementary rather than competitive strategies.
Measures India Can Adopt to Enhance Its Relations with UAE
A more intense level of economic cooperation, especially in the fields of renewable energy, technology, and infrastructure, will only help India continue developing its multi-dimensional relationship with the UAE. Stronger collaboration in trade and investment, after agreements like CEPA, will further help enhance bilateral relations. More regional security coordination, apart from cultural exchanges and tourism, would help consolidate a long-term strategic partnership.
Digital Diplomacy Drive
India can harness its IT prowess to create a dedicated digital platform for India-UAE collaboration. This could include a real-time trade portal, a joint innovation hub, and a digital skills exchange program. India could work with the UAE to expand its cross-border digital payment system in other Gulf countries. This initiative could reduce transaction costs, enhance financial inclusion, and facilitate easier remittances.
Green Energy Corridor
India should propose a comprehensive “India-UAE Green Energy Corridor” to align with both countries’ climate goals. This could involve joint investments in renewable energy projects, technology transfer in areas like green hydrogen, and collaborative research on sustainable desalination techniques. This initiative could also include setting up a joint climate change research center, focusing on desert ecology and sustainable urban development, leveraging India’s scientific expertise and the UAE’s financial resources.
Skill Bridge Program
Implement a targeted “Skill Bridge Program” to upskill Indian workers for the UAE job market, focusing on emerging sectors like AI and sustainable technologies. For instance, partnering with the UAE’s National Program for Coders, India could offer specialized courses in areas like blockchain and machine learning. This initiative would not only enhance the employability of Indian workers but also contribute to the UAE’s knowledge economy goals.
StartUp Synergy Scheme
Develop a “StartUp Synergy Scheme” to foster collaboration between Indian and UAE startups. This could include a joint incubation program, a bilateral startup fund, and reciprocal market access facilitation. For instance, leveraging India’s vibrant startup ecosystem and the UAE’s financial heft, the scheme could aim to nurture ample India-UAE joint ventures. Specific focus areas could include fintech, health tech, and agritech, aligning with both countries’ development priorities. The scheme could also include a “Startup Visa” program, allowing easier movement of entrepreneurs between the two countries.
Maritime Cooperation Blueprint
Formulate a comprehensive “India-UAE Maritime Cooperation Blueprint” to enhance collaboration in maritime security, blue economy initiatives, and port development. This could include shared maritime domain awareness systems and collaborative marine research projects. For example, building on the bilateral naval exercise “Zayed Talwar,” India and the UAE could aim to conduct joint patrols in the Arabian Sea as well. The blueprint could also include developing two joint deep-sea ports, one each in India and the UAE, to enhance trade connectivity and maritime presence in the Indian Ocean region.
How the UAE Can Help India Enhance its Ties with the Middle East
The UAE, with its strategic location and deep economic and cultural ties across the Middle East, can serve as a vital bridge for India to strengthen its regional partnerships. By leveraging the UAE’s influence and collaborative initiatives, India can enhance trade, security, and diplomatic relations with key Middle Eastern nations.
Diplomatic Bridge-Builder
The UAE, with its strategic position and diplomatic clout, can act as a bridge between India and other Middle Eastern nations. Its role in facilitating back-channel talks between India and Pakistan in 2021 demonstrates this potential. The UAE could help organize a regional summit, including India, focusing on shared challenges like climate change and food security. This could build on frameworks like the I2U2 (India, Israel, UAE, USA) group, expanding it to include other Gulf Cooperation Council (GCC) countries, potentially creating an “Extended I2U2” forum for regional cooperation.
Economic Integration Catalyst
Building on the success of the India-UAE Comprehensive Economic Partnership Agreement (CEPA), the UAE could advocate for similar agreements between India and other GCC nations. The UAE’s position as a re-export hub could facilitate India’s economic integration with the broader Middle East. This could aim to increase India’s trade with the GCC.
Energy Security Facilitator
The UAE can play a crucial role in enhancing India’s energy security by facilitating broader energy partnerships in the region. This could involve joint investments in oil fields, collaborative research in renewable energy, and the creation of regional energy grids. For example, the UAE could accelerate discussions on the undersea pipeline project connecting the Middle East to India, potentially including countries like Oman.
Cultural Diplomacy Hub
Leveraging its multicultural society and India’s large diaspora, the UAE can serve as a hub for Indo-Arab cultural exchange. It could host annual cultural festivals showcasing Indian and Middle Eastern arts, literature, and cuisine. The UAE could also facilitate the establishment of Indian cultural centers across the Middle East, similar to the BAPS Hindu Temple in Abu Dhabi.
PESTEL Analysis
| Political: The political will between the India-UAE relationship is strong on both sides, with high-level exchanges along with strategic agreements such as the CEPA. However, there are geopolitical tensions from alliances like the I2U2 group and the Abraham Accords that may have implications for the dynamics with other regional players like Iran. Economic: Strong trade, considerable FDI, and energy security cooperation are hallmark features of economic bonding. The introduction of CEPA has seen a remarkable rise in trade, especially in non-oil trade. Social: The Indian diaspora is quite large in the UAE and often remits money back home, which is a factor that is very critical to the economy of the UAE, while cultural exchanges have been enhancing bilateral ties. The sensitive social issue at stake is labor rights, and much attention needs to come its way in order to protect the rights of Indian workers in the UAE. Technological: The I2U2 emphasized technical and innovative cooperation in the projects related to AI and Clean Energy. The UAE investment in the Indian food parks and tech-driven projects highlights the potentiality of this sector. Environmental: Both countries committed to net-zero, all aiming for renewable energy projects. This alignment of environmental goals creates the belief that cooperation on green energy initiatives is complementary, even though that contrasts with the UAE position of a leading oil supplier. Legal: Legal regimes, like CEPA, indeed help in promoting economic activities, but the enforcement of labor-related legislation with respect to Indian workers in the UAE is still a cause for concern. In this regard, strengthening legal protection and its implementation will go a long way toward protecting the rights of workers. |
Conclusion
The India UAE relations have evolved significantly, blending historical ties with modern strategic cooperation. The Comprehensive Economic Partnership Agreement (CEPA) and initiatives in energy, trade, and technology have strengthened relations. Both nations are poised for continued growth, leveraging shared cultural connections. Thus, emerging global opportunities for a resilient and prosperous future.
| UPSC Civil Services Examination, Previous Year Questions (PYQs) Mains Q. Discuss the impediments India is facing in its pursuit of a permanent seat in the UN Security Council. (GS Paper II, 2022) Q. The India-UAE relationship has evolved into a strategic partnership in recent years. Discuss the major areas of cooperation under the Comprehensive Economic Partnership Agreement (CEPA) and its potential in transforming trade between the two countries. |
