India UAE Relations – Explained Pointwise

India and the UAE bilateral relations enjoy strong bilateral relations based on historical ties, cultural affinity, and shared aspirations. India and the United Arab Emirates (UAE) established diplomatic relations in 1972. While the UAE opened its Embassy in India in 1972, the Indian Embassy in the UAE was opened in 1973. But the relationship witnessed a remarkable transformation in 2015, when Prime Minister Narendra Modi visited UAE, which was the first visit by an Indian Prime Minister after 34 years. It led to upgradation of the India UAE relationship to Comprehensive Strategic Partnership level.

At present, Abu Dhabi Crown Prince Sheikh Khaled bin Mohamed is on visit to India. It has led to the signing of several key agreements and many symbolic gestures like tree planting, which may further strengthen this relationship.

What is the history of India-UAE relations?

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.

What have been some of the major achievements of the India-UAE relations?

Economic Relations

Trade: In February 2022, India became the first country with which the UAE signed a Comprehensive Economic Partnership Agreement. India-UAE trade increased from US$ 180 million in the 1970s to US$ 85 billion in 2022-23, making UAE India’s 3rd largest trading partner. Comprehensive Economic Partnership Agreement (CEPA) has led to slashing of tariffs on more than 80% of goods and gives zero duty access to 90% of India’s exports to the UAE. The target of non-oil trade hitting $100 billion by 2030 seems an imminent possibility now.

Investments: UAE’s investment in India is around US$ 20-21 billion, of which US$ 15.5 billion is FDI. ADIA, the UAE’s Sovereign Wealth Fund, has invested in several Indian projects, including NIIF Master Fund and renewable energy.

India’s Exports: UAE is India’s 2nd largest export destination after the US, with exports worth US$ 31.61 billion in 2022-23. India exports a wide range of goods to UAE, including petroleum products, gems, food items, textiles, and engineering goods.

India’s Imports: UAE is an important partner of India in ensuring energy security. UAE exports to India include petroleum, gems, minerals, and chemicals. UAE is India’s 4th largest source for crude oil and the 2nd largest for LNG and LPG.

Connectivity: There is a high level of connectivity between countries, with more than 1,500 flights between the UAE and India every single week.

Financial System: India and UAE signed a MoU for a Local Currency Settlement (LCS) System in 2023 to facilitate cross-border transactions in INR and AED. It will enable the use of their local currencies for cross-border transactions. Furthermore, Indian tourists in the UAE and those living in the Emirates who have bank accounts in India can use the UPI network.

Geo-Strategic relations

The Middle-east region is a theatre of warfare like the Israel-Hamas war, Conflicts in Syria, Iraq, Yemen etc. These conflicts have several security implications in India. For ex- Rise of ISIS recruitments from Kerala. Hence, India-UAE relationship becomes significant to bolster internal and external security of both the nations.

India’s access to the UAE’s Al Dhafra air base for refuelling has enhanced its strategic reach.

India-UAE relations are necessary to strengthen the security of the Arabian Sea and Indian ocean region, that is prone to piracy.

India and UAE have been collaborating in joint exercises to counter terrorism. For ex- Desert Cyclone (Military), Zayed Talwar (Naval) and Desert Eagle (Air force).

India-Middle East-Europe Economic Corridor (IMEC)– UAE is a vital cog in the India-Middle East-Europe Economic Corridor (IMEEC) that would boost connectivity and act as a credible alternative to China’s Belt and Road Initiative.

Geo-political relations

Cooperation on Multilateral Forums: India and UAE have strong cooperation at the United Nations. UAE supports India’s bid for entry in the UNSC. Both countries participate in plurilateral platforms like BRICS, I2U2 (India-Israel-UAE-USA), and the UAE-France-India (UFI) trilateral. UAE was a Guest Country at the G20 Summit during India’s presidency.

Better Coordination with Regional Groupings antagonistic to India – UAE commands a significant respect in regional groupings like OIC (Organization of Islamic Cooperation) and GCC (Gulf Cooperation Council). An improvement in relation will open India’s door for an OIC membership and India-GCC FTA.

People to people Relations

Indian Diaspora: The Indian expatriate community, the largest ethnic group in the UAE, makes up around 35% of the population. Over 3.5 million Indians live in the UAE, where Indian culture, cinema, and media are well-integrated. The Indian community in the UAE, contributes significantly to remittances, which account for 18% of total remittances to India.

Cultural Relations: In 2021, an agreement was signed between NYU Abu Dhabi and the Indian Council for Cultural Relations to establish a visiting professorship, enhancing academic exchange. A BAPS Mandir is under construction in Abu Dhabi, with the inauguration expected in 2024, enhancing people-to-people ties.

Education: A tripartite MoU was signed in July 2023 to establish an IIT Delhi campus in Abu Dhabi, with programs starting in 2024. Leading Indian institutions like Manipal, BITS Pilani, and Amity University also have campuses in the UAE.

What are the challenges to the India-UAE Relationship?

1. Non Tariff Barriers (NTBs)-  The Non-Tariff Barriers like Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT) adopted by the UAE, has dampened Indian exports related to poultry, meat and processed food.

2. China’s Cheque Book Diplomacy – China with its deep pockets has been offering low interest loans and crowding out Indian companies from the UAE and Middle-east region.

3. Regional Conflict: Conflicts in the Middle East which primarily involve Israel-Palestine-Lebanon and indirectly involve Iran, US and other regional countries, are threat to the connectivity projects like IMEC and trade. The UAE’s normalization of relations with Israel (Abraham Accords, 2020) could potentially affect India’s relations with Iran and few other Arab countries.

4. Kafala System – The welfare and rights of Indian expatriates in the UAE, particularly blue-collar workers, remain a concern. The inhumane conditions imposed by the Kafala system on immigrants engaged in blue collar jobs in the UAE is a major challenge in India-UAE relations. It gives employers disproportionate control over migrant workers’ immigration and employment status.

5. Extension of Loans to Pakistan – UAE is a major lender to Pakistan. Pakistan sponsors cross border terrorist attacks in India. The money provided by the UAE seems to be used in endangering India’s national security.

6. Trade imbalance: While trade has been growing, there’s a trade imbalance. In FY 2022-23, India’s trade deficit with the UAE stood at USD 16.78 billion. The UAE’s efforts to diversify its economy and reduce dependence on expatriate workers could affect Indian interests.

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

1. Transparency and predictability in the use of Non-Tariff Barriers (NTBs)- There must be regular information sharing on labelling, licensing, permit requirements, import monitoring and surveillance requirements.

2. Establishment of 2+2 Dialogue – India must establish more strategic dialogue platforms like India’s 2+2 dialogue with U.S., Russia.

3. Alignment with ‘Vision 2021’- UAE, through its ‘Vision 2021’, seeks to diversify its economy and reduce its dependency on oil. India must use areas like renewable energy, start-ups, fintech to deepen its engagement with the UAE.

4. Reformation of Kafala System – India should actively engage with the UAE to reform the Kafala system. For Ex- Qatar has promised to reform the Kafala system on India’s insistence.