India and the UAE: A confluence of cultures and commerce

The Prime Minister just concluded a very successful visit to the UAE. This was his seventh trip to the country since 2015. A key highlight of prime minister’s visit was the inauguration of the grand BAPS Temple in Abu Dhabi on 14 February, the UAE’s first traditional Hindu stone temple. This was evidence of solid cultural ties between the two countries. At the same time, it also highlights the UAE’s commitment to multiculturalism and religious tolerance. There were two other highlights of this visit. First was the prime minister’s address at the World Government Summit. At the Summit, the prime minister emphasised the significance of governance that prioritises inclusivity, technological advancement, transparency, and environmental sustainability. He expressed appreciation for the UAE’s leadership in creating a platform that brings together global thought leaders to discuss the pressing challenges of the 21st century. These include issues related to food, health, water, energy security, and the imperative of fostering an inclusive society. The prime minister highlighted technology’s role as both a disruptor and an enabler, and the need for concerted efforts to tackle terrorism and climate change. He advocated for governments to adopt approaches that ensure minimal interference in people’s lives while maximizing governance efficiency. The prime minister shared insights from his extensive experience in governance, advocating for policies that promote digital identity, financial inclusion, women’s empowerment, and the development of a vibrant startup ecosystem. He called for global cooperation to address challenges in the digital age, such as artificial intelligence, cryptocurrency, and cybercrime, stressing the need for a balance between national sovereignty and international law. The prime minister’s vision for the future of governance is one of learning and collaboration, where solutions emerging from summits like these shape a better global future, embodying the principles of “One Earth, One Family, One Future”. Second was the signing of the Bilateral Investment Treaty between the two countries. This BIT is designed as a mechanism to further bolster the investment flows between the two nations, ensuring a robust framework for investor protection and dispute resolution. This treaty will be instrumental in elevating the Comprehensive Strategic Partnership. By establishing clear legal parameters for investments, the BIT aims to significantly enhance investor confidence, facilitating a surge in Foreign Direct Investments (FDIs) and Overseas Direct Investments (ODIs). The technical provisions within the treaty are expected to streamline investment processes, reduce risks associated with cross-border investments, and foster an environment conducive to increased capital flows, thereby contributing to economic growth and job creation in both countries. Apart from this, the PM and President of the UAE oversaw the exchange of several significant agreements, including a Memorandum of Understanding (MoU) on electrical interconnection and energy trade. The two countries signed an Intergovernmental Framework Agreement on the India-Middle East Economic Corridor to boost regional connectivity and cooperation. An MoU on cooperation in Digital Infrastructure Projects aims to create a framework for investment cooperation and knowledge sharing in the digital sector. Additionally, a cooperation protocol between the National Archives of both countries and an MoU for cooperation in heritage and museums were established, the latter to support the Maritime Heritage Complex at Lothal, Gujarat. Agreements to interlink the instant payment platforms UPI (India) and AANI (UAE), and to connect domestic debit/credit cards RuPay (India) with JAYWAN (UAE), were also signed, enhancing financial sector cooperation and facilitating seamless cross-border transactions. The Prime Minister congratulated the President on the launch of UAE’s domestic card JAYWAN, which will work in tandem with India’s digital RuPay credit and debit card stack, and they witnessed a transaction using the JAYWAN card. The discussions also highlighted the strengthening of the energy partnership, with India entering into long-term contracts for LNG, building on the UAE’s status as a significant source of crude and LPG for India. But what is the reason behind this pivot to UAE? Again, there are two reasons. First, the economic ties between the two countries have seen remarkable progress, making the UAE India’s third-largest trading partner for the year 2022-23 and India’s second-largest export destination. The second reason is that the UAE hosts a large Indian expatriate community, which is a significant aspect of India’s extended socio-economic ties abroad. The economic ties between India and the UAE have seen remarkable growth in recent years, highlighted by key milestones and ambitious trade targets that have further strengthened their partnership. The Comprehensive Economic Partnership Agreements (CEPA) programme has accelerated the progress in their relations. From 2020 to 2022, the volume of non-oil trade between the two nations surged by 84 per cent, showcasing the rapid expansion of their economic and trade relations. The UAE-India CEPA, effective from 1 May, 2022, has been particularly transformative, reducing tariffs on a vast majority of UAE goods exported to India and enhancing market access across numerous sectors. This agreement has not only facilitated trade by eliminating technical barriers but also provided UAE businesses with access to Indian government procurement opportunities, thereby significantly boosting bilateral non-oil trade. According to Ministry of Commerce’s System on  Foreign Trade Performance Analysis (FTPA), exports from India to the United Arab Emirates (UAE) have shown a positive growth of 5.98% in the period from April to December 2023 compared to the same period in 2022, with provisional figures indicating an increase from $23,333.67 million to $24,728.48 million. Given that these numbers are provisional, the final export figures for 2023 are likely to be even higher, underscoring a strengthening trade relationship between India and the UAE. Between April and November 2023, India’s export portfolio to the UAE showcased a diverse range of commodities, highlighting the strong trade relations between the two nations. Leading the export list was rice, a staple of Indian agriculture, with significant exports valued at $262.11 million. Frozen meat followed, with a demand in the UAE leading to exports worth $144.36 million, reflecting the UAE’s appetite for Indian meat products. The export of nuts, particularly coconuts, Brazil nuts, and cashews, contributed significantly, amounting to $70.32 million. Indian tea, renowned globally, also made a substantial contribution to the exports, valued at $74.20 million. Other notable exports included a variety of dried nuts, crustaceans, molluscs, and other aquatic invertebrates, dried leguminous vegetables, and fresh or chilled alliaceous vegetables like onions and garlic, along with other fresh or chilled vegetables, and meat of sheep or goats, highlighting the diversity of India’s export capabilities. In a strategic move to strengthen economic relations further, India and the UAE have started to settle bilateral trade in their respective currencies, a development that aims to reduce transaction costs and shield businesses from currency fluctuation risks. This agreement is expected to make Indian exports more competitive by removing hedging costs and is a testament to the deep-rooted trust and strategic partnership between the two nations. It symbolizes a shift towards a multipolar economic world, reducing dependency on dominant reserve currencies. Bilateral trade between India and the UAE increased by 16 per cent to $84.5 billion from April 2022 to March 2023, indicating a robust trading relationship. The introduction of local currency trading is anticipated to further enhance this relationship by simplifying trade processes and potentially increasing export volumes. The people-to-people connect between the UAE and India has played a crucial role in strengthening the bilateral relations between the two countries, notably influencing their economic ties. The foundation of this connection lies in the extensive Indian expatriate community in the UAE, which is the largest ethnic group in the country, constituting approximately 30 per cent of the nation’s population. In 2021, the number of resident Indian Nationals in the UAE was estimated to be around 3.5 million. Theories such as Joseph Nye’s “Soft Power” concept suggest that the ability of a country to co-opt rather than coerce can be a significant factor in international relations. The Indian community’s contribution to the UAE’s labor market, ranging from blue-collar workers to high-skilled professionals, exemplifies a form of soft power, fostering a positive image of India in the UAE and facilitating smoother diplomatic and economic interactions. Moreover, scholars like Robert Putnam have highlighted the role of social networks in facilitating economic transactions by reducing transaction costs and promoting trust and reciprocity among community members. The dense network of the Indian diaspora in the UAE serves as a bridge between the two countries, enhancing mutual understanding and cooperation. This, in turn, positively impacts bilateral trade, investment flows, and collaborative ventures across various sectors. The prime minister also acknowledged this. At the “Ahlan Modi” event in Abu Dhabi, the prime minister highlighted the deepening bonds between India and the UAE, expressing gratitude for the warm reception and acknowledging the contributions of the Indian community to the UAE’s development. He underscored the significance of the Indian diaspora as a bridge between the two nations, emphasizing their role in the UAE’s progress and the mutual respect and affection that underpin this relationship. The PM also lauded the UAE for granting Indians a place in their hearts and for their cooperation during challenging times, such as the COVID-19 pandemic. The future of India-UAE relations shines bright, with potential for growth across various sectors, including trade, energy, technology and cultural exchange. Initiatives like the India-Middle East Europe Economic Corridor (IMEC) and the I2U2 Group, comprising India, Israel, the UAE, and the United States, are just the beginning of a new era of cooperation that promises to bring mutual benefits and foster stronger ties. The recent visit of Prime Minister Modi to the UAE is a harbinger of the boundless possibilities that lie ahead. In the words of Sheikh Zayed bin Sultan Al Nahyan, “History is a continuum of events, the present only a fleeting instant between a past and a future,” and in this spirit, India and the UAE stand on the brink of a future bright with promise, their partnership a beacon of what can be achieved when two nations share a vision of progress and prosperity. The author is OSD, Research, EAC-PM. He tweets adityasinha004. Views expressed in the above piece are personal and solely those of the writer. They do not necessarily reflect Firstpost’s views. 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