INDIA – UAE
India and United Arab Emirates (UAE) enjoy strong bonds of friendship based on age-old cultural, religious, and economic ties between the two nations.
Areas of Cooperation
- Economic Cooperation:
- Energy: UAE is a significant supplier of crude oil, LNG, and LPG to India. In 2020, it was India’s third-largest oil supplier.
- Trade: UAE is India’s third-largest trading partner, with bilateral trade valued at $59 billion in 2019-20.
- Investments: UAE is a valuable source of FDI in India, with investments currently valued at around $18 billion.
- Military Cooperation:
- Security: There is an ongoing emphasis on security cooperation, particularly to counter terrorism and combat online radicalization.
- Defense Exercises: The “Desert Eagle” bilateral exercise, involving the air forces of both countries, demonstrates the strength of this partnership.
- Human Resources:
- Diaspora: The Indian community is the largest ethnic group in the UAE, accounting for about 30% of the population. They work across various sectors, sending back significant remittances.
- Technology Partnerships: Both nations have signed agreements for digital innovation, technology partnerships, and projects like the Red Moon mission. UAE offers “golden visas” to high-skilled professionals and specialists.
- Strategic Cooperation:
- Jammu and Kashmir: UAE has shown support for India’s moves in Jammu and Kashmir, including investment and infrastructure projects.
- Terrorism and Extradition: UAE has moved from being a safe haven to actively supporting India in extraditing fugitives and suspected terrorists.
Why UAE Needs India as a Partner
- Geopolitics:
- Roping in Iran: UAE seeks India’s support amid regional tensions with Iran, especially concerning the Strait of Hormuz.
- Non-Deliverance by Pakistan: UAE’s focus has shifted from Pakistan towards India due to Pakistan’s inconsistent economic and security deliverables.
- Economic Reasons:
- Oil Market: India is a significant consumer of UAE’s oil, supporting UAE’s ambitions of expanding its hydrocarbon sector.
- Infrastructure Export: UAE’s sovereign wealth funds can invest in India’s infrastructure, making India a key investment destination.
- Security:
- Violent conflicts around without any resolutions: Countries like Syria, Iraq, Libya and Yemen are suffering from violent conflicts. Gulf Cooperation Council (GCC) has not produced expected results. India has the potential to mediate.
- Issue of Terrorism: 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.
- Example: Recently, 5 UAE diplomats were killed in an attack in Kandahar in Afghanistan.
- Diplomatic
- India being a natural partner: 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.
- High level treaties: In 2017 the two sides signed the agreement on Comprehensive Strategic Partnership (CSP).
Comprehensive Economic Partnership Agreement (CEPA)
CEPA is a free trade pact between India and UAE that focuses on enhancing trade in services, investment, and other economic partnerships.
Key Reasons Why CEPA Matters:
- Increase in Trade: CEPA aims to double bilateral trade in goods over the next five years, with a target of reaching $100 billion.
- Employment Opportunities: The agreement obligates the UAE to offer 1.4 million work visas to highly skilled professionals from India.
- Zero Duty on Exports: CEPA facilitates zero-duty access for 90% of India’s exports to the UAE.
- Value Addition: The agreement includes stringent ‘rules of origin’ to ensure substantial value addition, with requirements for up to 40% processing.
- Market Accessibility: Indian exporters can access larger Arab and African markets through the UAE.
- Promotion of Indian Exports: CEPA is expected to benefit $26 billion worth of Indian exports currently subject to a 5% import duty in the UAE.
Challenges in India-UAE Relations
- Energy Pricing: As an OPEC member, UAE supports higher oil prices, whereas India advocates for lower prices.
- Geopolitical Balancing: UAE’s relationship with countries like Iran, Yemen, and China sometimes conflicts with India’s strategic interests.
- Treatment of Indian Labor: Indian laborers face challenges, including lack of citizenship and tough working conditions in UAE labor camps.
- Example: The pandemic saw a large repatriation of labor, and remittances may reduce in the coming years.
- Air Services Agreement: UAE seeks to increase flight frequencies and destinations, while India is cautious to protect its airline industry.
- Treatment of Minorities in India: The UAE, as part of the Organisation of Islamic Cooperation (OIC), has raised concerns about perceived injustices against Muslim minorities in India.
Way Forward
- Improving Investment Climate: Streamlining business regulations in sectors like automobile, agriculture, and allied industries could attract more UAE investments.
- Enhancing Defence Engagement: Strengthening cooperation through joint training and exercise programs for Indian and UAE officers. Increasing the number of Emirati officers who can avail training in its defence schools will lead to greater familiarization within the defence establishment.
- Promoting medical tourism: India’s private hospitals have the necessary infrastructure, facilities and expertise to provide world class medical care within a fraction of the cost spent in developed countries. Hence, it can be an important area where India can attract Emiratis.
- Renewable energy: The cost for production and transmission of solar energy in the UAE are a fraction to that of India and this is a priority area for the UAE government. Indian companies with expertise in this area can invest in the renewable energy sector in UAE.
- Education sector: India has some of the finest higher education institutions in engineering and management fields and given their cost-effective and world-class education, they can be a major attraction for UAE students looking for acquiring higher education and better skills.
- Enhancing people to people contacts: There is a need for enhancing the people-to-people contacts for familiarization and increasing interactions between think tanks, researchers and through academic exchanges.