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Navigating New Horizons: India and UAE Trade Partnership


India is quickly emerging as a major force in global commerce as it continues to strengthen trade relationships with other nations. The United Arab Emirates (UAE) is one such nation with whom India shares strong commercial ties built on the principles of strategic partnership and reciprocal prosperity.

As an emerging economy, India enjoys many advantages – a young demographic,  strategic position in global efforts to de-risk from China, a robust digital public infrastructure, a nation at the cusp of a clean energy transition, and increased relevance in multilateral negotiations aimed at handling global and transnational challenges, making it an attractive market for long-term foreign investments. The ongoing fragmentation of the world order has further created space for India to flex its foreign policy muscles[1] allowing the country to shine on the global stage.

Similarly, the promising business environment in the UAE has quickly positioned it as a global trade and commerce hub. It is driven by favourable government policies, tax reforms, diverse immigration and residency options, and a strategic shift from an oil-based economy to a sustainable and diversified one.

The relationship between India and the UAE has long been a two-way street. For India, it has opened up a huge market for exports, facilitated the outbound expansion of Indian start-ups and family offices, and more recently, internationalisation of India’s homegrown digital payment solutions. Chiefly for the UAE, the investment opportunities in India have facilitated diversification of investments and associated risks, while helping to reduce its dependency on oil as the primary growth driver.  

In the context of international trade, India and the UAE have always maintained close ties, reinforced by recent government initiatives solidifying these long-standing economic relations. With approximately 3.5 million Indians constituting around 30% of the UAE’s overall population, this bilateral relationship is highlighted by two key dimensions: trade and investment relations as well as demographic and physical proximity.

Comprehensive Economic Partnership (CEPA)

The UAE is India’s second top export destination, while India is the UAE’s second-largest trading partnerwith bilateral trade rising to USD 85 billion in 2022-23. Their relationship was further bolstered by the landmark Comprehensive Economic Partnership Agreement (CEPA) signed in February 2022,[2] which eyes expansion of bilateral trade of USD 100 bn over the next five years through tariff reductions, fast-tracked approvals, and access to trade zones. CEPA has already made a significant impact on bilateral trade, which is reflected in the expansion of India’s exports to the UAE in sectors, such as gems, jewellery, agri products, medical devices, and automobiles.[3] It must be noted that 90% of India’s exports to the UAE now attract zero duty under CEPA with gems, jewellery, pharmaceuticals, food and energy being the key beneficiary sectors. On the other hand, Indian sectors attracting most investments from the UAE include real estate, financial services, oil and gas, among others.

IMEC and Other Bilateral Trade Agreements

In February-March 2024, India and the UAE signed the Inter-Governmental Framework Agreement (IGFA) on India-Middle East Economic Corridor (IMEC). Announced initially on the sidelines of the G20 summit, the IMEC aims to extend India’s reach across the Arabian Sea to the UAE to fortify their ties in ports, maritime and logistics sectors.[4] During the same period, India and the UAE additionally signed[5] a bilateral investment treaty and exchanged cooperation agreements covering electrical interconnection, trade and digital infrastructure. Furthermore, the two countries have signed two long-term LNG supply agreements to further enhance the bilateral partnership in the energy sector.[6] In line with the Indian government’s commitment towards digital infrastructure, a recent MoU[7] has also been signed by the two countries to foster cooperation in digital infrastructure projects and sharing of technical expertise. Despite the prevailing geopolitcal challenges, the demonstrated commitment between India and the UAE signals a resolute push towards realizing the economic corridor.

Cross-Border Digital Payments

Recently, central banks of both countries allowed the use of local currencies (INR and Dirhams) for cross-border transactions, including trade, remittance, and investment flows. India’s rapid growth as a fintech giant has sparked a lot of interest overseas. One such example is the the linkage of Unified Payment Interface (UPI) with the UAE’s instant payment system Aani, which is expected to benefit millions of Indians residing in, and visiting the UAE. The acceptance of India’s RuPay cards in the UAE paves the way for internationalisation of India’s financial sector initiatives. The UAE has also launched its own domestic card ‘JAYWAN’ modelled on the digital RuPay credit and debit card stack.[8] Both countries are additionally exploring interoperability between their central bank digital currency projects, which is set to boost fast, safe and cost-efficient digital payments in both jurisdictions, while enhancing bilateral economic ties further.

Towards Renewable Energy & Sustainable Future

In the backdrop of UNFCCC COP28 and the Paris Agreement in July 2023, leaders of the two countries issued a joint statement on climate change,[9] pledging to enhance cooperation on climate ambition, decarbonisation and clean energy. They underscored support to sustainable, reliable and affordable energy for all as an integral part of a low-carbon development trajectory. In furtherance to this goal, a deal has been signed to explore the establishment of grid connectivity, which includes a pact on renewable energy such as green hydrogen and solar. The UAE is also financially supporting India’s energy transition programme that aims to generate 500 GW of renewable energy by 2030. Additionally, both nations’ economies are witnessing a significant shift in the rapidly-growing electronic vehicles (EVs) sector. To this end, CEPA too provides a gateway for business collaboration and technology transfer in the EV sector. As per reports, Indian EV start-ups too have embraced this revolution and are targeting the Middle East automobile market.[10]

These collaborations are a significant step towards global climate action and sustainable energy development, particularly when India is strongly moving towards greening its infrastructure and the financial eco-system. They also open up a great opportunity for Indian companies looking to enter or grow in the fields of renewable energy, green hydrogen, electric vehicles, waste management and other sustainable projects. As such, both countries can benefit greatly from shared knowledge and expertise in these areas.

Infrastructure & Real Estate

Both economies enjoy a long-standing and robust partnership in the infrastructure and real estate sectors. The UAE has committed to channelling USD 75 billion towards Indian infrastructure.[11] Recently, the National Highways Authority of India (NHAI) launched an initiative to monetise its infrastructure, looking for investment from the UAE via InVITs.

Equally, Indians have consistently been among the top three nationalities to buy properties in Dubai in the last two decades. The UAE’s booming real estate market has drawn the interest of Indian real estate investors, who are keeping a close eye on Dubai due to its high rental yields and business-friendly environment.[12] These trends underscore mutual benefits and economic synergies between the two nations.

Family Office Movement

FY23 saw considerable increase in wealthy Indians wanting to set up family offices in UAE by relocating and structuring their finances in the region. Synonymous with luxury, the UAE is emerging as a favoured destination for India’s ultra-high-net-worth individuals (UHNIs), given the business friendly environment, tax benefits, stable economy & currency, accessible visa program, exceptional safety & security, residency options, world class health and education systems, vibrant cosmopolitan atmosphere, among other benefits. UAE also offers prominent business families, UHNIs with remarkable wealth management solutions. This is due to many free zones, liberalised economy, internal financial centres, facilitation of independent ownership, etc. Around 4,300 millionaires are expected to leave India in 2024, with the majority of them choosing to relocate to the UAE,[13] which speaks volume about the growing ties between both nations. Historically, there have been several examples of such expansion to the UAE by popular business houses such as the Landmark Group, Jashanmal Group, Sobha Group, Kalyan Jewellers.

Startup Environment

The UAE’s elevated entrepreneurship ecosystem has allowed Indian enterprises to thrive in Dubai, evidenced by a remarkable 39% uptick in the registrations of Indian-owned companies.[14] Indian start-ups are increasingly venturing into UAE, drawn by compelling factors such as favourable government policies, vast market size, rapid digital advancements and an overall conducive environment. For instance, FreshToHome, an e-commerce platform, has already entered multiple UAE Emirates, Ola, a ride-hailing service, is also diversifying and expanding in the region. PolicyBazaar, an online insurance aggregator, also marked its entry into the UAE while partnering with various local insurance companies. While “flipping” ownership structures from India to the UAE seems to be gaining popularity among Indian startups generally, an increased interest among UAE-based investors has additionally led to substantial investments in Indian ventures, further fuelling their growth and reinforcing the solid investment sentiment between Indian start-ups and the UAE.[15]

AI and Tech

Both India and the UAE dominate the technology sector with government and industry initiatives rapidly boosting innovation. Both countries are brainstorming light-touch regulation on artificial intelligence (AI) to allow scope for innovation and development. Similar to IndiaAI Mission, the UAE Cabinet recently approved a new strategy aimed at the digital economy contributing 20% of the UAE’s gross non-oil national economy. The UAE is also proposing to launch a new AI model to compete with global tech companies.[16]

In 2023, the two countries signed an MoU focusing on facilitating industrial investments, technology transfer and enabling the deployment of advance technologies in industries. Through this MoU, the countries will collaborate with mutual benefits through shared resources in sectors such as space, sustainable energy technologies, and artificial intelligence.

The UAE has also been emerging as a preferred destination for Web3 companies as it provides for ease of business establishment, dedicated regulatory framework for digital assets, low taxes and overall a prime financial hub.

Cross-Border Investment

TheUAE established the fourth largest foreign investor base in India with FDI inflow of around USD 3.3 billion in FY23.[17] 

Abu Dhabi Investment Authority (ADIA), the world’s largest sovereign wealth fund, is an active participant in the Indian stock market holding 22 listed stocks with a networth of over INR 3,447 crore (USD 412 million).[18] In February 2024, ADIA has also received in-principle approval to set up a USD 4-5 billion fund in India’s Gujarat International Finance Tec-City (GIFT City) and is expected to start investing shortly. This move signifies a growing confidence of global investors in the evolving landscape of GIFT City as a financial hub.

In addition to ADIA, other popular UAE fundhouses such asMubadala and ADQhave also deployed money in India’s new-age firms. Jio Platforms, Reliance Retail, Byjus, Greenko and Lenskart are a few examples of privately held Indian ventures backed by Emirati investors.

As for outbound investments from India to the UAE, Dubai alone witnessed investments to the tune of USD 1.6 billion between 2020 and 2023, making it one of the top five countries for foreign investments in Dubai.[19]

Bright Future Beckons

Favourable government initiatives, geographic proximity and cultural advantages have paved the way for a booming bilateral trade partnership between India and the UAE. As a result, there has been a significant uptick in the volume of trade and investments between the two countries. In terms of job creation, investment flows and ease of doing business, both countries have benefitted from the CEPA. Additionally, as important energy trading partners, the two countries are also working towards a low-carbon future, which will be mutually beneficial. It is evident that the strengthening ties between India and the UAE are leading to a new era of trade and investment opportunities, innovation, and sustained economic growth for both countries.

These initiatives, coupled with the election of a new government in India that is known to have a pro-foreign investment stance and a reputation for forging diplomatic relations, portend well for the overall economic growth of both nations, particularly India’s goal of becoming a developed nation by 2047. 

[1] Carnegie Endowment for International Peace, In India, Foreign Policy Is on the 2024 Ballot. (Last visited on July 5, 2024).

[2] Department of Commerce, Comprehensive Economic Partnership Agreement (CEPA) (Last visited on July 5, 2024).

[3] Deloitte, India–UAE Comprehensive Economic Partnership Agreement (CEPA). (Last visited on July 5, 2024).

[4] Press Information Bureau, Cabinet approves Inter-Governmental Framework Agreement…(Last visited on July 5, 2024).

[5] ThePrint, India, UAE sign agreement on India-Middle East Economic Corridor. (Last visited on July 5, 2024).

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[7] Press Information Bureau, Prime Minister’s meeting with President of the UAE. (Last visited on July 5, 2024).

[8] Press Information Bureau, Prime Minister’s meeting with President of the UAE. (Last visited on July 5, 2024).

[9] Ministry of External Affairs, Joint Statement: Visit of Prime Minister to the United Arab Emirates (February 13-14, 2024). (Last visited on July 5, 2024).

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[11]  Indian Express, India, UAE ink pacts on linking digital payment platforms, trade, energy. (Last visited July 5, 2024).

[12] The Economic Times, Real estate renaissance: Dubai developers eye India’s booming property market.(Last visited July 5, 2024).

[13]  Business Today, Why are some of India’s richie rich moving to UAE? Here’s the golden secret. (Last visited July 11, 2024).

[14]  The Economic Times, Indian companies represent over 30% of Dubai’s startup community, space for more: Mohammad Ali Rashed Lootah, Dubai Chambers. (Last visited July 5, 2024).

[15] Press Information Bureau, UAE-India MoU to drive investment and collaboration in industry and advanced technologies. (Last visited July 5, 2024).

[16]  Reuters, UAE releases new AI model to compete with big tech. (Last visited July 5, 2024).

[17]  The Economic Times, UAE emerges as fourth largest investor in India in FY23. (Last visited July 5, 2024).

[18]  FrontPage, India-UAE Relations are Going from Strength to Strength. (Last visited July 5, 2024).

[19] The Economic Times, As the UAE’s foreign investment soars, Dubai reigns as India’s prime destination for FDI. (Last visited July 5, 2024).