Context: 

This article is based on the news “Old-fashioned trust and credibility bind India-UAE ties” which was published in the Hindu. The visit of the Indian Prime Minister to the United Arab Emirates, reflects the growing importance of their bilateral relations and significance of UAE in India’s engagement in the Gulf region.

PM Modi UAE Visit Highlights

• Regular Interactions: This is the seventh visit of the Prime Minister since 2015, and third in the past eight months. 
• Inauguration of Temple: Bochasanwasi Shri Akshar Purushottam Swaminarayan Sanstha (BAPS) temple, the first Hindu temple of Abu Dhabi, would be inaugurated by the PM during his visit.
• World Government Summit: PM will address the World Government Summit on February 14 in Dubai as the ‘Guest of Honour’. The focus of this year’s summit is on ‘Shaping Future Governments’ and gives India a platform to put forth its own views.
• Addressing the Indian Diaspora: During his visit, the PM would also be addressing the Indian community in the “Ahlan Modi” (Hello Modi) event at the Zayed Sports City Stadium.

India UAE Relations: Background

• India UAE Relations: Before Independence

  • India UAE Trade relations: The India UAE relationship dates back several centuries, rooted in vibrant trade links across the Arabian Sea. The trade consisted of items like spices, textiles, pearls and ideas. 
  • Cultural Exchange: These early interactions facilitated cultural and social exchanges, enriching the historical relations of both nations with shared linguistic, culinary, and artistic influences.

• India UAE Relations: Post Independence

• • Beginning of Diplomatic Relations: Formal diplomatic relations were established soon after the UAE’s formation in 1971 and the first Prime Ministerial visit was made by Indira Gandhi in 1981.
  • Early Economic ties: Initially, the relationship was heavily focused on trade and labour migration, with India becoming a major manpower exporting nation for the emerging UAE’s economy. 

Progress in India UAE Relations Through Decades Economic Relations

• India UAE Trade Relations: India is UAE’s second-largest trading partner accounting for 9% of its total foreign trade and 14% of non-oil exports. Also, the UAE is India’s third biggest trade partner. 
  • India UAE bilateral trade worth US$ 84.84 billion during 2022-23. 
• India’s Exports: India exported 7,707 commodities to UAE in 2022-23 accounting to US$ 31.60 billion. 
  • Major Exported Items from India to UAE include petroleum products, gold and other precious metal jewellery, telecom instruments, pearls, precious and semi-precious stones, iron and steel etc. during 2022-23.
• India’s Imports: India imported 4,064 commodities from UAE, accounting to US$ 53.23 billion, in 2022-23.
  • Major items imported by India from UAE include petroleum crude, petroleum products, pearl, precious and semi-precious stones, gold, aircraft, spacecraft and parts, plastic raw materials, other precious and base metals etc. during 2022-23.
• Comprehensive Economic Partnership Agreement (CEPA): India and UAE signed CEPA in February 2022 which acted as a catalyst in reducing tariff barriers and increasing trade and investment flows between the nations.
• • Post Signing of CEPA UAE emerged as the fourth largest investor in India. It has committed to invest US$ 75 billion in India’s infrastructure sector. 
  • The Abu Dhabi Investment Authority (ADIA) will soon open an office in GIFT City, Gujarat. 
  • 14 percent increase in India’s non-oil exports to UAE during the July-August 2022 period, just months after the CEPA came into force.
• Bilateral Investment Treaty: The two sides signed the Bilateral Investment Treaty which will be a key enabler for further promoting investments in both countries.
• Bharat Mart: It is a key initiative of Dubai-based DP World and India’s Ministry of Commerce and Industry to boost exports of Indian Micro, Small and Medium Enterprises.
  • The project builds on the momentum of India UAE CEPA which completed its first year in 2023 and has seen India’s trade with the UAE grow by 16% to $85 billion.
• Trade in Local Currencies: An MoU was signed to promote the use of local currencies for cross-border transactions. Interlinking of payment and messaging systems was initiated

Cultural Cooperation Between India and UAE

• Indian Diaspora: The UAE is home to 3.5 million Indians (30% of the Emirate’s population). Indians are the largest expatriate community in the UAE, and their remittances are a significant source of foreign earnings.
• Educational Cooperation: A campus of the Indian Institute of Technology-Delhi is being established in Abu Dhabi, initially offering a Masters program in Energy Transition and Sustainability.
• Restoration and Preservation of Archival material: The two countries signed a cooperation protocol for their National Archives, focusing on the restoration and preservation of archival materials.
• Religious Cooperation: The BAPS temple initiative strengthens religious diplomacy and is a mark of religious tolerance in a Gulf nation.

Defence Cooperation Between India and UAE

• High-Level Visits: Regular high-level exchanges, including state visits by leaders, further cemented strategic ties and expanded the scope of cooperation.
• I2U2 Framework: In July 2022, a new quadrilateral forum was established called the I2U2, whose members are India, Israel, UAE, and the US. 
  • The forum identifies six areas of cooperation, namely water, food security, health, energy, transportation, and space.

Global Cooperation Between India and UAE

• Collaborative Global Leadership: India’s G20 presidency and the UAE’s COP28 presidency provided additional opportunities for working together on global issues such as environmental protection, climate change and south south cooperation.
• India-Middle East Economic Corridor: The two sides also signed an intergovernmental framework agreement on the India-Middle East Economic Corridor which would foster India-UAE cooperation, furthering regional connectivity.

Fintech Cooperation Between India and UAE

• Interlinking of Digital Payment Platforms: UPI (India) and AANI (UAE) would be interlinked to facilitate seamless cross-border transactions between the two countries.
• Interlinking Domestic Debit/Credit Cards: They also signed a pact on interlinking domestic debit/ credit cards, RuPay (India) with JAYWAN (UAE), which would build financial sector cooperation and enhance universal acceptance of RuPay across the UAE.

Energy Cooperation Between India and UAE

• Electrical Interconnection and Trade: The two sides signed an MoU on cooperation in the field of electrical interconnection and trade, including energy security and energy trade.
• Strengthening of Energy Partnership: The leaders also discussed the strengthening of energy partnership and appreciated that in addition to the UAE being among the largest sources of crude and LPG, India is now entering into long-term contracts for LNG.

Factors Transforming India UAE Relations

• Increased Diplomatic Engagement:

  • Frequent Leadership Visits: Prime Minister Modi’s frequent visits to the Middle East, including 15 trips since 2015 and reciprocatory visits by Gulf leaders and officials signify a major uptick in diplomatic engagement compared to previous administrations.
  • Developing Personal Relationships: The Indian PM’s strategy of developing personal connections with Gulf leaders has deepened ties, capitalising the Gulf monarchs’ preference for trust-based relationships.

• Strategic Geo-Political Reorientation

  • Shift from Declaratory Support to Strategic Engagement: Moving past mere from traditional declaratory support for Arab causes, India has adopted a more pragmatic and strategic engagement with the Gulf, evidenced by the formation of the I2U2 group and initiatives like the India-Middle East-Europe Economic Corridor.
  • Regional Partnerships: India’s shift towards closer cooperation with the US, Israel, and conservative Gulf states marks a significant geopolitical realignment.

• Shift in Religious Diplomacy

  • Overcoming Historical Complications: By moving past the religious lens and Pakistan-centric approach that previously complicated relations, India has managed to strengthen its ties with the Gulf, focusing on shared interests and goodwill.
  • Promoting Religious Tolerance: The construction of the Swaminarayan temple in Abu Dhabi symbolises a broader trend towards religious tolerance in the Gulf, aligning with India’s secular and pluralistic values.

• India UAE Strategic Relations

  • Shift from Transactional to Strategic Economic Ties: Recognition of the Gulf as a major centre of global capital and its growing significance in accelerating India’s economic growth. India is eyeing investments from the UAE in green energy, space, semiconductors, and artificial intelligence.

• Counter-Terrorism and Defense Collaboration

• • Deepening Security Ties: The last decade has seen significant growth in counter-terrorism collaboration between India and Gulf nations like Saudi Arabia and the UAE.
  • Potential for Defense Partnership: Amidst changing regional geopolitics, there’s a push for diversifying defence partnerships, with Gulf countries looking to India as a regional security provider and exploring joint military developments.

Major Challenges In India UAE Relations

• Geopolitical Concerns Between India UAE Relations

  • Relationship with Pakistan: The historical and ongoing tensions between India and Pakistan affect India’s relations with Gulf countries, including the UAE. 
    • Furthermore, the financial support from the UAE to Pakistan could be diverted for anti-India activities.
  • Navigating Regional Tensions: India’s diplomatic manoeuvring amid UAE’s regional conflicts, especially with Iran and the impact of Middle Eastern geopolitics, presents a complex challenge.
  • Competition from China: China’s strategic investments and financial engagements in the UAE, surpassing USD 30 billion between 2005 and 2020 presents a competitive challenge for India.

• Trade Challenges Between India UAE Relations

  • Concentration of Trade in Specific Items: India UAE trade relations lack diversity and are mostly concentrated in hydrocarbon and precious metals trade.
  • Presence of Non-Tariff Barriers: Non-tariff barriers like Sanitary and Phytosanitary measures along with issue of Halal certification has led to the decline in Indian food item exports to the UAE. 

• Labor Rights Concerns

  • The Kafala System, a sponsorship program in which employers import foreign labourers and bind them to a contract for a specified time period proves to be exploitative practice for the Indian diaspora.

• Investment and Economic Cooperation Delays

  • Slow Project Implementation and sluggish pace in executing the $75 billion UAE investment fund for Indian infrastructure projects underscores inefficiencies and delays in bilateral economic initiatives.

• Energy and Transportation Disputes Between India and UAE

• • Oil Pricing Conflicts: Disagreements over oil pricing between India, a major consumer, and the UAE, an OPEC member, have led to tensions, impacting energy cooperation.
  • Air Services Agreement: The unresolved negotiation over air travel arrangements limits the expansion of flight services, affecting connectivity and economic ties.
    • India has Air Service Agreements (ASA) with 109 countries covering aspects relating to the number of flights, seats, landing points and code-share.

Way Forward To Strengthening India UAE Relations

• Addressing Geopolitical Concerns

  • Transparent Aid Tracking: Advocate for transparency in financial aid, ensuring UAE’s support to other nations does not adversely affect India’s security interests.
  • Diplomatic Engagement: Strengthen diplomatic channels to navigate regional tensions, maintaining a balanced approach in relations with the UAE, Iran, and other Middle Eastern countries.

• Navigating Non-Tariff Barriers (NTBs)

  • FTA Compliance: The countries should aim for a clearer and more predictable regulatory regime. Proper compliance within the tariff framework of each country should be adhered to ease trade. 

• Improving Labor Rights and Welfare

  • Bilateral Agreements: The countries should work towards bilateral agreements that ensure the protection of labour rights and improve the living conditions of migrant workers under the Kafala systems.

• Fostering India UAE People to People Relations

• • Cultural Exchanges and Community Welfare Programs: The countries should engage in promoting cultural and educational exchanges to bolster people-to-people connections and implement programs aimed at improving the welfare of the Indian diaspora.