THE CONTEXT: During his visit to Delhi, Sheikh Khaled followed a tradition set by his father and grandfather. This visit highlights the solid historical and strategic partnership between the two nations, enriched by mutual respect, trust, and complementary strengths despite their apparent differences in size, population, and economic foundations.
INDIA-UAE BILATERAL RELATIONS:
Establishment of Diplomatic Relations: India and the UAE formally established diplomatic relations in 1972. This laid the foundation for a robust partnership that has evolved significantly over the decades.
Economic and Trade Relations
- Growth in Trade: The UAE emerged as India’s third-largest trading partner, with bilateral trade reaching $85 billion in 2022-2023. The Comprehensive Economic Partnership Agreement (CEPA), signed in February 2022, aims to increase service trade to $115 billion in five years and has already boosted bilateral trade by 16% within a year.
- Investment: The UAE is India’s significant foreign direct investment (FDI) source, ranking as the fourth-largest investor. The bilateral investment treaty approved in February 2024 is expected to further enhance economic engagement, particularly in manufacturing and FDI.
Strategic and Diplomatic Engagements
- High-Level Visits: Indian Prime Minister Narendra Modi’s frequent visits to the UAE, including seven since 2015, highlight the importance of this relationship. These visits have facilitated numerous agreements and collaborations across various sectors.
- Multilateral Collaborations: India and the UAE are part of several multilateral platforms, such as the I2U2 grouping (India, Israel, UAE, US) and the India-Middle East-Europe Economic Corridor (IMEEC). These collaborations underscore their strategic alignment on global issues.
Energy and Security Cooperation
- Energy Security: The UAE plays a vital role in India’s energy security as a major oil supplier and a key partner in the Strategic Petroleum Reserve (SPR). Agreements have been signed for crude oil storage in India, with the UAE being the first international partner in this initiative.
- Defense Cooperation: The relationship includes joint military exercises, defense equipment manufacturing, and counter-terrorism efforts. The UAE has shown interest in Indian defense products like BrahMos missiles and Tejas fighter jets.
Cultural and People-to-People Ties
- Expatriate Community: The UAE is home to over 3.5 million Indians, the largest expatriate community in the country. This demographic plays a crucial role in the UAE’s economy and exemplifies the strong people-to-people ties.
- Cultural Initiatives: The inauguration of the first Hindu temple in Abu Dhabi symbolizes shared values of tolerance and coexistence, further strengthening cultural ties.
Technological and Educational Collaborations:
- Digital and Financial Integration: Initiatives like introducing India’s RuPay card and Unified Payments Interface (UPI) in the UAE enhance financial collaboration.
- Educational Initiatives: The establishment of the Indian Institute of Technology Delhi’s branch in Abu Dhabi exemplifies educational collaboration and exchange.
ROADBLOCKS IN INDIA-UAE RELATIONS:
Economic and Trade Challenges
- Trade Diversification and Imbalance: Despite the Comprehensive Economic Partnership Agreement (CEPA) boosting trade, it remains concentrated in sectors like gems, jewelry, petroleum, and smartphones, limiting broader economic gains. Imports from the UAE increased 19%, reaching USD 53,231 million in FY23, affecting India’s trade balance.
- Non-Tariff Barriers (NTBs): Indian exports face challenges due to NTBs like Sanitary and Phytosanitary (SPS) measures and mandatory Halal certification, particularly impacting poultry, meat, and processed foods. This has led to a significant decline in processed food exports to the UAE by almost 30% in recent years.
Labor and Human Rights Issues
- Kafala System: The Kafala system in the UAE grants employers significant control over migrant workers, leading to human rights concerns such as passport confiscation, delayed wages, and poor living conditions for Indian expatriates, particularly those in low-wage jobs.
Geopolitical and Diplomatic Challenges
- Regional Conflicts: The UAE’s involvement in regional tensions, such as the Israel-Hamas conflict and the Iran-Arab nations strain, complicates India’s diplomatic balancing act. These conflicts add complexity to India’s foreign relations and strategic planning.
- Financial Assistance to Pakistan: The UAE’s financial support to Pakistan raises concerns about the potential misuse of these funds, given Pakistan’s history of sponsoring cross-border terrorism against India. This financial aid could potentially sour bilateral relations.
Competitive Influence
- Chinese Economic Influence: China’s “Cheque Book Diplomacy” in the UAE, characterized by offering low-interest loans, has overshadowed Indian economic endeavors in the region. China’s investments and contracts in the UAE have exceeded USD 30 billion between 2005 and 2020, surpassing Indian ventures.
Regulatory and Business Environment
- Commercial Challenges: Indian companies face unclear regulations, labor laws, and transparency in the UAE, which can hinder business operations and investments.
THE FUTURE PERSPECTIVE:
- Investment and Infrastructure: Encouraging joint ventures and infrastructure projects can attract more foreign direct investment (FDI). The UAE is already the fourth-largest investor in India, and continued collaboration in sectors like fintech and startups can further boost economic engagement.
- Renewable Energy Collaboration: Both countries can enhance cooperation in renewable energy, focusing on green hydrogen and solar energy. The UAE’s support for India’s International Solar Alliance (ISA) and the “One Sun, One World, One Grid” initiative highlights potential areas for collaboration.
- Joint Defense Initiatives: Expanding joint military exercises and defense technology collaborations can strengthen security ties. The UAE’s interest in Indian defense products like BrahMos missiles and Tejas fighter jets indicates the potential for deeper defense cooperation.
- Diaspora Engagement: With over 3.5 million Indians in the UAE, fostering cultural exchanges and educational collaborations can strengthen ties. Initiatives like establishing the Indian Institute of Technology Delhi’s branch in Abu Dhabi exemplify such efforts.
- Fintech and Digital Payments: Expanding the use of India’s RuPay card and Unified Payments Interface (UPI) in the UAE can facilitate financial transactions and integration. Implementing a Local Currency Settlement System (LCSS) can further ease trade.
- Labor Rights and Welfare: Reforming the Kafala system to improve the rights and welfare of migrant workers can enhance bilateral relations and address human rights concerns.
- Trade Barriers: Addressing non-tariff barriers, such as Halal certification requirements, can facilitate smoother trade flows and enhance market access for Indian exports.
THE CONCLUSION:
Strategic partnerships and mutual respect are essential in overcoming challenges. The UAE’s role as a key partner in India’s West Asia outreach and its participation in multilateral platforms like the I2U2 and IMEC underscore the potential for deeper collaboration.
UPSC PAST YEAR QUESTION:
Q. How will the I2U2 (India, Israel, UAE, and USA) grouping transform India’s position in global politics? 2022
MAINS PRACTICE QUESTION:
Q. India and the UAE have developed a comprehensive strategic partnership in recent years. Examine the critical aspects of this relationship and discuss the challenges that need to be addressed to strengthen bilateral ties further.
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