Insights by: Sumit Kochar
Prime Minister Narendra Modi’s recent visit to the United Arab Emirates (UAE) holds considerable strategic significance, highlighting the Indian government’s unwavering commitment to strengthening its relationship with the Emirates in the Gulf region. This marks the seventh visit by Prime Minister Modi since 2014, demonstrating the importance accorded to this diplomatic engagement. The timing of the visit, which included addressing the ‘World Governments Summit’ in Dubai and inaugurating Abu Dhabi’s first Hindu temple, serves to emphasize the diplomatic commitment and strategic focus placed on the enhancement of bilateral ties between the nations.
The visit resulted in the signing of ten bilateral agreements, with particular attention given to the swift conclusion of the Bilateral Investment Treaty (BIT), following the Comprehensive Economic Partnership Agreement (CEPA) signed in 2022. Notably, the UAE stands as the first country to have both these agreements with the Modi government, making it the sole nation enjoying both a trade and an investment agreement with India. The UAE has emerged as India’s third-largest trading partner, second-largest export destination, and the fourth-largest source of Foreign Direct Investment (FDI).
During the visit, a notable development occurred with the inauguration of ‘Bharat Mart’, a proposed warehousing facility designated for Indian Micro, Small, and Medium-sized Enterprises (MSMEs) within the UAE. The facility is scheduled to commence operations by 2025 and will cover an area exceeding 100,000 square meters within the Jebel Ali Free Zone (JAFZA). Bharat Mart aims to serve as a versatile facility providing a holistic platform for Indian exporters to exhibit their merchandise. A pivotal aspect of the Bharat Mart initiative is the intention to establish a digital platform facilitating transactions for buyers worldwide to procure goods from the facility. This digital infrastructure is designed to streamline transactions and bolster trade between Indian exporters and international buyers. It will furnish a secure and convenient channel for buyers to peruse and acquire a diverse array of products showcased at Bharat Mart. The platform will particularly benefit Indian enterprises seeking to expand their operations into Africa, Europe, and the United States. The establishment of Bharat Mart carries substantial significance as it corresponds with the mutual objectives of India and the UAE to fortify trade relations. Bharat Mart is poised to play a vital role in realizing this objective by furnishing a dedicated platform for Indian exporters to exhibit their merchandise and attract international buyers. As an ambitious project, Bharat Mart is poised to revolutionize the landscape for Indian exporters in the UAE market, offering comprehensive facilities, a digital platform, and a strategically advantageous location. It is anticipated to evolve into a vibrant nucleus for trade and commerce.
In the payments vertical, the integration of the Unified Payments Interface (UPI) with the UAE’s instant payments platform AANI will further bolster cross-border transactions. Prime Minister Narendra Modi’s launch of RuPay card services and the agreement to inter-link domestic debit/credit cards – RuPay from India and JAYWAN from the UAE – exemplifies the commitment to enhancing financial connectivity between the two nations.
Between April 2000 and March 2023, the United Arab Emirates (UAE) made substantial investments in India, amounting to an estimated US$20-21 billion. Notably, this includes a FDI contribution of US$15.5 billion, with the remaining portion categorized as portfolio investment. The bilateral trade between the two nations reached approximately US$85 billion during the fiscal year 2022-23, establishing them as significant trading partners. The Ministry of External Affairs (MEA) reports that the UAE has emerged as the fourth-largest source of FDI into India for the fiscal year 2022-23.
In a testament to the depth of economic collaboration, the UAE has committed to investing a substantial US$75 billion in India’s infrastructure sector. The Abu Dhabi Investment Authority (ADIA), a principal sovereign wealth fund of the UAE and one of the world’s largest has played a pivotal role as an anchor investor in the National Investment and Infrastructure Fund (NIIF) Master Fund. This commitment is reflected in a substantial investment of US$1 billion in the NIIF, thereby reinforcing the UAE’s confidence in India’s infrastructure development.
Furthermore, the Abu Dhabi Investment Authority (ADIA), as the UAE’s largest sovereign wealth fund, is set to create a fund ranging between US$4 billion to US$5 billion in India’s latest special economic zone. The regulatory authority for financial services at Gujarat International Finance Tec-City (Gift City) has granted in-principle approval for the establishment of this fund. This landmark approval positions ADIA as the first sovereign wealth fund to initiate investments in India via Gift City signifying a significant milestone in economic collaboration between the two nations.
The agreements signed during the visit encompass technological collaboration, focusing on digital infrastructure development, Research and Development (R&D) for energy security, trade in green hydrogen, energy storage, and digital cross-payments. The Intergovernmental Framework on the India-Middle East Economic Corridor (IMEC) lays a foundation for multilateral cooperation, building on existing initiatives with the United States, Israel, and the UAE’s recent inclusion in BRICS.
Rooted in centuries-old maritime trade and a significant diaspora contributing to India’s global remittances, the historical and cultural engagement between India and the UAE is profound. Prime Minister Narendra Modi’s articulation of shared values during his visit underscores the importance of these common bonds in bridging the geographical and cultural expanse separating the two nations across the Arabian Sea. The strides made during this visit solidify Prime Minister Narendra Modi’s diplomatic acumen in fostering robust and mutually beneficial relations between India and the UAE.
