India-UAE Relations | UPSC Notes

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India-UAE Relations | UPSC Notes

• The UAE is an important part of India’s strategy in West Asia. The number of governmental and diplomatic interactions with the UAE has grown a lot in recent years. Certainly, trade, business, and energy are the most obvious parts of India-UAE relations. However, over the past few years, Security has quickly become a topic of conversation between the two countries.

• In 1972, formal ties were made between India and the UAE. When India’s Prime Minister went to the UAE in August 2015, it was the start of a new strategic partnership between the two countries. This was a big step forward in the relationship between the two countries.

• In May 2016, Manohar Parrikar was the first Indian military Minister to go to the United Arab Emirates (UAE) to meet with his counterpart there and talk about ways to improve military relations.

• Also, during the visit of the Crown Prince of Abu Dhabi to India in January 2017 as the chief guest at India’s Republic Day celebrations, it was decided that bilateral ties would be upgraded to a comprehensive strategic partnership. This gave the negotiations for a broad economic partnership agreement between India and the UAE a boost.

• About 3 million Indians live in the UAE without any trouble. The UAE is a willing partner for India as it works to improve business ties and security cooperation with the Gulf.

• The UAE “Looks East” to find partners for its economic growth, and it finds a natural partner in India. The UAE is worried about its security because of unrest in West Asia and the growing threat of terrorism, so India is a good fit. The UAE is one of the most important parts of India’s strategy in West Asia.

Political Areas of Cooperation

• High-level trips from both India and the UAE have helped to boost the relationship between the two countries. The historic trip of the Hon’ble Prime Minister of India to the UAE on August 16 and 17, 2015, was the start of a “new, comprehensive, and strategic partnership.” The visit was important because it was the first visit by an Indian prime minister in 34 years. The visit set off a chain of events that would make the bond between the two countries more than just a business one.

• In 2017, the UAE’s Crown Prince Sheikh Mohammed bin Zayed Al Nahyan went to India as the main guest for Republic Day. This showed that India was getting more involved with the Gulf. During the visit of the Crown Prince of Abu Dhabi, the two countries’ relationship was upgraded to a “Comprehensive Strategic Partnership,” which is expected to help India take on a new role in the Gulf region. • The UAE-India Strategic Dialogue, which was set up as part of the Comprehensive Strategic Partnership agreement, has been a useful way to track progress in the agreed-upon areas of engagement.India was asked to attend the sixth World Government Summit as the Guest of Honour. For this reason, the Prime Minister of India went to the UAE on a State visit on February 10 and 11, 2018. This strengthened the relationship between India and the UAE at the top political level.

• Modi’s last trip to the UAE was in August 2019, when he was given the “Order of Zayed,” the UAE’s greatest honour.

The visit of the Indian Prime Minister to the UAE (2018)

• Signed five agreements in the energy field, on railways, with workers, and in the financial services area.

• Use interfaith dialogue to promote the ideals of tolerance, peace, and acceptance, and to fight against extremist ideas.

• Work together more on fighting extremism and terrorism and make their efforts even stronger.

• Work together more on maritime security, such as fighting piracy, training, drills, cyberspace, outer space, and other things.

• Looked at how close they are to reaching their goal of investing USD 75 billion in India to improve infrastructure.

• Recognised the value of working to stop and break up terrorist networks, as well as to stop them from getting money and moving around, in line with the UN Charter and international law.

• Soon, the Joint Task Force on preventing and fighting human trafficking will hold its first meeting for 2018.

• As soon as possible, a Memorandum of Understanding (MOU) on Cooperation in the Exchange of Financial Intelligence linked to Money Laundering, Associated Predicate Offences, and Terrorist Financing could be signed.

• Examine different tariff and non-tariff hurdles and agree to focus on making it easier to trade in certain goods.

Trade and Investment

• India and the UAE have always had a close and friendly relationship, which has grown into a major economic and business partnership.

• Two-way trade was worth about US$ 72 billion in FY 2021-22. UAE is India’s third biggest trading partner and second largest export destination.

• Over the past few years, UAE’s FDI in India has grown and is now worth more than $12 billion.

• The UAE is India’s biggest supplier of oil and oil products, precious metals, stones, gems, and jewellery, minerals, chemicals, and wood and wood products.

Before oil was found in the UAE (oil exports began from Abu Dhabi in 1962), traditional goods like dates, pearls, and fish were the main items traded. When oil was found, things changed quickly.

 The big push, though, came when Dubai became a regional trading centre in the early 1990s, around the same time that India began to open up its economy.

• In February 2018, India and the UAE signed a deal that gives a group of Indian oil companies a 10% stake in the Lower Zakum offshore oil field and gives the UAE a role in making India’s strategic oil reserve in Mangalore work. This is India’s first investment in the upstream oil industry of the UAE. This changes the traditional relationship between buyers and sellers into a long-term relationship between investors.

• Between April and September 2022, India sent about $16 billion worth of goods to the UAE, which was a 24 percent increase from the previous year. During the same time period, India sent $28.4 billion worth of goods to the UAE, which was a 38 percent increase from the previous year.

Investment:

The UAE has put about US$8 billion into India. About US$4.03 billion of this is foreign direct investment (as of March 2016), and the rest is capital investment. In terms of FDI, UAE is the tenth largest investment in India. UAE’s investments in India are mostly in five industries: construction development, power, air transport, hotel and tourism, and metallurgical industries. • Many Indian companies have also set up factories in the UAE, either as joint ventures or in Special Economic Zones, to make cement, building materials, textiles, engineering products, consumer electronics, etc.

Culture and Diaspora

• India and UAE signed a Cultural Agreement in 1975, and the Embassy continues to put on cultural events both on its own and with the help of Indian cultural groups based in UAE. On June 21, 2016, the second International Day of Yoga was held. His Highness Sheikh Nahyan bin Mubarak Al Nahyan was the guest of honour.

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The UAE is home to about 3.4 million Indian expatriates. This is the largest expatriate group in the UAE.Since there are a lot of blue-collar Indian workers in the UAE, the focus of bilateral ties is also on creating effective ways for Indian workers to get their problems fixed.

• During his trip to Abu Dhabi in February 2018, the prime minister of India went to the event where the first Hindu temple was built. In February 2018, the two countries signed a Memorandum of Understanding (MoU) that is meant to make it easier for them to work together to manage the contract jobs of Indian workers.

• The importance that the UAE places on Indian culture was shown again in April 2019, when India was the Guest of Honour at the Abu Dhabi International Book Fair.

Security, Terrorism, and Defence Cooperation

• India and UAE see each other as important players in keeping peace and security in their own regions. They have strengthened their partnership to fight terrorism, stop people from becoming radicalised, and stop terrorists from getting money by sharing intelligence.

• India got the most help from the UAE after the attacks in Uri and Pathankot, when Abu Dhabi made a public statement telling India to take strong action against the attackers.

• India’s relationships with the UAE and other countries in the Gulf and West Asia are separate from their relationships with Pakistan and Indo-Pak relations. However, India has made more of an effort to bring up the issue of cross-border terrorism and the use of religion to incite terrorism against India when it talks to these countries.

• The UAE is very worried about the rise of extremist groups in the area. Five officials from the UAE were killed in Kandahar on January 10, 2017. This has caused a lot of worry. This was the first time officials from the UAE were targeted in a country other than their own.

• Despite these occasional problems, India and the UAE are likely to work together more in the future because they have strong economic, cultural, and political ties. In March 2018, the first joint naval drill, called Gulf Star 1, took place.

• As radicalism grows in the Gulf and South Asia, India wants to work more closely with the UAE to protect against terrorist risks and stop radicalization.The air forces of India and UAE took part in “Desert Eagle II,” a ten-day air combat practise.

Collaborations in technology

• India and the UAE have made a number of agreements to work together on digital innovation and technology. ISRO and UAESA also have plans to work together on missions like the Red Moon mission.

• The Emirates have given “golden visa” residency permits to doctors, engineers, PhD students, and experts in high-end technology fields like artificial intelligence (AI), big data, virology, and epidemiology. They also hired the former head of ISRO, K. Radhakrishnan, to run their space agency.

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Significance of UAE to India

Strategic

• Energy Security: India’s energy security and growth depend on the UAE’s help. UAE is the 5th biggest exporter of energy resources to India (2015-2016), and its help is also important for India’s Strategic Petroleum Reserve, which is being built up for emergencies.

• Terrorism: In 1999, India and the UAE signed a deal on extradition. With the growth of global terrorist groups and the spread of extremism in the Gulf and South Asia, India wants to work more closely with the UAE and other Gulf countries to protect against terrorist threats and stop people from becoming radicalised online.

• Kashmir and Pakistan: The Organisation of Islamic Cooperation, which has 57 members, often puts forward measures against India about the situation in Kashmir, while the Gulf Cooperation Council (GCC) tends to side with Pakistan on the issue. India needs UAE’s influence in the Gulf Cooperation Council (GCC) and the Organisation for Islamic Cooperation (OIC) to protect its interests and concerns about Kashmir.

• Trade Route: Freedom of passage and security at sea are important to both countries from a strategic point of view. The security of the Straits of Hormuz and Bab-el-Mandeb is linked to India’s trade and energy security in a way that can’t be broken.

Gulf Cooperation Council (GCC)

• The GCC is a group of six Gulf countries: Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman, and Bahrain. The council is India’s biggest group of traders.

The UAE has the biggest sovereign wealth fund, which is used for investments. Its $800 billion sovereign wealth fund is a big pool of money that can be used to invest in infrastructure development in India. Abu Dhabi’s interest in Indian Highway projects shows that the country is making progress in this direction. Under the “Make in India” programme, the joint production of defence weapons is another important area to look at.

• It plans to invest $75 billion in India. So, it’s important for the UAE to spend more in India’s infrastructure sector. In this way, the UAE has set up a national fund worth USD 75 billion for India. USD 1 billion has already been sent to India. But it’s not clear when the whole amount will be sent or what the terms of the payment are.

• Exports: The UAE is the only country in the Persian Gulf that India has a trade surplus with, even though it gives India a lot of crude oil. UAE is also seen as India’s entry point to Africa and Central Asia for exports.

Recent Agreements signed

• ONGC Videsh, Indian Oil Corp. Ltd (IOC), and a part of Bharat Petro Resources Ltd (BPCL) paid $600 million for a 10% share in the UAE’s offshore oil and gas field Zakum.

This is the first time an Indian company has invested in the upstream oil industry of the UAE. This changes the normal relationship between buyers and sellers into a long-term investor relationship. The BAPS Swaminarayan temple in Abu Dhabi got its start when Prime Minister Narendra Modi laid the first stone.

Both sides signed an MoU that aims to make it official that they will work together to manage temporary jobs for Indian workers in Gulf countries.

Under the MoU, both sides will work to stop any wrongdoing that is already going on, fight trafficking, and put together programmes to educate and raise knowledge among contract workers. A MoU for technical cooperation on trains was also signed. The goal is to work together on infrastructure, especially railroads. It will make it easier to work together on projects, share information, do research together, and pass on technologies. A MoU was also made between the Bombay Stock Exchange and the Abu Dhabi Securities Exchange.

 It aims to make it easier for both countries to work together in the financial services business. It would make it easier for buyers from both countries to put money into the financial markets. A MoU to set up a multi-modal logistics park and hub in Jammu and Kashmir with warehouses and tailored storage solutions.

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Diaspora’s Interest:

• About 30% of the people living in the UAE are Indian expats. In addition to payments, India is worried about the safety of its people living abroad because of the unstable situation in the Gulf.

Significance of India to UAE

India is very important to UAE because it sees its relationship with India as a top concern and because India is a key part of stability and security in Asia. India and the UAE are working together to stop terrorism. Their ships are also working together to stop piracy and help with humanitarian aid and disaster relief. This will help the Emirates at a time when West Asia is changing.India is also important for UAE because it is becoming more important on the world stage. This is because India is becoming a nuclear state, a large source of labour, a large market, a stable democracy, and so on.

• The state of geopolitics, since Iran keeps saying it will close the Strait of Hormuz if there is a war with Saudi Arabia or the US. UAE will also suffer because of this.

• UAE saw Pakistan as a partner and built a strong relationship with it in terms of both business and security. But Pakistan doesn’t seem to be much help to UAE right now. Pakistan already had problems at home, so it didn’t help Saudi Arabia fight rebels in Yemen who were backed by Iran. It also hasn’t been able to stop jihadists from acting from its land across West Asia.

• India is an important place to buy oil and energy because the US is getting close to being independent of hydrocarbons. The huge national wealth funds of the UAE can help India build up its infrastructure in a big way.

• India and the UAE are becoming more alike on the problem of terror, and both countries have talked about the need to fight terror groups without favouritism. This is because five UAE diplomats were killed in an attack in Kandahar, Afghanistan.

• There are violent battles in places like Syria, Iraq, Libya, and Yemen. The Gulf Cooperation Council (GCC) has not had the effects that were hoped for.

Challenges in Relations

There are some problems that need to be solved before the growing relationships can reach their full potential and promise.

• Investments: When it comes to investments, the slow application from the Indian side is a big problem that affects the whole system. During the prime minister’s visit in August 2015, the UAE decided to put money into India’s infrastructure projects by setting up a $75 billion investment fund. But even after more than two years, the rules for the fund and how it will be run have not been decided.

• Indian businesses that do business in the United Arab Emirates (UAE) also have trouble because many business rules, labour laws, and business practises in the UAE are not clear.

• Diaspora: There are also problems that Indian immigrants have to deal with because of rules that are hard to follow and favour Emirati companies. Indian workers are also being replaced by workers from other countries, like the Philippines and Bangladesh. This is mirrored in a slight drop in remittances from the UAE to India in recent years.

• Pakistan: Political ties between India and the region have been tense for a long time because of Pakistan. This is despite the fact that India and the region have a long history together, are close culturally, are close geographically, are becoming more economically dependent on each other, and have a large number of Indian workers in the Gulf.

• Keeping the world’s politics in check: India and Iran (also played out over Yemen), and the UAE and China.

• India and the UAE have yet to renegotiate their air services agreement, which has become a source of tension because the UAE wants to increase the number of flights to India and the number of destinations, but India continues to limit these to protect Indian airlines.

Relationships have been rocky lately, and it’s because of what Nupur Sharma and Naveen Kumar Jindal said about the Prophet Mohammed.

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India-UAE CEPA trade deal

• The new strategic economic agreement will increase mutual trade in goods to $100 billion in the five years after it is signed (2022-27) and increase trade in services to $15 billion.

• CEPA is a type of free trade agreement that covers negotiations on the trade of services, investments, and other areas of economic relationship.

• The Agreement is a comprehensive agreement that will cover: Trade in Goods, Rules of Origin, Trade in Services, Technical Barriers to Trade (TBT), Sanitary and Phytosanitary (SPS) measures, Dispute Settlement, Movement of Natural Persons, Telecom, Customs Procedures, Pharmaceutical Products, Government Procurement, Intellectual Property Rights, Investment, Digital Trade, and Cooperation in Other Areas.

• It will have a part for digital trade, which will be a first for both countries.

• The United Arab Emirates is India’s third biggest trading partner and second largest export market.

With an estimated investment of US$ 18 billion, the UAE is also the eighth biggest investor in India.

Importance of the deal: • Better access to markets: The agreement will give Indian and UAE companies a lot of benefits, such as better access to markets and lower tariffs.

• In the next 5 years, the CEPA will increase trade between the two countries from the current $60 billion to $100 billion.

• India was happy to see that the Gulf country was investing in Jammu and Kashmir. This would open up new trade and travel routes in the area and help India, Israel, the UAE, and the US all reach their goals.

• By getting closer to the UAE, Indian producers would also be able to sell their goods in other countries in West Asia, Africa, and some parts of Europe.

• Digital trade: The early harvest agreement is expected to have a section on digital trade that will help the two countries work together better in the future on digital trade.

 Digital trade is likely to include frameworks for paperless trading, digital payments, and online consumer protection. It may also handle issues like intellectual property rights in digital trade and challenges for small and medium-sized businesses.

• The UAE wants to make it easier for its petrochemicals, metals, and dates to get into the Indian market.

• Since the UAE has no customs obstacles, Indian goods will flow to the other GCC countries.

• Energy ties: The UAE is India’s third largest supplier of crude oil and second biggest supplier of LPG and LNG. The next step for mutual energy ties is to work together on renewable energy.

• It could also help India sell more jewels around the world.

• People hope it will make new jobs, raise living standards, and give both countries more social and economic chances.

Issues/Challenges of Trade Deal: • Lack of negotiations: A free trade deal with the GCC, which is made up of Saudi Arabia, Kuwait, the United Arab Emirates, Oman, Qatar, and Bahrain, was first thought of in 2007. However, after a few rounds of talks, the talks stalled.

• Lack of experience as a global giant: Even though India has a $2.5 trillion economy, its businesses are small. In fact, none of the big Indian businesses come close to the big global conglomerates, which have the resources, infrastructure, and knowledge to handle huge investments.

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• Procedural Issues: Lack of planning, not having enough information, and bureaucratic bottlenecks continue to be a problem for foreign investors, even though the government is making a lot of efforts to make investments easy and handy.

• Legal Problems: In the past, legal problems have made foreign investors less likely to put money into India. For example, the investments of Etisalat and Etihad of the United Arab Emirates (UAE) got stuck in legal problems, which made investors less excited. Even though there needs to be checks and regulations, these kinds of problems can be avoided by making the methods and processes run more smoothly.

• Political Will: Political distractions can be hard to deal with, especially when an election year is coming up.

India has a tendency to focus on its own problems and forget about other countries.

If the UAE wants to make big investments, it needs to be involved all the time.

Conclusion

• The UAE is India’s closest partner in the Arab world right now, and it’s a good thing that the two countries’ ties are strong enough to survive the recent upheavals.

• India and UAE continue to work together more closely in these areas, building on their good relationships and long history of getting to know each other as people. India and the United Arab Emirates have a strong energy relationship that is now putting more of an emphasis on renewable energy.

• It will take a steady effort at public diplomacy to make things even better.

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Critical Views on India-UAE Relations

• Recent high-level visits from both sides, changes in geopolitics in the area, and changes in the world on many fronts have made it important for both sides to show strong interest, energy, and vigour in their relationship.

• By saying that India and the United Arab Emirates have a “natural strategic partnership” and putting security cooperation, including fighting terrorism, at the heart of it, PM Modi has taken advantage of a rare moment of change in the Gulf and started a new phase in India’s relationship with a very important region.

Modi decided to go to the Emirates on short notice because Delhi realised it was time to get rid of old ideas about the area and take advantage of new chances to change the way the subcontinent and the Gulf work together.

• The joint statement says that both countries are committed to “openness, peaceful coexistence, and social harmony.” This is not the kind of language that India usually uses when dealing with monarchies anywhere in the world.

• Calling the UAE “a shining example of a multi-cultural society” is a political way of acknowledging how important it is to protect the economies of the region, which are so vulnerable to violent religious extremism.

• India’s relationship with the Gulf has been messed up for a long time because it tends to look at the area through a “ideological lens,” letting its internal politics shape its strategy and letting the “Pakistan factor” limit the chances of a partnership. Now, the prime minister has the chance to help India get rid of its “economic mercantilism” and “political diffidence” in the Gulf and replace them with a comprehensive plan. India can’t miss the things that shape this kind of policy.

• Neither the US nor China nor Russia sees relations with the region as a “zero-sum game” between Israel and the Arabs. No one in the Middle East is trying to force India to choose between its foes. All people in the area expect India to show more political and business interest in the area.

On the political side, India will need to keep up a steady flow of high-level talks. Given how quickly things change in the area and how often big events upset the status quo and bring up new problems, it makes sense to hold regular high-level meetings and use Track 2 diplomacy. This will require a strong, high-level engagement with the region in the coming years. This is something India hasn’t been able to do in the past because its leaders were too focused on internal issues and because our media gave the impression that foreign trips were mostly for fun.

• Modi’s visit follows his “neighbourhood first” policy, his work with big powers and countries in Central Asia, and his “Act East” strategy. India’s relationships with the countries of West Asia are like the three points of a triangle, which are Iran, Israel, and the Gulf Cooperation Council (GCC) countries. The visit from the UAE is the first step in a larger plan to work with the area, where ties are tense between the three sides of the triangle. There needs to be a very good balance between these three things, and they need to stop hyphenating each other, both for the good of the area as a whole and for India’s place in the world. Even the GCC and other countries agree that India’s relationships with Iran and Israel will go in their own directions and won’t necessarily hurt India’s relationships with those countries. This is also a sign of how India wants to be able to make its own strategic decisions and how its foreign policy plans for India to have informed interests.

Way Forward

• India and UAE want to improve their relations with each other, and there are places that offer more chances to do so. These should be used to strengthen the ties.

• The Indian health business and medical sector have a lot of potential that hasn’t been used yet. So, medical tourism can be an important way for India to draw in people from the UAE. Renewable energy, especially solar energy, has even more promise that hasn’t been used yet.

• India could do more to make it easier for businesses from the UAE to invest there. India has a large market, and there is a lot of room for growth in the automobile industry, services sector, agriculture, and related industries. There is also a need to improve people-to-people contacts and increase interactions between think tanks, researchers, and universities.

• In the defence sector, there needs to be more cooperation through joint training programmes for Indian and UAE officers. • Because of this, India needs a full review of its policy for the Gulf as a whole, not just a review of individual issues. India will get the most out of its ties with UAE if it does this.

Conclusion:

India is in a good situation to become a reliable security and economic partner of the UAE and the wider Gulf region at a time when the West is looking inward and China’s rise is being slowed down by its aggressive talk about territorial issues. India’s changing attitude towards the rest of the area can be seen in the way it works with the UAE. It is a sign that India is becoming more secure and “looking west.” This, in turn, will make India’s extended neighbourhood bigger, which is good for boosting its status and reputation around the world.