Shifting Sands: India, UAE move to new pastures

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There is a lot of substance behind the optics of Prime Minister Narendra Modi making a purchase of one kilo of motichoorladdoo by swiping a RuPay card at a mock ChhappanBhog Abu Dhabi outlet set up during the launch of the RuPay card at the Emirates Palace during his visit to the UAE in August 2019.

The RuPay Cards which will now be accepted at 175,000 merchant acceptance locations and 5,000 ATM and cash access locations within the UAE is business as usual now for an India which believes in giving a tech edge to economic diplomacy with traditional and new partners. Indeed, the India-UAE bilateralism underpinned by a rich historical legacy of commercial and cultural connect, has seen a steady upswing in recent years and transformation into a dynamic and multi-dimensional economic partnership underscored by the significant visit of Prime Minister Narendra Modi’s to the UAE in 2015 and in February 2018 for the World Government Summit (WSG), reciprocated by the visit of Crown Prince of Abu Dhabi Sheikh Mohamed bin Zayed Al Nahyan to India in February 2016 and his presence in 2017 as the Guest of Honour for the Republic Day Celebrations in India.

Richly supplemented by successive meetings of the UAE-India Joint Task Force on investment in Abu Dhabi in January 2018 to discuss facilitation of investment in key sectors in UAE and India and visit of a delegation from UAE to India in February 2018 to further promote the strong bilateral relations between the two countries, the two countries appear headed for one of the most defining partnerships in the world. There is a renewed business confidence instilled by the emergence of UAE as the 10th biggest investor in India in terms of FDI and as India’s third-largest trade partner with about USD 60 billion bilateral trade in 2018-19, growing at 11 percent. The UAE holds steadfast as India’s highest source of remittance inflow with a contribution of $ 17 billion last year. India has also started issuing five-year multiple entry visas for UAE citizens to promote trade, investment and tourism.

Going ahead, there are two imperatives which will drive the sustained rally in India-UAE engagement. First is the expansion of the strategic partnership through Indo-UAE energy cooperation in boosting India’s energy security efforts which is gaining traction against a backdrop of growing uncertainties in the global energy market and India’s own growth requirements. This strategic relationship is witnessing enhanced energy links between India and the UAE with a pathbreaking deal which will see Abu Dhabi National Oil Co (Adnoc) storing oil in two of its four compartments of its strategic petroleum reserves at Padur. Strategically this means that India would be able to establish strong connect with producers who wish to supply oil to Asian consumers and establish a ground presence in the Indian market. The other significant energy deal is an agreement with Adnoc for exploration rights for the Abu Dhabi Onshore Block 1 to a consortium of three Indian companies. What all this indicates is that India and the UAE have moved beyond the buyer-seller relationship in the realm of energy to a strategic recognition of the other’s potential and value.

The other trigger for a more intense India-UAE engagement is the economic and business one, with India’s target of achieving USD 1.7 trillion worth of investments in the coming five years shaping New Delhi’s outreach strategy globally. Clearly, the third visit of Prime Minister Modi to the UAE in the last four years underscores the strategic importance of the UAE as a source of the crucial foreign inflows that would be needed to power a $5-trillion economy. At the same time, with the UAE undergoing macroeconomic shifts fuelled by a desire to transition from oil dominated to a more diversified economy as outlined in Vision 2021, India’s economic credentials and multi-sectoral strengths offer a solid partnership to deliver on this objective. Notwithstanding a few challenges on the economic radar and a moderation in growth, India’s attractive proposition in terms of opportunities and investments has found support in Takehiko Nakao, President, Asian Development Bank who, during his recent visit here, has expressed his optimism that India “as one of the fastest-growing economies in Asia and the Pacific is expected to grow in 2019 at 7.0 percent and in 2020 at 7.2 percent despite downside risks in the global economy. India has also recently opened up more investment opportunities through approval for 100 percent FDI in contract manufacturing and coal mining which effectively opens the gates for global manufacturers of electronic goods and other research and development-intensive products to set up manufacturing facilities in India and facilitate significant investment in these sectors.

Rajiv Kher, Distinguished Fellow, RIS, former Commerce Secretary offers another strategic angle to the India-UAE dynamics as trading partners which opens up for India a unique space to leverage on UAE’s strength as an entrepot. “The UAE is essentially a large trading point from where goods travel to various directions and where goods come from various directions. It is a market which does not consume all the products which is going from India or other parts of the world. So when we speak of India’s significant exports to the UAE, this large quantum is not necessarily getting consumed there. We have to factor in the potential of all the countries which serve as a catchment area for the UAE,” says Kher. He takes the example of Central Asia which is becoming an important destination for Indian products as well as a sourcing point for India.

“I expect our trade with Central Asia will go up given also that India is negotiating a free trade pact with the Eurasian Economic Union comprising some countries of Central Asia and Russia. That will also help in the flow of trade from Central Asia to India. All of this can be used by the UAE’s trading ecosystem to enhance the inflow and outflow of goods and services to India,” says Kher.

Of course, infrastructure is a potential gamechanger in the India-UAE economic equations. The UAE is a leading player in ports, airports, highways and construction and it is time to leverage on this advantage and their interest for fulfilling India’s plans for the rapid expansion of next-generation infrastructure including elevated suburban corridors, dedicated freight corridors and high-speed corridors. In road transport, opportunities for investors range from developing safe, efficient and environmentally robust road transport across India, exchange and sharing of knowledge on transportation technologies and transport policies for passenger and freight movement by roads, setting up of logistics parks and transportation warehousing as well as cooperation in planning and management of road infrastructure.

Indeed, there is a lot that India and the UAE have on the table. The two Asian powers have all the reasons to take a quantum leap into the future.

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