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Indian UAE Cooperation

Context

In Abu Dhabi, EAM Jaishankar and UAE Foreign Minister Sheikh Abdulla bin Zayed Al Nahyan co-chaired the 14th India-UAE Joint Commission Meeting (JCM). The two countries agreed to expand economic cooperation in a variety of areas while reiterating their commitment to reaching the $100 billion bilateral trade goal in the next five years.

Relevance

GS Paper 2: Important Bilateral Agreements

Mains Question

Discuss the UAE’s economic and strategic importance to India and propose measures that can be taken to make India stronger. Relations with the UAE (250 Words)


Bilateral Relationship between India and the UAE

  • India and the United Arab Emirates established diplomatic relations in 1972. Their bond has grown exponentially since then.
  • In January 2017, India and the United Arab Emirates signed a Comprehensive Strategic Partnership Agreement.
  • The exchange of high-level visits by both sides has given impetus to the strong bilateral relations.
    • In February 2019, the UAE invited India to address the Organization of Islamic Cooperation’s Inaugural Plenary 46th Session as the “Guest of Honour.”
    • In August 2019, Prime Minister Modi paid his third visit to the UAE. He received the UAE’s highest civilian award, the ‘Order of Zayed.’
    • In January 2017, the Crown Prince of the UAE visited India for the second time as the Chief Guest at India’s Republic Day celebrations.
  • In April 2019, the foundation stone for Abu Dhabi’s first traditional Hindu Temple was laid.
  • PM Modi and Crown Prince of Abu Dhabi HH Sheikh Mohammed bin Zayed Al Nahyan held a virtual summit in February 2022.
    • Both leaders issued a Joint Vision Statement titled “Advancing India and the UAE’s Comprehensive Strategic Partnership: New Frontiers, New Milestones.”

Commercial Relationship

  • Until FY20, the UAE was India’s second-largest goods export market, trailing only the US. When the pandemic caused severe trade disruptions in FY21, China pipped it.
  • The UAE is currently India’s third-largest trading partner, with bilateral trade worth $59 billion in FY20.
  • In addition, the UAE is India’s second-largest export destination after the United States (approximately $29 billion in FY20).

India and the UAE have signed a Comprehensive Economic Partnership Agreement (CEPA)

  • Both countries have begun negotiations for a mutually beneficial CEPA in September 2021.
  • The India-UAE CEPA was signed in New Delhi in February 2022 during the India-UAE Virtual Summit.
    • India announced the signing of the CEPA with the UAE in March 2022.
  • Coverage
    • It covers almost all of India’s (11,908 tariff lines) and the UAE’s tariff lines (7581 tariff lines)
  • Priority access to goods
    • CEPA establishes an institutional mechanism to encourage and improve bilateral trade.
    • India will benefit from the UAE’s preferential market access on over 97% of its tariff lines, accounting for 99% of Indian exports to the UAE in value terms.
    • India will also grant the UAE preferential access to over 90% of its tariff lines, including those of export interest to the UAE.
  • Services Trade
    • India has offered the UAE market access in approximately 100 sub-sectors.
    • Indian service providers, on the other hand, will have access to approximately 111 sub-sectors from the 11 broad service sectors.
    • Both parties have also agreed to a separate Pharmaceutical Annex to facilitate access to Indian pharmaceuticals
  • For the first time, a separate section of pharma has been created to facilitate the export of Indian generic medicines.

Investment

  • The UAE is India’s eighth-largest investor, with $11 billion invested between April 2000 and March 2021.
  • Indian companies are expected to invest more than $85 billion in the UAE.

Remittances from Non-Resident Indians

  • The annual remittances made by the UAE’s large Indian community (estimated at around 3.3 million) total US$ 17.56 billion in 2018.

Cooperation in Energy

  • In 2017, the Abu Dhabi National Oil Company (ADNOC) and the Indian Strategic Petroleum Reserves Ltd. (ISPRL) signed a Memorandum of Understanding (MOU) to establish a strategic crude oil reserve in Mangalore (Karnataka).
  • In addition, ADNOC is investigating the possibility of storing its crude oil at ISPRL’s underground oil storage facility in Padur, Karnataka.
  • The Lower Zakum Concession has been awarded to a consortium led by ONGC, which includes Indian Oil and Bharat Petro Resources.

The Next Steps

  • Benefits of India-UAE Trade Agreements: With India’s newfound export strength, a trade agreement with a major country like the UAE would help sustain the growth momentum.
  • As the manufacturing sector recovers, the UAE would be an appealing export market for Indian electronics, automobiles, and other engineering products.
  • Because the UAE and India are both aggressively pursuing FTAs with a number of important countries, not only companies from these two countries but also MNCs from other geographies would find the UAE and India to be appealing markets to invest in.
  • Creating a Foundation for Better Relations with the GCC: The UAE is a signatory to several regional and bilateral free trade agreements, including those with GCC countries.
  • As a member of the GCC, the UAE has strong economic ties with Saudi Arabia, Kuwait, Bahrain, and Oman, with whom it shares a common market and customs union.
  • The UAE has free trade access to Saudi Arabia, Kuwait, Bahrain, Qatar, Oman, Jordan, Egypt, Iraq, Lebanon, Morocco, Tunisia, Palestine, Syria, Libya, and Yemen under the Greater Arab Free Trade Agreement (GAFTA).
  • This FTA with the UAE will allow India to enter the UAE’s strategic location and have relatively easy access to the Africa market and its various trade partners, allowing India to become a part of that supply chain, particularly in handlooms, handicrafts, textiles, and pharmaceuticals.
  • Compliance with UAE NTBs: Because the UAE tariff structure is bound with the GCC (the applied average tariff rate is 5%), addressing Non-Tariff Barriers (NTBs) becomes critical.
  • Non-Tariff Measures (NTMs), which are mostly covered by Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade, are a reflection of NTBs (TBT).
  • The SPS notifications primarily concern live poultry, meat, and processed food, whereas the TBT notifications concern fish, food additives, meat, rubber, electrical machinery, and so on. These regulations present a challenge to Indian exporters.
  • The FTA agreement must strive to increase transparency and predictability in the use of NTBs, making compliance easier.

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October 2022
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