India-UAE Bilateral Relations Overview

Context: The Bilateral Investment Treaty (BIT) 2024 between India and the UAE has replaced the earlier Bilateral Investment Promotion and Protection Agreement (BIPPA), aimed at fostering stronger economic cooperation between the two nations. The UAE, accounting for 3% of India’s total FDI, has invested around $19 billion in India between 2000 and 2024.

Historical Milestones in India-UAE Relations

• Strategic Partnership Declaration (2015): The Indian Prime Minister’s visit to the UAE marked the start of a strategic partnership, expanding cooperation in multiple fields.
• Cultural Ties (2019): India was honored as the Guest of Honour at the Abu Dhabi International Book Fair, highlighting the enduring cultural connections between the two countries.
• COVID-19 Support (2020-2021): The UAE provided vital medical aid to India during the COVID-19 crisis, showcasing solidarity in challenging times.
• Comprehensive Economic Partnership Agreement (2022): The CEPA was signed to significantly boost trade and economic cooperation, focusing on a range of sectors.

Challenges in India-UAE Relations

• Non-Tariff Barriers (NTBs): Regulations such as Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT) in the UAE have impeded Indian exports, especially in poultry, meat, and processed foods.
• China’s Growing Economic Role: China’s provision of low-interest loans in the UAE has led to increased competition for Indian businesses in the region.
• Middle Eastern Tensions: Ongoing conflicts, including the Israel-Palestine issue, impact India’s IMEC projects and create additional strain due to UAE’s evolving relations with Israel.
• Kafala System: The UAE’s employment system poses significant challenges for Indian migrant workers, granting employers substantial control over workers’ immigration and employment.
• Financial Support to Pakistan: UAE’s financial aid to Pakistan, which India views as a security concern due to its links with terrorism, adds complexity to the relationship.
• India’s Contract Enforcement: India’s low rankings in contract enforcement remain a concern for UAE investors, limiting FDI despite new and favorable terms in BIT 2024.

Path Forward

• Strategic Dialogue Platforms: Launch dialogue formats like the 2+2 format seen with the U.S. and Russia to expand cooperation across critical sectors.
• Alignment with UAE’s Vision 2021: Seek opportunities in renewable energy, fintech, and startups, supporting UAE’s economic shift from oil.
• Defence Cooperation: Strengthen defense ties through agreements similar to COMCASA with the U.S., which enables secure and encrypted military communication channels for India.