#142: India-UAE Relations
GS2 IR Notes
PM Modi recently flew back to India from UAE after inking a deal of Rupee-Dirham trade.
This blog post will give you an insight into India-UAE relations over the years.
Introduction
The two countries share age old ties in field of:
culture
religion
economy
diaspora in UAE
3m+ Indians live in UAE and UAE’s Look East brought it closer to India to address the economy, manpower and security concerns.
India’s success in maintaining political stability in a region of utter chaos, rising economic power and demography presents a lucrative option for UAE.
This saw both countries signing Comprehensive Strategic Partnership (CSP) in 2017
But what pushed UAE towards India?
Geopolitical tensions in Iran and UAE’s interest in Strait of Hormuz
India’s market appetite for oil and UAE’s sovereign wealth funds offering fair RoI
UAE lost 5 diplomats in Kandahar (Afghanistan) which brings terror convergence to the plate among India and the UAE
UAE’s first set partnerships with Pakistan incorporating deep relationship. But Pak’s internal polity, religious fanaticism, and depleting economic standing drifted UAE away.
Depleting essence of Gulf Cooperation Council and new India’s rise on the global platform
UAE-India relations
Economic Relations
UAE’s one of the leading FDI sources in India
8% of oil imports (5th largest) come from UAE
UAE is India’s 3rd largest trade partner after China and the US
Security and Defense Cooperation
Desert Eagle, 10 day air combat exercise organized b/w two
Terror convergence is finding pace in the relationship of the two countries
Golden Visa
2019 scheme of UAE to offer long term residence visas (5-10 years)
Open to high net worth or high skill individuals
Investors, entrepreneurs, businesspersons above certain threshold
Researchers, medical professionals, RnD professional, SnT professionals
Why this scheme?
Must to keep talented, skilled and high net worth individuals in UAE as many left amidst COVID19 lockdowns
To attract talented professionals to foster the innovation and bring greatest minds of the world to Dubai.
Concerns
India’s slow pace of execution puts many investors off
Reduced bilateral trade; rise of imports from Russia and diversified resources
Workers from Bangladesh and Philippines have started to replace Indians
Recent wins from the PM Modi’s visit
IIT Delhi campus in Abu Dhabi
One MoU to put framework for the promotion of local currencies for trade to push for the trade in Rupee and Dirham across the borders
To further the investments and remittances b/w two countries
Local Currency Settlement System to promote use of rupee and dirham bilaterally
This will allow invoicing in local currencies thus developing forex market for INR-AED
Will help
averting the exchange rate risks (high in use of USD)
increasing cooperation among banks
explore competitive pricing
Second MoU aims at interlinking payment & messaging systems
Enables “fast, convenient, safe, and cost effective” cross border transactions
UPI to be linked with UAE’s Instant Payment Platform alongside, RuPay Switch and UAESWITCH card switches
Card switches entail facilitating communications and transactions b/w different payment providers
This will make remittances faster and easier for low wage earners to send money back to home in India
MoU will further facilitate mutual acceptance of domestic cards & process transactions
Discussions on I2U2 and UAE-France-India Trilateral cooperation where the collaborations are explore with other powers
Conclusion
India-UAE relations are a pivot of India’s Look West policy
INR-AED trade will give further strength to the respective currencies
Abraham Accords bring further fresh opportunities in the relationship making UAE as logistics hub for Asian economies
Multi-domain partnerships in shared economic vision and geopolitical outlook reflect a strong point of reference for both the parties
Way Forward
Fresh impetus to Medical tourism needed
India shall explore renewable energy investments
Faster execution of the investment projects by India is a must
Join training programs shall be taken up to strengthen defense cooperation
Strengthen the collective voice on the international platforms against terror
India shall further explore collabs in food, agri, automobiles and related industries
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