The India-UAE relationship has strengthened in recent years and is no longer restricted to any single sphere. While for very long ties between India and UAE were viewed largely from the lens of India’s oil imports from the UAE, in recent years the New Delhi-Abu Dhabi relationship has emerged into a truly multilayered one driven by robust economic and strategic linkages.

This change has been driven by a number of factors; India's economic rise, New Delhi’s focus in recent years on building a strong relationship with GCC (Gulf Cooperation Council States);  UAE’s foreign policy re-orientation, and its desire to cultivate holistic economic relations with other countries; and, of course, the changing geopolitical landscape of the Middle East and South Asia.

Multisectoral economic ties

If one were to look at the economic relationship between both countries, a Comprehensive Economic Partnership Agreement (CEPA) was signed between both countries in February 2022. This FTA became operational in May 2022 and sought to increase non-oil trade between both countries from the current level of $60 billion to $100 billion.  While India’s trade deficit vis-à-vis the UAE rose as a result of a large number of oil imports from the UAE, and the rise in oil prices in the aftermath of the Russia-Ukraine war, India’s non-oil exports have also risen for the period from June 2022-January 2023. Exports from India to UAE have increased and sectors including electricals, automotive, machinery, gems and jewellery, textile and leather footwear have certainly benefitted from the CEPA.

The UAE has been showing interest in India’s infrastructure, tech and start-up sectors. In the past five years, UAE sovereign wealth funds have invested an estimated $ 10 billion in India in a number of areas, including infrastructure, energy and telecom. India’s Ambassador to the UAE, Sunjay Sudhir, said that CEPA has not merely given a fillip to bilateral trade, but has also given a boost to two-way investments in areas that were hitherto unexplored. 

Said Sudhir: “CEPA is well beyond trade because it has given rise to confidence which has resulted in further investments. If you look at the last year, you will see so much more investment happening in two ways…. Much of this investment has gone into non-traditional areas. Of course, infrastructure has received a lot of investment. But a large chunk of this investment has gone into startups. It has gone into renewables, which were not really there on the drawing board say five years ago,"

The last few years have also witnessed an increased presence of Indian start-ups in the UAE. UAE has also been trying to attract more investment from Indian startups with the objective of diversifying its economy.

Beyond the bilateral relationship

Cooperation between India and UAE is not just bilateral, both countries are part of the I2U2 which also consists of Israel and the US. The I2U2 seeks to promote cooperation in several areas like water, energy, transportation, space, health and food security. The I2U2 also seeks proactive participation of the private sector. On the sidelines of the recent Sherpa meeting held in Abu Dhabi an I2U2 business forum was organized with the objective of strengthening linkages between business communities of I2U2 countries.

If one were to look at the trilateral initiative consisting of India-France-UAE, it seeks to foster cooperation in areas including defense, energy and climate change.  While the I2U2 – often referred to as the Middle Eastern Quad -- grouping is a strong illustration of changing landscape of the Middle East, and India's strong ties with all the other countries which are part of the grouping, the India-UAE-France trilateral is interesting because while all three countries have robust relations with the US, there are foreign policy divergences on a number of issues. 

France-US relations deteriorated after the announcement of AUKUS (Australia, UK and US) pact in 2021. While speaking on the sidelines of the G20 Summit last year, French President Emmanuel Macron categorically stated that the world needs "one order"-- and not two orders -- while alluding to the US-China rivalry. France has also differed from the US handling of the Russia-Ukraine war as have UAE and India.

The India-UAE relationship is important for a number of reasons. First, greater economic linkages will help both countries in achieving their economic goals. Second, the Indian diaspora in the UAE which has distinguished itself in different spheres of life is an important bridge between both countries. Third, due to a growing convergence of global geopolitical issues, both countries are likely to strengthen cooperation under platforms like I2U2 and the India-UAE-France trilateral agreement.

 (The author is a policy professional and Visiting Faculty, O P Jindal Global University, Sonipat, India. He is the author of South Asian Cooperation and the Role of the Punjabs. Twitter @tridiveshsingh. Views are personal)