UAE-India sails catch trade winds

In late 2021, when the UAE and India agreed to pursue a Comprehensive Economic Partnership Agreement (CEPA), both countries arrived at a free-trade deal with a difference. The goal wasn’t simply to reduce tariffs on goods entering each other’s markets – although that was a key element – but to bring the two nations closer together, align our growth visions, and work to deliver long-term, sustainable prosperity in an ever-evolving global economy. It meant building private-sector networks to identify opportunities, facilitating investment flows into key sectors, strengthening pivotal East-West supply chains, and creating an ecosystem in which entrepreneurs can scale and innovate.The subsequent UAE-India CEPA, signed in February 2022 and implemented in May that year, was an acknowledgement that both countries can only benefit from deeper economic integration.

The visits of crown prince of Abu Dhabi, Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, to India this week is another crucial part of realising its promise. The delegation will secure a range of new partnerships and projects and, at the UAE-India Business Forum in September, will explore opportunities in high-potential sectors such as logistics, RE, agritech, healthcare and AI.

CEPA is a framework of collaboration that can, with proper coordination and support, drive new growth opportunities and accelerate diversification goals of bot countries. Action is already evident. In January, interest in the UAE pavilion at the Vibrant Gujarat Global Summit in Gandhinagar was palpable, as was the desire from delegates to leverage the CEPA’s provisions.

At nearby Kandla, UAE ports operator DP World has entered a $500 mn deal to build and operate a new container terminal that will improve access to global markets for northwest India’s manufacturing and agriculture sectors. Abu Dhabi Investment Authority, the UAE’s largest sovereign wealth fund, has now announced plans to set up an office in Gujarat. The state will also be home to the first of the UAE’s $2 bn chain of proposed food parks.

This is being replicated across India. In 2023, the UAE became the fourth largest foreign investor in India, with a $3.35 bn commitment representing 3x increase on 2022. This capital is targeting sectors of transformational potential, including logistics, healthcare, food production systems, retail, RE, aviation, tourism and financial services.In Bengaluru, the UAE’s leading industrial companies Ducab has opened a new regional office to serve its rapidly expanding customer base in India, while LuLu Group is establishing multi-million-dollar retail malls and food processing plants in Tamil Nadu and Uttar Pradesh. VPS Healthcare Group is now expanding its footprint across the country’s healthcare sector.This is far from one way. In 2023, Indian FDI into the UAE totaled $2.05 bn, more than the total invested in 2021 and 2022 combined. This included the decision of Malabar Gold & Diamonds, one of the world’s largest jewelry retail chains, to maximise the impact of CEPA by consolidating its international operations in a new facility in the UAE. This was followed by the announcement of Bharat Park, a showroom and warehouse that will facilitate the growing global demand for Indian goods, and the inauguration of IIT Delhi Abu Dhabi, the first international IIT campus.

CEPA is now helping private sectors project themselves onto the world stage. In June this year, AD Ports Group partnered with India’s Adani International Port Holding to acquire, via the newly formed East Africa Gateway, 95% of Tanzania International Container Terminal Services and begin to unlock Africa’s vast economic potential.

Of course, market access and connectivity remain the connective tissue of UAE-India ties. In the first half of 2024, bilateral non-oil trade reached $28.2 bn, a near 10% increase on the same period in 2023 – not only far higher than the average global trade growth of 1.5%, but also in stark contrast to India’s 6% global trade decline. In fact, India now represents 7.4% of the UAE’s total non-oil foreign trade, a figure that will continue to accelerate as the target of $100 billion by 2030 gets closer.

The CEPA is also supporting new and stronger supply chains. Major sea freight operators such as Maersk add services between the UAE and India, while a new Bengal Middle East Express has been launched to connect Kolkata with Jebel Ali in the UAE. Etihad has also increased cargo capacity on flights to India and Asia to meet growing demand.

A new era of rupee-dirham trade has also been unlocked, with the Local Currency Settlement System established by central banks increasing efficiencies and reducing costs during transactions.

By harnessing collective resources, creativity and talent, it’s accelerating growth, creating opportunity and unleashing innovation in industries that can power economies of the two countries for decades to come.

(The writer is minister of state for foreign trade, UAE)