UAE, India trade has potential to go up to $100 billion annually

Indo-Arab relationship goes back a long time, and historians estimate that it might have started during the early period of the Sumerian dynasty in 2800 B.C. The civilisational ties continue to this day, and this sense of brotherhood is the very foundation of UAE-India relationship. The presence of 3.42 million Indian citizens in UAE obviously provides an additional dimension to the bond between them. The bilateral trade has now grown to $60 billion per annum with the UAE becoming the third-largest trading partner of India, and the trade volume is poised to grow even further. Interestingly, nearly eight per cent of India’s oil is sourced from UAE. It is noteworthy that both countries’ alliance is now multifaceted with UAE and Indian investments into each other growing at a healthy pace. And the flow of investment is supported by the legal framework provided by bilateral investment treaty (BIT) signed between India and UAE in December 2013. The treaty protects UAE investments into India and vice versa. UAE is the ninth biggest investor in India with the total investment in the region of $10-$11 billion, but the potential is much more.

Both UAE and India have grown robustly over the past two decades, and it is only a matter of time that their trade and investment ties caught up with the ground reality. UAE, in particular, has emerged as a first-world nation over the past two decades. According to World Bank data, the GDP of UAE has grown from $104 billion in 2000 to $421 billion by the end of 2019. In other words, UAE has grown its economy by almost four times in a span of twenty years. Currently, the country has a total population of 9.77 million with a per capita income of $43,470, among the world’s highest. Latest reports indicate that there are 79,000 high-net-worth individuals (HNWIs), 3,400 multimillionaires, and 12 billionaires in UAE. Or in other words, UAE with its huge capital can help India bridge its investment deficit. This is not to say that India is a laggard or pushover. In fact, India grew its GDP from $468 billion in 2000 to $2869 billion by the end of 2019, becoming the world’s fifth-largest economy. Tremendous feet indeed, but India’s huge size and Prime Minister Modi led government’s GDP target of $5 trillion means it must attract more foreign investments.

The UAE and India are already making steady progress in the investment arena. The eighth meeting of the UAE-India High-Level Joint Task Force on Investments co-chaired by Sheikh Hamed bin Zayed Al Nahyan, Member of the Executive Council of the Emirate of Abu Dhabi, and Shri Piyush Goyal, Minister of Railways and Commerce & Industry, Government of India, was held in November 2020. The meeting discussed potential UAE investments into India in healthcare and pharmaceutical industry, mobility and logistics, food and agriculture, energy, and utilities. Also discussed were issues faced by UAE-based funds investing into India, in the light of SEBI (Securities and Exchange Board of India) Foreign Portfolio Investor Regulations 2019. Resolution of this issue might hopefully lead to more UAE portfolio investments in India.

Bal Krishen is chairman of Century Financial. Views expressed here are his own do not reflect on this newspaper’s policy.