India-UAE Trade & Investment: Key Sectors, Growth Trends and Future Opportunities

For European companies interested in the UAE as a potential market for their services and products, India, just about 3 hours away by air, also offers several opportunities. The strong partnership between TTE Gulf and Expandys (India) will enable our clients’ entry into these markets smoothly and efficiently.

While both markets have their differences, some of the reasons to consider the UAE and India together (apart from their proximity) include: growing consumer markets, strong trade relations, favourable government initiatives and tax treaties, and other cooperation agreements between the two countries. A large Indian diaspora in the Middle East also reduces cultural and communication barriers, while India could be a potential sourcing destination.

India and the UAE have maintained strong trade ties for decades, with a significant shift in economic relations occurring after the 1990s.

Key Highlights of India-UAE Trade:

India is the UAE’s second-largest trading partner, making up 9% of the UAE’s total foreign trade and 14% of its non-oil exports.
The UAE ranks as India’s third-largest trade partner, with trade growing from US$180 million annually in the 1970s to US$84.84 billion in FY23.
Trade volumes are projected to surpass US$100 billion within five years, driven primarily by non-oil sectors.
In FY24, trade between the two countries amounted to US$83.6 billion, with the UAE remaining India’s third-largest trade partner globally and second-largest export market.
The UAE is a major investor in India, standing as the seventh-largest source of cumulative FDI with investments totaling US$21.9 billion from April 2000 to September 2024.
Approximately 3.5 million Indians live in the UAE, constituting 30% of its population. This community is the largest group of expatriates in the UAE and plays a significant role in its economy through remittances.

Recent Trends and Developments in India-UAE Relations:

CEPA Progress:
As of October 2024, India and the UAE are close to reaching their goal of US$100 billion in non-oil trade before 2030, thanks to strong growth since their trade agreement started. This progress was further assessed at the first CEPA Joint Committee meeting in June 2023, which also established service sub-committees and a UAE-India CEPA Council focused on supporting MSMEs and startups.

Defence Cooperation:
The 12th Joint Defence Cooperation Committee (JDCC) meeting in July 2024, focused on increasing defense ties with joint military exercises, research, and partnerships.

MOUs and Initiatives:
During the celebration of India’s 75th independence and the UAE’s 50th anniversary, India and the UAE signed multiple MOUs:

A partnership between APEDA and DP World & Al Dahra for the Food Security Corridor initiative.
A collaboration between India’s Gift City and Abu Dhabi Global Market for financial projects.
MOUs on Climate Action and Education.

I2U2 Framework:
In July 2022, India and the UAE established the I2U2 framework to enhance cooperation in areas like water, food security, health, energy, transportation, and space.

Leadership Talks:

In July 2023, Prime Minister Modi and UAE President Sheikh Mohamed bin Zayed discussed key areas of partnership, including fintech, renewables, climate action, and education. They also exchanged documents to promote the use of local currencies for cross-border transactions, and planned the establishment of IIT Delhi-Abu Dhabi.

Sustainable Development Collaboration:
On October 5, 2023, India and the UAE signed an MoU for sustainable industrial development, focusing on industrial investments, technology transfer, and joint technological advancements.

Climate Action at COP-28:
In December 2023, COP-28 in Dubai, India and the UAE co-hosted a high-level event for the Green Credits Programme, which incentivizes pro-environment actions to combat climate change, focusing on ecosystem restoration.

Business Opportunities in India-UAE Trade:

Comprehensive Economic Partnership Agreement (CEPA):
The CEPA agreement, signed on February 18, 2022, is a major boost for trade between India and the UAE. Under this deal, 90% of Indian exports and 80% of trade categories will enjoy zero-duty benefits, making it easier and more competitive for Indian businesses to sell their products in the UAE.

Key Sectors for Growth: Several sectors are set for significant growth in India-UAE trade and investment, including:

- Gems and Jewelry
- Pharmaceuticals and Medical Devices
- Food Production and Security
- Security and Defense
- Technology Startups and Artificial Intelligence (AI)
- Education and Financial Services
- Advanced Technology
- Aviation and Infrastructure Development
- Oil and Gas
- Renewable Energy

Energy Transition and Investment: The UAE is contributing to India’s energy transition programme, which aims to generate 500 GW of renewable energy by 2030. UAE investments are crucial in supporting India’s push toward clean energy. The UAE has also made significant investments in India’s energy sector, particularly in renewables and oil & gas.

Investment by UAE Companies: The UAE has already established itself as a major investor in India, ranking as the 7th largest investor, with FDI inflows of US$ 16.67 billion between April 2000 and September 2023. Some of the biggest investments include over US$ 6 billion in major Indian companies such as Jio, Adani, Tata Motors, and Tata Power.

Food and Energy Collaborations under I2U2: Under the I2U2 framework, India and the UAE are exploring joint projects, including:

- US$ 2 billion investment from the UAE to develop food corridors in India.
- US$ 300 million for building a 300 GW hybrid wind and solar power plant in India.

Financial and Digital Payment Innovations: A key development in the financial sector is the partnership between NPCI International Payments Limited (NIPL) and Al Etihad Payments (AEP), a subsidiary of the Central Bank of the UAE. This collaboration aims to implement a Domestic Card Scheme (DCS) in the UAE to boost e-commerce, digital transactions, and financial inclusion. This partnership aligns with the UAE’s goals for greater digitalization and secure payment systems.

The India-UAE trade partnership is expanding across multiple sectors, with CEPA as a catalyst for future growth. Key areas such as energy, defense, food security, and technology offer vast business opportunities in both countries. The UAE’s investments, particularly in renewables and technology, alongside strategic collaborations like I2U2, will drive economic relations forward.

Expandys & TTE Gulf: Your Strategic Partners for International Expansion

As India and the UAE strengthen their economic partnership, businesses must navigate complex trade landscapes, regulatory frameworks, and market entry strategies. This is where Expandys and TTE Gulf come in.

With expertise across key markets in the Middle East, Africa, and Asia, Expandys and TTE Gulf provide:

Market Entry & Expansion Strategies tailored to business objectives.
Regulatory & Compliance Support to facilitate smooth operations.
Local Business Development & Partnerships, leveraging strong regional networks.
Custom Trade & Investment Solutions to maximize opportunities in high-growth sectors.

To discuss your specific needs and start your journey towards international expansion, reach out through the following:

Visit Our Website: ttegulf.com | www.expandys.com
Connect on LinkedIn: TTE Gulf Management Consultancy | Expandys

Sources:

Forbes

IBEF