India–UAE Relations: A Future-Ready Strategic Alliance

India–UAE Relations: A Future-Ready Strategic Alliance

This article covers “Daily Current Affairs”  and the topic India–UAE Relations: A Future-Ready Strategic Alliance

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GS-2- International Relations- India–UAE Relations: A Future-Ready Strategic Alliance

FOR PRELIMS

What is the significance of defence and nuclear energy cooperation between India and the UAE?

FOR MAINS

What are the key areas of cooperation between India and the UAE in recent years?

Why in the News? 

India and the United Arab Emirates (UAE) are taking bold strides in redefining their strategic relationship, moving beyond traditional trade into dynamic areas such as nuclear power, advanced technology, digital finance, and defence cooperation. This evolution reflects a shared vision of sustainable development, regional connectivity, and economic resilience.

Trade and Economic Relations: Surpassing Milestones

1. Bilateral Trade Achievement: India-UAE trade surpassed the $100 billion milestone, five years ahead of the 2027 target, making the UAE India’s third-largest trading partner after China and the US.
2. CEPA as a Game-Changer: The Comprehensive Economic Partnership Agreement (CEPA), signed in 2022, significantly reduced trade barriers, tariffs, and paperwork, enhancing bilateral trade flows.
3. Virtual Trade Corridor: As part of CEPA, the Virtual Trade Corridor has improved customs clearances and enabled real-time trade facilitation, supporting the larger IMEEC vision.
4. Foreign Direct Investment Growth: UAE’s total FDI in India stands at $23 billion, indicating robust investor confidence.
5. Investment Commitments in 2024: A notable $4.5 billion was committed in 2024 alone, further strengthening economic ties.
6. Bilateral Investment Treaty (2023): The BIT signed in 2023 has created a legally stable framework for UAE investors, boosting capital flows and project commitments.
7. Diversification of Trade Portfolio: The partnership now spans oil, petrochemicals, food, textiles, IT, and green energy, making it broad-based and strategic.

Financial Integration and Local Currency Trade

1. Local Currency Trade Settlement: Approximately 10% of India-UAE bilateral trade is now settled in rupees and dirhams, reducing over-reliance on the US dollar.
2. Introduction of Jaywan Card: The UAE launched the Jaywan national payment card, based on India’s RuPay technology stack, indicating fintech alignment.
3. Digital Payment Synergy: India’s Unified Payments Interface (UPI) will be linked with UAE’s Aani platform by November 2025, enabling real-time, low-cost cross-border transactions.
4. CBDC Interoperability Plans: Discussions are underway to ensure central bank digital currency (CBDC) interoperability, enhancing financial resilience and security.
5. SWIFT Alternative in Progress: Both countries are exploring direct messaging systems for banks as an alternative to SWIFT, ensuring secure and sovereign data transmission.
6. Fintech Innovation Model: This bilateral financial integration serves as a model for Global South countries pursuing sovereign digital payment systems.
7. Support for MSMEs and Startups: Fintech linkages are expected to benefit small and medium enterprises, reducing transaction costs and improving market access.

Advanced Technology and Education Linkages

1. Vibrant Gujarat 2024 Focus: The Vibrant Gujarat Global Summit 2024 spotlighted India-UAE collaboration in AI, space, biotech, and clean tech.
2. Knowledge-Based Partnership: Both nations aim to transition into knowledge economies, emphasizing innovation, R&D, and digital transformation.
3. IIT Abu Dhabi Launch: The UAE inaugurated IIT Abu Dhabi’s PhD program, fostering advanced research and Indo-UAE academic ties.
4. IIM Ahmedabad Campus in Dubai: A global branch of IIM Ahmedabad in Dubai reflects growing demand for Indian management education in the Gulf.
5. IIFT Dubai Presence: The Indian Institute of Foreign Trade (IIFT) has also established a campus, supporting trade education aligned with CEPA outcomes.
6. Talent Exchange and Skill Development: These initiatives facilitate human capital mobility, aligning workforce capabilities with industrial needs.
7. Tech-Education Convergence: The education partnership complements technological cooperation, creating an innovation corridor between South Asia and the Gulf.

Defence Cooperation: Elevating Strategic Trust

1. Upgraded Strategic Dialogue: Defence cooperation has been elevated to the secretary-level, signaling a deeper institutional framework for joint security planning.
2. Joint Military Exercises: Regular joint drills like Desert Cyclone, Desert Flag, and the India–France–UAE Trilateral Exercise enhance interoperability and combat readiness.
3. Regional Security Alignment: These exercises reflect shared concerns over maritime security, counterterrorism, and regional stability in the Indian Ocean and West Asia.
3. Defence Industry Collaboration: Indian defence companies are active participants in international platforms such as IDEX and Dubai Airshow, showcasing indigenous capabilities.
4. Tejas Fighter Components: UAE firms are contributing to the Tejas Light Combat Aircraft project, demonstrating mutual trust in core defence technologies.
5. Drone & Anti-Drone Systems: Joint development of unmanned aerial vehicles (UAVs) and anti-drone solutions is underway, responding to evolving battlefield needs.
6. DefExpo Engagement: The consistent UAE presence in India’s DefExpo and reciprocal Indian participation in Gulf defence expos reflect expanding defence diplomacy.

Nuclear Energy Cooperation

1. Current Nuclear Share: The UAE currently meets 25% of its electricity demand from nuclear sources, with an installed capacity of 5.6 GW.
2. 2030 Target: Plans are in motion to double nuclear capacity by 2030, aligning with UAE’s energy diversification agenda.
3. PACE Initiative: India and UAE are collaborating under the Partnership for Accelerating Clean Energy (PACE), along with the US and France, to expand nuclear energy deployment.
4. Clean Energy Transition: Nuclear energy is emerging as a non-carbon, base-load power source, supporting net-zero ambitions in both nations.
5. Barakah Plant Participation: India is contributing to the Barakah Nuclear Power Plant, the first operational multi-unit plant in the Arab world.
6. Technology Transfer and Training: Opportunities exist for training, safety protocols, and regulatory exchanges between Indian and Emirati nuclear authorities.
7. Strategic Energy Security: Nuclear collaboration strengthens energy security cooperation, a vital pillar of the broader strategic partnership.

Critical Minerals, Space, and Infrastructure Initiatives

1. Minerals MoU: A 2024 MoU on critical minerals cooperation aims to secure access to lithium, cobalt, and rare earth elements, essential for green technologies.
2. Space Collaboration: Joint efforts are underway in satellite development, precision navigation, and space research, including polar initiatives.
3. IMEEC Connectivity Vision: The India–Middle East–Europe Economic Corridor (IMEEC) envisions a modern connectivity architecture spanning containers, data, and energy.
4. Subsea Cables: The corridor includes undersea data cables, promoting faster and more secure digital exchange between continents.
5. Energy Grids: Cross-border electricity grids are being considered for seamless energy transmission between South Asia, the Gulf, and Europe.
6. Logistics & Trade Infrastructure: IMEEC will streamline freight movement via multi-modal transport, reducing transit time and costs.
7. Strategic Infrastructure Financing: UAE’s sovereign wealth funds are expected to co-finance large-scale infrastructure projects along IMEEC.

I2U2 and Sustainable Development

1. Quad of the West Asia: I2U2 (India, Israel, UAE, US) serves as a strategic framework for economic cooperation and innovation in the region.
2. Food Security Projects: Two food parks in Gujarat are being developed with UAE investment, aiming to boost agricultural exports and reduce food waste.
3. Renewable Energy Target: I2U2 aims to install 60 GW of renewable energy capacity across Gujarat and Rajasthan by 2030.
4. Green Technology Exchange: The group promotes clean energy collaboration, particularly in solar, hydrogen, and smart grid systems.
5. Private Sector Involvement: Major firms from all four countries are participating in public–private partnership models under I2U2.
6. Innovation and Agri-tech: Focus is on agricultural innovation, water conservation, and AI-based farming to ensure sustainable food production.
7. Model for South-South Cooperation: I2U2 showcases a new model for development diplomacy and joint economic projects in the Global South.

Multilateralism, Market Access & Africa Outreach

1. UAE in BRICS: The UAE’s recent entry into BRICS positions it as a vital link between Asia and Africa, expanding its geopolitical relevance.
2. Bharat Africa Setu: This India-led initiative seeks to enhance trade, connectivity, and development cooperation with African nations, using UAE as a bridge.
3. Leveraging CEPA Network: India can benefit from UAE’s 25 CEPA agreements, accessing wider markets through manufacturing bases in the Emirates.
4. Energy-Intensive Industries: UAE’s low energy costs and predictable regulatory framework attract Indian industries in sectors like metallurgy, chemicals, and fertilizers.
5. Gateway to West Asia and Africa: The UAE serves as a strategic transhipment and investment hub for Indian outreach to Africa and Europe.
6. Multilateral Forum Alignment: India and UAE align on platforms such as G20, BRICS, and IORA, enhancing shared developmental and strategic goals.
7. Legal and Investment Security: A stable legal environment, robust arbitration mechanisms, and investor protection make UAE a reliable base for Indian firms.

Cultural Diplomacy: Symbol of Mutual Respect

1. BAPS Hindu Temple: The first traditional Hindu temple in the Arab world, inaugurated in Abu Dhabi, represents a milestone in cultural diplomacy.
2. Interfaith Harmony: The temple stands as a symbol of religious tolerance and mutual respect, championed by the UAE leadership.
3. Diaspora Connect: It enhances emotional ties with the 3.5 million-strong Indian diaspora in the UAE, strengthening people-to-people relations.
4. Soft Power Projection: India leverages cultural outreach as a tool of soft power diplomacy, promoting pluralism and inclusivity abroad.
5. Cultural Exchange Programs: Ongoing academic, artistic, and heritage exchange initiatives deepen socio-cultural understanding.
6. Tourism and Spiritual Diplomacy: The temple is expected to draw tourists from India and beyond, supporting spiritual and religious tourism.
7. Bilateral Goodwill: The UAE’s support for the temple reflects bilateral trust, shared values, and a future-oriented cultural relationship.

Conclusion

India–UAE ties have transformed into a multifaceted strategic partnership, extending beyond trade to include defence, fintech, clean energy, education, and connectivity. CEPA, local currency trade, and fintech linkages reflect deepening economic integration and innovation.  Collaborations in defence, nuclear energy, and infrastructure (IMEEC, I2U2) highlight shared goals of sustainability and regional stability. The UAE’s BRICS membership and role as a gateway to Africa and West Asia complement India’s global outreach.

Prelims Questions

Q.  With reference to recent India–UAE relations, consider the following statements:
1. The Barakah Nuclear Power Plant is the first multi-unit nuclear plant in the Arab world, with Indian involvement.
2. The Jaywan card launched in the UAE is based on India’s RuPay technology stack.
3. The I2U2 grouping includes India, UAE, UK, and USA.
4. CEPA between India and UAE came into force in 2023.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 4 only
(c) 1, 2 and 3 only
(d) 1, 2 and 4 only

Answer: A

Mains Questions

Q. India and the UAE are redefining their strategic engagement beyond trade into areas such as clean energy, digital finance, defence, and multilateral cooperation. Discuss the significance of this evolving partnership and its implications for India’s regional and global positioning.

                                                                                                                                                         (250 words, 15 marks) 

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