19 Jul PM’s Visit to UAE
This article covers “Daily Current Affairs” and the topic details “PM’s Visit to UAE”. The topic “PM’s Visit to UAE” has relevance in the “International Relations” section of the UPSC CSE exam.
India UAE Groupings, Trade and UAE in map
GS2: Bilateral Relations, Agreements affecting India’s interests
Why in the news?
The Prime Minister’s recent visit to the United Arab Emirates marked his fifth visit to the country within the past eight years.
Highlights of the visit
The outcomes of the visit include the signing of several Memoranda of Understanding (MoUs) and discussions on various topics such as the energy sector, climate change, the Indian diaspora, etc.
- Both countries signed MoUs:
- To establish a framework that will promote the use of local currencies (INR-AED) for cross-border transactions.
- On interlinking payment and messaging systems, also signed by the Governors of the respective Central Banks.
- For the planning of establishing the Indian Institute of Technology – Delhi in Abu Dhabi.
- Energy security:
- The two countries will continue their collaboration in the areas of green hydrogen, solar energy, and grid connectivity.
- The two sides also agreed to increase investment in the energy sector, including India’s Strategic Petroleum Reserve Programme.
- Climate Change:
- The leaders commended the joint efforts on climate change, especially during India’s presidency of the G20 and the UAE’s presidency of COP28.
- They agreed to cooperate to ensure that COP28 is a success for all.
- Indian Diaspora:
- The UAE expressed gratitude to the large Indian diaspora for their continued significant contribution to the UAE’s society and economy, which has further strengthened bilateral relations.
- Bilateral Trade:
- The two leaders praised the economic partnership, which is currently worth USD 85 billion, and expressed hope that it would reach USD 100 billion in trade before the G20 meeting in Delhi this year.
The two leaders of both countries reiterated their dedication to further strengthening the Comprehensive Strategic Partnership, exploring new areas of cooperation, and promoting peace, stability, and prosperity in the region and beyond.
Local Currency Settlement System (LCSS)
- One of the significant achievements of the visit was the signing of an MoU between India and the UAE to establish a framework for promoting the use of local currencies, specifically the Indian Rupee (INR) and the UAE Dirham (AED), for cross-border transactions.
- It encompasses all current account transactions and approved capital account transactions.
- The implementation of the LCSS would enable exporters and importers to invoice and make payments in their respective domestic currencies.
- This development would facilitate the growth of an INR-AED foreign exchange market.
- The Reserve Bank of India (RBI) emphasized that this arrangement would also stimulate investments and remittances between the two countries.
- Moreover, utilizing local currencies would enhance transaction cost efficiency and reduce settlement time for various transactions, including remittances from Indian residents in the UAE.
India UAE Bilateral Relations
- India and the United Arab Emirates (UAE) established formal ties in 1972.
- The bilateral ties were upgraded to a Comprehensive Strategic Partnership in 2017 during the visit of Sheikh Mohamed bin Zayed Al Nahyan (MBZ), then Crown Prince of Abu Dhabi and now the President of the UAE.
- India and the UAE are currently participating in several multilateral platforms, such as I2U2 (India-Israel-UAE-USA) and UFI (UAE-France-India) Trilateral.
- I2U2 is a new grouping of India, Israel, the United States, and the United Arab Emirates.
- The group was formed in 2021 with the aim of promoting economic cooperation and investment in six key areas: water, energy, transportation, space, health, and food security.
- The first I2U2 summit was held in July 2022, and the group has since announced several joint initiatives, including a food security project and a hybrid renewable energy facility.
- UFI is a trilateral cooperation initiative between the United Arab Emirates, France, and India. It was established in February 2023 with the goal of promoting cooperation in the fields of energy, climate change, and the circular economy. The first UFI summit was held in Paris in March 2023.
- India-UAE trade reached USD 85 billion in 2022.
- The United Arab Emirates (UAE) became India’s third-largest trading partner and second-largest export destination for the year 2022-23. Conversely, India is the UAE’s second-largest trading partner.
- Bilateral trade has increased by approximately 15% since the implementation of the Comprehensive Economic Partnership Agreement (CEPA) signed in March 2022.
- The Indian community in the UAE, estimated to be around 3.3 million, made annual remittances exceeding US $17.06 billion in 2019.
- The UAE has proven to be a reliable and resilient energy exporter as India’s industrial and manufacturing capacity expands.
- In 2018, the Indian Strategic Petroleum Reserves Ltd (ISPRL) and the UAE’s Abu Dhabi National Oil Company (ADNOC) signed an agreement ensuring stable pricing and oil supply.
- India and the UAE have established digital innovation and technology partnerships.
- Collaborative plans between ISRO and UAESA include missions like the Red Moon mission.
Residency Permits and Collaboration:
- The UAE offers “golden visa” residency permits to professionals such as doctors, engineers, PhD scholars, and specialists in high-end technology fields like AI, Big Data, virology, and epidemiology.
India and UAE have strengthened ties in recent years due to shared economic visions and aligned geopolitical outlooks. Economic engagement, diaspora relations, and strategic convergences have deepened, and the CEPA and the new MoUs will further strengthen ties.
Q1. With reference to India UAE relations, consider the following statements:
- The United Arab Emirates (UAE) became India’s third-largest trading partner
- UAE is the second-largest export destination for the India
- India and UAE have signed the Free Trade Agreement recently in 2022.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 3 only
Q2. Consider the following countries:
- Saudi Arabia
How many of the abovementioned are neighboring countries of the United Arab Emirates?
(a) Only one
(b) Only two
(c) Only three
(d) Only Four
Q3. Analyze the key factors contributing to the growing economic partnership between India and the UAE, highlighting the sectors of collaboration and potential areas for further expansion.