Today's Editorial

Today's Editorial - 12 February 2024

A privileged strategic partnership, without a gulf

Relevance - GS Paper II

Why in the News?

India's Prime Minister is set to visit the United Arab Emirates (UAE) from February 13-14, 2024, marking his seventh visit since 2015 and the third in the last eight months.

Key agenda of the meeting:

  • The visit will include the inauguration of a temple built by Bochasanwasi Shri Akshar Purushottam Swaminarayan Sanstha (BAPS) in Abu Dhabi.
    • The BAPS temple, which is built on land donated by the UAE President, will be the second big Hindu temple to be inaugurated in the UAE in recent years, the first being the Hindu Temple in Dubai, opened in 2022.
  • The Prime Minister will also address the World Government Summit on February 14 in Dubai as the “Guest of Honour”.

The pillars of ties - India & UAE:

Special relationship:

  • UAE President was felicitated in a road show when he was in Gandhinagar in January this year as the chief guest of the 10th Vibrant Gujarat Summit.
  • The convergence of ideas on global climate issues was also clear when the Prime Minister of India was in Dubai for the COP28 climate summit.
    • Both India and the UAE co-launched the Global Green Credit Initiative.
  • The UAE was one of few nations specially invited for the G-20 summit in September 2023 under India's G-20 presidency.
  • The IIT Delhi Abu Dhabi campus has been established, and the UAE opened a consulate in Hyderabad in 2023.
  • Both countries have made exceptions for each other, such as inviting India's External Affairs Minister as a keynote speaker at the Organization of the Islamic Cooperation (OIC) Foreign Ministers' Meeting in 2019, despite protests from some nations, including Pakistan.
  • Earlier, in 2018, India was the 'Guest of Honour' country at the Abu Dhabi Festival (ADF), the UAE’s annual cultural festival.
  • In 2019, the UAE conferred its top civilian honour, the Order of Zayed, to the Prime Minister of India.
  • The Crown Prince of Abu Dhabi was the chief guest at the Republic Day in 2017.

Trade and Investment:

  • India and the UAE have a strong economic partnership, with bilateral trade growing to $85 billion in 2022-23, making the UAE India's third-largest trading partner and second-largest export destination.
    • The UAE is also the fourth-largest overall investor in India.
  • The India-UAE Comprehensive Economic Partnership Agreement (CEPA),  signed in a record time of 88 days, aims to increase trade to $115 billion in five years.
  • The Indian government approved the signing and ratification of a bilateral investment treaty with the UAE in February 2024, boosting bilateral economic engagement, especially manufacturing and foreign direct investment.

Fintech:

  • It is another area of mutual convergence, with the RuPay card, a key component of India's Digital Public Infrastructure (DPI), being accepted in the UAE since 2019.
  • The rupee has also been accepted for transactions at Dubai's airports. India and the UAE also operationalised a rupee-dirham settlement system in 2023.
    • The Indian Oil Corporation made a rupee payment to the Abu Dhabi National Oil Company for crude oil imports.

Energy security

  • UAE is a trusted partner in energy security and the only nation in the region with strategic oil reserves stored in India.
    • An agreement was signed between Indian Strategic Petroleum Reserves Ltd (ISPRL) and Abu Dhabi National Oil Company to invest in a strategic crude oil storage facility in Mangaluru, with an initial investment of $400 million.

Strategic ties

  • India and the UAE are closely coordinated and part of important groups such as -
    • I2U2 or the West Asian Quad (India, Israel, the United States and the UAE).
    • India-Middle East-Europe Economic Corridor (IMEEC) infrastructure project.
      • It aims to connect India to Europe across the Arabian peninsula and is a potential rival to China's Belt and Road Initiative.

Conclusion:

India has numerous strategic partnership agreements, but none display more convergence and mutual respect at all levels than the one with the UAE. While India recognises and values the UAE’s role in the region, the UAE is also cognisant of the ‘global leadership’ role that India is set to acquire. The visit also comes at a critical time with the war in Gaza enveloping the region. It will allow the two leaders to confer on this critical issue.

Beyond Editorial:

Alignment of India and UAE‘s interests

UAE’s significance for India:

  • Look West Policy: India aims to strengthen ties with West Asian countries through economic, strategic, technological, and people-to-people cooperation. It aligns with the UAE's policy, allowing India to increase its regional influence.
  • Entry into regional groups: India aims to join regional groups like the Gulf Cooperation Council (GCC) and the Organization of the Islamic Cooperation (OIC). The UAE can lobby for India's inclusion, potentially convincing group members, as it holds significant clout in these groups.
  • Gateway to Africa and West Asia: The UAE, a strategic transportation hub, can assist India in entering Africa and the Gulf markets, fostering regional development and technology transfer through coordinated diplomacy between the two nations.
  • Energy Requirements: UAE's stability and reliability bolsters India's strategy to diversify crude oil sources. Both countries have entered long-term contracts and strategic agreements to ensure a stable and reliable crude oil supply.
  • Counter-Terrorism and De-radicalisation: India and UAE signed the Extradition Treaty in 1999, aiming to collaborate on counter-terrorism measures, de-radicalization, anti-money laundering, counter-terrorism financing, and countering extremist ideologies through intelligence sharing.

UAE’s inclination towards India:

  • Gulf Cooperation Council (GCC): The GCC faces internal disputes and factions, including Qatar's economic blockade. India's non-interfering approach has positioned it as a reliable partner for the UAE.
  • Failure of Pakistan: UAE sees India as a suitable destination for long-term investments and infrastructure development due to its rapidly growing economy and large market size as compared to Pakistan's frequent economic, political, and security crises.
  • Competition from Saudi Arabia: ​​UAE and Saudi Arabia are engaged in geopolitical competition in the Gulf region, targeting economic diversification, energy sector, tourism, and infrastructural development. UAE aims to attract India for market catering.
  • Sovereign wealth funds: The UAE, with its significant sovereign wealth fund, Abu Dhabi Investment Authority (ADIA), is seeking investment opportunities in infrastructure, start-ups, real estate, healthcare, education, and long-term investments, with India as a potential destination.

Some important developments:

  • Local Currency Settlement System (LCSS): It is trade in local currencies between two countries.
    • For example, an exporter in India can make an invoice in rupees (INR), and an importer in UAE can pay in dirhams (AED). Hence reducing the reliance on third-party currency.
  • Interlinking of Payment Systems: India’s Unified Payments Interface (UPI) is linked with its UAE-counterpart Instant Payment Platform (IPP). This is alongside the linking of card switches, the RuPay switch and UAE Switch.
  • Skill development programmes:
    • TEJAS (Training For Emirates Jobs and Skills) is focused on training, certifying and placing 10,000 Indian workers in UAE in its first year by partnering with some leading employers, such as EFS, Dulsco, TASC, Lulu Finance and more, in the region.
    • National Initiative for Promotion of Upskilling of Nirman Workers (NIPUN) envisages training over 1,00,000 construction workers through fresh skilling and upskilling programmes and placing some in gulf countries.

Challenges in the relations:

  • Migrant workers: UAE has many workers who have shifted there for low-skilled and semi-skilled jobs. The issues faced by migrant workers are problematic, for example, the kafala system, which gives private citizens and companies almost total control over migrant workers' employment and immigration status.
  • Tariff rate: The tariff structure of UAE is bound by GCC. Now that the CEPA has been in place, the tariff structure has been subject to relaxation, but it still remains a matter of concern. The sanitary and phytosanitary measures are also tightly held.
  • Diplomatic ire: West Asia is known for its geopolitical complexities and conflicts. India's engagement with the UAE could attract the ire of other regional nations. Balancing the relations while strengthening the India-UAE strategic partnership is a diplomatic challenge. 
  • Investment in green technologies and climate change: The UAE is an oil-exporting economy, so it doesn’t readily want to invest in green technologies. Meanwhile, India has set a net zero target of 2070 and is currently focussing on transitioning to a green economy. The alignment of both nations on this issue is debatable.

Way forward:

  • Labour rights and Skill development: India needs to work with the UAE to ensure workers have rights and proper living conditions. Meanwhile, India is working on providing skills to Indian workers in the UAE; both countries can collaborate to strengthen and diversify the job prospects of migrant workers.
  • Climate change and sustainability: India should convince the UAE to work together in environmental sustainability. A massive investment in green technologies should strengthen mitigation efforts further. Research and development and knowledge sharing should be a part of the measures, ultimately leading to technology transfer.
  • Cybersecurity: There is a need to develop robust cybersecurity measures and establish contingency plans for cyberattacks in both countries. Meanwhile, Data Embassies announced in the Union Budget 2023-24 could be set up.

 

Mains PYQ

Q. How will I2U2 (India, Israel, UAE and USA) grouping transform India's position in global politics? (UPSC 2022)

Q. The question of India’s Energy Security constitutes the most important part of India’s economic progress. Analyze India’s energy policy cooperation with West Asian Countries. (UPSC 2017)

 
 
 

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