India-UAE Economic & Commercial Relations

India and UAE have shared trade links through the centuries. The trade, which was dominated by traditional items such as dates and fishes, underwent a sharp change after the discovery of oil in UAE. With the emergence of UAE as a unified entity in 1971, exports from India started growing gradually over the years. The real impetus, however, started after Dubai positioned itself as a regional trading hub by early 1990s and about the same time, the economic liberalization process started in India.

Growing India-UAE economic and commercial relations contribute to the stability and strength of a rapidly diversifying and deepening bilateral relationship between the two countries. Both sides are striving to further strengthen these ties for mutual benefits. India-UAE trade, valued at US$ 180 million per annum in the 1970s, is today is close to US$ 72 billion making UAE, India’s 2nd largest trading partner for the year 2011-12.

India-UAE bilateral trade for the last five years

Value in US$ Million

Source : DGCIS, Kolkata

UAE –India bilateral trade for the last five years

UAE Min. of Foreign Trade released figures (excluding oil)

India’s Major Exports and Imports to the UAE:

India's exports to the UAE are well diversified with a large basket. India's major export items to the UAE are: Petroleum Products, Precious Metals, Stones, Gems & Jewellery, Minerals, Food Items (Cereals, Sugar, Fruits & Vegetables, Tea, Meat, and Seafood), Textiles (Garments, Apparel, Synthetic fibre, Cotton, Yarn) and Engineering & Machinery Products and Chemicals. India’s major import items from the UAE are: Petroleum and Petroleum Products, Precious Metals, Stones, Gems & Jewellery, Minerals, Chemicals, Wood & Wood Products. India also imported 15.79 MMT of crude oil from UAE in 2011-12.

Investments :

There is an estimated US$8 billion UAE investment in India of which around US$2.3 billion is in the form of foreign direct investment, while the remaining is portfolio investment. UAE is the tenth biggest investor in India in terms of FDI. UAE’s investment in India were concentrated mainly in five sectors: Power(18%); Services(10%); Computer hardware & software(8%); Construction (8%); and Tourism & Hotels(6%). To further attract UAE Investment, CI&TM had issued an invitation to Sheikh Hamed bin Zayed Al Nahyan, Managing Director, Abu Dhabi Investment Authority to visit India with a delegation. The visit took place from 16 to 20 January 2012 and the delegation had, apart from meetings with the CI&TM, Finance Minister, External Affairs Minister, Minister of Rural Development, Minister of Urban Development, Secretary (Disinvestment) also met with Chairman, SEBI and had interactions with FICCI/Invest India, CII, IDBI, ICICI, and leading industrialists in Mumbai and Bengaluru and explored investment possibilities. A suggestion was mooted for ADIA’s participation in the development of the Delhi-Mumbai Industrial Corridor. A High Level Task Force on Investment has been set up in May 2012, with Commerce & Industry Minister as the Chairman from Indian side and ADIA’s Managing Director as the Chairman from UAE side. The first meeting is yet to be held.

Joint Ventures:

There are a number of joint ventures and investments undertaken by UAE companies in India. EMMAR, a real estate company of Dubai Government, is active in the real estate sector having already set up a major township, an international convention centre and a golf course in Hyderabad. Emaar and India's MGF Development Limited, joined together to form India's largest FDI in real estate amounting to over half a billion dollars for projects with a capital outlay of US$4 billion (Rs.18,000 crore) and constructed flats for the Commonwealth Games (2010) Village.

Dubai Ports World is now operating 6 major Ports in India at Nhava Sheva, Navi Mumbai, Chennai, etc, following its acquisition of the P&O of U.K. DP World was awarded a $150 million contract in 2007 for work on construction of the International Container Transshipment Terminal (ICTT) at Vallarpadam in Kochi (Kerala). The first phase of the ICTT Project at Vallarpadam (Kochi) was inaugurated by Prime Minister on - February 11, 2011. The terminal currently has a capacity to handle one million TEUs (twenty-foot equivalent container units). The planned capacity at Vallarpadam, when fully expanded, is three million TEUs, making it the country's largest container terminal.

In Gujarat - UAE's company "Dubai Port World", a leader in international marine terminal operations has a 100% equity stake in the $364.77 million "Mundra International Container Terminal" (MICT) facility and executes full operational control.

Ras al-Khaimah (RAK) signed a MoU for a JV with Govt. of A.P for setting up a one million tonne per annum Alumina plant and a 250,000 tonne aluminium smelter. RAK, represented by the RAK Investment Authority (RAKIA), will set up a registered company in India to set up the plant which would use the bauxite resources available in A.P. RAK has already commissioned the RAK ceramics factory located at Kakinada in AP.

UAE tile manufacturer, RAK Ceramics India, plans to set up a tile plant in Ahmedabad, at an investment of $150 million. The plant will be commissioned by early-2012. Many UAE companies have signed MoUs with many state Governments in real estate and construction fields.

Dubai Aluminum Company (Dubal)'s proposal for a joint venture project with L&T Ltd. for aluminum extraction and refinery in Orissa with an investment of U5$1 billion. The project when goes into full capacity is expected to produce up to 3 million tons of aluminum per year. So far, Dubal has invested U5$15 million, but is now awaiting the final approval for the project from the Odisha government.

Abu Dhabi National Energy Company (TAQA) has presence in India, through a company called "ST -CMS Electric Company Pvt Ltd.", operating 250 MW lignite- fired power plant in Neyveli, Tamil Nadu. TAQA has plans to expand its power generating capacity by another 250 MW at the same site. The likely investment will be around US$250 million. TAQA is, in collaboration with Jyoti Limited, engaged in power-transmission projects in the northern region.

The Abu Dhabi Investment Authority (ADIA), which is a sovereign fund owned by the Abu Dhabi Government has around US$700 billion in investible funds. Most of the investments made by ADIA in India are in portfolio investments.

Indian investments in UAE:

Hinduja Group has set up manufacturing units for Ashok Leyland vehicles in Ras-al-Khaimah. An Aqua theme park is being set up as a joint venture between Polo Amusement Park from India, RAK Investment Authority and RAK Properties. Many Indian companies have set up manufacturing units either as joint ventures or in Special Economic Zones for cement, building materials, textiles, engineering products, consumer electronics etc. Many Indian companies including Taj Group of Hotels have also invested in the tourism, hospitality, catering, health, retail and education sectors. The EMKE Group under the banner 'Lulu' set up by an Indian national, dominates the retail/departmental sectors in UAE. Amarak Chemicals opened two factories in UAE. Al-Fara’a group is a booming construction-sector company. Indian cement manufacturer JK Cement announced on 11 November 2011, an investment of US$14.97 mn to set up a white cement plant with a capacity to produce 0.6 million tones per year(mtpy), in Fujairah Free Trade Zone. Indian companies like Ashok Leyland, Mahindra, Dabur etc. operate out of RAKFTZ. India’s Essar Steel Processing and Distribution (ESPD), part of Essar Steel, has commissioned a service centre facility in Dubai on 20/6/2011 to cater to the needs of customers in Middle East and neighboring region. Essar's Dubai facility has a processing capacity of 250,000 tonnes. Besides meeting local demand in the UAE, the processed material will also be shipped by road to other GCC countries. The region has traditionally been one of Apollo Tyres’s strongest export markets, out of India, accounting for about 30 per cent of export revenues. The company has opened an office in Dubai and its distribution network in the Middle East is spanning 14 countries and 23 business partners. Indian television major Zee Entertainment has invested in the satellite television network in the Middle East, with Dubai as its base. It is already running a special Arabic channel Zee Aflam devoted to bollywood entertainment. In September 2012, Zee announced a $100 million investment in Zee Alwan - Dubai, the second Arabic channel by Asia’s largest television provider. Birla Institute of Technology & Science (BITS) Pilani in India opened its international campus in Dubai on December 2007 - BITS Pilani, Dubai. Now it becomes the leading ‘engineering’ institution in the Middle East. BITS Pilani is the one of the dedicated engineering institution in the region and has the largest campus spread across a 15-acre plot in Dubai International Academic City with an excellent academically conducive infrastructure and highly qualified faculty.

Major Indian companies such as L&T, ESSAR, Dodsal, Punj Lloyd, ElL etc have been able to obtain significant number of contracts in the UAE. L& T and its Oman- based subsidiary have secured major contracts in water supply projects, construction, oil, electric transmission and other sectors. In June 2011, India-based PCM Strescon Overseas Ventures Ltd (Siliguri, West Bengal) signed a contract worth US$40 million with Etihad Rail for design & manufacture of railway sleepers as well as production of sleeper manufacturing facility for Phase I of the railway network of 266 km route linking Shah, Habshan and Ruwais in the Abu Dhabi western region. Larsen & Toubro has won two engineering, procurement and construction (EPC) contracts in the UAE worth more than $639m. L&T is already executing the civil & electrical part of the Abu Dhabi Khalifa Interchange Highway project, construction of electric transmission lines in Fujairah. Saipem, Tecnimont and Dodsal as a consortium won a contract in October 2011 worth US$900 million from Etihad Rail to carry out civil and track works that will connect the Western Region cities of Habshan and Ruwais by 2013 and Shah Habshan by 2014. Dodsal had earlier, in April 2011, signed a contract worth US$500 million with GASCO for design, engineering & construction of Habshan Sulphur Granulation Plant. Dodsal has been awarded a US$450 million EPC contract in August 2012 for constructing the Habshan-Maqta-Taweelah gas pipeline project for GASCO, to be executed in 34 months time.

There are 635 direct flights operating every week between various destinations in India and UAE, serviced by Air India/Air India Express, Jet Airways, Spicejet, Indigo, Emirates, Etihad, Flydubai, Air Arabia and RAK Airways.

Institutional Arrangements :
A Joint Commission mechanism at the level of Foreign Ministers, has held ten sessions so far, to discuss the entire gamut of bilateral relations. The 10th Meeting of the Indo-UAE Joint Commission was held in Abu Dhabi from April 15-16, 2012. Both sides discussed various issues for promoting bilateral cooperation in the following fields: trade and investment; education, culture, youth and sports; health, science and technology, agriculture and environment; manpower; and energy, hydrocarbons, petrochemicals and fertilizers. Memorandums of understanding on setting up a joint committee for consular affairs and a protocol to amend the India-UAE Double Taxation Avoidance Agreement (signed in April 1992) were signed during this JCM.
A Joint Business Council consisting of Federation of UAE Chambers of Commerce & Industry and Federation of Indian Chamber of Commerce & Industry (FICCI) has been set up and the first meeting of the JBC was held at Abu Dhabi on March 8, 2004. There have been no meetings subsequently. Confederation of Indian Industry (CII) has signed a strategic agreement with the Khalifa Industrial Zone of Abu Dhabi (KIZAD) in October 2011 at Mumbai to support the Indian businesses investing in the new Industrial Zone. Double Taxation Avoidance Agreement (DTAA) was signed between India and UAE in April 1992. Discussions are being held on finalizing and signing a Bilateral Investment Promotion and Protection Agreement (BIPPA). A Customs Cooperation Agreement was signed on 1st April 2012.
Free Trade Agreement (FTA)

On the multilateral framework, India and GCC have signed a Framework Agreement on Economic Cooperation on 25th August 2004 acknowledging the growing importance of economic and commercial relations between India and GCC countries and to facilitate entering into a Free Trade Agreement (FTA). The first round of negotiations on FTA took place at Riyadh on 21-22 March 2006. The progress has been slow since the process of integration within the GCC has been slow and there are concerns in India about providing free access to petroleum products from GCC.
NRI Remittances:
The annual remittances made by the large Indian community in UAE (estimated to be around 1.75 million) amount to over US $5 billion. They had actively invested in the past in the various bonds floated by India such as Resurgent India Bonds and the India Millennium Bonds.

Banking:
Bank of Baroda which is the only Indian bank holding a license from the UAE authorities for conducting full fledged banking operations, has been in operation in UAE since 1974. BOB has one zonal office, six branches and four Customer Service Centers (CSCs) across UAE. Its request to open two more branches in UAE is still pending with UAE authorities for approval. Similarly, Abu Dhabi Commercial Bank has two branches in India and Mashreq Bank one. Canara Bank, State Bank of Travancore and South Indian Bank manage exchange centers in UAE in collaboration with local banks. Other Indian Banks with representative offices in the UAE include Bank of India, HDFC Bank Limited, ICICI Bank Limited, Punjab National Bank, Union Bank of India, Federal Bank, Andhra Bank, Corporation Bank, Axis Bank, Indian Overseas Bank (IOB), Indusind Bank Ltd. etc. State Bank of India has a long pending application for opening of a full-fledged branch in UAE. In a recent meeting, Governor of the Central Bank of UAE had stated that the Bank was considering relaxation of rules for foreign banks to open branches and once these have been approved by the Board, the situation should ease.
The Dubai Financial Services Authority (DFSA), entered into a Memorandum of Understanding (MoU) with the Reserve Bank of India (RBI) on 15/6/2011 at Mumbai. Indian banks have a significant, and growing, presence in the Dubai International Financial Centre (DIFC), so this enhancement of information sharing and assistance between the RBI and the DFSA is a critical step to ensuring confidence in each of our regulatory regimes.
President’s state visit to UAE ( 21-26 Nov. 2010):

President Smt. Pratibha Devisingh Patil paid a state visit to UAE from Nov. 21 to 26, 2010. A business delegation consisting of 56 businessmen and representative of CII, FICCI and ASSOCHAM accompanied the visiting President. They held fruitful discussions with their counterparts in Abu Dhabi, Dubai and Sharjah. The Abu Dhabi Chamber of Commerce and Industry (ADCCI) hosted a luncheon meeting in honour of the President. UAE Minister of Foreign Trade (MoFT) Sheikha Lubna Al-Qasimi was also present at the meeting. President chaired an Internal Business Meeting (IBM) at Dubai on 24th November 2010. Fruitful discussions and exchanges took place between the visiting Indian Business Delegation members and Indian Businessmen based in UAE in the IBM. The Dubai Chamber of Commerce and Industry also hosted a reception in honour of the President at Dubai. The reception was also attended by Maryam Khalfan Al Roumi, UAE minister of social affairs, officials and representatives of Dubai’s business community. On Nov. 25, 2010, President inaugurated the India Trade and Exhibition Centre (ITEC) in Sharjah in the presence of Dr. Shaikh Sultan Bin Mohammad Al Qasimi, Supreme Council Member and Ruler of Sharjah. ITEC is a non-profit organisation established with the assistance of the Sharjah Chamber of Commerce and Industry and works for the promotion of trade and investment between India-UAE, India-GCC and India-MENA countries by holding industry specific exhibitions on a regular basis.

Trade-related issues:
Ministry of Economy, UAE had raised the matter of legal shortcomings noticed in levying of anti-dumping duties by the Government of India on goods exported from UAE. A detailed list of six cases was sent to the Department of Commerce in December 2011. From our side, we have been pursuing the case for lifting the ban imposed since July 2007 on import of poultry & poultry products, after the detection of avian flu. (Since isolated cases were still reported from the eastern and North-eastern part of India, we are not in a strong position to push the issue actively.) Another issue is the non-registration of agricultural pesticides manufactured in India. The matter was taken up with the UAE Government who had replied that at the moment, only such products from ‘First World’ countries are being allowed to be registered. Ministry of Environment & Water is currently working on updating pesticides registration in line with the development of pesticide industry. The Mission has referred the matter to Department of Commerce to raise this issue in appropriate forums, as a non-tariff barrier imposed by UAE.