India-UAE relationship is testament to power of diplomacy, trade and people-to-people contact

DUBAI

The UAE witnessed an extraordinary Diwali celebration in 2024, rivalling even the most spectacular celebrations in India itself. Organised by Dubai’s economic and tourism department, in collaboration with the Indian consulate in Dubai, the festivities went on for three weeks. Streets were illuminated with dazzling lights, and fireworks lit up the skies―a rare sight in a country where fireworks are usually prohibited in public. The celebrations not only reflected the cultural richness of India, but also highlighted the depth of the long-standing relationship between India and the UAE.

The permission for such grand celebrations, especially the use of fireworks, raises an interesting question: Why are fireworks allowed for Indians when other expatriates are not allowed such privileges? The answer lies in the deep historical and cultural ties between the two nations. For Indians in the UAE, the country has become more than just a temporary home; it is a second home, and for second- and third-generation Indians, it is often the only home they know.

This bond goes beyond recent diplomatic agreements, as it is rooted in a history that spans over 6,000 years. India and the UAE have shared trade routes, cultural exchanges and a connection that predates the formation of the emirates. Before the country’s establishment, the Indian rupee was already being used as a medium of exchange in the region, making India one of the earliest partners in the development of what would become the UAE. This enduring historical connection forms the foundation for the UAE’s recognition of the Indian community, leading to privileges such as the Diwali celebrations.

The India-UAE relationship is reinforced by robust economic cooperation. The India-UAE Comprehensive Economic Partnership Agreement (CEPA), signed on May 1, 2022, stands as a key milestone in the growing relationship. The agreement aims to increase non-oil trade to $100 billion, with an emphasis on the movement of goods and also people, capital, services and ideas. It is a far-reaching agreement that reduces or removes tariffs on over 80 per cent of products, providing a non-discriminatory environment for trade between India and the UAE. This, in turn, has created a clear, transparent framework that improves the ease of doing business.

India is the UAE’s largest trading partner for non-oil exports, contributing nearly 14 per cent. CEPA has facilitated increased trade and also improved competitiveness by benefiting small and medium-sized enterprises, thus making the trade environment more inclusive.

Alongside CEPA, another groundbreaking development in India-UAE relations is the rupee-dirham agreement, signed on July 16, 2023. This allows transactions between the two countries to be settled in rupee and dirham, eliminating the need for currency exchange. Moreover, it facilitates the use of rupee for oil payments. This shift towards local currency settlement is expected to reduce reliance on the dollar and make bilateral trade more competitive. The local currency settlement system, introduced under this agreement, helps lower transaction costs, improves price transparency and accelerates settlement times.

Building on the advancements made by the rupee-dirham agreement, the UAE has introduced its own credit and debit card system, known as Jaywan, supported by licensed technology from the National Payments Corporation of India. With UAE banks now rolling out the infrastructure to accept Jaywan cards and integrate ATM systems for cash withdrawals, the payment landscape in the UAE is becoming increasingly connected with India.

CEPA has also spurred increased cooperation in the gold trade between India and the UAE. Under the agreement, India has committed to importing up to 200 metric tonnes of gold annually from the UAE, under a 1% Tariff Rate Quota. The UAE has become an increasingly important source of gold for India, accounting for over 16 per cent of India’s total gold imports.

Additionally, the UAE’s strategic location serves as a vital gateway for global trade. With its superior air, land and sea connectivity, the UAE plays a crucial role in facilitating re-exports, allowing India to use UAE ports to send goods to other parts of the world. This logistical advantage enhances the UAE’s role as a critical partner in global trade and further strengthens its economic ties with India.

The India-UAE partnership is not limited to trade. Both countries have expanded their cooperation in various sectors, including education, culture, and infrastructure. The construction of Bharat Mart in Dubai will showcase Indian products to the global market, while the Indian Institute of Technology Delhi has opened a campus in Abu Dhabi. Several Indian universities are also establishing campuses in the UAE, fostering educational exchanges between the two countries.

The establishment of a regional office for the Central Board of Secondary Education (CBSE) in Dubai and the opening of a Hindu temple in Abu Dhabi by BAPS further highlight the cultural exchanges taking place. These initiatives demonstrate the multi-faceted nature of the India-UAE relationship, which continues to grow and evolve. “The relationship and friendship between India and the UAE are historical and it is strengthening day by day,” said M.A. Yusuff Ali, chairman, Lulu Group International. “The visits of UAE President Sheikh Mohamed bin Zayed Al Nahyan to India and Prime Minister Narendra Modi to the UAE have taken this relationship to a new level, further boosting investment and business partnerships.”