Problem Statement
While India and the UAE share thriving economic relations valued at $85 billion (2022), its sustainability hinges on diversifying beyond hydrocarbons and fostering deeper collaboration in strategic sectors like clean energy, technology, and infrastructure. The current reliance on traditional trade patterns leaves the relationship vulnerable to fluctuations in oil prices and global economic shifts.
Analysis
Trade Dominance:
- Oil and gas reliance: Although slightly reduced from 70% in 2020, hydrocarbons still command a substantial 67% share of UAE exports to India as of October 2023. This translates to an average monthly value of USD 2.2 billion, highlighting the partnership’s sensitivity to fuel price fluctuations.
- Non-oil growth: While promising, non-oil trade growth has moderated to 12% year-on-year compared to 15% immediately post-CEPA. Gems and jewellery, textiles, and chemicals still dominate, with emerging sectors like pharmaceuticals and electronics contributing only 8% of total trade.
Limited Diversification:
- Sectorial concentration: Both countries remain significantly invested in traditional sectors. As of 2023, textiles account for 18% of India’s exports to the UAE. It is indeed followed by gems and jewellery (15%) and chemicals (12%). The UAE primarily exports refined petroleum products (24%), gold (17%), and pearls and precious stones (15%) to India.
- High-growth sector neglect: High-potential sectors like renewable energy, biotechnology, and advanced manufacturing remain under-represented in bilateral trade. In a word, this limits knowledge transfer and collaborative value creation in fast-growing industries.
Infrastructure Gaps:
- Funding shortfall in India: India’s ambitious infrastructure development plans face a projected funding gap of USD 1.7 trillion by 2025. This could hinder crucial infrastructural upgrades needed to leverage the UAE’s expertise fully.
- Underutilized UAE capabilities: The UAE’s world-class expertise in logistics and project management lacks optimal integration into India’s infrastructure projects. It is due to limited joint venture models and complex regulatory processes.
Technological Disconnect:
- Capital access mismatch: India’s vibrant tech startups struggle to access UAE’s vast investment capital. It is mainly due to perceived risk factors and limited financial infrastructure integration.
- Talent mismatch: Conversely, the UAE faces a talent shortage in key tech domains like AI and data analytics, where India possesses a skilled workforce. This mismatch hinders cross-border collaborations and knowledge sharing in the tech sector.
Solutions
Focus on Clean Energy:
- Joint R&D hubs: Establishing dedicated research facilities to develop simultaneously cutting-edge technologies in solar, wind, and green hydrogen production can leverage the combined expertise of both nations. India’s research prowess and the UAE’s financial muscle can propel clean energy innovation.
- Solar manufacturing collaboration: UAE investments and technology partnerships can bolster India’s ambitious plans to become a global solar manufacturing hub. Setting up joint ventures to manufacture high-efficiency solar panels for both domestic and export markets can create significant economic value.
- Green hydrogen gateway: India and the UAE can collaborate to establish a green hydrogen trade corridor. It would make India a major producer and exporter of this clean fuel, while the UAE serves as a key distribution hub, capitalizing on its existing energy infrastructure and strategic location. As per a recent McKinsey report, the global green hydrogen market could reach USD 700 billion by 2050. This is an immense potential for both countries.
Boosting Startup Ecosystems:
- Streamlined investment channels: Setting up dedicated venture capital funds with both Indian and UAE investors can provide crucial funding for promising startups in high-growth sectors like AI, fintech, and healthcare. Additionally, simplified regulatory frameworks and tax incentives can attract more overseas investments into India’s startup ecosystem.
- Joint incubator network: Establishing a network of bi-national incubators in key cities like Delhi, Mumbai, and Dubai can foster cross-border collaboration and knowledge exchange. These incubators can provide young entrepreneurs with:
- mentorship
- networking opportunities
- access to markets in both countries.
- Skill development and talent exchange: Bridging the talent gap through joint training programs and internship opportunities can equip Indian startups with the specialized skills needed to succeed in the global market, while also tapping into the UAE’s diverse talent pool for specific niche areas.
Smart Infrastructure Partnerships:
- Targeted PPP models: Public-private partnerships (PPPs) involving Indian construction companies and UAE sovereign wealth funds can unlock funding for crucial infrastructure projects in India, from high-speed railways and smart cities to renewable energy infrastructure. The UAE’s experience in managing successful PPPs can offer valuable guidance for India in structuring these initiatives.
- Invest in logistics and connectivity:
- Upgrading ports
- Developing dedicated trade corridors
- Investing in digital trade infrastructure
Thos ideas can significantly reduce logistical bottlenecks and boost bilateral trade efficiency. This can involve utilizing the UAE’s expertise in port management and logistics technology to modernize India’s infrastructure.
- Sustainable infrastructure focus: Integrating sustainability principles into infrastructure development projects can attract additional investments from environmentally conscious investors. Meanwhile, it would also align with both nations’ ambitious climate change goals. This could involve promoting:
- green building materials
- renewable energy sources
- climate-resilient design principles.
Digital Trade Corridor:
- Harmonized data regulations: Establishing common data protection and privacy frameworks can eliminate regulatory barriers and pave the way for seamless cross-border data flows. This is crucial for:
- fostering e-commerce growth
- facilitating remote work opportunities
- enabling collaboration on digital content development projects.
- Digital trade infrastructure: Investing in secure and high-speed data transmission infrastructure, including subsea cables and cloud infrastructure, can underpin the expansion of the digital trade corridor. This can further enhance collaboration in areas like telemedicine, online education, and digital financial services.
- Joint e-commerce initiatives: Establishing joint e-commerce platforms that cater to both Indian and UAE markets can provide Indian sellers access to a wider consumer base and empower UAE consumers to access unique Indian products. This can be further bolstered by simplifying customs procedures and streamlining cross-border payment mechanisms.
Implementation Plan
Establishing a Joint Economic Council (JEC):
- Composition:
- High-level government officials (e.g., Ministers of Commerce, Industry, Energy)
- Industry leaders from key sectors (e.g., CEOs of renewable energy companies, tech giants)
- Academic experts specializing in relevant fields.
- Mandate:
- Identification and prioritization: Conduct in-depth research and stakeholder consultations to identify high-potential collaboration areas in clean energy, technology, and infrastructure, considering factors like market demand, resource availability, and existing initiatives. Specifically prioritize these areas based on potential economic impact, job creation, and environmental benefits.
- Regulatory streamlining: Analyze existing regulations and bureaucratic hurdles hindering cross-border investments and trade in the identified sectors. Develop concrete recommendations for policy reforms coupled to administrative simplifications to streamline processes and attract investments.
- Joint R&D initiatives: Facilitate collaboration between research institutions and universities at the same time in both countries to launch joint research. Development projects should focus on critical challenges and technological advancements in chosen sectors.
- Monitoring and evaluation: Establish a robust monitoring and evaluation framework to track the progress of implementation plans, identify performance gaps, and recommend course corrections to ensure continued alignment with strategic goals.
Timeline:
Launch by Q2 2024 with the inaugural meeting hosted in Dubai, followed by quarterly gatherings rotating between India and the UAE. On this occasion, consider inviting guest speakers from international organizations and other relevant stakeholders to provide additional expertise and perspectives.
Launching Sector-Specific Task Forces:
Focus areas:
- Renewable energy (solar, wind, green hydrogen)
- Sustainable infrastructure (smart cities, high-speed railways)
- AI and fintech applications
- Healthcare innovation
- Digital trade infrastructure.
Structure:
Each task force is led by a joint chairperson (one from each country) and composed of representatives such as:
- Relevant Government agencies such as Ministries of Energy, Environment, Infrastructure, Information Technology, etc.
- Industry associations: Chambers of commerce, sector-specific associations representing private companies.
- Research institutions: Universities with expertise in relevant fields.
- Private sector players: Leading companies and startups actively involved in the chosen sectors.
Deliverables:
Within six months, each task force should develop a comprehensive action plan outlining:
- Specific projects and initiatives: Identify concrete projects to be undertaken collaboratively, detailing project costs, timelines, and responsible parties.
- Investment targets: Define targeted investment volumes required for each project, outlining potential funding sources and mechanisms (e.g., government grants, private investments, PPPs).
- Regulatory reforms: Specify recommended policy changes and administrative simplifications needed to facilitate project implementation and therefore create a conducive environment for cross-border collaboration.
- Skill development initiatives: Identify critical skill gaps and develop training programs and exchange programs to address them, ensuring a readily available workforce for project execution.
Reporting:
Submit progress reports to the JEC for review and approval. It will ensure alignment with overall strategic goals and addressing any cross-cutting issues. Thirdly, encourage task forces to collaborate and share best practices to leverage synergies and learn from each other’s experiences.
Skill Development Programs:
Needs assessment:
Conduct a joint study to assess UAE’s specific skill gaps in chosen sectors (e.g., AI engineers, solar panel technicians). Map those to India’s skilled workforce potential (e.g., graduates with relevant degrees, vocational training graduates).
Targeted programs:
Develop vocational training programs and exchange programs tailored to bridge the identified skill gaps:
- Develop AI skill development programs: Offer joint training programs by Indian and UAE institutions, focusing on practical applications like AI-powered healthcare systems or smart city management.
- Establish renewable energy technician training programs: Train Indian professionals in skills relevant to the UAE’s clean energy projects, such as solar panel installation and maintenance.
- Implement exchange programs: Enable Indian professionals to gain practical experience by working in UAE companies for specific periods, and vice versa, while facilitating cultural exchange and understanding.
Funding:
Collaborate with government agencies, private training providers, and industry partners to establish a sustainable funding model for these programs, ensuring accessibility and long-term impact. Another key point is to consider exploring public-private partnerships and co-funding arrangements.
Creating a Bilateral Venture Capital Fund:
- Size: Consider an initial target of USD 1 billion, specifically raised through equal contributions from Indian and UAE sovereign wealth funds, private investors, and venture capitalists with experience in the chosen sectors.
- Investment Focus: Prioritize high-growth startups operating in sectors aligned with the partnership’s goals, with specific emphasis on:
- Clean energy innovations: Startups developing next-generation solar technologies, energy storage solutions, or green hydrogen production methods.
- Technological advancements
Read more about India and UAE relationship:
India – UAE Economic Relations : Conclusion
The future of the India-UAE economic partnership lies not in the depleting sands of hydrocarbons but in the fertile ground of shared values, collaborative innovation, and a commitment to a sustainable future. By proactively addressing the challenges outlined and diligently implementing the proposed solutions, both nations can forge a truly transformative bond that transcends mere trade and thrives on shared interests in clean energy, technology, and infrastructure development.
This transformation promises not just economic prosperity, but also a positive global impact. India and the UAE, as rising stars on the world stage, have the potential to become pioneers in sustainable development and technological advancements. Their successful collaboration can serve as a model for other nations on the path to building resilient and prosperous economies while contributing to a healthier planet.
Finally, embracing this shift towards sustainability and knowledge-driven collaboration requires dedication, a shared vision, and unwavering commitment from both sides. By establishing the Joint Economic Council, launching sector-specific task forces, and investing in skill development and joint ventures, India and the UAE can forge a sustainable partnership and stron economic relations that not only secures their economic futures but also builds a bridge to a brighter, greener world for generations to come.
Building Sustainable Partnerships: India – UAE Economic Relations – Infographic
