Narendra Modi's UAE visit to boost trade, investment
Dubai - Attracting more foreign direct investments to India, which is among the top three trade partners of the UAE, is certainly one of the main agendas of the Indian leadership, particularly in the backdrop of the $1 trillion infrastructure spending planned by the country.
Prime Minister Narendra Modi's historic two-day visit next week to the UAE promises to give a new impetus and focus to the thriving trade and investments between the two regional economic powerhouses besides paving the way for a spate of accords covering a wide range of topics.
The visit by the Indian premier, which was eagerly anticipated for more than three decades, will also help set into motion several new initiatives to add a further dimension to the strong economic and political relations between the two nations.
Modi has been invited by His Highness Shaikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces. The Indian Prime Minister will also meet His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai during the visit.
Attracting more foreign direct investments to India, which is among the top three trade partners of the UAE, is certainly one of the main agendas of the Indian leadership, particularly in the backdrop of the $1 trillion infrastructure spending planned by the country.
Modi, whose visits to 25 countries since getting elected to lead the world's largest democracy and the third largest Asian economy in 2014, has already generated $19.78 billion in foreign direct investment (FDI) inflow from 12 countries in financial year 2014-15.
|ECONOMIC AND COMMERCIAL RELATIONS|
> India-UAE trade, valued at $180 million per annum in the 1970s, is today around $60 billion, making UAE India's third largest trading partner for the year 2014-15 after China and US.
> UAE is the second largest export destination of India with an amount of over $33 billion for the year 2014-15.
> For UAE, India is the largest trading partner for the year 2014 with an amount of over $28 billion (non-oil trade).
> There is an estimated 8 billion UAE investment in India of which around $3.01 billion (Jan 2015) is in the form of FDI, while the remaining is portfolio investment. UAE is the 10th biggest investor in India in terms of FDI.
> UAE's investments in India are concentrated mainly in five sectors: Construction Development (15.52%), Power (13.09%), Metallurgical Industries (9.90%), Services Sector (9.58%), Computer Software & Hardware (4.90%).
Given the huge untapped potential of the UAE sovereign wealth funds estimated at over $800 billion, it will not be a hard task for the Indian leader to lure more FDI into the world's fastest growing economy.
Already, the stage has been set to facilitate increased cross-border investments with both countries inking a critical accord -- Bilateral Investment Protection Agreement -- in 2014. It is expected that Modi's maiden visit to the region will help reinforce the confidence among UAE's corporates, some which had suffered setbacks in the past, in boosting their investments in India.
Currently, the UAE investments in India are estimated to be $8 billion of which around $3.01 billion as of January 2015 is in the form of foreign direct investment, while the remaining is portfolio investment.
Major investors in India from the UAE's corporate world include Emaar, DP World, Abu Dhabi's National Petroleum Construction Company, Abu Dhabi National Energy Company (Taqa), Abu Dhabi Investment Authority, Abu Dhabi National Energy Company, KEF Holdings, Ras Al Khaimah Investment Authority, Eithad Airways, Abraaj Group and Drake and Scull International.
While the UAE is the tenth biggest investor in India in terms of FDI, investments by Indian companies in the UAE are estimated to be in excess of $55 billion, making the Gulf country a sought-after destination of Indians.
The UAE, one of the world's most vibrant remittance corridors, is a major source market for India, the largest receiver of remittances in the world at $70 billion.
In 2014, individual remittances from the UAE to India, excluding export earnings, FDI and FII (foreign institutional investments) surged to $12-15 billion, according to Sudhir Kumar Shetty, President of the UAE Exchange.
The UAE's investments in India are concentrated mainly in five sectors: Construction Development (15.52 per cent), Power (13.09 per cent), Metallurgical Industries (9.90 per cent), Services Sector (9.58 per cent), Computer Software & Hardware (4.90 per cent).
Improvement in bilateral trade
Another huge fillip is expected in the two-way trade, which has slumped from a record high of $75.45 billion in 2012-13 to $59.54 billion in 2013-14 consequent to India's curbs on gold imports. However, given the meteoric growth in trade value from $180 million in the 1970, to the current levels, India is well positioned to regain its ranking as the number one global trade partner of the UAE.
India, at present, the third largest trading partner of the UAE after China and US, is the largest non-oil export destination of the Emirates at $28 billion in value.
For India, the UAE is the second largest export destination with trade value at $33 billion for the year 2014-15. According to projections, India will remain as the UAE's top export destination until 2030, leaving Japan and China in second and third positions.
According to HSBC forecast, the UAE's fastest-growing export destinations in the decade to 2030 will include China and Malaysia (10 per cent per annum) as well as India (nine per cent per annum).
India's rapid economic growth is forecast to quickly project it into pole position for merchandise exports, displacing Japan.
"The UAE and India enjoy historically strong commercial and cultural linkages that will support the continued expansion of bilateral trade flows between these two nations over the medium term. With the UAE focusing on knowledge-based industries and with India rapidly emerging as a world leader in areas such as pharmaceuticals and bio-technology, there is also considerable scope for cooperation in R&D and technology transfer," the bank said in its forecast.
While long pending agreements on joint security cooperation to fight extremism, maritime and food security are likely to get a final touch, the high level talks between leader of two countries will lead to the swift implementation of certain pacts that have already been inked. These include prisoner swap and bilateral investment protection agreement.
India's on-going talks with the Gulf countries on finalising Free Trade Agreement are also expected to get a new boost with the Indian leader's visit.