The United Arab Emirates (UAE) has cemented its position as the fourth-largest investor in India for FY23. With the implementation of a comprehensive free trade agreement in May last year, the UAE has significantly increased its foreign direct investment (FDI) in India.
How much is the FDI by UAE in India?
According to the Department for Promotion of Industry and Internal Trade (DPIIT), FDI from the UAE to India has more than tripled in the past fiscal year, reaching an impressive USD 3.35 billion, compared to USD 1.03 billion in 2021-22. This surge in investment has propelled the UAE from the seventh position to the fourth position among India's top investors.
Growing Investments from the UAE
Singapore leads the pack as the largest investor in India for FY23, with a substantial investment of USD 17.2 billion. Following closely behind are Mauritius with USD 6.1 billion and the United States with USD 6 billion. The UAE's investments in India are mainly concentrated in key industries such as services, marine transport, power, and construction.
What Led To The Surge In FDI From UAE?
One of the significant factors contributing to the rise in FDI from the UAE is the signing of the Comprehensive Economic Partnership Agreement (CEPA) between India and the UAE. This agreement, which came into effect on May 1, 2022, has fostered a strong bilateral relationship by promoting trade and investment. Under the CEPA, both countries enjoy zero-duty access to each other's markets for a wide range of goods, and relaxed norms have been introduced to encourage investment.
Long-standing India-UAE Economic Ties
Over the years, the UAE has consistently shown its commitment to investing in India. Between April 2000 and March 2023, the UAE accounted for around 2.5 percent of the total FDI received by India. In this time period, India has welcomed a substantial USD 15.6 billion in foreign inflows from the UAE, according to available data. These investments have played a vital role in boosting various sectors of the Indian economy and fostering economic growth.
Factors Behind UAE Becoming the Fourth-Largest Investor in India
Comprehensive Economic Partnership Agreement (CEPA)
The United Arab Emirates (UAE) has climbed the ranks to become the fourth largest investor in India, and this achievement can be attributed to several key factors.
CEPA is a full and deep Agreement signed on 18 February 2022, during a virtual summit between the Prime Minister of India, Narendra Modi, and the President of the UAE and Ruler of Abu Dhabi, Sheikh Mohamed bin Zayed Al Nahyan. CEPA entered into force on 01 May 2022.
The Commerce Secretary highlighted that both sides are continuing to work together to further improve the Ease of Doing Business between the two countries. Representatives from Industry mentioned the experience of leveraging upon the CEPA to register significant growth in their respective sectors.
Strengthened Bilateral Relationship
The signing of the Comprehensive Economic Partnership Agreement (CEPA) between India and the UAE has played a significant role in bolstering the bilateral relationship and attracting increased investment. Effective from May 1, 2022, the CEPA has facilitated smoother trade between the two countries by granting zero-duty access to each other's markets for a wide range of goods. Additionally, relaxed norms have been introduced to encourage investment, providing a favorable environment for businesses from the UAE to expand their operations in India.
The UAE's investments in India are primarily concentrated in key sectors, including services, marine transport, power, and construction. These industries offer promising growth opportunities and have attracted significant attention from UAE investors. By strategically channeling their investments into these sectors, the UAE has not only diversified its portfolio but also contributed to the development of critical industries in India.
Long-standing Economic Ties
The UAE has maintained a longstanding economic relationship with India, which has laid the foundation for increased investments. Over the years, the UAE has consistently demonstrated its commitment to investing in India, contributing around 2.5 percent of the total FDI received by India between April 2000 and March 2023. With a cumulative foreign inflow of USD 15.6 billion during this period, the UAE has established itself as a trusted partner in India's economic growth story.
Confidence in the Indian Market
The UAE's rise as a major investor in India is also a testament to its confidence in the Indian market. The stability of India's economic and regulatory environment, coupled with the country's robust growth potential, has attracted the attention of UAE investors. India's large consumer base, skilled workforce, and ongoing reforms make it an attractive destination for foreign investments, and the UAE has capitalized on these opportunities to expand its presence in the Indian market.
The United Arab Emirates has emerged as a significant investor in India, demonstrating its confidence in the Indian market. With the implementation of the comprehensive free trade agreement and the signing of the CEPA, the UAE has made substantial investments across multiple sectors, further strengthening the economic ties between the two countries. As India continues to attract foreign investments, the UAE's contributions play a crucial role in fostering growth and development in the Indian economy.