CEPA Framework
The UAE-India Comprehensive Economic Partnership Agreement, which entered into force in May 2022, represents one of the most significant bilateral trade agreements in the recent history of either country. CEPA eliminated or reduced tariffs on over 80 percent of product lines, with the target of increasing bilateral non-oil trade from approximately USD 45 billion to USD 100 billion within five years. The agreement covers goods, services, investment, intellectual property, government procurement, and digital trade — creating a comprehensive framework that goes well beyond traditional free trade agreements.
For the UAE, CEPA is a strategic instrument that deepens economic integration with the world’s fastest-growing major economy while diversifying trade partnerships away from overdependence on any single market. India’s demographic trajectory — with a working-age population projected to exceed one billion by 2030 — positions it as the UAE’s most important long-term economic partner in terms of consumer market potential, labour supply, and technology services.
Trade Flow Analysis
Bilateral trade has expanded significantly since CEPA’s implementation, though the growth trajectory has been uneven across sectors. Indian exports to the UAE have increased in textiles, gems and jewellery, agricultural products, and pharmaceuticals — all sectors where tariff reductions under CEPA provide competitive advantages. UAE exports to India remain dominated by hydrocarbons, but non-oil exports in gold, precious metals, and petrochemical products have grown.
The services trade dimension is potentially more transformative than goods. Indian IT services firms have expanded their Gulf operations through the UAE, using the federation as a regional hub for serving Middle Eastern and African clients. Conversely, UAE financial services firms have increased their presence in India, and the two countries have established a rupee-dirham settlement mechanism that reduces dependence on dollar-denominated trade finance.
The IMEC Dimension
The India-Middle East-Europe Economic Corridor, announced at the G20 summit in September 2023, positions the UAE as a critical infrastructure node in a trade route designed to connect India to Europe through the Arabian Peninsula and the Eastern Mediterranean. The corridor envisions rail links, shipping lanes, data cables, and energy pipelines that would reduce transit times between India and Europe by up to 40 percent compared to existing routes.
For the UAE, IMEC is a geopolitical project as much as an infrastructure one. The corridor depends on normalised relations between the UAE and Israel — linking it directly to the Abraham Accords — and positions the federation as an indispensable logistics hub in a Western-aligned trade architecture that provides an alternative to China’s Belt and Road Initiative. Abu Dhabi’s participation in IMEC reinforces its strategic value to both Washington and New Delhi while creating physical infrastructure that would deepen economic interdependence with India for decades.
Diaspora Economics
The Indian diaspora in the UAE — estimated at 3.5 million people, constituting roughly 30 percent of the total population — is a foundational element of the bilateral relationship. Indian workers and professionals are the backbone of the UAE’s construction, retail, healthcare, and technology sectors. Remittance flows from the UAE to India exceed USD 15 billion annually, making the UAE the largest single source of remittances to India.
This demographic reality creates a human infrastructure of bilateral relations that reinforces economic and political ties. The UAE’s investment in labour reforms, worker welfare programmes, and skills-based immigration policies is partly calibrated to maintain the quality and stability of this workforce, which is essential to the federation’s economic functioning.
Strategic Convergence
Beyond economics, the UAE and India have deepened cooperation on defence, space technology, and counterterrorism. Joint naval exercises, intelligence sharing, and defence technology partnerships reflect a growing strategic alignment driven by shared concerns about regional instability, maritime security in the Indian Ocean, and the rise of extremist non-state actors.
The convergence is reinforced by complementary geopolitical positions. Both countries maintain relationships with multiple major powers while resisting exclusive alignment. Both are members of the I2U2 group (India, Israel, UAE, US), which provides a framework for coordinating economic and technology initiatives across the four countries. The alignment of Indian and Emirati strategic interests — combined with the economic foundations established by CEPA — suggests a bilateral relationship with significant room for further deepening.
Risk Assessment
The primary risk to the partnership is a divergence in trade policy. India’s protectionist instincts — particularly regarding agricultural imports and data localisation requirements — could create friction as CEPA implementation proceeds. A secondary risk is the vulnerability of remittance-dependent economic ties to labour market disruptions, whether from UAE nationalisation policies or Indian skills shortages. The IMEC corridor faces execution risk from regional instability, financing challenges, and the long timelines inherent in major infrastructure projects.
Strategic Outlook
The UAE-India relationship is on a structural upward trajectory driven by economic complementarities, demographic linkages, and strategic alignment. CEPA and IMEC provide institutional frameworks that will deepen integration regardless of short-term political fluctuations. For the UAE’s 2031 vision, India represents the most significant growth market for non-oil trade diversification and a partner whose scale and dynamism can absorb the federation’s ambitions for economic transformation.