India’s Growing Economic Footprint in Dubai: A New Era of Bilateral Ties

During the past decade an increasing number of consultants and entrepreneurs alongside businesses from India made Dubai their new base due to its beneficial business policies and tax-friendly system. India has become the leading nation sending Foreign Direct Investment (FDI) to Dubai surpassing traditional FDI powers such as the USA, UK, and France during 2024. Dubai has become a world-class FDI hub because of its strategic policies together with modern infrastructure and pro-investment regulatory system that draws big capital flows while creating new jobs. The trade collaboration with energy partnerships along with strategic investments and diplomatic cooperation between India and UAE continues to strengthen their relations. The relationship continues to encounter economic mismatch in trade but also faces persistent issues connected to regional tensions along with employee rights violations.

India's Role in Dubai's FDI Growth

• FDI capital from India contributed to 21.5% of the total flow into Dubai during 2024.

• The FDI capital coming from Dubai experienced a growth of 33.2% which reached $14.24 billion during the year.

• The position of Greenfield FDI leader remained with Dubai for its fourth consecutive annual period.

• Indian FDI exceeded the contributions made by the USA which provided 13.7% of funds while France supplied 11% and the UK supplied 10% last year.

• The latest year recorded 1,117 newly established Greenfield investments in Dubai which became the highest number in its history.

• The jobs created by FDI increased by 31 percent in 2024 to reach 58,680 total positions.

Why Dubai Attracts Indian Investment

• Business-friendly tax regime (0% corporate tax on most businesses).

• Robust infrastructure and connectivity to global markets.

• The city features pro-investment regulations and simple business procedures.

• Strategic location as a trade and logistics hub.

• The business and IT and finance and logistics fields have developed their talent base in Dubai.

Strengthening India-UAE Bilateral Relations

Trade Partnership:

• The economic trade relationship between UAE and India reached $85 billion (2022-23) to become the 3rd largest in their trading partnerships.

• Through CEPA between India and UAE the agreement eliminated customs duties for 80% of all merchandise exchanges.

• The countries strive to increase their non-oil trade volume up to $100 billion by 2030.

• Investment & Energy Cooperation:

• UAE makes investments worth $20-21 billion through which FDI amounts to $15.5 billion.

• Agreements on nuclear energy cooperation, LNG supply, and strategic petroleum reserves.

• The ADIA Sovereign Wealth Fund of UAE invested资金 in renewable energy as well as Indian infrastructure.

Strategic and Defense Cooperation:

• Al Dhafra air base in the UAE gives India military refueling facilities.

• The UAE and India cooperate through multiple joint military drills named Desert Cyclone for the Army and Zayed Talwar for the Navy as well as Desert Eagle for the Air Force.

• The UAE and India collaborate for counterterrorism measures and they exchange intelligence information as well as work together on maritime security.

Cultural & People-to-People Ties:

• More than 3.5 million Indians currently reside in the UAE and they make up 35 percent of the total population.

• The United Arab Emirates stands as one of the major countries from which financial remittances flow to India.

• The future development plans of Abu Dhabi include constructing both BAPS Hindu temple and IIT Delhi campus.

Significance for India:

• Economic Growth & Employment Generation:

  • Dubai’s FDI growth benefits Indian industries and entrepreneurs.

  • The employment market of Dubai creates additional positions that suit Indian experts.

• Energy & Trade Security:

  • The United Arab Emirates (UAE) occupies position four when counting crude oil exporters to India and place two when considering LNG and LPG exports to India.

  • Strategic petroleum reserves serve to protect India against energy security threats.

  • UAE’s role in India-Middle East-Europe Economic Corridor (IMEC) boosts global trade connectivity.

• Diplomatic Leverage & Regional Influence:

  • Strengthened ties with UAE help India counterbalance China’s influence in the region.

  • UAE supports India’s bid for a permanent UN Security Council seat.

  • The relationship helps India achieve more effective access within the Gulf Cooperation Council (GCC) and Organization of Islamic Cooperation (OIC).

Challenges & Concerns:

• Trade Imbalance:

  • The trade deficit between India and UAE reached $16.78 billion throughout 2022-23.

  • Food imports from India to UAE may diminish after UAE accomplishes its economic diversification plans.

• China’s Economic Influence:

  • China's low-cost financial support alongside infrastructure development projects threatens India's market position in the trade sector.

• Regional Conflicts & Political Dynamics:

  • India faces challenges in their Middle East policies as the Israel-Palestine conflict interacts with UAE's recent diplomatic ties to Israel through the Abraham Accords in 2020.

  • The growing tensions between Iran along with UAE threaten to disrupt Indian trade routes.

• Labor Rights Issues (Kafala System):

• The Kafala sponsorship system operated by UAE continues to jeopardize the working conditions of Indian employees.

• The government of India needs to fight for enhanced labor rights together with stronger legal safety systems.

• Pakistan-UAE Relations:

  • UAE gives financial resources to Pakistan which transcends into money that supports terrorist groups with hostility toward India.

Conclusion & Way Forward:

The continuous growth of Indian Foreign Direct Investment in Dubai under strengthened UAE-India diplomatic relations creates a vital economic and security chapter in bilateral partnership. It is essential for India to strike the right balance between promoting its trade activities and building diplomatic relationships while protecting workers' rights. India must:

• Address Non-Tariff Barriers (NTBs): Negotiate with the UAE for transparent trade regulations.

• A 2+2 strategic dialogue should become operational to strengthen military cooperation between parties.

• The two countries should expand economic cooperation by focusing on developing renewable energy ventures as well as startups operating in AI and fintech fields.

• Indian migrants working in the Gulf will be better protected through my advocacy efforts to reform the Kafala labor system.

• The strategic alliances of I2U2 BRICS and IMEC should be strengthened by India to develop regional influence.

The sustainable development of a long-term strategic alliance between India and the UAE becomes feasible through effective advance solutions for existing obstacles.