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Sat 13 Feb 2016 11:18 AM

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Why trading with India is so valuable

The current emphasis on UAE-India bilateral trade and investment puts the Gulf state in an enviable position.

Why trading with India is so valuable

The UAE is known for its trading prowess but news last week that it was India’s third largest trading partner – and behind only the world’s most populous and wealthiest countries (China and the US) — is a stunning example for a country of only 9.5 million people.

Further, the countries are planning to boost the volume of trade from $60bn today to $100bn within a few years, an Indian official said last week prior to a visit by Crown Prince of Abu Dhabi, Sheikh Mohammed bin Zayed Al Nahyan. Assuming other trade relationships do not move at the same pace, the UAE would become India’s largest trading partner (China-India trade is currently worth $72bn), accounting for one-eighth of India’s total trade.

An astonishing, yet entirely feasible, status.

The position is valuable given that India’s economy is among the top 10 largest in the world and the fastest growing. It expanded by 7.3 percent in the last quarter, well above China’s 6.8 percent.

Cross-Arabian Sea trade has been going on for thousands of centuries and our list of the richest 50 Indians in the Gulf in this week’s edition is an illustration of how important this region has been to India and vice versa.

UAE-India trade has fallen back from a record $74.45bn in 2012-13 as the Indian economy slumped during the latter part of Manmohan Singh’s term as prime minister, but the relationship has been pursued with particular gusto since the business-friendly Narendra Modi came to power almost two years ago. Modi’s UAE visit in August was the first for an Indian leader since 1981.

The flamboyant, and often controversial, prime minister also has opened up doors for foreign direct investment by easing regulations in 15 sectors; set a target to increase solar power capacity from 4 gigawatts to 100 by 2022; and reformed taxation, among other initiatives that are among the most radical changes to the fiscal architecture since economic liberalisation in 1991.

China’s slowdown — and declined demand for commodities such as iron ore - also is working in the UAE’s favour. Indian exports to China retreated $13.38bn in 2015, ballooning its trade deficit to $44.87bn, according to the Press Trust of India.

Meanwhile, the UAE is forging strong inroads to its diversification programme in sectors including renewable energies, aviation, technology, infrastructure and small-to-medium enterprises (SMEs) — all areas that Modi is keen to explore to help fulfil his country’s enormous potential.

The pair announced in August plans to set up a $75bn fund to invest in Indian infrastructure projects such as ports and rail, and cooperate in producing military equipment, space technology and nuclear energy.

Indian businessmen have taken advantage of opportunities in the emerging Gulf for at least four decades, creating countless multi-million dollar companies in everything from jewellery and real estate to petrochemicals – our list shows but 50 of the most successful. But many of them now view their home turf as the next place of expansion.

Aster DM Healthcare, one of the UAE’s largest healthcare providers, revealed last week it intended to list in India later this year, as it also set aside $30m to secure three more hospitals in the country. Yusuffali MA, chairman of the UAE-based LuLu Group, is investing $150m to build a convention centre, shopping mall and five-star hotel in Uttar Pradesh’s state capital Lucknow.

Even Bollywood actors including Anil Kapoor and Shah Rukh Khan have bought property in Dubai. Indeed, Indians are the single largest investors in the UAE property market, buying about $4bn worth last year alone.

Dubai International Financial Centre (DIFC) also has an explicit target to increase its registered Indian firms to more than 100 in the next 10 years — a significant jump from one in 2007 and less than 30 today.

As both countries strive to open up their markets, boost trade and enhance their economies, coupled with their proximity, long-standing relationship and existing trade influence, they could hardly find better working partners. Thus, that $100bn target ought to be well within reach by the end of the decade. But no doubt by then a new one will have been set.