It is a trading relationship that stretches back decades, but has strengthened in modern times. In 2016, global consultancy McKinsey described India’s potential “to become one of the largest growth engines in the world”.
In February, India regained its position as the world’s fastest growing economy, after posting 7.2 per cent growth in the fourth quarter of 2017. The International Monetary Fund expects growth to outpace that figure, reaching 7.4 per cent this year, and 7.8 per cent in 2019.
“Clearly our hope as the Government of India is that we will touch even higher figures,” says Vipul, Indian Consul General in Dubai. “Even 9 to 10 per cent would be good. And most experts feel that is achievable. And I think the Government of India is working towards that target.”
Consultants Deloitte said last year that India will drive the third great wave of Asia’s growth – following Japan and China – with a potential workforce set to climb from 885 million to 1.08 billion people in the next 20 years and hold above that for half a century.
The UAE is poised to gain financially from its close political and business ties with India, as the economic growth of the Asian powerhouse accelerates even further, experts have said.
Trade links between the Gulf and the India stretch back for decades
The UAE is home to the largest number of Indian migrants in the world at 3.3 million people, and hundreds of Indian businesses. And its bilateral trade relationship is significant. India is already the UAE’s largest trading partner, and the UAE is India’s third largest.
“We saw trade volumes reaching about $60 billion last year so it is a very natural mix and fit for these two countries by highlighting their business relationships as we have seen over the last years,” says Jan-Willem Sudmann, Head of International Banking Group at Mashreq.
“So to that extent, we expect quite a lot of growth in business between the UAE and India over the next few years.”
In recent months, there has been a spate of business deals between the two states. Abu Dhabi Investment Authority (ADIA), one of the world’s largest sovereign wealth funds, which is based in Abu Dhabi, has signed a number of deals in India in recent months. In December, ADIA became a minority shareholder in KKR India Financial Services, which provides financing for companies and medium-sized enterprises. In October, it signed a agreement with the National Investment and Infrastructure Fund (NIIF) to invest in energy, transportation and other infrastructure-related sectors in India.
These types of investments are needed for development in India, says Vipul. “Across the board we need more and more investments as people move from rural areas to urban areas, or there is urbanisation of rural areas, and as people move up the value chain,” he says.
“That is where the UAE, especially sovereign wealth funds like ADIA can be of really big help. And it is a win-win situation, because India can get funds from the UAE and the UAE gets a good return on investments,” adds Vipul.
Abu Dhabi Investment Authority (ADIA) has signed a number of deals in India
India’s relationship with the UAE, which already has close ties stretching back decades, will be key in growing the economy.
“There is a lot of history between this part of the world and India,” says Hamad Buamim, President and CEO of the Dubai Chamber.
“This country was really built by people from around the world, and Indians have really played a big part in terms of the workforce and in terms of the businesses. Nowadays here in Dubai, almost 20 per cent of the businesses are either owned by Indians or are managed by Indians.”
The countries are also forging closer political ties. “Today, India and UAE ties are touching new highs,” says Vipul. “I think it is the relationship between the leaderships and the countries which has really been a game changer. I think this started with [Indian] Prime Minister Modi’s visit to the UAE in 2015. And after that we have had successive visits every year.”
Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi with Indian prime minister Narendra Modi
Gateway to the world
Opportunities abound for investment because it will take years to complete India’s development, says Ram Buxani, president of the Business Leaders Forum, an industry body of Indian executives.
Companies from areas in India, which lack the infrastructure necessary for companies to trade with the rest of the world, could use the UAE as their base, he says.
The UAE not only has excellent transport links, with 1,065 flights a week between India and UAE, but is also home to large ports that are well positioned to serve the subcontinent.
“It would be to the great advantage of India. The whole world market can be exposed to Indian manufacturers and exporters,” says Buxani.
Buamim agrees that Dubai has the potential to collaborate with India to facilitate trade. In addition to strong infrastructure, Dubai has close ties to many other countries that India could take advantage of.
Companies from Inda could use the UAE as their base to trade with the world
“We can collaborate with India to offer companies from all over the world to access India. And vice versa. Indian companies that have interest in a lot of emerging countries such as Africa and Latin America, definitely with the ties that we built with these countries at different levels,” says Buamim.
“There is no doubt that Indian businesses can benefit from being in Dubai accessing these markets.”
Banks like Mashreq, which has a long history in India, are ready and willing to assist companies interested in doing business in the UAE and India.
“We have had a branch for more than 40 years in India,” says Sudmann.
Opportunities abound for investment as India looks to grow further
Business in the corporate branch – which offers a range of services such as financing – has grown over the last few years, and Mashreq predicts that it will continue to expand. “We have positioned ourselves in a way that we can help the Indian corporates coming over to the GCC and the GCC corporates moving into India.”
Mashreq has placed a stronger focus on its Indian business in the last 18 months and has set itself an ambitious target. “Our goal is to double revenues within the next three years of Indian business,” he adds.
And the bank is confident that it can achieve it, given its strong regional focus and comprehensive understanding of the markets, adds Sudmann.
“In addition to that it has global expertise and trade finance and that is something that clients in general value,” he adds.