UAE Invests $7 Billion In India: A Deal Of Mutual Benefit

India - UAE diplomatic ties began in 1972. This has recently upgraded to a strategic partnership in 2017. The ties between the two countries are spread across the domains of history, culture, and geography. With a mutual trade amounting to $60 billion, UAE is the third-largest trading partner of India.

Given the significance the two countries hold for each other, it seems rational that they have decided to cement their association further. In this light, on the 8th and 9th December of 2020, the 2 countries organised a conclave on food processing, where UAE confirmed its investment of $7 billion in “Food Corridor”.

The investment is in tune with the National Strategy for Food Security presented by UAE in November 2018 during their Government’s second Annual Meeting. The strategy will focus on facilitating the global food trade, diversifying food import sources, identifying alternative supply schemes, and covering three to five sources for each major food category.

In line with this agenda, two UAE based companies, namely, DP World and DMCC (Dubai Multi Commodities Centre) are already exploring tie-ups with Indian companies and farmers. The former is exploring synergies for offering integrated supply chain solutions, while the latter has an agriculture trading platform named ‘Agriota’ – which will link farmers in India with food companies in the UAE to boost agriculture import from India. Also, Emaar Group, a UAE based real estate company, is coordinating with other Indian entities to invest up to $5 billion in mega food parks and similar facilities in various Indian cities. We will also see Emaar Group investing $2 billion in contract farming, and sourcing of agro-commodities and related infrastructure.

Commenting on the cordial relations of the two countries, Ahmed Al Banna, UAE’s Ambassador to India in a public statement noted, “Considering our strategic relationship, I strongly believe that this is a very opportune time for UAE and India to escalate food security cooperation”. This statement is not unfounded, as UAE is investing in 8 food parks of India in Madhya Pradesh. This investment is projected to benefit 2 crore farmers and create 20,000 new jobs, through the establishment of logistics infrastructure and agricultural projects. The projects are framed keeping the farmers of Punjab and Maharashtra in mind.

One may wonder why the UAE has chosen India as a food supplying partner, and not the Gulf countries close to it. This is due to a multitude of reasons. Firstly, India is a food surplus nation, where 30% of the produce goes waste due to various lacunae. Supplying to the UAE will not only prevent food wastage but will also help the farmers supplement their income. With the ongoing protests around MSP (Minimum Support Price) in Delhi, an alternative source of income can allay the monetary concern of farmers. Direct association with the company will free the farmers from the clutch of middlemen.

Secondly, given the climatic conditions of the UAE, agriculture is difficult for them. Partnering with India will bring about food security in the middle eastern country. Given the strong historic ties between the two countries, India has emerged as a reliable partner. Thirdly, the two countries trade mainly in the import and export of oil, and this venture will diversify the platform for interaction between the two. Presently, India and UAE have trade associations around investments and oil supply, with 8% of India’s oil import coming from UAE. Lastly, there is a large ex-pat population of Indians in the UAE standing at 3.42 million. Providing them opportunities abroad will benefit the remittance supply back to India. While both countries have their interests in mind, it is turning out to be a win-win situation for everyone.

Taking note of the advantages of this programme, a Minister from the Punjab government, Rana Gurmeet Singh Sodhi, invited UAE investors to get into food processing in the state, which is one of the country’s largest producers of crops. This $7 billion investment could also be highly advantageous in strengthening the logistics and trade sector in the UAE. Also, the UAE can benefit from lower food prices from India while adding to its food security. There has thus evolved a system of mutual understanding between the 2 countries, with UAE ensuring energy security, and India ensuring food security.

The changing investment climate India is positive for countries looking to invest. For example, India’s Production Linked Incentive (PLI) scheme will make investing in India lucrative for firms. The companies can easily leave after the ease of provisions under the Insolvency and Bankruptcy Act and Companies Act. These acts will enable more investment from UAE companies.

Thus, India and UAE have come a long way in the last 40 years. With countries moving towards inward trade and self-sustenance, these bilateral engagements are a refreshing change.