Government data reveals that the UAE and India implemented a comprehensive free trade agreement in May of the preceding year, has become the fourth largest investor in India during the fiscal year 2022-23.
Foreign direct investment (FDI) from the UAE to India witnessed a remarkable surge in the last fiscal year, increasing more than three-fold from $1.03B in 2021-22 to $3.35B, as per data from the Department for Promotion of Industry and Internal Trade (DPIIT).
The UAE’s position as an investor in India significantly improved, with the country climbing from the seventh spot in 2021-22 to becoming the fourth largest investor in India during the fiscal year 2022-23. Singapore emerged as the top investor in India during FY23, making a substantial investment of $17.2B, according to Economic Times.
Mauritius secured the second position with an investment of $6.1B, while the United States closely followed with $6B in investments.
“The rapidly strengthening of bilateral ties and investment cooperation between India and United Arab Emirates (UAE) can be chiefly attributed to the strong bilateral relations between India and UAE, growth in investment commitments from UAE, and the policy reforms to further ease of doing businesses between the two countries,” Rudra Kumar Pandey, Partner, Shardul Amarchand Mangaldas & Co, said.
UAE’s Contribution to India’s Foreign Direct Investment (FDI)
UAE’s investments in India primarily focus on sectors such as services, sea transport, power, and construction activities.
The signing of the Comprehensive Economic Partnership Agreement (CEPA) between India and UAE on February 18, 2022, which came into effect on May 1, 2022, is cited as one of the key factors contributing to the rise in foreign direct investment (FDI) from the UAE.
“Apart from CEPA, another growth engine of FDI from UAE in India is the investment commitment from UAE. UAE has committed to invest $75B in the Indian infrastructure sector over a period of time. It has also committed to partner with India in the renewable energy sector,” Pandey noted.
Since May 1 of the previous year, India and the UAE have implemented an operational comprehensive free trade agreement.
This agreement facilitates zero-duty access to various goods in both markets and also streamlines investment promotion measures.
Data indicates that the UAE accounted for approximately 2.5% of the total foreign direct investment (FDI) received by India from April 2000 to March 2023. During this period, India attracted $15.6B in foreign inflows from the UAE.
Experts highlight that the trade agreement has played a significant role in boosting import-export activities between the two countries, leading to increased investments from the UAE in Indian businesses.
“India’s constant liberalisation of the FDI policy also boosted such investments. Similarly, we are also seeing that several Indian startups are exploring expansion in the UAE,” Anindya Ghosh, Partner, IndusLaw, said.
She also mentioned that the Abu Dhabi Investment Office, along with other agencies, is actively supporting innovation-driven startups through its Innovation Program. This support includes a range of financial and non-financial incentives such as providing information on data, networking opportunities, assistance with licensing, logistics, real estate, visas, and more.
