Rise of the India–UAE Growth Corridor

• 19 Feb 2026

This editorial is based on “The UAE-India corridor is sparking a growth story” which was published in The Hindu on 16/02/2026. The article brings into picture the remarkable pace of India–UAE ties, the partnership has surpassed $100 billion in trade five years ahead of schedule, evolving far beyond its energy roots under CEPA.

For Prelims: India–UAE CEPA, Small Modular Reactors (SMRs), Indian Ocean Region,  India-Middle East-Europe Economic Corridor (IMEC), BRICS Chairmanship, I2U2 (India, Israel, UAE, USA). 

For Mains: Key Areas of Convergence Between India-UAE Relations, Key Areas of Friction in India-UAE Relations.

The India–UAE economic partnership has entered a new phase of unprecedented momentum, achieving the $100 billion bilateral trade target 5 years ahead of schedule under the 2022 CEPA. What began as an energy-driven relationship has evolved into a diversified corridor spanning advanced manufacturing, infrastructure, finance, technology, renewables, and AI. Massive two-way investments, deep diaspora linkages, and robust institutional frameworks including CEPA and the Bilateral Investment Treaty, have strengthened long-term strategic trust. The corridor is now expanding into third markets across Africa and Eurasia, signalling global ambition beyond bilateral gains. As India rises as a $4 trillion economy, the India–UAE axis exemplifies how aligned policy, capital, and execution can reshape regional and global economic architectures.

What are the Key Areas of Convergence Between India-UAE Relations?  

• Economic Statecraft & Supply Chain Integration: India and the UAE have fundamentally pivoted from transactional commodity trading toward deep institutional economic integration designed to shield both markets from global supply chain volatility.  
  • For instance, the landmark CEPA accelerated bilateral trade past the $100 billion milestone in FY2024-25, prompting a newly upgraded target of $200 billion by 2032 in January 2026. 
    • Furthermore, non-oil trade between the two countries grew nearly 20% last year to reach $65 billion, demonstrating that this partnership has moved well beyond its energy origins. 
• Energy Security & Clean Energy Transition: The bilateral energy convergence has decisively shifted from a simple buyer-seller dynamic centered on crude oil to a comprehensive partnership encompassing energy transition, strategic reserves, and advanced nuclear collaboration.  
  • In January 2026, a 10-year pact was signed for the UAE to supply 0.5 million tonnes of LNG annually to India starting in 2028, significantly reducing India's reliance on volatile spot markets.  
    • Simultaneously, following India's 2025 SHANTI Act, both sides are formally exploring partnerships in Small Modular Reactors (SMRs) alongside joint investments in green hydrogen value chains. 
• Frontier Technologies & Digital Interdependence: Convergence in the digital domain represents a calculated shift toward high-end technological interdependence, prioritizing data sovereignty, cross-border digital public infrastructure, and joint aerospace innovation.  
  • By synergizing India's immense IT talent pool with the UAE's sovereign capital and strategic vision, the partnership is fostering an ecosystem capable of leading the Fourth Industrial Revolution.  
  • A landmark 2026 agreement between C-DAC and G42 will establish a massive supercomputing cluster in India. 
    • Furthermore, IN-SPACe and the UAE Space Agency recently signed a Letter of Intent to jointly develop commercial launch facilities. 
• Strategic Defense & Maritime Security: Defense ties have rapidly evolved from nominal joint exercises into a robust security architecture aimed at preserving stability in the Indian Ocean Region and countering transnational threats.  
  • Both states share a profound strategic autonomy imperative, viewing each other as indispensable anchors against regional volatility, maritime piracy, and cross-border terrorism.  
  • The January 2026 visit culminated in a critical Letter of Intent for a formal Strategic Defense Partnership. 
    • The inauguration of a world-class small arms manufacturing facility in Hyderabad by UAE-based CARACAL, under the EDGE Group, in partnership with India’s ICOMM Tele Ltd, marks a significant milestone in India’s defence manufacturing landscape. 
• Connectivity & Intercontinental Corridors (IMEC): India and the UAE are transforming regional geography by championing the India-Middle East-Europe Economic Corridor (IMEC), positioning themselves as central nodes in a new multimodal Eurasian trade architecture.  
  • By institutionalizing port connectivity, both nations are creating a resilient, rules-based supply chain pathway that permanently links the Global South to European consumer markets.  
  • Also, the Bharat-Africa Setu initiative aims to establish the UAE as a strategic gateway for Indian products, particularly from MSMEs, to enter African markets. 
• Financial Architecture & Fintech Interoperability: The bilateral financial convergence has decisively pivoted away from dollar reliance toward sovereign fintech integration, fostering a frictionless, low-cost ecosystem for cross-border trade and remittances.  
  • By directly interlinking their digital public infrastructures, both nations are setting a pioneering global standard for real-time financial interoperability that shields their macroeconomies from external currency shocks. 
  • The complete integration of India's UPI with the UAE's AANI instant payment platform, alongside the interlinking of the RuPay and JAYWAN card networks has fundamentally streamlined a remittance corridor. 
• Multilateralism & Plurilateral Coalitions (BRICS+ & I2U2): Strategic convergence transcends bilateral boundaries, manifesting in coordinated leadership within plurilateral frameworks designed to reform outdated global governance structures.  
  • By aligning their diplomatic weight in expanded forums, India and the UAE effectively amplify the geopolitical voice of the Global South while pushing for multipolarity and equitable institutional financing.  
  • As India officially assumed the BRICS Chairmanship in January 2026, the UAE, now a fully integrated member, committed comprehensive support to New Delhi's agenda of resilience and innovation.  
    • Simultaneously, under the I2U2 (India, Israel, UAE, USA) grouping, the UAE's $2 billion commitment to develop climate-smart integrated food parks across India is actively progressing to stabilize inter-regional agricultural supply chains. 
• Sovereign Wealth & Institutional Investment: The investment dynamic has matured from passive portfolio allocations into strategic, long-term sovereign wealth deployments targeting India's core infrastructure and high-tech manufacturing sectors.  
  • The UAE increasingly views India's unprecedented economic growth as a secure, high-yield anchor to diversify its massive post-oil wealth transition.  
  • During the landmark January 2026 bilateral summit, the Indian Prime Minister actively invited UAE sovereign wealth funds to participate in the upcoming second NIIF Infrastructure Fund to underwrite national mega-projects.  
  • Reinforcing this institutional pipeline, the UAE committed heavy investments into Gujarat's Dholera Special Investment Region. 

What are the Key Areas of Friction in India-UAE Relations? 

• Structural Trade Imbalance & CEPA Underutilization: Despite the operationalization of the Comprehensive Economic Partnership Agreement (CEPA), a structural trade imbalance persists, fundamentally skewing the economic corridor toward energy dependency rather than diversified manufacturing.  
  • This dynamic frictionizes bilateral commerce, forcing New Delhi to continuously tighten regulatory scrutiny to protect its domestic industries from indirect dumping.  
  • In FY2024-25, even as total bilateral trade successfully crossed the $100 billion threshold, India’s trade deficit remained stubbornly high at $26.8 billion due to inelastic crude dependencies.  
    • Furthermore, sudden surges in gold and silver imports routed through the UAE have repeatedly triggered Indian regulatory crackdowns to prevent the circumvention of established CEPA rules of origin. 
• Geopolitical Vulnerability & IMEC Stalling: The geopolitical fragility of West Asia poses a severe bottleneck to bilateral connectivity ambitions, directly threatening the viability of mutually championed mega-projects like the India-Middle East-Europe Economic Corridor (IMEC).  
  • Consequently, New Delhi’s requirement for strategic autonomy frequently collides with the UAE’s complex regional hedging, particularly regarding the ongoing Israel-Gaza war and maritime security in the Red Sea.  
    • The operational rollout of the UAE-Israel leg of the IMEC network has been effectively paralyzed since late 2023 due to the sustained Gaza conflict, freezing physical infrastructure integration.  
    • Highlighting this operational disconnect, India’s sustained 40-warship deployment in the Red Sea through early 2026 has functioned completely independently of Emirati naval assets, reflecting a reality of parallel coordination rather than true military integration. 
• Diaspora Labor Vulnerabilities & "Emiratisation": The demographic backbone of the relationship, the massive Indian expatriate workforce, remains a latent diplomatic pressure point due to systemic labor vulnerabilities and shifting domestic employment policies in the UAE.  
  • While recent reforms have attempted to modernize the kafala sponsorship framework, persistent issues of wage theft, inadequate workplace safety, and exploitative contract conditions continue to generate high volumes of migrant distress.  
  • Simultaneously, Abu Dhabi’s aggressive "Emiratisation" quotas introduce long-term job insecurity for the Indian white-collar diaspora, signaling a gradual transition from a labor-import model to a highly protectionist domestic market. 
    • Official data presented to the Indian Parliament in early 2026 revealed that the UAE accounted for 1,500+ registered labor grievances on the MADAD portal, making it the second-highest source of overseas distress calls.  
• The China Factor & Technology Transfer Limits: A subtle but critical strategic friction stems from the UAE's deepening technological and commercial entanglement with China, which directly complicates India's calculus regarding sensitive technology transfers and joint defense manufacturing.  
  • As New Delhi seeks to build secure, sovereign digital infrastructures and limit Beijing's regional influence, Abu Dhabi’s willingness to integrate Chinese state-linked entities into its telecommunications and logistics hubs creates a severe security dilemma.  
  • Extensive investments by Chinese firms within the Khalifa Economic Zones Abu Dhabi (KEZAD) and joint AI ventures have raised persistent red flags regarding supply chain security within the plurilateral I2U2 framework. 
• Multilateral Irritants & The OIC-Pakistan Nexus: While bilateral relations have reached unprecedented heights, a structural diplomatic disconnect persists regarding the UAE's role within the Organization of Islamic Cooperation (OIC) and its historical balancing act with Pakistan.  
  • This forces India to continuously expend diplomatic capital to compartmentalize bilateral warmth from multilateral condemnation, exposing the limits of the UAE's willingness to unilaterally neutralize anti-India rhetoric within Islamic blocs.  
  • Also, Pakistan's concurrent defense pact with Saudi Arabia ensures the UAE must maintain a delicate regional equilibrium rather than entirely de-hyphenating India from Pakistan.

What Measures can India Adopt to Enhance its Relations with UAE?  

• Operationalizing Sovereign Data Corridors & Digital Embassies: India should accelerate the operationalization of the proposed "Digital Embassies" framework to establish mutually recognized, sovereign data corridors that protect critical national infrastructure.  
  • By institutionalizing strict data localization and shared cybersecurity protocols, both nations can safely deepen their integration across sensitive frontier technologies.  
  • This necessitates the rapid deployment of joint supercomputing clusters, leveraging the synergies between India's vast artificial intelligence engineering talent and the UAE's sovereign capital ecosystem.  
• Institutionalizing Defense-Industrial Co-Production: To materialize the Strategic Defense Partnership, India must decisively pivot from conducting standard interoperability exercises to institutionalizing deep defense-industrial co-production.  
  • This requires establishing fast-tracked, reciprocal technology transfer frameworks that allow UAE-based advanced technology conglomerates to seamlessly co-develop kinetic platforms alongside Indian defense public sector undertakings. 
  • New Delhi should also integrate the UAE into its broader domestic defense supply chains, effectively utilizing the Emirates as a strategic springboard for exporting jointly manufactured hardware to third-party markets.  
• Plurilateral Geoeconomic Expansion in the Global South: India should strategically leverage the UAE's extensive geoeconomic footprint to jointly execute structural developmental projects across the Global South, moving beyond bilateral confines into a plurilateral growth model.  
  • By actively operationalizing frameworks like the newly proposed "Bharat-Africa Setu," both nations can synergize Indian manufacturing scale with Emirati logistical prowess to dominate emerging African and Eurasian markets.  
  • This trilateral approach demands the alignment of UAE sovereign wealth funds with India's project execution capabilities in sectors ranging from climate-resilient agriculture to sustainable green energy corridors.  
• Frictionless Fintech Harmonization & De-Dollarization: To maximize the utility of their economic agreements, India must prioritize the complete, frictionless harmonization of bilateral fintech architectures to facilitate instantaneous cross-border capital flows.  
  • By structurally expanding the Local Currency Settlement System, India can aggressively drive the de-dollarization of bilateral commerce, significantly insulating both macroeconomies from external currency volatility and unilateral financial sanctions.  
  • Furthermore, New Delhi should actively streamline the regulatory frameworks within its specialized financial tech cities to offer bespoke, fast-tracked investment pathways for Emirati institutional investors.  
• Integrated Food Security and Agritech Corridors: To structurally resolve persistent regional supply chain vulnerabilities, India and the UAE must operationalize an integrated, climate-resilient food security corridor.  
  • This necessitates a transition from traditional bulk agricultural exports to the co-development of advanced, AI-driven mega food parks within India, entirely underwritten by Emirati sovereign investments.  
  • Additionally, pooling resources into joint agritech research for arid-climate farming and desalination will simultaneously tackle the impending planetary crises of water scarcity and soil degradation.  
• Critical Minerals and Advanced Materials Synergy: To secure dominance in the impending global energy transition, India and the UAE must establish a unified consortium for the acquisition and processing of critical rare earth minerals.  
  • This strategic resource acquisition must be immediately coupled with the co-development of advanced metallurgical processing hubs and material science research centers within Indian special economic zones.  
  • Furthermore, creating a shared intellectual property bank for next-generation material sciences will rapidly accelerate their mutual ambitions in indigenous semiconductor, aerospace, and battery manufacturing.  

Conclusion: 

The India–UAE partnership today stands as a model of pragmatic, future-oriented diplomacy anchored in trust and economic synergy. It reflects how strategic alignment, policy stability, and human linkages can transform bilateral ties into a global growth corridor. As both nations expand cooperation in defence, technology, energy, and third markets, the relationship is moving from transactional engagement to structural integration. The next phase will test not ambition, but the depth and durability of this strategic convergence. 

Drishti Mains Question:

“The India–UAE partnership has evolved from an energy-centric relationship to a comprehensive strategic and economic corridor.” Examine the key drivers behind this transformation. Discuss its significance for India’s economic growth, energy security, defence cooperation, and outreach to West Asia and Africa.

 

FAQs:

1. How has the India–UAE relationship transformed under CEPA from a transactional energy partnership to a comprehensive strategic corridor?
The relationship has moved beyond crude oil trade to deep integration in manufacturing, fintech, defense production, AI, logistics, and third-market outreach, institutionalized through CEPA, the Bilateral Investment Treaty, and strategic defense frameworks.

2. What are the major strategic convergences driving the India–UAE partnership in the 21st century?
Key areas include supply chain integration, clean energy transition, digital public infrastructure interoperability, IMEC connectivity, sovereign wealth investments, defense co-production, and coordination in plurilateral forums such as BRICS+ and I2U2.

3. What structural frictions continue to shape the limits of India–UAE engagement?
Persistent trade imbalances, geopolitical volatility in West Asia affecting IMEC, diaspora labor vulnerabilities under Emiratisation, the China factor in technology ecosystems, and multilateral sensitivities linked to the OIC-Pakistan equation remain underlying constraints.

4. Why is the India–UAE partnership strategically significant for India’s Global South and multipolar ambitions?
The corridor acts as a gateway to Africa and Eurasia, strengthens de-dollarized financial architecture, enhances energy and food security cooperation, and amplifies India’s influence in emerging plurilateral platforms shaping a multipolar world order.

5. What policy measures can India adopt to deepen and future-proof its partnership with the UAE?
India should institutionalize defense-industrial co-production, operationalize sovereign digital corridors, expand local currency settlement mechanisms, co-develop food and critical mineral value chains, and leverage UAE sovereign wealth for infrastructure and high-tech manufacturing expansion.

UPSC Civil Services Examination Previous Year Questions (PYQs)

Prelims:

Q. Which of the following is not a member of ‘Gulf Cooperation Council’? (2016)  

(a) Iran 

(b) Saudi Arabia  

(c) Oman  

(d) Kuwait  

Ans: (a)

Q. Consider the following statements: (2008)  

1. Ajman is one of the seven Emirates of the UAE.  
2. Ras al-Khaimah was the last Sheikhdom to join the UAE.  

Which of the statements given above is/are correct?   

(a) 1 only  

(b) 2 only  

(c) Both 1 and 2    

(d) Neither 1 nor 2

Ans: (c)

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Mains

Q. The question of India’s Energy Security constitutes the most important part of India’s economic progress. Analyse India’s energy policy cooperation with West Asian countries. (2017)