PYQ Relevance[UPSC 2017] The question of India’s Energy Security constitutes the most important part of India’s economic progress. Analyze India’s energy policy cooperation with West Asian Countries. Linkage: Energy cooperation with West Asia forms the backbone of India’s external economic strategy and remains central to supply stability and growth. Deepening ties with countries like the UAE reflect India’s shift from transactional oil imports to structured energy, investment, and renewable partnerships within its broader West Asia policy. |
Mentor’s Comment
India-UAE relations have transitioned from energy trade to a multi-sector strategic economic relation. The partnership now spans trade, infrastructure, digital governance, financial integration, and AI cooperation. The development has implications for India’s industrial strategy, West Asia policy, and global supply chain positioning.
Why in the News?
The Comprehensive Economic Partnership Agreement (CEPA) between India and the UAE is witnessing rapid expansion beyond tariff reduction into infrastructure, energy transition, and digital cooperation. This reflects a structural shift in India’s West Asia policy toward deeper economic and strategic integration.
What is the India-UAE CEPA?
- The India-UAE Comprehensive Economic Partnership Agreement (CEPA), became effective from May 1, 2022.
- It has significantly boosted bilateral trade to over USD 80 billion by early 2025.
How does CEPA institutionalize trade liberalization and regulatory coordination?
- Trade Liberalization: It eliminates tariffs on 97% of UAE imports from India and 90% of India’s exports to the UAE, focusing on key sectors like gems, jewellery, textiles, and engineering. It accelerates non-oil trade growth. Example: $100 billion trade milestone achieved ahead of schedule.
- Regulatory Certainty: Ensures predictable investment conditions, strengthens long-term industrial commitments. Example: Revised target of $200 billion by 2030.
- Services Integration: Expands cooperation in financial services, logistics, and technology sectors.
- Energy Security Framework: Strengthens LNG supply chains through ADNOC-Indian Oil agreements.
How does infrastructure collaboration strengthen supply-chain resilience?
- Logistics Expansion: DP World invests $5+ billion in Indian ports and logistics parks.
- Industrial Corridors: Facilitates warehousing, wholesale hubs, and regional export networks.
- Strategic Port Connectivity: Enhances India-West Asia-Africa trade flows.
- Urban Infrastructure Investment: Mubadala invests over $4 billion in renewable and technology sectors.
How does the corridor reflect strategic autonomy and geoeconomic balancing?
- Diversified Partnerships: Reduces overdependence on traditional Western or regional trade blocs.
- West Asia Realignment: Aligns with India’s extended neighbourhood strategy.
- Diaspora Diplomacy: Utilizes 3.5 million Indian diaspora for economic and institutional integration.
- Energy-to-Technology Shift: Expands cooperation beyond hydrocarbons into AI and digital governance.
How does digital and AI cooperation redefine bilateral governance architecture?
- Technology Integration: Establishes AI research collaboration including global AI summits.
- Digital Economy Expansion: Supports fintech, data centres, and digital trade frameworks.
- Regulatory Innovation: Promotes technology governance dialogue between emerging economies.
- Institutional Coordination: Strengthens policy synchronization in digital standards.
How does financial integration enhance institutional accountability and capital flows?
- Sovereign Wealth Participation: Mubadala channels long-term capital into Indian growth sectors.
- Banking Sector Consolidation: Emirates NBD acquisition expands foreign banking footprint in India.
- Investment Diversification: Encourages renewable, healthcare, and technology investments.
- Financial Stability Linkages: Deepens cross-border capital market integration.
What governance challenges arise from rapid corridor expansion?
- Regulatory Harmonization: Requires alignment in customs, standards, and dispute resolution.
- Energy Transition Balance: Ensures diversification beyond hydrocarbons.
- Strategic Risk Management: Balances geopolitical shifts in West Asia.
- Institutional Coordination: Requires Centre-State alignment in logistics and industrial corridors.
Conclusion
The UAE-India corridor institutionalizes economic integration through trade liberalization, infrastructure expansion, financial interdependence, and digital cooperation. It strengthens India’s geoeconomic positioning in West Asia while demanding regulatory harmonization and strategic risk management.
