💸 [Data Story] How the UAE is Driving India’s Export Economy
[9 mins read] How has India and the UAE's 50 year friendship helped both countries' economies? Read on 👇🏻
What do Jai and Veeru, Joey and Chandler, Mowgli and Baloo have in common?
They are chuddy buddies.
Well, that's India and the UAE too.
Our friendship dates back to 1972, and today, the two countries almost depend on each other for multiple things.
The UAE was India’s third-largest trading partner for 2022-23 and India’s second-largest export destination (after the US).
India is the UAE’s second largest trading partner, accounting for 9% of its total foreign trade.
The bilateral trade between the two countries was worth $85 Billion in 2022-23.
To further strengthen this friendship, PM Modi visited the UAE in Feb, 2024.
This was his third visit to the UAE in the last eight months!
What happened at the meeting?
A lot of business was discussed.
From the bilateral investment treaty to the interlinking of the UPI and AANI (instant payment platform of the UAE), the two countries are exploring all possibilities of working together.
In today's piece, we will discuss:
UAE’s Demographics and the Consumer Class
India's Exports to the UAE
India's Imports from the UAE
Future of the India-UAE friendship
Inside United Arab Emirates
Before we get into understanding what India can offer to the UAE, it is important to understand what the UAE needs.
You can sum up UAE in 3 adjectives:
Skyscrapers, luxurious lifestyle, booming economy.
The UAE’s population is 9.5 million, most of which is estimated to comprise expatriates (people who live outside their native countries).
Largest expatriate community? Indians.
The UAE is home to 3.5 million Indians (~35% of the population).
The workforce is predominantly young, with a median age of around 33.6 years.
Only 12.2% of the country's total pre-tax national income is held by the bottom 50% of the population.
Meaning, the majority of the pre-tax national income is held by the top 50% earners!
Plus, the UAE could have seen a net inflow of about 4,500 millionaires in 2023 (mostly from India, UK, Russia, Hong Kong and China).
These numbers indicate just one thing: The UAE is rich.
Economic prosperity = High Purchasing Power
From luxury cars to designer handbags, the people here sure know how to live it up.
The UAE’s luxury goods market is estimated to be $4.19 Bn in 2024, and is growing at a 5.20% CAGR to reach $5.39 Bn by 2029!
But when it comes to expenses, housing takes the lion's share of the pie (~41.3% according to a 2021 survey). After all, living in those skyscrapers doesn't come cheap!
As we dug deeper into the luxury market, we went:
Why, you ask?
Here:
A year-long Mall Mapping Study of 4,800 people in the UAE found that over 50% of them visited a mall AT LEAST once a week!
38% respondents from Abu Dhabi and 21% from Dubai commute between the two Emirates at least once every 3 months just to visit malls!
Dubai was the busiest market for high value properties in the first half of 2023 (ahead of New York, Hong Kong and London) - Luxury home buyers spent $1.59 billion on properties worth $10 million or more in Dubai in the third quarter of 2023 (July-Aug-Sep)
The largest segment in the luxury goods market in the UAE is watches and jewelry.
With 99% internet penetration rate, the UAE is officially the social media capital of the world.
This is also driving more online transactions in the predominantly offline luxury goods market.
And this is where there are endless opportunities for India.
Our diverse manufacturing base, skilled craftsmanship, and rich cultural heritage help us cater to the UAE's luxury market demand.
India's Exports to the UAE
India exported goods worth $27.28 Billion in 2022.
Note: the complete data for 2023 is not available yet
The UAE imports gems and jewellery worth $10.48 billion from around the world - 30% of this is sourced from India.
While petroleum products, gold and other precious metal jewellery, and precious and semi-precious stones are top export items from India to the UAE, we can also focus on the following sunrise export sectors:
Textiles and garments: India's textile industry, with its rich fabrics, traditional handloom products, and contemporary designer, can tap into this segment, offering both traditional ethnic wear and modern fashion statements. India provides over $1.1 Billion of garments to the UAE annually, with growth estimated to be between 10-15% each year.
With the rising popularity of home-grown brands and ability to match international standards at competitive prices, India can capture a larger share of the global apparel market.
Food and Beverages: Gourmet food products, including organic and health foods, as well as premium alcoholic beverages like craft beers and fine wines, have a growing market in the UAE.
The foodservice market in the UAE is expected to grow from $19.98 Billion in 2024 to $43.98 Billion by 2029 (17.09% CAGR).
Indian exporters can capitalise on this trend by offering high-quality, specialty food products that cater to the sophisticated palate of the UAE consumer.
There is also a huge scope to export frozen foods to the UAE.
Handicrafts and Decor: India's rich tradition of handicrafts, including items made from marble, silk, and precious metals, could be an interesting appeal to the UAE's luxury segment looking for unique and high-quality home decor.
Tourism services: The UAE has become an ideal tourist destination for many. From leisure travel to business conferences to the World Cup and Formula One, the country has something to offer to everyone.
The travel and tourism industry contributed 9% to UAE’s total GDP in 2022.
Indian businesses can export travel and tourism services to cater to the diverse needs of tourists in the UAE.
Why is the UAE Importing from India?
The UAE’s wealth and economic progress can be majorly attributed to its strategic location and huge reserves of natural resources (read: oil).
But now as the world is going green, the UAE is realising the need to diversify.
Over the years, it has invested in infrastructure and services to boost tourism, real estate and banking industries.
And for this diversification, it is turning to its dear friend, India.
Key reasons for UAE’s imports:
Arid climate: The UAE's arid climate makes it difficult to produce agricultural products, making it dependent on imports for a variety of food products. India's diverse climate, on the other hand, allows for a wide range of agricultural goods, from spices and grains to fruits and vegetables.
Expensive labour: Its diversification strategy requires importing technology and machinery due to high labour costs in the country
High standard of living: The high standard of living and luxury consumer market are major attractions for tourists and expatriates into the UAE. To maintain this lifestyle, it imports luxury goods, electronics, automobiles, and high-end fashion from around the world.
India has multiple advantages to export to the UAE:
‘Make in India’ initiative: The ‘Make in India’ initiative aims to transform India into a global manufacturing and design hub. PLI schemes and other incentives are being offered by the government to boost domestic production.
Geographic proximity: India's geographic proximity to the UAE reduces shipping times and costs, making Indian products more competitive compared to other countries.
Low labour costs: Due to lower labour and production costs, Indian products and services are often more competitively priced than those from other countries with higher manufacturing costs.
Skilled craftsmanship: Whether it's IT and software development or the craftsmanship required for textiles and jewelry, India's quality is unparalleled. High-quality goods and services at competitive prices make Indian exports attractive to the UAE market.
Cultural and Consumer Insights: The long friendship between the two countries gives Indian exporters an inherent understanding of the UAE market's preferences. This insight allows Indian businesses to tailor their products and marketing strategies to higher consumer satisfaction in the UAE.
Now, this is not a one-way relationship. You give some, you get some.
India also imports from the UAE.
In 2022, India imported commodities worth $53.85 Billion from the UAE.
Why does India Import from the UAE?
Energy Requirements: India's rapidly growing economy and its increasing energy demand are primary drivers for importing crude oil and natural gas from the UAE.
India is currently the third largest consumer of oil, and is likely to account for 25% of global energy demand growth over the next two decades.
Geographic Proximity: The UAE’s strategic location and geographic proximity to India result in lower logistics costs and faster delivery times compared to other countries, making it ideal for India.
Future of the India-UAE friendship
India and the UAE’s friendship is truly like fine wine - it gets better with time.
With every conversation, every handshake and every event, the ties between the two countries get stronger than ever.
In 2022, the Indian Government and the UAE signed a trade deal, the Comprehensive Economic Partnership Agreement (CEPA).
Simply put, it was like a friendship pact to promote trade between the two countries.
Under the CEPA,
Preferential market access was provided by the UAE on more than 97% of its tariff lines (corresponding to 99% imports from India),
The UAE has committed to issuing 140,000 employment visas to skilled Indian professionals by 2030,
Zero-duty market access was given for 90% of exports from the UAE into India, benefitting UAE commodity exporters of chemicals, aluminum, and copper
How has it helped the two countries?
Trade has increased from $72.9 billion (Apr 21-Mar 2022) to $84.5 billion (Apr 22-Mar 2023), a year-on-year increase of 16%
During April-March period, Indian exports to the UAE increased from $28 bn to ~$31 bn; a 11.8% year-on-year growth
All in all, CEPA could help increase bilateral trade between India and the UAE to about $100 billion by 2027.
In PM Modi's latest visit to the UAE, the two countries further discussed business to strengthen their ties:
The Bilateral Investment Treaty was signed to promote investments in both countries
An agreement was signed to set up the India-Middle East-Europe Economic Corridor (IMEC) - it will have railway lines, sea lines and road networks from India to Europe to boost trade (you can read more about it here)
An MoU was signed for digital infrastructure projects and electricity interconnection and trade
An agreement was signed to interlink the instant payment platforms - UPI and AANI (UAE) - to facilitate cross-border transactions between the countries
An agreement was signed to interlink domestic debit/credit cards - RuPay (India) and JAYWAN (UAE)
As the friendship between India and the UAE evolves and strengthens, here's to hoping that the two nations move towards a greener, better Earth.
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Very much Effort put in.