UAE Signals $25 Billion More Investment in India: CEPA, Rupee Trade and Energy Security
The United Arab Emirates (UAE) has signalled an additional $25 billion of investment intent in India. This was announced around the 14th meeting of the India-UAE High Level Joint Task Force on Investments (a joint body set up in 2013 to push and protect investments between the two countries).
The UAE has already invested about $25 billion in India. The two sides are working towards an eventual target of $100 billion of UAE investment in India.
Bilateral trade has doubled to about $100 billion since the India-UAE Comprehensive Economic Partnership Agreement (CEPA) came into force in 2022. The new target is $200 billion by 2032.
The two countries are exploring more cooperation in energy security: storing UAE crude oil in India's strategic petroleum reserves, making the UAE a larger supplier of LPG and LNG (cooking gas and liquefied natural gas), and studying subsea (under-the-sea) pipelines to carry and store gas.
The share of trade settled in local currencies (Indian rupee and UAE dirham) instead of the US dollar is rising and is now in double digits (above 10%).
Other areas for cooperation include ports, shipbuilding, space, food security, logistics, fintech and artificial intelligence.
India-UAE Comprehensive Economic Partnership Agreement (CEPA)
The India-UAE Comprehensive Economic Partnership Agreement, or CEPA, is a trade deal between India and the United Arab Emirates. It removes or cuts the import taxes (customs duties) that each country charges on the other's goods. It also opens up trade in services, supports investment and sets common rules for things like product standards and digital trade. It was signed on 18 February 2022 and came into force on 1 May 2022.
The doubling of trade to about $100 billion is the main result of the CEPA, now four years old. The new $200 billion target by 2032 and the extra $25 billion investment intent show that both sides want to build on the CEPA and the investment treaty, especially in energy, ports and technology.
Local Currency Settlement (LCS) Mechanism and Internationalisation of the Rupee
Local currency settlement means two countries pay each other for trade in their own currencies, instead of using a third currency like the US dollar. For example, an Indian importer buying goods from the UAE can pay in Indian rupees, and a UAE importer can pay in UAE dirhams. Internationalisation of the rupee is the bigger goal: making the rupee widely used by people and businesses outside India for trade, investment and savings.
The share of India-UAE trade settled in rupees and dirhams is now in double digits. This follows directly from the 2023 Local Currency Settlement System. It shows the mechanism is moving from a few test deals to regular use, which supports India's wider plan to make the rupee an international currency.
India's Strategic Petroleum Reserves (SPR)
India's Strategic Petroleum Reserves are large emergency stores of crude oil kept in underground rock caverns near the coast. They are managed by Indian Strategic Petroleum Reserves Ltd (ISPRL), under the Ministry of Petroleum and Natural Gas. They are used only when normal oil supply is disrupted, for example by war or a blocked shipping route. Because India imports most of its crude oil, these stores act like a safety buffer.
Talks on strategic petroleum reserves are a key part of the new energy cooperation. If ADNOC stores more crude in Indian caverns, India gets oil security close to home at lower cost, and the UAE gets a storage base next to one of its biggest customers.
- Additional UAE investment intent: $25 billion; existing UAE investment about $25 billion; eventual target $100 billion
- 14th meeting of the India-UAE High Level Joint Task Force on Investments (set up in 2013)
- India-UAE bilateral trade: about $100 billion (2024-25); target $200 billion by 2032
- India-UAE CEPA: signed 18 February 2022, in force 1 May 2022
- India-UAE BIT: signed 13 February 2024, in force 31 August 2024
- UAE: India's 3rd-largest trading partner, 2nd-largest export destination, 7th-largest FDI source
- Local-currency share of India-UAE trade: now in double digits
- RBI and Central Bank of the UAE Local Currency Settlement System MoU: 15 July 2023
- India's SPR Phase I: 5.33 MMT at Visakhapatnam, Mangaluru and Padur
- Energy areas explored: SPRs, LPG and LNG supply, subsea gas pipelines