Explanator | How India uses the strategic location of the UAE to defend US rates

Copyright © HT Digital Streams Limit all rights reserved. Prime Minister Narendra Modi with UAE Deputy Prime Minister Sheikh Hamdan Bin Mohammed Bin Rashid Al-Maktoum in New Delhi in April. (PIB/ AFP) Summary with steep US rates, India looks at the UAE’s ports, free zones and trade requirements as a buffer – and a launch path for new markets. India turns to the United Arab Emirates to utilize the strategic location of the Western Asian country to redirect exports and target new markets to tide through the US tariff of 50% on Indian goods. India also uses the vague to indirectly source critical equipment that countries such as China do not sell directly to India. Mint explains why and how the vague becomes more important to Indian trade. What makes the vague decisive for the Indian trade? The vague, with Europe in the West and Africa in the south, is perfectly placed for trade. The massive Jebel Ali port in Dubai handles millions of containers every year, while the Jebel Ali-free zone offers with tax-free trade and easy re-export options. This makes the vague a “trading highway” for India to send goods elsewhere. In addition, India’s comprehensive economic partnership agreement with the UAE, signed in 2022, reduces 90% of Indian goods, which makes it cheaper to export to the Arab nation. In 2024-25, India’s textile exports to the UAE rose 6.2% to $ 2.1 billion. While the UAE is nowhere near the scope of the US market – where the shipping in FY25 has touched $ 10.9 billion – it is a growing outlet for Indian exporters. How does it play out in the context of US rates? India plans to use a new demand in the vague and nearby markets to take up part of the US trade, which offers the immediate relief of exports, while also preparing for future tariff shocks. India’s plan is to push textiles, pharmaceuticals, jewelery and jewelry, seafood and farm products such as rice and spices to the vague. India also strives for $ 100 billion to trade (oil and precious metals) with the UAE excluded. If the UAE 20-30% of the $ 13 billion can absorb textiles and seafood that sends Indian exporters to the US, it will help keep Indian factories going and save work. The UAE strategy can also tackle India to spread trade on more countries. If the US market delays – say, in the case of a recession – to drop the UAE as a relapse, it could be a sensible strategy. With $ 99.7 billion worth of India and UAE in FY25, 19% higher than FY24’s $ 83.6 billion, and plans for green projects such as the UAE’s Masdar investment in Indian clean energy, the UAE strategy is more than a quick solution. While India continues with the US to lower rates and for a bilateral trade agreement, the vague offers a way to flow the trade, which turns a setback into an opportunity to grow stronger. What is the Chinese angle here? India exports goods worth $ 63.4 billion from the UAE, mostly oil and gas. But the UAE is also a key route for importing ‘strategic’ goods from countries such as China. India buys over $ 113 billion from China, but due to border tension between neighbors, China often blocks direct exports of rare minerals, fertilizers and other products needed for electronics and defense. The vague helps by acting as an intermediate between. Indian businesses buy such Chinese goods by Dubai traders, who refute them to avoid China’s restrictions. Last year, the UAE $ 36.2 billion exported Chinese goods to India, according to a report published in the Middle East briefing. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #Mint-Explainer Read the following story