An investment gateway for UAE businesses

India is emerging as a top new investment destination for many Gulf businesses in general and the UAE in particular.

Business tie-ups have bolstered on both sides - in the UAE and India as well. Both nations have taken strategic decisions to benefit from each other's strengths and tap the full potential of business opportunities. The businesses are now exploring opportunities in key sectors like infrastructure, oil and gas exploration, storage and renewable energy, logistics hubs, food processing and industrial parks, healthcare, hospitality and information technology.

"The comprehensive strategic partnership and the 13 other agreements that were recently signed between the UAE and India have the potential to significantly boost cooperation across several sectors and areas, including defence, energy, maritime transport, infrastructure, agriculture and security," said Hamad Buamim, president and chief executive of the Dubai Chamber of Commerce and Industry.

While referring to the latest research report 'GCC-India corridor - Investment opportunities and challenges' released on Tuesday by Alpen Capital, he said the Dubai Chamber would open a new representative office in India later this year.

India's share of the total investments into the GCC increased from 4.7 per cent in 2011 to 16.2 per cent in 2016 while GCC investments into India also continued to rise from 0.7 per cent in 2011 to 2.95 per cent in 2016. Sectors such as oil and gas, food processing, healthcare, education and infrastructure seem to be the top picks for investors looking towards GCC as an investment destination.

"In India, sectors such as infrastructure, ICT, food processing and healthcare prove to be more attractive as investment opportunities for GCC companies. We are likely to see an increase in the flow of investments between the regions improving ties and regulatory environment," said Sanjay Bhatia, managing director, Alpen Capital.

The country offers a spectrum of opportunities with over 1.3 billion consumer base and may sustain 7.7 per cent growth by 2021, making it a prominent consumer goods market.

"The bilateral trade and investment relationship between India and the UAE have gone from the basic trade model to a more strategic level, which significantly includes areas such as infrastructure, defence, space technology and energy, to name a few. Indians have been in the forefront in their contribution to the overall economy of UAE - be it retail, gold, real estate, IT, trade, etc., - they are well-entrenched in the system," said Krishnan Ramachandran, CEO, Barjeel Geojit.

He said the enhanced political co-operation and the focus on increasing cross border investments between the two countries will serve to reinforce the fraternal relationship between the two great economies in the region.

"The recent predictions that the Indo-UAE trade will cross $100 billion by 2020 is a new beginning towards a long lasting and mutually beneficial partnership between UAE & India," he said.

According to a survey on world investments prospects by the United Nations Conference on Trade and Development (UNCTAD), India emerged as the third most attractive FDI destinations for 2017-2019. Indian government has relaxed FDI limits in various sectors to boost FDI.

Annual FDI from the GCC to India stood at $1.4 billion in 2016, translating into a five-year CAGR of 41.2 per cent, faster than the FDI growth from India to the GCC. The rapid growth is mainly due to substantial inflows during 2016 across the GCC countries, barring Oman.

The GCC share in total FDI into India has increased over the years, but still remains low at 2.9 per cent. Investments by non-resident Indians (NRIs) in the GCC also play a major role in the investments into India. The stability of the Indian rupee over the years have supported remittances to the country. Although relations are progressing, India has not received large investments from the GCC countries, except the UAE - the 10th largest FDI investor in India.

"India, as a fast growing and emerging economy, is in the process of upgrading infrastructure, creating a digitally empowered society, increasing local manufacturing and enhancing energy production. Such initiatives from both regions will create increased investment opportunities and further strengthen the relations between GCC and India", says Rohit Walia, executive chairman, Alpen Capital (ME) Limited.

India has a large consumer market with a population above 1.3 billion in 2016, which is estimated to increase by over 88 million individuals by 2021. Not only is the sheer size an advantage, but also the factors like diversity, age distribution, gender mix and urbanisation that are driving consumption. Also the spending power in India is also rising, owing to a rapidly growing economy. The country's real GDP is anticipated to grow at an annualised rate of 7.7 per cent by 2021, making the country a prominent consumer goods market.

India's trade relations with UAE are more than century old and this relationship has become much stronger due to cordial ties between the leaders of both countries. While India has emerged as a leading world power in manufacturing and services, UAE has emerged as gateway to global trade and investments.

"India provides investment opportunities in the areas of infrastructure, construction, energy and services among others as the nation of 1.3 billion is facing challenges in meeting the requirements of increased urbanisation while it is growing at scorching pace of seven per cent plus per annum. The bilateral trade between UAE and India was at $49 billion during fiscal year 2015-16 and estimated to reach $100 billion by 2020.

"The UAE investments into India exceeded $1 billion during fiscal year 2015-2016. The proposed GCC-India Free Trade Agreement will only increase the trade and investments substantially once it is effective," said Sahul Agarwal, managing director, Sahul Group.

Source: Khaleej Times