Bilateral trade between India and the UAE suffered a historic 21 per cent decline for the last financial year compared to 2012-13.
Reports and data show that the Indian government’s 10 per cent tax legislation on gold imports is largely to blame for the downfall in official figures.
The Indian Ambassador to the UAE, T.P. Seetharam, told GN Focus in an exclusive interview before the budget, “There was a decline in gold imports from [the UAE] last year of around $9 billion (about Dh33 billion).
“There’s a very simple reason for that — the last government’s increased tax on the gold duty immediately led to a decline in gold imports. I hope this would be addressed in the budget.”
Exports of precious stones and metals from the UAE to India fell from $20.3 billion to $11.9 billion last year. In the past two years India’s previous government, led by the UPA, raised the import tax on gold bullion to a whopping 10 per cent from 2 per cent. And despite hope in many Indian quarters that the new NDA-led government, headed by Prime Minister Narendra Modi, would lower the tax on gold imports by 2-4 per cent in its maiden budget, the numbers remain unchanged.
A reduction would have not only boosted trading volumes, but also eased concerns over growing instances of gold smuggling. Seetharam had hoped Modi’s government would address the issue so commercial links with major trading partners such as the UAE could recover some of the lost capital.
There’s little doubt the inflexible policy will continue to hurt the UAE’s gold exports to India, and possibly overall trade between the countries too.
Trade slump
In total, two-way trade between India and the UAE plummeted from $75.4 billion (about Dh276.9 billion) to $59.6 billion, with Indian exports dropping 16 per cent from $36.3 billion in the 2012 fiscal year to $30.49 billion this year. Indian imports to the UAE also fell drastically, down 25 per cent from $39 billion to $29 billion during this period.
The $15.8 billion slump is the biggest percentage decline in trade ever registered between the two countries, according to India’s Ministry of Commerce statistics. Furthermore, bilateral trade now rests at its lowest in four years. In the 2010 fiscal year, two-way trade stood at $66 billion.
This major drop in commercial activity sees the UAE fall from being India’s number one trading partner spot to the third place — behind China ($65.8 billion) and the US ($61.4 billion).
As for the UAE importing Indian goods, Seetharam said recent sanctions have hindered the process, negating 16 per cent of potential revenues.
“The other factor is that the UAE is a major point of re-export of Indian goods. Trade conditions have changed, including the sanctions on Iran. So a lot of things that were re-exported from [the UAE] are now being shipped straight from India, and that again reflects a dip in bilateral trade,” he added.
Balancing the books
However, good news can be gleaned from trading figures as far as India is concerned, with the trade balance now in its favour by $1.38 billion.
“Our trade with the UAE is fairly balanced compared to our other major trading partner China,” said Seetharam. India has a trade imbalance of about $36 billion with the Far Eastern powerhouse at present.
There are signs that commerce is picking up pace elsewhere. Copper imports witnessed a spike of 51 per cent, increasing from $450 million in 2012 to $681 million in 2013, while aluminium imports saw a 13 per cent spike, up to $427.8 million from $371.2 million.
It’s not only the trade issues that Seetharam — in office for about eight months — has been dealing with. Prolonged delays in renewing passports due to issues with the embassy’s outsourced printing company BLS has > created a backlog that saw thousands of Indians waiting in limbo to receive their renewed IDs. Up to 290,000 passports are issued by Indian authorities in the UAE every year.
But Seetharam said there is no need to panic, as the situation is under control, adding, “It’s a global situation; it’s not just the UAE. The problem lay with the printing of passport booklets in India, which involved the import of special paper and lamination materials, and which were in short supply.
“We have started receiving passports from India, but in small numbers. Even though the situation is under control, there is still a backlog, which needs to be cleared. We’ve worked hard with BLS to resolve the issues and assist any Indian expatriates who had problems.”
Meanwhile, the Indian envoy says he is pleased with the way India and the UAE have worked together in the recent past to improve the much maligned conditions for NRI labourers who work in the UAE’s construction projects.
Examining labour woes
Talking about the issue, Seetharam said, “We have set up regular consultations with the UAE authorities to discuss any labour or trade issues that come up. Generally the situation has improved considerably over the years and we are happy with the way it stands now.
“There may be specific cases related to particular companies when they don’t provide the expected levels of support, and these are issues that are being addressed by the UAE authorities. So we are quite happy with this procedure, which is why more people are coming from India.”
In 2012, the Indian Embassy and the UAE’s Ministry of Labour jointly launched the unique Contract Registration and Validation System — a web-based attestation of job contracts for Indian workers — touted as a step forward in safeguarding workers’ rights.
Hailed as a milestone, the move was a way of affording workers the opportunity to review and approve the terms of a proposed work contract and working conditions prior to their departure from India, and aimed at full transparency of the contracting process.
“We’re quite happy with the manner in which the Indians who come here to work are treated — not only labourers, but also people who come to invest and contribute in different ways to this country,” said Seetharam.
There are already more than two million non-resident Indians living and working in the UAE in just about every sector imaginable. And with the improving labour conditions for unskilled workers in the UAE, the number of Indian expatriates migrating to the Gulf is only set to increase, especially with Expo 2020 around the corner, Seetharam added.
“On an average there are about 200,000 Indians moving to the UAE each year and there will be a steady inflow because of the market conditions here.”
Seetharam was also very hopeful that the newly-elected Modi will visit the UAE soon. “We don’t have any dates yet, but I expect the Prime Minister will visit soon. A visit from an Indian Prime Minister is long overdue and I hope to address that as soon as possible.” n
