India’s Budget 2026-27: A new chapter in the India-UAE economic partnership

As India strides confidently towards its destiny as one of the world’s largest economies, the United Arab Emirates stands out not merely as a partner, but as a pivotal force multiplier. More than a destination market, the UAE is India’s strategic gateway to the wider region — a role forged by centuries of cultural exchange and now powered by contemporary economic ambition.

This historic relationship entered a new orbit with the India–UAE Comprehensive Economic Partnership Agreement (CEPA), a pact that has transformed goodwill into growth and potential into performance. India’s Union Budget 2026–27 presented by India’s Finance Minister in Parliament on February 01, 2026 has now added fresh fuel to this momentum, placing the India–UAE partnership firmly on the fast track to the future.

The Economic Survey 2025-26, released a day prior to the Union Budget 2026-27, presented a report card of India’ economy, in which UAE features prominently in the context of trade diversification, strategic resilience and energy security. The Survey explicitly highlights the India-UAE CEPA as a key catalyst behind growth in trade between the two countries.

UAE is India’s third-largest trading partner (after the USA and China) and its second-largest export destination. The Survey notes that Bilateral trade reached a historic high of $100.06 billion in FY 2024-25 and also mentions the recent announcement during the visit of UAE President His Highness Sheikh Mohamed Bin Zayed Al Nahyan to India regarding the target of doubling this trade to $200 billion by 2032.

Let’s look at some numbers. Between April and November 2025, Indian exports to the UAE recorded spectacular year-on-year growth: silk carpets surged by 103.1%, auto components by 84.5%, gems and jewellery by 34.9%, and leather footwear by 31.4%. The UAE together with Hong Kong today absorbs over 53% of India’s total gems and jewellery exports, making it the single most important global destination for this sector.

Investment flows tell an equally compelling story. The UAE emerged as India’s third-largest destination for Outward Direct Investment, touching nearly $48.3 billion. Between April 2000 and March 2025, cumulative UAE FDI into India reached $22.84 billion, making it India’s seventh-largest overseas investor. UAE’s investments span real estate, infrastructure, energy, financial services, and private equity.

The Union Budget 2026–27 acts as a powerful amplifier for bilateral ambitions. By scaling up domestic manufacturing in sunrise sectors, India is opening new avenues for UAE–India joint ventures and long-term investment. Flagship initiatives such as the Rs100 bn ($1.1 bn) Biopharma SHAKTI programme and India Semiconductor Mission 2.0 signal India’s determination to be a hub for high-value, high-tech manufacturing. Complementing this is the Rs100 bn ($1.1 bn) Small and Medium Enterprises Growth Fund, designed to nurture “Champion MSMEs” and integrate them seamlessly into global value chains—an explicit synergy with CEPA’s Chapter on MSMEs.

Ease of doing business for Emirati and overseas investors has received a decisive boost. The Budget proposes doubling the individual investment limit for Persons Resident Outside India in listed companies from 5% to 10%, with the aggregate cap raised to 24%. This is a structural shift. It allows serious investors from the UAE to take more meaningful, concentrated stakes in Indian growth stories without the administrative hurdles of the Foreign Portfolio Investor (FPI) route.

A tax holiday until 2047 for foreign companies using Indian data centres for global cloud services positions India as a digital backend for the world — an opportunity ripe for the UAE’s vibrant tech ecosystem. This may be viewed in the context of the recent visit of Sheikh Mohamed to India few days ago, during which both countries agreed to explore cooperation in setting up data centres in India and establishing digital embassies.

To further de-risk large-scale investments, India will establish an Infrastructure Risk Guarantee Fund, while a comprehensive review of FEMA rules aims to deliver a modern, investor-friendly regulatory framework. Enhanced tax incentives for GIFT City also create a competitive financial bridge with DIFC and ADGM, enabling deeper cross-border treasury and financial services integration.

The next phase of India–UAE cooperation is increasingly digital. Building on CEPA’s digital trade provisions, the budget prioritises AI-driven governance and trade facilitation. A single, interconnected digital window for cargo clearance — targeted for April 2026 — promises faster, frictionless logistics. The extension of duty deferral for Authorised Economic Operators to 30 days further smoothens trade flows. This becomes more relevant in the context of the ongoing work on the India-UAE Virtual Trade Corridor.

Physical connectivity is also undergoing a quiet revolution. New East–West Dedicated Freight Corridors, seven high-speed rail corridors, and 20 operational National Waterways will dramatically reduce logistics costs and transit times. These initiatives align seamlessly with the India–Middle East–Europe Economic Corridor, reinforcing India and the UAE as co-architects of future trade routes.

At the heart of this partnership lies the Indian diaspora in the UAE — the living, breathing bridge between our nations. Accounting for 19.2% of India’s inward remittances, they are not just contributors, but co-creators of prosperity. The budget addresses their needs with sensitivity and foresight. A one-time six-month foreign asset disclosure window eases financial transitions for returning NRIs. To attract global expertise based in the UAE, non-resident professionals will enjoy income tax exemption on global income for up to five years.

Reduced TCS rates — down to 2% — on overseas education, medical expenses, and tour packages further ease the burden on families. Eliminating the TAN requirement for property transactions streamlines the process for NRIs, allowing them to use PAN-based challans instead. The Baggage Rules 2026 simplifies procedures and improve passenger facilitation at airports inter alia by increasing general free allowances, including specific provisions for jewellery.

India’s trade diplomacy today is expansive and confident. The India–EU Free Trade Agreement — described by Prime Minister Narendra Modi as the “mother of all deals” — connects the world’s second and fourth largest economies, promising jobs, innovation, and digital collaboration.

Similarly, the recent India–US Framework for an Interim Trade Agreement reinforces India’s position as a trusted manufacturing and technology partner. The GCC, with the UAE as a key member, has also joined this growth journey through the signing of Terms of Reference for an FTA with India. Due to the complimentary nature of our economic ties, India’s expanding trade partnerships will further bolster the economic partnership with the UAE.

From the sands of the Emirates to the soil of India, this partnership is shaping a 21st-century growth story. With CEPA as the foundation and reform as the driving force, India and the UAE are not merely exchanging goods and capital — they are co-authoring a future of shared prosperity, resilience, and global leadership.

Dr Deepak Mittal is the Ambassador of India to the UAE