Daybreak - Why India's $100B trade romance with the UAE is only the beginning

Episode Date: September 9, 2025

With ties to the US and China on shaky ground, India is leaning on a new partner—the UAE. The economic relationship has surged past $100 billion in FY25, and this surge has resulted in Indian companies from Tata to Omega Seiki Mobility setting up shop in the Emirates’ tax-free zones.Attractive incentives like access to capital, world-class infrastructure, and geographical centrality are attracting Indian manufacturers abroad. But this raises a big question: is the UAE a launchpad for India’s global ambitions—or a risk to it’s own manufacturing dreams?Tune in.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. For weeks now, every major news outlet has been talking about Trump's 50% tariff on India and what it could mean for us. Earlier this year, China blocked rare earth exports to India. Now, while ties with Beijing might look a little better right now, one thing is clear.

2025 has been the year of India experiencing turmoil with its first and second largest trading partners, the US and China respectively. But if there's one relationship that may still be in its blossoming first days, then it's with the UAE. If you didn't know, the UAE is India's third largest trading partner. And given the highs and lows of India's relationships elsewhere, it may soon surpass China to become our second largest partner. In fact, after the two countries signed an economic partner, in 2022, trade between them grew to $100 billion in FY25.

The thing is, of the 11,000 companies in Jafsa, that's the Jebel Ali Free Zone, a major free economic zone in Dubai, 2,300 are Indian. Tata, for instance, already has a sprawling presence, from a steel flooring facility in Jafsa to luxury hotels like the Taj Exotica in Dubai. And Tata's not alone. Himalaya Wellness, the Personal Care and Pharma Company, Omega Seiki Mobility or OSC, and electric vehicle maker, Jinders saw the iron and steel pipe manufacturer. They are all going to be joining this shift soon. And they are just a few of the many Indian firms setting up fully operational manufacturing bases

across the UAE's free trade zones. You see, the UAE has been turning barren desert into competitive global hubs for a while, for tourism, for technology, and now for manufacturing. India has tried its own version with special economic zones and gift city, which is the Gujarat International Finance Tech City, but if you put the results in comparison, India has almost 300 operational SEs with around more than 6,000 companies. The UAE?

Well, it's roughly the same size as the state of Bihar and has only 40 free trade zones. But guess how many companies? More than 200,000. The contrast is striking. A former diplomat previously stationed in the Middle East told my colleague, the Ken reporter Suprita Nupam, that the India-UAE relationship

is truly a trade-driven partnership, even if India is currently running a deficit. In fact, it took just 88 days for the countries to negotiate a CEPA or the Comprehensive Economic Partnership Agreement. Think of CEPA as the next-level free trade deal. It doesn't just cover goods, but also services, investment, intellectual property and more. Of course, Indian companies are responding to this budding romance, because they also have plenty of other financial incentives to look forward to.

But in the Rush to use Dubai as a global launch pad, could they be leaving their biggest market behind? Welcome to Daybreak, a business podcast from the Ken. I'm your host Rachel Virgis and every day of the week, my co-host, Snicktha Sharma and I will bring you one new story that is worth understanding and worth your time. Today is Wednesday, the 10th of September. Now, CEPA truly broadened the scope of the India-UAE relationship beyond trade. And the result, UAE now offers Indian manufacturers unparalleled advice. over other global trade hubs such as Singapore and Qatar.

These advantages are basically things like tax-free zones, world-class infrastructure and a very strong port system. But actually, the most significant incentive is not logistical but financial. Udhaan Arang, the founder and CEO of OSM, told us that Dubai offers easy access to regional and international capital, making it an ideal base for scaling operations at speed. The company is now set to invest $25 million. in an EV manufacturing plant in Japsa. The incentive also comes in the form of financial backing from UAE's sovereign wealth funds, joint ventures or loans.

For instance, before Lenskart's Dubai factory became operational in 2024, sovereign wealth fund Abu Dhabi Investment Authority or ADIA had invested $500 million in it. There's also the case of Triton EV, an electric vehicle manufacturer headquartered in the US with major operations in India. They have landed a pretty big deal with UAE sports car maker W Motors. Triton is to begin building vehicles for W in the UAE by 2026. But these are not just isolated partnerships. There's a much bigger financial story at play.

The UAE has pledged $75 billion in Indian infrastructure and has already anchored $1 billion in India's sovereign wealth fund. That's the NIIF or National Infrastructure Investment Fund. They have even set up an ADIA office. in Gift City with a $5 billion commitment. And it isn't just infrastructure. UAE-based funds are backing Indian startups as well, not only as late-stage investors,

but also as limited partners in early-stage VC firms like Bloom Ventures, Stellaris and Idea Spring. Now, compare this with India's other relationships. US foreign direct investment fell to $5 billion in FY24, down by nearly three times the original number. Chinese investment has also collapsed. from an annual average of nearly $900 million between 2016 and 2020 to just roughly $70 million right now. And unlike the UAE, both the US and China often set conditions, whether it's China

blocking rare earth exports or the US slapping 50% tariffs on India for buying Russian oil. In that light, the India-UAE partnership stands out for both its breadth and its stability. As that former diplomat told us, and as we mentioned earlier, it wouldn't be surprising if the UAE soon surpasses China to become India's second largest trading partner. But here's the question. As more Indian manufacturers head to Dubai, is this just clever strategy or could it signify the beginning of a brain drain? Stay tuned.

India's ties with the UAE go back much further than this recent manufacturing wave. In fact, they stretch all the way back to the 1980s when wealthy Indian businessmen first set up operations in Dubai and later expanded back into India. Take the Lulu Group, the multinational retail, chain founded by M.A. Usof Ali from Kerala. Or, billionaire Ravi Pillai's RP group, with businesses spanning construction, healthcare and hospitality. There's also the Danube group, the trading company founded by Rizwan Sarjan. All of these companies began their rise in the Gulf before turning into global players.

So what happens when newer Indian manufacturers build in Dubai today? According to Jitesh Agarwal, founder and CEO of Tree Life Consulting, there's a catch. Products made by Indian companies in Dubai count as UAE exports, not Indian ones. That doesn't just lower India's export numbers. It also means that advanced manufacturing capabilities and knowledge clusters that should develop in India will develop in Dubai instead. This would slow down India's push into high-value manufacturing. But according to the former diplomat, there are some limits to the setup, and they are clear. Indian manufacturers may be using Dubai to sell to global markets, but that doesn't discount.

the size and importance of the Indian market itself. And for the most part, most companies will likely keep key manufacturing units here in India. Lenskart, for example, produces hardly 1% of its total products in its Dubai plant. According to the VC partner from earlier, it could go up to 5%. But no more. Similarly, Himalaya Wellness continues to see India as a key market, even as it establishes its global presence in hubs like the UAE. Also, Omega Seiki's Dubai plant is set to make.

manufacture 200 EVs a month and employ 100 people, while its manufacturing capability in Faridabad near Delhi is more than 1,000 EVs a month with a headcount of 500 employees. The implication is clear. A leveraging of Dubai's resources doesn't mean these companies are leaving India behind. In fact, far from it. For its part, India is making the most out of this partnership on the political side. At the Johannesburg summit in 2023, it strongly supported UAE's membership to the BRICS. The two countries, are also partners in platforms like the India-Middle-East Europe Economic Corridor and the I2-U2 group with Israel and the US.

And when India hosted the G20 summit in 2023, the UAE was invited as a guest country. All of this shows how the India-UAE relationship has become both broader and deeper. And while Indian companies setting up plans in Dubai may change the way that the world sees India's manufacturing ambitions, there's another angle as well. Exposure to Dubai's efficiency and speed might actually show you. up in India's own manufacturing story. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform.

What you're listening to is just a small sample of our subscriber-only offerings. A full subscription offers daily long-form feature stories, newsletters and a whole bunch of premium podcasts. To subscribe, head to the ken.com and click on the red subscribe button on the top of the Ken website. Today's episode was hosted and produced by my colleague, Rachel Varghies, and edited by Rajiv Sien.