Narrowing a $27 billion deficit key to India-UAE’s new $200 billion trade goal

India and the United Arab Emirates (UAE) on January 19 officially set a target to double bilateral trade to $200 billion by 2032

• India and UAE set goal to double bilateral trade to $200 billion by 2032
• Indian exports must grow faster to avoid widening trade deficit with UAE
• High-value sectors like telecom and precious metals show strong export growth

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India and the United Arab Emirates (UAE) on January 19 officially set a target to double bilateral trade to $200 billion by 2032, a goal that could help New Delhi accelerate exports while addressing the current widening trade deficit nearly $27 billion.

The announcement came during the visit of President Sheikh Mohamed bin Zayed Al Nahyan to New Delhi, building on the growth achieved since the Comprehensive Economic Partnership Agreement (CEPA) between India and the UAE, which came into effect from 2022.

Prime Minister Narendra Modi and Al Nahyan reaffirmed defence and security cooperation as a key pillar of the India–UAE comprehensive strategic partnership, welcoming the momentum generated through regular exchanges of visits by defence officials and service chiefs, as well as the successful conduct of bilateral military exercises.

The two leaders also welcomed the signing of a Letter of Intent towards concluding a Strategic Defence Partnership, signalling deeper collaboration in defence manufacturing, training and strategic coordination.

Widening deficit

Before CEPA, in 2021–22, India’s exports to the UAE were $28 billion, with a trade deficit of $16.8 billion. However, after the trade deal in 2024–25, exports rose to $36.6 billion, but imports surged to $63.4 billion, with India’s trade deficit widening with the UAE to $26.8 billion.

While total trade reached $100 billion, data shows that Indian exports have lagged behind imports, particularly in the previous fiscal year when export growth slowed to 2.8 percent but imports grew 32 percent, largely due to energy shipments.

India’s top purchases from the UAE are energy products, precious metals, aerospace components, plastics, with gold and petroleum together accounting for the largest share of the import basket.

If the bilateral trade target is to be achieved without further widening the trade gap, Indian exports will need to expand faster, with total trade requiring a growth rate of about 10.4 percent annually to reach $200 billion by 2032.

A closer look at the latest data shows Indian exports are catching up, as exports in April–November 2025 grew 6.7 percent, while imports rose 8.8 percent, even as the trade deficit continued to widen to $19.1 billion from $17.1 billion during the same period last year.

This is because many traditional Indian exports to the UAE are stagnating or declining.

Mixed bag

Petroleum products, one of India’s top exports, fell 11 percent year-on-year during April–November of the current fiscal to $3.86 billion, while iron and steel also declined 11 percent to $0.40 billion. Residual chemical and allied products were down 26 percent, buffalo meat dropped 35 percent, and auto components decreased 46 percent to $0.30 billion.

Other sectors showing declines include petroleum derivatives down 5 percent, raw cotton down 2 percent, and coal, coke and briquettes down 1 percent.

Even key industrial and engineering goods experienced only modest growth, with motor vehicles rising 8 percent and ship and boat structures increasing 7 percent.

In contrast, certain high-value and emerging sectors are showing strong growth, reflecting shifting demand in the UAE market. Telecom instruments rose 61 percent to $2.68 billion, pearl and precious stones increased 46 percent to $2.02 billion, gold and other precious metals grew 30 percent to $4.22 billion, and products of iron and steel climbed 19 percent to $5.93 billion.

Emerging categories such as electric machinery and equipment and ready-made garments also saw significant gains, indicating opportunities for India to expand exports in technology-intensive, luxury, and high-value sectors.

At a time when Indian exporters are looking to diversify shipments amid steeper tariffs from their largest market, the United States, the higher target with the UAE could help expand shipments while containing the imbalance.