India and the United Arab Emirates (UAE) on Thursday discussed incentives that could encourage greater investments in India by sovereign wealth funds from the Middle East country.
Already in the budget of 2020 the government had exempted income from dividend, interest of long-term capital gains from tax arising from an investment made in India in a company or enterprise involved in the business of developing and maintaining infrastructure.
The budget had specifically mentioned Abu Dhabi Investment Authority (ADIA) and its subsidiaries for the exemption. For other sovereign wealth funds to qualify for the exemption the Finance Bill required a separate permission and notification.
This exemption to ADIA is for investments made before March 2024 with a minimum lock-in for three years.
Apart from ADIA, the UAE has several sovereign wealth funds most well known among them Mubadala and International Petroleum Investment Company. Collectively they have invested $10 billion in India during 2020 and 2022.
At the 11th meeting of the India-UAE High Level joint Task Force on Investments, the Indian side invited sovereign wealth funds to establish a presence in India. ADIA has already announced plans to set up an office in Gujarat International Finance Tec-city and at the meeting progress on it was also discussed.
The meeting was co-chaired by Sheikh Hamed bin Zayed Al Nahyan, the Managing Director of ADIA and Commerce and Industry Minister Piyush Goyal.
The meeting also took stock of the progress in negotiations on India-UAE Bilateral Investment Treaty and underscored the need to accelerate the discussions for a balanced agreement.
Progress on Fast Track Mechanism to facilitate Indian investment in UAE was also discussed. The Indian side also invited the UAE to invest in areas of renewable energy, health, semiconductors and asset monetisation programmes.
The UAE’s investment in India is estimated to be around $ 20-21 billion of which $ 15.18 billion is in the form of FDI while the remaining is portfolio investment. It is the second biggest investor in India in terms of FDI.
UAE has committed to invest $ 75 billion in India’s infrastructure sector over a period of time. ADIA is an anchor investor in NIIF Master Fund and through an investment of US$ 1 billion in National Infrastructure Investment Fund (NIIF).
During the meeting, the co-Chairs reviewed the progress made on the implementation of the Comprehensive Economic Partnership Agreement (CEPA) between the UAE and India, which came into force in May 2022.
The trade agreement has helped reduce tariffs on more than 80% of product lines, eliminate barriers to trade and create new pathways for investment and joint ventures. In the first 12 months of the CEPA, bilateral non-oil trade reached $50.5 billion, representing a growth of 5.8% compared to the corresponding period a year earlier. The two countries are now aiming for $ 100 billion non-oil trade by 2030.
Establishment of Abu Dhabi – India Virtual Trade Corridor, which aims to increase overall trade volumes by developing data exchange systems to facilitate paperless trade between the two countries, improving efficiencies and security was also discussed.
The co-chairs also reviewed the progress on key projects including the food security corridor related investment under I2U2 Framework into India. The project will be instrumental in addressing food security challenges, with the aim of bolstering the supply of essential food items and establishing a resilient value chain between the two nations.
The Joint Task Force witnessed the signing of an MOU between the UAE Ministry of Industry & Advanced Technology and the Ministry of Commerce and Industry related to cooperation in the fields of Industry and Advanced Technology.
The MOU will promote cooperation in sectors such space, healthcare, renewable energy, artificial intelligence, among others. The two sides aim to develop cooperation efforts and build an institutional framework to promote and develop bilateral cooperation.